Bits Bucket And Craigslist Finds For May 10, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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number of the day/new trading accounts in china
CompuCredit’s Charge-offs Jump 81% in First Quarter
first (small) signs of widening spreads for junk/lbo financing
http://immobilienblasen.blogspot.com/
“Some 4.787 million new A-share trading accounts were opened in April, more than the combined number of the previous two years”
Unbelievable. I wonder what the man on the Shanghai street is gonna do when the wheels fall off that wagon.
definitely the Chinese flavour of tulip mania; they should check out what happened in Holland in 1635 …
–
When it comes to gambling the Dutch are lot more restrained than the Chinese. East Asians SAVE money so that they can have fun gambling! We Americans have fun by borrowing money and living in Big-Ugly homes and driving big SUVs.
Jas
I agree regarding gambling in the casino etc. but certainly not in general. The Dutch seem to have financial speculation in their genes; they have proven that over and over again, right from the start of the Dutch republic.
–
I must defer to you on the Dutch. Brits and Americans owe a lot to the Dutch who showed the way in terms of trading and finance. Aussies and the Brits seem to have led the recent Housing Bubble that has spread to most parts of the globe.
Jas
the Dutch housing bubble was already well on its way in the big cities around 1992, in the UK/London it started 2-3 years later. Don’t know about Oz but I guess they were a little behind the British. But I don’t think it was really one country that started this worldwide housing bubble, it seems to have started in the financial capitals (mostly in Europe) so the real start was with the central banks (most of all the FED) and their loose monetary policy.
regarding history: trading, finance and manias always go hand in hand. It’s no coincidence that the first huge mania (tulip mania) occured shortly after the invention of the stock exchange - those events were directly linked. Most of the other manias can also be linked to some kind of ‘financial innovation’ (not as a direct cause, but certainly used as ‘this time it IS different’).
jmf…
Excellent sleuthing, Thanks~
You’ve stated your case well.
Just heard on CNBC, That the ” Shanghai mkt. is larger than all the Asian Mkts. Japan included…Bubblicious indeed”
In some perverse sense, a blow out in the China A-share market would probably mean low interest rates here for years to come. Since the Chinese form a core group of savers in the world, once the stock market looks unattractive, as it always does after a bubble pops, they will seek the safety of goverment and corporate issued debt.
You are likely wrong. The 1929 crash caused the creditor nation USA to call in loans speeding up the defaults. A Chinese crash will likely cause the same result for debtor nations like the USA.
…and hence a bid up on the Dollar.
Bk of Eng raises rates
hhhhhhhhmmmmmmmm
Good thing inflation is contained to the United Kingdom!
Here’s an interesting report from ABN Amro (smallish PDF file.)
http://www.housepricecrash.co.uk/pdf/abn-amro-home-truths-04042007.pdf
would be nice if ABNAMRO had the courage to make a similar analysis for their home market that is even more overvalued…
And, as UK raises to 5.5% and US holds at 5.25%, the dollar somehow gains on the pound sterling. I guess it was already priced in, and the action is somehow cathartic.
but the dollar also gained significantly vs. the euro …
NYC listings are piling up on craigslist. I’ve never seen it ramp up like this before in the couple of years I’ve been faithfully watching listings as a fence-sitter. Will keep you all posted, but basically they seem to have doubled since 2005…and have surged up quite a bit in the last 2 weeks.
NYC, the F market of the Future. (See below.)
I put an ad on craigslist last week to sell a small coop in queens for my in-laws. well 3 repsonses in 2 days and 2 offers submitted in writing. my in-laws decided to sign with a realtor (i know i asked them to give me a week, they couldn’t) so now the realtor is handed 2 potential buyers who are both more than qualified to buy this place.
i tried, my in-laws are older stubborn and stuck in their ways
i decided to seperate myself from this situation for my sanity
if they do not take one of these solid offers i will be shocked and amazed. i spoke to the realtor last night and said he needs to kick back some cash to me for doing his job for him.
some people will never learn, but i tried
btw my new place is a rental just in case anyone thought i had went to the darkside.
where are you moving to? did you get a rent stabilized lease?
NO RENTING- 3 bedrooms in queens in a private home close to the city- good location and pet friendly too!
Keep us posted. I love soap operas.
lol REhobbyist-
i have removed myself from as the greed turns>>>>
“F” Is the First Letter in Florida!
Bob Toll grades the markets at the end of the conference call yesterday:
“Florida central market, that’s Orlando, we sell a lot of homes. We get a lot of homes back. We sell the same homes. We get the same homes back. It’s a very hard market to figure. People I guess are renting them without ever moving in. That’s an F market. Florida East Coast is an F-plus market. Florida North, Jacksonville, pretty much of an F to F-plus market. Tampa is an F. Florida on the west coast is an F.”
Transcript of Toll’s 2nd Quarter Conference Call
http://usmarket.seekingalpha.com/article/35088
Yes, well, Toll is an Fing jerk. LMAO! The builders are grading the regions in which they are building! Love it. That’ll teach them to build in Florida.
F for Florida?
F is for Farther and Faster, which is how the market will Fall here after the grade from Toll.
F is for Foreclosure, which will be the major industry here.
F is for Fantastic, which is how it will be here again once this is over, the builders have Failed and the idiots have left the state.
F is for FBs.
F is for Farewell to Toll, and don’t let the door hit ya where the good Lord split ya.
Jerry Jeff Walker?
M is for the mudflap you give me for my pickup
O is for the oil I put in my hair
T is for…
–
Roberto knew what he was doing when he dumped so much of his stock in 2005. The guy is a “visionary.” He saw the future and he sold!
Jas
Dang the MSM.
Yesterday we get an unbiased report of 10% drop in resales… No context, like despite 40% pop gain, this is below 1997 Spring sales pace…. but at least it wasn’t full of Realtor spin.
AND, they allowed readers comments.
http://www.azcentral.com/business/articles/0509biz-homes0509-ON.html
Today, that story is off the site’s list of stories.
We get this B.S. spin:
http://www.azcentral.com/business/articles/0510biz-housing0510.html
“The county recorded 4,870 sales in April 2000. ”
Yeah, but…. 2000 was a down year, and out population is up 25% since then.
“While the resale market is tracking near historical norms, the levels should be well below those of the last few years because the current market lacks the market frenzy to own and/or invest at almost any price and reasoning,” he said.
Yeah, but why would they be off 10% since last month?
A drop of 10% from March to April is NOT a historically normal pattern.
“The county recorded 4,870 sales in April 2000. ”
Yeah, but…. 2000 was a down year, and out population is up 25% since then.
———————————————–
I’m glad you make this point. Any meaningful year-to-year comparisons (in a booming area) need to take population increases into account. Recent activity in PHX is meaningfully slower than in 2000.
Went for my run in St. Louis yesterday (University City) and in a short 2 mile neighborhood stretch there were 11 houses for sale.
11 for sale in 2 miles….that’s very few. In my old subdivison there are 12 homes for sale out of 98 homes.
Well, 2 miles is about 10,400 feet. If you figure 1 house every 70 feet or so, that’s 150 houses passed. Possibly fewer if you subtract out intersections, gas stations, etc.
So your numbers are not very different.
and then, of course, there’s the other side of the street
River, you’re seeing in St. Louis what I’m seeing in Tucson. It’s about 4 or 5 for sale signs per mile.
LOL. I love this blog. Only people here would calculate their running distance in for-sale-houses per mile!
Wal-Mart (total)April same-store sales down 3.5% !
estimate was down 1,5%
Wal-Mart Stores April same-store sales down 4.6%
JC Penney April same-store sales down 4.7%
estimate flat!
………
Part of that is Easter (which was in the April period last year, but the March period this year) the retail calendar is pretty strange (you probably don’t recall but many stores had very, very good March sales growth). Part of it is weather (it was very cold this April in the east which is where a preponderance of stores are). Part of it is weakening fundamentals (especially overbuilding). The art is in assigning the correct weight to each part.
i agree.
but that they missed the already weak guidance is telling that something isn´t working…..
80% of the retailers are missing the estimates for April sales. Hey, it’s not as if those doing the estimating had no clue what the weather was like in April, or that Easter was early. I’d say that a proper weighting of these results should emphasize weakening fundamentals.
Exactly,
All retailers are missing targets. Unless Joe Sixpack has suddenly decided to run positive cash flow, we have something else going on.
The difference between a 1.5% drop and 3.5% is huge.
Yes Easter will counter-balance inflation and a little more.
I’d like to know where they missed. I’m betting high end TV’s…
Got popcorn?
Neil
You’ll know that when BBY and CC announce their quarterly results. From the pattern, I’d suspect apparel (typically apparel responds primarily to weather). Probably candy as well.
From the release:
Grocery continued to be stronger than general merchandise. Perishables such as bread, dairy, produce and frozen foods, were among the strengths in grocery. Pharmacy sales, driven by the $4 generic prescription offerings, continued to perform well. In the entertainment area, sales of flat panel TVs, digital audio products and laptop computers continue to demonstrate gains over the same period last year.
Sales in apparel, home and hard lines at Wal-Mart Stores were soft, as the cold weather affected traffic and seasonal merchandise. The product recalls by several manufacturers in the dog and cat food category contributed to a slowdown in pet supply sales during the April reporting period. The Company is resuming shipments of selected pet food products this week and expects a turnaround in the category sales by the end of May.
I buy a 25 pound bag of cat food for my 2 milk lappers and it costs me around $11.00…
It lasts about 3 months.
No biggie.
Keep feeding them that cheap cat food and they will live may not live very long. : O
My friend once bought some corn chips from Walmart, and he started coughing whenever he ate them. So I tried a few and it gave me a scratchy throat too. I didn’t eat any more and I recommended he do the same.
Remember that guidance and the analyst’s predictions should have already taken the Easter related changes into account. Surely they saw Easter on their calendars.
Analyst estimates for monthly sales releases are way more art than science, track the pattern for a few years and you’ll see that the consensus estimates rarely account for stuff like holidays moving or weather (that should be easily observable). If you go back to the (should be April 5) headlines, almost all retailers beat estimates in March for the same two reasons. It’s a pretty easy trade and retail analysts come pretty cheap.
Littel note from the trenches in Telecommunications and Electrical distribution sales. April sales were better than last year, but were “slow” compared to the last few months.
Don’t know if this is a trend, but watching carefully.
Sales are down at Wal-Mart? Oh, the horror!
Walmart isn’t as reliable an indicator as it once was, I think. The fact of the matter is Target is expanding throughout the country and more people are concluding that Walmart sucks. Compare the two - Walmarts are dumps, while Targets are usually clean and organized. Since prices are the same, why shop at Walmart?
So I can see all those ex-realtors who are now Wal-Mart greeters.
Target April same-store sales down 6.1%
Target April Thomson Finan. same-store sales est. down 6.2%
but a nice rebound in may…
Target Sees May Same-Store Sales Up 5%-7%
wmt estimates 1-2%
Hey, Lou, I agree with you strongly here. I’ve only been to a Target once or twice, we don’t have one close by, but if there was one, I’d shop there. I grew up in a family that was heavily involved in the advertising industry in NY back in the day and I really appreciate the creativity of the Target commercials, it’s nostalgic and contemporary at the same time. Also classy. Here in Florida, I go out of my way to shop at Publix supermarkets, while the Winn Dixies stores tend to be dumps also. And there’s a big difference in personnel. Despite our “globalized” society, there’s something to be said for stores that are clean, well-lit, have good customer service and merchandise.
I don’t live near a Target or a Wal-Mart. But, the last time I shopped at Target, I was struck by how empty the store was, and how disengaged the employees were. It seemed like they were working their shifts like prisoners waiting to be set free.
I disagree…Target is a more of a pseudo-style dump store than anything else. The new one they built a mile and half from me is always empty and it has been open for six months.
Walmart parking lots and Kmart parking lots have also been suspiciously empty. Places that seem to be full on the weekends is Mills Fleet Farm and Menards. Just bought a water heater from the new Lowes here and they are a tomb!!
Anedoctal evidence I know but business is down from my observations.
Where are you from? Can’t even process anecdotal data with an asterisk if we don’t have a location.
eastern suburbs of Saint Paul, Minn.
I’m guessing he’s from Wisconsin with the stores mentioned - maybe Iowa or Illinois. I’d say MN, but most Minnesotans have a sense of pride in the Minneapolis-based Target.
Guess correct…as of prime for the former Dayton Hudson corporation, there is little….they are now Target. Sells pseudo trendy made in China merchandise.
In the coming collapse, hipness, cool and trendy will mean little. It will be of an alien land.
I don’t like shopping at either of those. For some reason they make me really sad.
I’m glad you said that. for some reason they kind of buzz kill my day, too. But Costco makes me HAPPY. :)))) Though even there I’ve noticed crowds lighter than usual, parking easier, etc.
Costco makes me happy because I can buy great wine at a significant discount from the price at any local liquor store.
I dropped $499 at Costco today. Happens everytime, so I limit my visits to three times per year. Eventually all of that ketchup, cereal and toilet paper will be used up.
$3 plus gas has no effect on walmart huh? or the lack of heloc money? this is getting interesting.
i am sure theses gf’s are so happy with their home and the 50% or better of their net income it takes.
the american dream alive and well
Good….let’s get about 6-12-18 months of this drop and maybe it will finally dawn on the corporate types that the credit inflation they have created will finally create a second Depression.
Ready to swoop in and buy assets on 5 cents on the dollar then.
Costco Wholesale Corp. had a 7 percent same-store sales gain, better than the 6.3 percent estimate.
—
Guess it helps to actually pay your employees a living wage.
Yesterday the truth leaked out — the Fed is indeed a deer caught in the headlights. Night-night, Goldilocks!
Fed Keeps Rate at 5.25%; Says Inflation is ‘Predominant’ Risk, by Craig Torres, Bloomberg, May 9, 2007.
http://tinyurl.com/2gzf8h
oops! wrong tiny, here’s the right one
http://tinyurl.com/26px8j
Fed’s eye still fixed firmly on inflation
Rates hold steady, as do price concerns
By Edmund L. Andrews
NEW YORK TIMES NEWS SERVICE
May 10, 2007
WASHINGTON – The Federal Reserve acknowledged yesterday that the economy is slowing, but it offered little hint that it is ready to lower interest rates soon.
As widely expected, the central bank kept the benchmark interest rate on overnight loans at 5.25 percent – the same level it has been ever since the Fed began its “pause” almost one year ago.
It also reiterated its stance of the past year that inflation remains the “predominant policy concern” and gave short shrift to recent data suggesting that price pressures have ebbed.
http://www.signonsandiego.com/uniontrib/20070510/news_1b10fedrates.html
Funny, isn’t it? Inflation is the “predominant policy concern” at the Fed? Give me a break! If it were, the Fed wouldn’t be printing dollars like crazy. If it were, the Fed wouldn’t have gone underground on its printing output by discontinuing its M3 reports.
The Fed is increasing inflation big time! It plays games with the public by acting as if it were fighting inflation while massively creating it.
Ron Paul would eliminate the Fed. Hope he gets elected.
If the Fed were actually as vigilant on inflation as they claim, at several things would happen:
1) All the plankton would die.
2) All creatures higher up the economic food chain that eat plankton would suffer tremendously.
3) The U.S. would collectively have to pay off its crushing debt burden (at the international, federal, state, city and household levels) at much higher real expense than if inflation were allowed to “accidently” get out of hand for a while. (Printing money is politically much cheaper than hard labor and high taxes.)
How could any central banker withstand this level of pressure to inflate?
Unfortunately, you are correct, GS.
“Funny, isn’t it? Inflation is the “predominant policy concern” at the Fed? ”
They FEDs are lying through their teeth. In fact, there is immense political pressure on Bernake to drop rates, but the fact is they are stuck, not because of inflation, but because China and England (among others) have raised central bank rates, the FED cannot drop rates without triggering a devaluation. They are stuck and clueless.
Nice dig. Here’s another quote from the same article: “Fed officials have openly admitted that economic indicators are flashing a bewildering mix of green and red.”
What anyone who has been paying attention has noticed, though, is that the Fed is frantically signaling a willingness to tighten to the currency markets, while still allowing everyone else to imagine they will certainly ease when things get hairy later this year (even the present NYT article assumes that). That’s why they the FED is wedged tight — any move will falsify one of these necessary illusions. One thing they are watching is this monster,
http://www.bankofcanada.ca/fx/iexe0102.gif
and trends in the pound, euro, etc.
Where’s the Yellow Light?
The one that indicates you ought to slow down…
Where’s the Yellow Light?
The one that indicates you ought to slow down…
Don’t drive in the big city much, eh?
Is the Fed at all concerned about inflation of the headline stock market indexes?
The Federal Reserve is concerned about a dramatic rise in interest rates as a result of inept congressional actions.
As long as the currency hearings are going on in Washington, the likelihood of precipitous actions against China increase.
From one of our astute congressman, Not!
“I am forced to conclude that it is incumbent upon this Congress to pass legislation that would require the administration to monitor and address unfair currency practices more adequately,” said Energy and Commerce Chairman John D. Dingell, D-Mich.
And it is from both sides
Kevin Brady, R-Texas,
“I think the solution here is less of a sledgehammer”
May 9, 2007
The Bank of Finland just completed a study titled
“Can the Chinese trade surplus be reduced through exchange rate policy?”
It is a PDF, but from the abstract:
“…the size of the surplus is such that exchange rate policy alone will be unable to address the imbalance. One of the main reasons why the reduction in the trade surplus is limited is that Chinese imports are reduced with a real appreciation of the renminbi. By estimating bilateral import equations, we find that it is imports from other Southeast Asian countries which fall….”
Bank For International Settlements
http://tinyurl.com/24uxyn
No, in fact I suspect Fed insiders are profiting handsomely from this little stunt with the stock market.
Keeping the rate the same is unsurprising.
Their main concern would be inflation because they want to be their government and private loans paid back in strong dollars, so that would push them to raise rates.
But a riproaring economy where they are making lots of loans and the finance industry is getting lots of service fees is also good, so they would want to lower rates to keep us from going into a recession.
Since we have both inflation and a weak economy, well then, what are they to do?
The Fed will NEVER hyperinflate printed currency because in essense that would be like debt forgiveness, or giving away money. Not the Fed. Put that idea to rest. They will hyperinflate the money supply through credit they can create out of thin air, that is ultimately paid back to them in real money. But that all comes to an end when everybody is credited out.
Only congress might fire up the printing presses to hyperinflate America’s way out of debt, but since both parties are wtfpwned by the financial industry, don’t bet on it.
At the end of the day, once all the credit banks can possibly lend has been lent, the main concern of the Fed is maximizing profits for themselves and their associates, and so we will see a gradual tightening of the dollar, and the American public and government will wind up broke.
IMHO.
It’s always a great time to buy ……….
or is it……….
http://www.cnn.com/2007/WEATHER/05/09/hurricane.forecast.ap/index.html
Joe Bastardi is a running joke in meteorology circles.
Say what you want but I’m stocking up for the invasion of the Houston relatives late this summer.
Hurricane prediction is not a certainty. However, patterns of heating, upwelling and current flows in ocean waters are well established and are useful in predicting the strength of hurricane seasons.
Refresh my memory. What was their prediction for last year’s hurricane season?
Yes. It was supposed to be the worst ever.
Heh.
Auto makers down on belt tighting consumer.
Toyota’s surge slowing, but it still beats out other makers
BY YURI KAGEYAMA AP BUSINESS WRITER
TOKYO — Just a few weeks after trumpeting that it would surpass GM as the world’s largest automaker this year, Toyota is signaling that it, too, is suffering from some of the troubles ailing its U.S. rivals.
Toyota officials said Wednesday that auto sales will likely be flat this year in the key North American market, where higher gas prices, a housing slump and a slowing economy have tempered consumer spending.
I went to our local Toyota dealership Sunday. There are over 20 Prius models on the lot. For the first time they are discounting them. In fact, the lot was packed with fuel-efficient cars, as well as gas guzzlers.
Full court press advertising on the Prius, too. Saw a couple of commercials for them last night. Effective - made me think about getting one.
never break even
the batteries are killer
my county , that has almost no polution is buying them
In a recent comparison between small hybrids and other efficient cars, the VW Jetta TDI beat the Prius in overall fuel economy. I subscribe to a few car rags, but I believe it was Autoweek. They took all the vehicles on a road trip and the Jetta got the best mileage.
Also, you won’t need to replace the battery packs to the tune of a few thousand bucks every few years, and you also won’t have to bleed out if you get in an accident and the fire department stands around scratching their heads figuring out how to extract you without getting zorched.
Diesels are where the practical fuel economy is; the Prius is a fashion accessory.
Plus, they’re ugly as sin.
The prius (and most other hybrids) get better milage in the city than on the highway. If you do lots of city driving get the prius, if you do lots of highway driving get the VW TDI
Diesels are where the practical fuel economy is; the Prius is a fashion accessory.
Diesels are very practical and will long term dominate the market.
However hybrids do have long term potential. Is the Prius a fashion accessory today? Naa… co-workers love them. One reason is their reliability; the same level is not achieved by the Jetta.
But then again, with as many full size SUV’s on the road, why are we even discussing the solutions?
Got popcorn?
Neil
Yes I think thats right.
Talk to a few VW owners about their reliability b4 you buy 1
Beware especially of VW’s made in Mexico.
“…the Prius is a fashion accessory. ”
The Prius is for people who want to let EVERYONE know just how “eco friendly” they are. They so many nicer looking hybrids out there that I have no idea why anyone would by a Prius.
It’s like the live strong crowd. I give money to cancer research too. MORE THAN A DOLLAR! I don’t wear it on my wrist.
“the batteries are killer”
That is the reason I do not believe there is a future in the hybrid technology. The metals used to manufacture are exploding on the upside. In the last year Cobalt was up 300% and BHP wasn’t giving quotes on availability.
Another wonderful thing manufactured in China with metals that are supplied by China.
Honda is supposed to have their newest “clean” diesel available in the USA by 2009 if you can wait.
Here in SoCal they’re definitely a fashion statement. That’s why I call them the Toyota Pritentious.
You might check on the status of the fed tax credit before buying. Only a fixed number of credits were available, and I think that after 60,000 Prius cars were sold the credit gradually declines. It was a big credit, too, like $5000, I think. I actually thought about buying one, but I never spend more than $12000 on a car.
IR-2007-97, May 7, 2007
WASHINGTON — The Internal Revenue Service announced that purchasers of qualified Nissan North America Inc. vehicles may continue to claim the Alternative Motor Vehicle Credit. The announcement comes after the IRS concluded its quarterly review of the number of hybrid vehicles sold.
Nissan sold 2,094 qualifying vehicles to retail dealers in the quarter ending March 31, 2007. The allowable credit amount for the 2007 Altima Hybrid — Nissan’s only certified hybrid vehicle — is $2,350.
Consumers seeking the credit may want to buy early because the full credit is only available for a limited time. Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.
My next car will be a “plug in” hybrid. This will be the next thing in cars. For shorter trips they will be all electric. Since my daily commute (roundtrip) is about 40 miles, I should not need gas except on the longer, special trips.
I’ve got 120K on my Subaru. Hopefully, by the time that I get to 220K the plug in hybrids will be available and well tested.
I’m a performance car guy, but I agree on plug-in hybrids, especially when they include the electronics to act as an emergency generator for the home. My guess is that people will be all over that…
I’m with you, former FB. A car that also served as a backup generator would be great. In my particular case, it would only be used for short trips around the neighborhood, so it would almost always be available as a backup power source. I would also add that such a hybrid should also have lots of cargo capacity - enough to hold the booty from my monthly Costco run.
For commutes and trips, I need serious range. For example, it is very nice to be able to drive from LA to LV without stopping for fuel. Also, I consider high acceleration, both starting and stopping, to be an important safety feature in a car that is to be used on a freeway.
Prius is ugly…looks like a stupid egg. I’ve also found Honda to be more reliable than Toyota; but their Insight hybrid, available several years BEFORE Prius, was never popular.
Late yesterday, there was an exchange on this board about Prop 13: one poster saying it’s “so unfair” and another saying that whatever limits taxation is usually a good thing.
The intended consequence of Prop 13 was to limit taxation, and for quite a few years it did so. The tax-and-spend crowd were always beefing about this service or that service having been gutted by Prop 13. Personally I applauded Prop 13. I believe that as a renter of an older home, I was an indirect beneficiary of Prop 13, a law that kept my landlord’s expenses low. An unintended consequence was, it gave public employees a substantive interest in a crazy runup in property prices. The severity of FL and CA bubbles may have coincided accidentally with their similar prop-tax limiting laws, or maybe not so accidentally. At this point, if the CA median SFH price is 10x median income, the 1.3% prop tax amounts to a 13% state income tax on any SFH buyers…on top of whatever CA state income tax they already pay. Only a flipper would be likely to tolerate such a thing. Outmigration is to be expected. Hang on, Californians, your chance to buy cheaper is coming.
You should never have to worry about losing your property as a result of not being able to pay the crooks in government. Jefferson/Washington/Franklin are rolling over in their graves at
what we have let our government become.
and soon FREE-er healthcare
NHZ post about the housing subsidies in EU = amazing
try this http://www.cagw.org
or go all the way http://www.lp.org
Plenty of subsidies here in the US too. They had a feature story on 10 news not too long ago about a couple who got 100k of subsidies to buy a house here in Sandy Eggo.
the difference is that in Netherlands probably more than half of the current buyers completely depend on this kind of subsidies - a bit like the way US buyers depended on ARMS in the last few years. Just imagine what happens if this subsidy system is introduced in the US (in fact, I think they are feverishly working on it behind the scenes, some of the new proposals I am reading on this blog sound SOO similar). I’m sure it would keep the bubble inflated for another few years.
“At this point, if the CA median SFH price is 10x median income, the 1.3% prop tax amounts to a 13% state income tax on any SFH buyers…on top of whatever CA state income tax they already pay. Only a flipper would be likely to tolerate such a thing. Outmigration is to be expected. Hang on, Californians, your chance to buy cheaper is coming. ”
Good point az_lender. Never thought of property tax from that angle (not that I pay any) but you are absolutely right.
Some more problems with Riverpark in Oxnard.
http://venturacountystar.com/news/2007/may/10/riverpark-developer-files-claim-against-district/
Interesting article on Slate today, arguing that bubbles are great for the economy:
http://www.slate.com/id/2165929/nav/tap1/
It’s difficult to believe that massive mis-allocations of capital are good for the economy.
I think Gross makes a valid point that many economists have observed. Particularly (if not exclusively) with new technological infrastructure (trains in the past, communications today), the initiators often don’t survive but the upgrade in productivity does have a lasting, powerful, effect. Yeah, too much money gets directed into these booms but who is going to say when “too much” is being spent on what? I’ll trust the market (imperfect as it may be) anytime over bureaucrats.
Its certainly arguable that the recent buildout in housing isn’t “powerful” in a productive sense. However, if people learn the lesson that housing is …..just housing and not an “investment” then the maldirection of excessive money into this economic category should abate. This would mean that future monies would be better directed (admittedly, after a LOT of pain) into more productive endeavors.
Would that the government realize this and put into place policies that would tax OVERCONSUMPTION of housing (McMansions) and only subsidize FAMILIES who are first time buyers of modest homes. Society benefits from having families owning homes for a lot of reasons. Society doesn’t benefit from subsidizing giant homes, second homes or from subsidizing the choice of buying vs renting by single persons.
A rational home subsidy program would be one that would be capped, would be scaled by income and be subject to the size of the family. What financial decisions single people and childless people make should be utterly unsubsidized. The result would be more money to help needier families, less pressure on housing prices and generally lower housing costs for everyone.
“What financial decisions single people and childless people make should be utterly unsubsidized.”
In a free country, why should I, a single person, be expected to “subsidize” people with families? Property taxes and school taxes already nail me, as does the income tax. I am not concerned with FAMILIES–as you put it—I am concerned with providing for myself.
If people insist on having children, they better be sure they can provide for them. Your children are your problem, not mine.
Someone is going to have to wipe your butt when you are in a nursing home.
LOL, Colorado! Hopefully my kids will keep me out of the nursing home!
Maybe someone needs to do a cost breakdown. Raising 1 child for 18 years, vs. decent assisted living in old age.
and I forgot - no guarantee, no matter how good of a job you do, that your child will have anything to do with you when the chips are down.
Colorado,
Nursing homes are all staffed by immigrants–and if they’re not a hellhole, run about 8-10k a month. If that’s your critieria, then ever more reasons why single folks should be “subsidized” not those raising future butt wipes.
Spike is right. Thinking that one’s children will be around to care from them when they grow old is both selfish and unrealistic. First off, to make such a scheme work parents must basically consign their spawn to live close by - and therefore drastically limit their employment opportunities in an increasingly global world. Second, there are plenty of parents laying about nursing homes - just visit one and see for yourself. Elder care will be a growing issue this coming decade - my siblings and I have dealt with this for quite some time - and I wouldn’t wish it on my worst enemy. Watching your kiddie poop his/her diapers is cute - watching a parent do it - not so much.
Be sure to factor in the chance of a 45 yo son mooching off a 80 yo mother between sentences in your cost/benefit calculations.
I think your basic point is valid–people need to take responsibility and care and provide for their families. But I think it’s a bit naive to say that another person’s children are not your problem. You will be affected if other people’s children are not cared for, are not educated, are not well-behaved. Other people’s children form the foundation upon which society will grow. If other people’s children have an impact on your life, your children, and your future.
So spike66, using your reasoning society shouldn’t do anything for children?
Fine. No subsidies for basic education, right? Let the “breeders” fend for themselves.
Masses of even less educated young people should improve society.
Tell me spike, exactly where would you live? To whom would you sell your product or service in a society growing dumber and less productive by the day?
My children are my responsibility, yes. But after 18 years or so they’ll either help you live YOUR life better or make it worse depending on how reasonable I do my job. Your suggestion would make sense if you had only 20 years or so to live. After that, who cares what “civilization” exists, no?
You may not like having to sometimes subsidize other people’s personal choices but, in the long run, if the subsidy creates something worthwhile (as opposed to a disaster) in may be in your (very selfish) personal interests as well, no?
Oh, give spike a break. I have kids, but it can be sickening to listen to people go on and on about their offspring. We are too kid-centric nowadays, and I support Spike’s right to vent.
Jag,
as I pointed out, I am already nailed for school taxes, property taxes. You have further tax deductions to support your personal choices. In addition, there is section 8 housing, welfare, food stamps, and medicaid. That takes care of schooling, housing, food, health care and incidentals. Is there anything else you feel entitled to take from me?
spike,
What makes you think that I don’t pay taxes? What makes you think I don’t pay taxes that far exceed the piddling tax advantage I get from a couple of deductions?
I ain’t taking nothing from you. My three kids spent less than 10% of their schooling in public schools. Honey, I’ve been subsidizing everyone else’s kids around me since my first pay check.
I’m not complaining. I’m grateful for my blessings. I don’t know what you do for fun, or work or whatever but I have a feeling I’ve also subsidized the roads, airports, beaches or other public facilities that I don’t use much.
But then, you haven’t calculated that into your balance sheet, no?
I don’t feel “entitled” to take anything “away” from you. In fact, I personally, don’t. But your assumption of no return on the portion of your taxes used to subsidize the welfare of SOME children is…..shortsighted. In my opinion.
Jag.
from your original post, you proposed a national housing subsidy.Since section 8 housing is already available, why should anything more be required. And you are pleased to decide who deserves a subsidy and who doesn’t. In your view, families yes, single and childless people, nada. It’s merely coincidence that you would of course be a beneficiary.
Home ownership is a financial decision–and those who can afford to pay for one are free to buy one. No one is entitled to a single family home. It is not a constitutional right.
For those who make too much for section 8, rentals are plentiful and affordable.
You’re backtracking on your original post–suddenly you’re discussing ‘SOME children”…and adding qualifiers etc.
From the original…
“Society benefits from having families owning homes for a lot of reasons….A rational home subsidy program would be one that would be capped, would be scaled by income and be subject to the size of the family. What financial decisions single people and childless people make should be utterly unsubsidized.”
The nanny state in a paragraph. I’m sure all the FBs would agree with you. Just call it a “subsidy” not a bailout.
Masses of less educated children on Psyco-tropic drugs are perfect cannon fodder for the next wave of “surges”. When 50% of all our federal tax dollars go to the military, and many of these should be going to education, I think its time to de-federalize education.
“Your children are your problem, not mine”
Good thing everyone in world loves America…and always will..so you don’t have to have other peoples children serve in the military and protect your ASS..ets
With a constitutional based foreign & monetary policy it would be real easy to protect your children and your own ass..sets, without sacrificing your scruples to do so. Have a look at that piece of paper; it’s a far cry from today’s pork barrel, special interest mafia.
Family size is negatively correlated with wealth generation in America. Be careful how much further you try to push productive people to pay for the “cretins cloning and feeding,” as they might one day revolt and leave you to your own devices.
The whole issiue of “Tax Deductable” incentives regarding homes is under fierce debate right now in the bowels we call Washington….Don’t be surprised if in the near future we see a severe curtailing of the mortgage interest deduction and a possible elimination of the deductability of property tax…
It was under debate in the beginning of the 80s, too, when some interest deductions were slashed. The mortgage interest deduction stayed, and it will stay until a major overhaul of the tax system.
There is no such thing as “the economy.” It all depends on *whose* economy you are talking about. If lots of people owe you a lot of money, and they have to start paying it back now, and the dollar is about to tighten, and the money you lent them isn’t real money, but money you invented out of thin air, so you stand nothing really to lose even if they default, then YOUR economy will do just fine.
Welcome to power.
I was responding to the OP:
Interesting article on Slate today, arguing that bubbles are great for the economy:
Wow. Just saw all the retail numbers on CNBC and they were, across the board, awful. I hope that Steve relates consumer spending to the housing bubble; it sounds like he is already setting up for it later today.
Almost every single company reporting missed estimates by large single to low double digit percentages. Those are big misses!
I love it…..plunge boys…plunge….the spending will stop soon…..should cool the economy then and gasoline prices and housing……
A lot of Hummers and F series items will be parked with 5 dollar a gallon gasoline and no more housing price increase. Won’t be anymore money to wring out with equity loans, either.
…but housing won’t have a negative effect on the economy.
In my zipcode, there was not a lot of new construction, so last week I started using it as a “gauge” of existing home prices. Since we were stitting at about $120K pre-bubble, I expect to see prices slide back towards the $150K-ish. We peaked close to $250K, but I think we’re already seeing a slide back towards $200K-ish.
So, anyway, I chopped the listings at $250K (first big milestone, when more are listed below than above), $200 (next big milestone, meaning halfway there), and $150K (what I think the median listing point SHOULD be a year or two from now).
It has only been 1 week, but…
300K 300-250 250-200 200-150
Crud, looks like it doesn’t like tabs in the text….
Anyway,
250K-200K 200K-150K
Arg…
Between 250K and 200K, up 1 lising, 2%
Between 150K and 200K, up 6 listings, 42% increase
Below 150K up from 0 to 1.
And, 14 of the 21 lisings between $200K and $150K have the little down arrow, indicating prices recently reduced.
Try using the
(code) in your comments to keep formatting.BTW: code refers to computer code, which can be nearly unreadable without tabs, returns, etc.
“At this point, if the CA median SFH price is 10x median income, the 1.3% prop tax amounts to a 13% state income tax on any SFH buyers…on top of whatever CA state income tax they already pay. Only a flipper would be likely to tolerate such a thing. Outmigration is to be expected. Hang on, Californians, your chance to buy cheaper is coming. ”
You mean I’ll get to come home soon, to….. Mexifornia?
Just one more reason to flee California/Mexifornia/Aztlan.
In yesterdays paper, the pro-immigration people said they are going to put together a bigger demonstration than the may-day fiasco. “they will not be intimidated”. I gotta tell ya, this crap is getting old.
Another Greenspan put, please…
http://www.marketwatch.com/tools/marketsummary/
All real estate is local, all stock market corrections are temporary and subprime is contained. It’s all good!
60 minutes is doing a story on real estate this sunday.
Ten years ago I’d have said that a negative 60 Minutes program would be significant. Today, I doubt it.
Then again, maybe it will at least symbolize a kind of capitulation to reality (assuming it is horrid enough). Could give “license” to other media, however, to come out of the closet and start printing local horror stories.
THAT could be significant.
10-12 minutes on 60 minutes is good, but when Frontline on PBS does 50+ minutes on the bubble that will really scare the crap out of alot of people
The people who know what Frontline even is already know there was a bubble.
15 minutes on Oprah is the true wake-up call.
vile,
You nailed it and the sob stories she uses will be fantastic. Kinda surprised she’s behind the curve on this…….
There’s a house for you!
There’s a house for you!
There’s a house for you!
There’s a house for you!
What, we could get rid of a hundred empty houses a day, 5 days a week…
I might be onto something.
What is the real solution to America’s trade deficit?
Stephen Roach
May 10, 2007
” ..By going after China, the US Congress is playing with fire.
US-china trade policy: a flawed “remedy”
For starters, this legislative “remedy” is based on seriously flawed macroeconomic analysis. China bashing doesn’t address the real problem that Capitol Hill believes is bearing down on American workers – a multilateral trade deficit that hit a record $836 billion in 2006. Since the Chinese bilateral deficit of $232 billion amounted to the largest slice of the overall trade gap – 28% for all of 2006 and fully 34% in the final period of the year – Congress has concluded that China is the major culprit behind the trade-related squeeze on middle-class American workers.
That overlooks one key point: The United States runs trade deficits not because it is victimized by unfair competition from China or anyone else but because it suffers from a chronic shortfall of domestic saving….
…if China accedes to US pressure and allows the RMB to appreciate a good deal more against the dollar, there would be less of a need to recycle such a massive amount of FX reserve accumulation into dollar-based assets. Absent such buying, US interest rates could rise. On the other hand, if Washington enacts onerous trade sanctions on China, there is a good chance that the Chinese government could retaliate and order its reserve managers to diversify incremental reserve accumulation out of dollars. In that case, the dollar could plunge and longer-term US real interest rates could rise sharply – a crisis-like scenario that could tip an already weakened US economy quickly into recession.”
Moneyweek
http://tinyurl.com/ywyxdd
I’ve never understood the short-sightedness of politicians thinking we can all get rich by turning the dollar into toilet paper. I suppose it’s because their buddies on Wall Street only care that stronger foreign currencies equal higher earnings in dollars for exporters.
Let’s see: stock market up, dollar weak and getting weaker, buyouts left and right, Michael Douglas starring as Gordon Gekko. . . Anyone else with a little nostalgia for 1987? It’d probably be too perfect in terms of symmetry for it to happen the same way (and could well take another year or two) but there is the sense of deja vu about things.
Received this notice from Morgan Stanley a few days ago…
“Notice to customers regarding precious metals transactions”
Burried deep in the pamphlet is reason you should free your metal from these Korpoate Financial Monsters…
SIPC Insurance Not Applicable
“The Securities Investor Protection Corporation (”SIPC”) provides certain protection for customers’ cash and securities in the event of a brokerage firm’s bankruptcy, other financial difficulties, or if customers’ assets are missing. SIPC insurance does not apply to precious metals or other commodities.”
The cover letter says:
“The enclosed notice contains important terms and conditions governing your precious metals transactions, including informaation about risks. Your precious metals transactions are subject to ALL the terms and conditions of this notice and your existing brokerage account agreement with Morgan Stanley & Co. Incorporated (”Morgan Stanley”)
Explain this one, Mr. Roach?
That is easy Aladin! The government reserves the right to confiscate any and all precious metals should the need arise. LOL - It will never happen here.
Last time I checked, Morgan Stanley wasn’t the government…
But SIPC (pronounced sipic which stands for nothing) is.
“SIPC insurance does not apply to precious metals or other commodities.”
No, that’s Goldman Sachs.
“The Federal Reserve and all the world’s central banks are shooting like crazy at you! So buy gold, silver and oil, you stupid fish, and buy yourself some protection! And make a hell of a lot of money, too!”
Addison Wiggin
Hoz,
The analysis overlooks another key point, which I have only seen touched on once or twice.
How much of the “Chinese bilateral deficit of $232 billion” is pass-through of parts manufactured elsewhere and assembled into the final item in China? Things like Japanese and Korean chips in “Chinese” electronic goods.
If the proportion is significant, then the only result of a big rise in the RMB is that the deficit will move to the next assembly point, like Vietnam maybe.
For every dollar of goods exported from China 80% is pass through from other Asian nations primarily ROK, Japan and Thailand. Somtime this fall China will be Japan’s largest trading partner.
Has anyone seen this or know what is? Is it a legit? My son has a friend that is considering it. He needs an opinion.
http://www.unitedfirstfinancial.com/Default.aspx?tabid=96
I briefly looked at it.
SCAM.
They charge for managing the 13th mortgage payment in a year aka biweekly mortgage payments.
You can do the same thing (as long as there is no pre-pay penalty on the loan) by simply paying additional amounts toward principal reduction.
Sunset is correct, there are many ways to do this yourself - from making an extra payment each year - to - paying extra every payment.
Also, you move from a likely non-recourse loan into a recourse loan. You pay off your mortgage faster by shifting money into your HELOC. Yah. Smart. SunsetBeachGuy called it correctly. Legal, but still a scam. They get you to transfer your mortgage to them.
Reminds me of “Brixdale” which eventually ended up on the mortgage fraud blog after people lost a lot of money being dumb…
Check out this tidbit from an article about the trade deficit:
http://news.yahoo.com/s/nm/20070510/bs_nm/usa_economy_dc;_ylt=ApSE25MdAK9Y6Y_rmANW9ee573QA
“The large March trade gap could prompt analysts to trim their estimates of U.S. economic growth.
“It indicates a downward revision in growth based on the early estimate for the first quarter,” said Keith Hembre, chief economist with FAF Advisors.
High Frequency Economics now expects first quarter economic growth to be revised downward to about 0.5 percent from the 1.3 percent that the government initially estimated last month, said their chief U.S. economist Ian Shepherdson.”
That would be quite a haircut, wouldn’t it?
Shocking. Considering the original number was 1.8%.
I meant was expected to be 1.8%
Northern Virginia prices fall in April
The average and median price of homes sold in April fell 2.5% and 1.2% on a year over year basis. Units sold dropped 12% year over year and days on market increased 52%. New listings of 4,111 outpaced new pendings of 1,948 by 2:1.
Two important points here:
1. Prices fell on a year over year basis.
2. Prices fell sequentially from March to April (the opposite of what normally happens during the spring).
Other stats (avg, med):
Alexandria: 0%, +3%
Arlington: 0%, -8%
Fairfax: -4%, -1%
Loudoun: -6%, -8%
Prince William: -5%, -4%
For people who are interested in Home Builders.
http://www.businessweek.com/bwdaily/dnflash/content/may2007/db20070509_977735.htm?site=cbs&campaign_id=djm
“Homebuilders in a Hole
Battered by the bust, they’re filing for Chapter 11 and begging hedge funds for help”
Filing Chapter 11??? Is this part of the new business model?
The Northern Virginia April sales report is out. The inner suburbs are faring better than the outlying Prince William County, which is still sinking fast.
Arlington County 2007, 2006
Total Sold Dollar Volume: $ 141,197,776; $ 121,162,523 16.54%
Median Sold Price: $485,000; $525,000 - 7.62%
Total Units Sold: 252, 216 16.67%
Alexandria City 2007, 2006
Total Sold Dollar Volume: $101,777,360; $95,816,873 6.22%
Median Sold Price: $448,950 $434,000 3.44%
Total Units Sold: 204 192 6.25%
Fairfax County 2007, 2006
Total Sold Dollar Volume: $603,372,395; $775,484,842 -22.19%
Median Sold Price: $474,200; $480,000 -1.21%
Total Units Sold: 1,142, 1,411 - 19.06%
Loudoun County 2007, 2006
Total Sold Dollar Volume: $232,850,691; $248,664,757 -6.36%
Median Sold Price: $431,900; $470,000 -8.11%
Total Units Sold: 467, 467 0.00%
Prince William County 2007, 2006
Total Sold Dollar Volume: $173,203,563; $259,403,615 -33.23%
Median Sold Price: $369,000; $385,000 -4.16%
Total Units Sold: 427, 608 -29.77%
Look for the inner suburbs (and inside the beltway) to start tanking from all of the condos.
The first wave will be:
Exurbs - houses
suburbs - townhouses
inside beltway - condos
At first, houses inside (and right outside) the beltway will appear to be safe. Eventually the crashing exurb houses, suburb townhouses, and city condos will pull even the poshest neighborhoods down as the plankton dries up.
Off topic but kinda interesting. Received a mailed advertisement from a realitor that stated “Dear Neighbor, Postal rates are increasing from 39 to 41 cents effective May 14. We recognize that can be an inconvience. Therefore, we sent you these 2 cent stamps in hopes that you can avoid waiting in line at the Post Office. Have a great summer.” There were two, $.02 stamps in the envelope. WTF?
SFH average $425K in this neighborhood and at 6% commision he can buy 21,250,000 two cent stamps on the sale of one home. The question is, what homeowner would believe that 2 free .02 stamps in any way indicate proffessional real property marketing ability/knowledge. Effective marketing, desperation or just plain stooopid?
Yes, we received 2 cent stamps in the mail from a realtor too! I thought it was strange since we don’t know the guy and are not selling our house. Kind of like when you receive a little calendar with a magnet and the agent’s picture on the top, or a little recipe on a flyer in the mail each month.
Does the recipe on the flyer or the magnet with agent’s picture make you more likely to use him or her? It sure wouldn’t cause me to be persuaded.
Two 2-centers? Two? Wow, how frikkin’ generous!
Considering it already cost them 50 cents for the envelope + postage + letter, that extra 4 cents in stamps comes across as awfully miserly.
I like to be near the post office when the inevitable postal increases come about…
you get to see el stupido Amerika, in all it’s glory.
Panic is a mild word to describe how people react to their old stamps not being up to snuff, suddenly.
I got the same offer via e-mail, but the guy offered to stop by and drop them off. It seemed strange, but got all of our collective attention. We now know there are a lot of idiot Reel-em-in-ters who listen to the same marketing departments. LOL
Whoa! A book of 2-cent stamps! Makes me want to list my house and pay this guy a 6% commission for selling it!
“Currently it is difficult to gauge the timing of a potential housing recovery, as conditions continue to vary greatly,” said Technical Olympic USA Inc. (TOA) CEO Antonio B. Mon as the company swung to a quarterly loss. See related story.
“We are concerned that housing inventories appear to be on the rise again in most of our markets, and sales in March and April were disappointing,” Mon said in a statement Thursday. “This leads us to believe that we have not reached the point of stabilization as we had previously anticipated and that the difficult conditions could persist for the foreseeable future.”
Form TOA’s earnings call today. They lost $1.11 a share which was over 2x analysts estimates and the stock is UP 6% today. Is everybody stupid or am I living in the past when companies needed to make money to support a rise in the stock price?
5. Anti-Consumption: The Philosophy of Absence
We ran across an interesting article in the New York Times yesterday on… kitchen equipment.
Kitchen equipment? You mean like this?
Viking Food Processor - $299.95
No. Not like that. Like this.
Chefs Knife Sani Safe 6″ - $20.02
Ok, a cheap knife versus a $200 food processor. What do they have to do with one another?
Nothing. Yet everything.
The point of the New York Times article was that kitchen equipment bears no relationship to the quality of the food that is produced.
“Some of the best cooks I’ve known worked with a battered batterie de cuisine: dented pots and pans scarred beyond recognition, an old steak knife turned into an all-purpose tool, a pot lid held just so to strain pasta when the colander was missing, a food processor with a busted switch. They didn’t complain and they didn’t apologize; they just cooked,” NYT “The Minimalist” food columnist Mark Bittman wrote.
Fair enough. But so what?
One interesting aspect of the article was the sharp, biting tone taken toward kitchen “Inessentials.”
Thinking about a bread machine? “You can buy mediocre bread easily enough, or make the real thing without much practice.”
What about a rice cooker? “Yes, if you eat rice twice daily. Otherwise, no.”
How about that boning knife the salespeople at Williams-Sonoma always try and foist on us? “Really? You’re a butcher now? Or a fishmonger? If so, go ahead, by all means. But I haven’t used my boning knife in years. (It’s pretty, though.)”
From a Socionomic standpoint this is yet another cultural shift in the making with respect to consumption versus savings; ostentatious displays of wealth versus necessity.
The article’s question, “What do we really need to make good food?”, belongs in a subset under a larger question: What do we really need to be happy?
In a society exhausted (physically and financially) and pushed to the brink by excessive pursuit of credit and consumption, articles like this one make it OK to stop and reassess priorities.
It becomes OK to not consume.
Articles such as this, appearing with increasing frequency over the past few years, point toward the beginning of a long-term cultural shift in attitudes toward consumption, a shift precipitated psychologically by the, perhaps subconscious, recognition that many of us are overextended in almost all aspects of life; physically, occupationally, financially, socially.
Reacting to this overextension while bombarded incessantly with overt and covert images, overt and subtextual messages urging us toward ever deeper overextension and consumption requires something more than a simple decision not to consume and add to the pile of stuff we are accumulating without purpose and without need.
It requires the vilification of excessive consumption; the assertion of simplification and downsizing as, first, something “cool”, then later as worthy, higher pursuits; as traits where the measure of worth is the opposite of accumulation and is instead absence.
The credit-fueled view of absence as deprivation shifts under this weight of material possessions, so that absence becomes its opposite, the presence of some thing conspicuous by its invisibility, and attractive by the difficulty of measurement at a glance, void of design, label, price tag, categorization.
This is not anti-capitalist.
It is capitalism evolved, pushed toward the commodification of the intangible, the priceless, involving the exchange of that which defies external measurement.
In that view of capitalism what are the modes of production? What is being exchanged exactly? What is it that is being commoditized and valued per this invisible exchange mechanism?
Think about it.
I gotta have my giant juicer machine to make a liter of fresh beet juice or carrot juice. Good luck squeezing juice from a beet or a carrot.
I went to Target the other day, looking to buy a hose for out front, a rake, new broom, etc. The hose I saw was 19 bucks, I thought, nah, I’ll wait. I went into Big Lots (aka Pic n Save) next day. The SAME hose-6 bucks. Broom 4 dollars, and the rake another 4 dollars. The same exact ones. Oh yeah, nice spray nozzle 4 bucks.
This change is necessitated by the current housing bust, but can’t happen soon enough as far as I’m concerned. No material possession is as satisfying as the exchange of ideas, facts, and gratuitous humor with others.
I like your article. I quit my 110K/yr nightmare and went back to teaching and research. No more cubes, idiots that I must deal with, bosses that are hopeless, and unending stress with no real rewards. My pay is less than half what it was. So what?
Roidy
Ahh I agree. Sometimes I watch Office Space to laugh at the life of my 20’s…
Fight Club MAN!!! It is all about FIGHT CLUB!
The stuff you own ends up owning you.
The advertisers have us working jobs we hate, to buy crap we don’t need, with money we don’t have.
To impress people we don’t even like.
“To impress people we don’t even like.”
There you go. If we liked them, we wouldn’t need to impress them.
This is exactly what I have be preaching for years…simplify….buy good quality tools and fewer of them. Make or repair slightly broken objects for use…become for a lack of a better word a “ragpicker” or dumpster diver…..
The detritus modern credit fueled consumer civilizations will leave in its wake will keep most of us going for a normal lifetime.
Pots, pans, regular cooking ware, good veggies, fruit and meat and herbs and spices are all most need.
Rice cooker = essential. Ask any Asian.
Rice cooker = money saving device. Rice is lots cheaper than red meat.
Definitely. My asian wife cracked me up once when she counted our time in our new house in units of “sacks of rice”.
Yeah, I had to break away on the rice cooker, too. We use ours 3-5 times a week and it’s great. $30 well spent, and that’s for the la-de-da Wolfgang Puck model. I was skeptical, relative to an $18 cheapie, but it is in fact an excellent rice cooker and veggie steamer.
And to think I bought my blender for two bucks at a yard sale. Back in 1994.
Can someone drop the bomb on ANF? Everything is deep in the red on my screen except the VIX and ANF. Dow down 127 points.
AMF
Help. Had a drunken rant at a friend (I hope that he still is) trying to convince him not to buy in Santa Monica. He trotted out the old stand-bys: it’s different here, school districts, yadda yadda. I tried to use actual metrics (imagine that). He was just flat wrong in so many areas, but he remains unconvinced of my certitude of a “correction”. Does anyone know of a specific site that addresses Santa Monica? He’s about to drop 1.2M I was getting close to sucker punching him to steal his checkbook…
Let him buy.
You’ve done your duty, now you must let him live his own life.
if you keep him from buying, he’ll resent you, even if it is the correct decision. now you can at least sleep well at night.
My best friend just put a contract down on an $800k 714 sq ft condo a few weeks ago. I also talked until I was blue in the face about all the fundamentals. in the end, they bought anyway.
So now I go forward, and have no regrets, no worries. They have to live their own life, I’m not their nursemaid or nanny… and who knows, in the end it may work out for them (stranger things have happened)
The hardest part will be if it ends in disaster, try not to say “I told you so”… everyone will know you’re thinking it, but you musn’t say it!
Hang in there!
I guess it depends on how much risk he’s taking on. If he’s sitting on 1.2 million in cash, then the happiness he gets from the house may be worth it to him.
If he’s only spending $1.2 million in Santa Monica, he’s either buying a condo or an SFH with serious problems. I would recommend that your friend spend some serious time in the neighborhood that he is considering before the writes the check. He might be getting a small byt nice condo in a good neighborhood for that amount, or he might be getting a tiny house in gang infested neighborhood. You can go from a great neighborhood to gangland in Santa Monica in less than two miles. Some parts have low-flying helecopters overhead every night, other parts do not.
I feel for you.
One of the few of my friends who used to be able to see the current insanity of the RE market has done an about face and is going to close escrow soon on an overpriced condo in one of the bubble-overflow states in a development full of specuvestors. Why? Because his wife is going to have a baby, and he wants “to stop throwing money away on rent.” He’s now convinced that the area is special. Can they really afford it? Do fundamentals for the area support it as a good decision? No way.
I was beyond belief when he finally told me. He already knows what I think and what we have discussed previously, but he’s going to do it anyway. He had been avoiding me because he didn’t want to hear my opinion. His head is too full of dreams to have any place for whatever I’m tempted to show him.
I decided to preserve the relationship. I suggested that he do his homework on it, which he insisted that he had, and I left it at that. I will be keeping a very close eye on the area though.
Westside LA blog -
http://westside-bubble.blogspot.com/
Oh my goodness. Those prices need to fall, bigtime. Is the west side that wealthy? We rented there for a year in 1992, and people didn’t seem to be.
Hey Mr. Bubble,
just forward your friend this article from Liz Pulliam Weston:
http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/3BadReasonsToBuyAHome.aspx
When I read that article last night, I was thinking it would have been better if she wrote it and published it in late 2004. But then the herd would laugh that article off back then, wouldn’t they? I’m a renter, and I’m certainly laughing now!
Thanks all! He tried to talk me out of marrying my ex-fiancee, so a small amount of turnabout is fair play in my book.
Hey my attitude at this point in life (40yrs) is that if someone is dumb enough to do stupid stuff, even after you take time to show you care and actually give good advice, then F em. Get new friends.
Yeah, but when it comes to coworkers, their incomprehensible financial stress becomes my overtime. (Borrow from girlfriend to refill checking account so sportscar isn’t repossessed => miss a half day of work to watch the GF’s sick kid. I guess the loan wasn’t free.)
If someone can’t see what’s going on now they’re probably COMPLETELY blind.
He’s hopeless. Give up. Pray he somehow doesn’t qualify for a loan or the property doesn’t appraise to the sales price.
Yeah, I agree… maybe in February of 2006 it might be worth getting worked up to save someone from a really stupid financial move.
But now? Email him Patrick.net and be done with it.
I’m sure they can still find a NOD’d broker or two who will “work with them”.
Hilarious. The spokesmodel on CNBC is blaming decreased retail sales on the weather. Couldn’t have any other explanation, could it?
Whoops, sorry. I hadn’t seen all of the earlier posts. My bad.
If lenders are requiring a down payment, what is the typical %? Is it 10%? If so, in so cal, you would need 50k, how many people have this? The reason I’m asking is prices are still 500k on new listings. I’m wondering how they are still asking for half a million dollars when the average wage is 35-40k. When is the big downturn going to happen? How in the hell do people afford 4000 a month for a mortgage? I am soooo tired of waiting. Arghhh!
A few weeks ago Yahoo was pimping an article on “shared equity” purcheses.
Someone (probably a parent) gives you a huge chunk of money, and you grant them a share of profit in the equity of the home at some point in the future.
Buy a $500K house with $50K down from your parents. Wait 10 years. If the house is worth $1 million, then the lender gets his $50K back, +$250K half the gain. If the house is only worth $700K 10 years from now, then they get their $50K and $100K.
Ummm… Hello.
Finish the extrapolation.
What if it goes up zip? Oh, they just get their $50k back. How? If you don’t have $50K now, how can you have it 10 years from now when you house is sucking up every penny you can get your hands on.
If it goes down…. Hmmm…. then what?
If it gets foreclosed?
They get the jet ski and the big screen.
If lenders are requiring a down payment, what is the typical %? Is it 10%? If so, in so cal, you would need 50k, how many people have this? The reason I’m asking is prices are still 500k on new listings. I’m wondering how they are still asking for half a million dollars when the average wage is 35-40k. When is the big downturn going to happen? How in the hell do people afford 4000 a month for a mortgage? I am soooo tired of waiting. Arghhh!
sorry for double post
Damn the weather! Not only did it muck up home sales, but now it has struck the retail sector!!
———————————————————————————-
RETAIL
Cruelest month
Chain U.S. retailers suffer worst April since same-store-sales records began 37 years ago.
Easter egged April sales; most retailers miss
By Jennifer Waters, MarketWatch
Last Update: 1:11 PM ET May 10, 2007
CHICAGO (MarketWatch) — April was largely a sales disaster for most of the nation’s biggest retail-chain operators, as consumers pulled in their purse strings after March’s spending spree and as they faced rising prices at the gas pump, as well as a slumping housing market.
But it wasn’t unexpected. Retailers raised flags well ahead of Thursday’s results, and investors grounded themselves long before that for what has become a record-breaking month of dismal sales numbers.
As a result, investors expected — and priced into retailers’ stocks — that the sorry combination of poor weather, an early Easter and tough year-over-year comparisons would hurt the final tab of same-store sales numbers for April.
(April’s negative results ‘are not necessarily an indication that consumers are not spending or that the economy is going down.’
— Jharonne Martis, Thomson Financial)
With 51 retailers reporting to Thomson Financial, 85% of them missed expectations for same-store sales, the industry’s benchmark for growth measured by receipts rung up at stores open longer than a year.
http://www.marketwatch.com/news/story/aprils-slide-retail-sales-actually/story.aspx?guid=%7B972C8768%2DEFEE%2D46D3%2DA584%2DA721B9501D86%7D
For perspective on how bad the retail report is, note that 37 years ago would take us back to 1970 — well past the back-to-back Reagan recessions (1980 and 1982) which most economists would agree were the worst in U.S. history over the post-Depression period.
The tone of shocked dismay at the “worse-than-expected” retail report is part of a pattern of shocked reactions to developments that some regular posters foresaw some time ago as logical consequences of a real estate bust. I am always puzzled when I read this kind of nonsense whether it is best explained by
1) denial?
2) ignorance?
3) cynical manipulation of public perceptions to help those who know what is going on make more money than they would with an informed public?
And Reagan’s Fed under Volker had to crank interest rates to 3 times as high as they are today to wring the stagflation out of the system. What would sales look like today with Prime in the mid-teens???
Paging Aladinsane…gold is getting hammered-down $15 as of 1:53 pm.
Cool! I’m gearing up to buy more PMs.
PMs = ?
precious metals
Is there a fundamental reason why gold and U.S. headline indexes often get hammered on the same day? Because I have always thought of gold as a hedge against big declines on the U.S. stock market, but with correlation and all, they seem to move in sync more often than not these days.
GS, One needs to know who is selling and why - The answer goes back a few weeks. (possibly your PPT)
Reuters, Sat Apr 21, 2007
“BERLIN (Reuters) - European finance ministers got help from Washington on Saturday as they renewed an endeavor to prevent the euro’s rise getting out of hand.
In an interview released overnight, U.S. Treasury Secretary Henry Paulson said that he still believed in a strong dollar — confirming a line Europe was striving to convey to markets which keep betting on further euro rises versus the dollar and yen.”
The ECB is a seller of gold and has been for the last few years.
“Sure enough the ECB can’t keep up with this pace of selling (they sold 89 tonnes in last 7 weeks) and once this selling pressure dies gold is ready to go.”
Eric Himmelberg
If gold closes the month of May above 680, it will be the highest monthly close ever! This event could be precipitous for the Euro/dollar. Traders have been shorting gold and then buying it back from the ECB, there are 11M tons left to sell. Germany is not selling its gold. There is not enough gold available for China, Russia, Japan or Norway to justify a buy of a few million oz (fortunately for us). Fortunately for Russia and Norway, they are divested from dollar reserves. China and Japan are going to be the dollar bagholders.
“Treasury Secretary Henry Paulson said that he still believed in a strong dollar…”
Believing is one thing and achieving quite another.
“China and Japan are going to be the dollar bagholders.”
A wise man once said, ‘Fool me once, shame on you. Fool me twice, shame on me.’
If they are holding onto cash and treasuries, then yes. If they are buying securitized loans, that isn’t the same.
Gold at 666, silver at 13. Superstitious?
Given that the historic ratio of gold to silver prices is around 15, silver is ridiculously undervalued right now.
Ratios cut both ways.
Just saw an add for this on CNBC…. between their stories about the declining housing market.
http://www.hurryhome.com/free-real-estate-listings.aspx?
Free gift…. “Finding and profiting on fixer-upers”.
castig a net looking for more sucker fish…
I suspect these are housing related layoffs
JWT Employment Communications
Layoff Report My 3, 2007
Fleetwood Enterprises Inc. (RV manufacturer)
Riverside, CA
101 - 500
Atari Inc.
New York, NY
International Business Machines Corporation
Armonk, NY
over 1,000 people
Norbord Inc.
Toronto, ON
Juniper, NB
Eighty-five people are losing their jobs today as the Norbord mill in Juniper, New Brunswick closes up for good. The closure follows months of failed efforts to find a buyer or a new partner for the I-joist plant.
Briggs & Stratton Corporation
Wauwatosa, WI
Power tool and engine maker Briggs & Stratton Corp. will cut 41 jobs from its engine division in June, according to filings with state and local authorities.
Cardinal Home Products Inc.
Solon, OH
Linesville, PA
A plant that makes metal building columns and adjustable jacks closed Monday, idling 19 workers in northwestern Pennsylvania.
Furniture Brands International Inc.
St. Louis, MO
Furniture Brands International Inc. said Friday it plans to cut about 80 executive and administrative positions across the company. The St. Louis-based company also said it will close three manufacturing facilities in North Carolina, resulting in the elimination of about 150 jobs.
J Squared Inc.
Morristown, TN
The state has received notice from University Loft in Morristown that it has laid off 40 people. The company makes furniture for colleges and universities.
Unaka Company
Greenville, TN
MECO Corp. in Greeneville is laying off 115 employees effective June 15. The company manufactures residential and commercial folding furniture, outdoor barbecue grills and motorcycle accessories.
PetSmart the company is laying off the facility’s 240 employees over the next six months following the sale of the company.
The Gap Inc.
San Francisco, CA
After nearly three years of sagging sales, clothing retailer Gap Inc. is trying to figure out how many workers to lay off as part of a cost-cutting effort designed to lift its profits. Responding to a story published Wednesday in the New York Post, a Gap spokesman confirmed job cuts are inevitable
http://www.jwtec.com/hrlive/layoffs.php
AMD (PC chip manufacturer) announced it will cut 430 jobs. These are positions in Sunnyvale/Santa Clara, CA, Austin, TX and Markham, Ontario.
http://www.mercurynews.com/businessheadlines/ci_5860928?nclick_check=1
US launches campaign for more foreign investment
http://news.yahoo.com/s/afp/20070510/bs_afp/useconomytrade_070510164110
GS, see they think like you do.
I read this and felt it was another step to becoming a third world country.
Stupid Question: If you had a mortgage from Countrywide (or any other lender) and that lender went bankrupt, don’t you then own your house free and clear? If not, why not?
No. Look what happened to New Century after it went bankrupt. Its assets, including its subprime loan portfolio, were sold as a part of the bankruptcy liquidation. A hedge fund picked up the loans for about $0.30 on the dollar. It’s up to the new owners of the loans to go after borrowers in default.
Like the phrase: “Now, Reno’s downtown is undergoing revitalization as developers convert old casinos into condominiums.” in the:
http://finance.yahoo.com/real-estate/article/103005/Best-Affordable-Suburbs:-West?mod=oneclick
Soft US data raise new fears for Fed
By Michael Mackenzie in New York, Chris Giles in London and Ralph Atkins in Dublin
Published: May 10 2007 23:13 | Last updated: May 10 2007 23:13
US stocks suffered their worst one-day decline in two months after weak chain-store sales and a widening trade deficit raised concerns about the health of the US economy.
A run of data showing slowing economic growth could raise fresh challenges for the US Federal Reserve after it reiterated its concern over inflation at its policy meeting on Wednesday. US retail sales and inflation at the production level for April are due today.
The data followed hawkish stances from the two main European central banks, which signalled that they would move further to control inflationary pressures across the Continent. The Bank of England raised interest rates by a quarter point to 5.5 per cent, while the European Central Bank indicated that it would also move rates higher next month.
Some investors had expected an even more vigilant tone, and both the euro and the pound moved to their lowest levels against the dollar in more than a month.
European stocks closed lower on Thursday, and are expected to come under further pressure today after losses on Wall Street.
The US trade deficit prompted analysts to slash their forecasts for US first-quarter growth to below 1 per cent. The provisional government estimate put it at 1.3 per cent. US markets were also unnerved when it was revealed that 85 per cent of US retailers missed their shop sale targets in April. The S&P 500 decline of 1.4 per cent was its largest loss in a day since mid-March.
http://www.ft.com/cms/s/c638811a-ff42-11db-aff2-000b5df10621.html
REVIEW & OUTLOOK
Freddie Krueger Mac
May 10, 2007; Page A16
Just when you think they’re defeated, Fannie Mae and Freddie Mac arise in Congress to kill any attempt to clean up their dangerous habits. This week’s scary movie comes as an attempt by four Members to blow up a carefully negotiated deal between Treasury Secretary Hank Paulson and House Financial Services Chairman Barney Frank.
http://online.wsj.com/article/SB117876393331198058.html?mod=googlenews_wsj
google on freddie krueger to get the whole story…
(And click on “News” unless you were more interested in the actual Nightmare on Elm Street than the metaphorical version at Fan and Fred…)
When leaving the office in Irvine tonight, I had to take a flyer off my car advertising a new home development out in Corona. No prices were advertised, but they did say “own your own home for what you pay in rent!”. The flyer didn’t give the prices, it simply stated that monthly payments range from $1360 to $2K. Competitive financing programs are available: Seller pays closing costs, 100% financing options, interest only options, 30, 40 and 50-year loans are available. Yikes…. they’re offering 50-year loans now? And the fine print at the bottom discloses that the monthly payment estimates don’t include property taxes. There’s a Wells Fargo Home Mortgage logo on this flyer so I’m assuming they’re loaning the money.
The Fannie Tax
WSJ Online
…
And yet the current meltdown in the subprime and Alt-A mortgage markets has led to calls — by the same people now dunning Fan and Fred — for all kinds of new lending oversight, rules and restrictions. Mr. Frank’s latest brainstorm is to stick investors in mortgage-backed securities with the losses when subprime borrowers default. It’s hard to imagine a measure better designed to cut off credit to those Mr. Frank claims to want to help. If investors don’t have legal certainty about the debt they are buying, they won’t lend the money. And no new subprime lending means no homeownership for many Americans. But maybe this is what Mr. Frank meant when he told Bloomberg News that “more money was lent than should have been lent.”
(Google on “fannie tax” then click “Search News” to find the full article)
this sound really good! If on top of that the investors also start suing the hell out of the Wall Street firms the repackaged the loans we are getting somewhere. Let’s reintroduce some risk in the markets, what a novel idea