Bits Bucket And Craigslist Finds For July 12 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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U.S. Foreclosures Jump 87 Percent as Lending Practices Tighten
The number of U.S. properties in foreclosure climbed 87 percent last month from a year earlier as home prices fell and lending standards tightened, making it harder for borrowers to sell homes and refinance mortgages.
There were 164,644 loan default notices, scheduled auctions and bank repossessions in June, led by filings in California, Florida, Ohio and Michigan that together accounted for half the total, according to RealtyTrac, a seller of foreclosure data.
An estimated 58 percent of properties in the foreclosure process are linked to borrowers with subprime loans, and RealtyTrac expects U.S. foreclosures to reach 1.8 million by year’s end, Rick Sharga, a spokesman for the company, said in an interview.
Nevada had the highest foreclosure rate in June with one filing for every 175 households, more than four times the national average of one per 704, RealtyTrac said. Nevada had 4,722 foreclosure filings, more than three times its total a year ago.
California had the second-highest rate, with one filing per 315 households, and the most filings overall, 38,801, for the sixth month in a row. Foreclosures in California, the most populous state, increased almost three-fold over a year ago.
Colorado had the third-highest rate with one foreclosure per 317 households. Florida was fourth with one per 347, followed by Arizona with one per 383, Ohio with one per 403 and Michigan with one per 420.
Six of the top 10 U.S. foreclosure rates for metropolitan areas were in California. Stockton, Merced, Modesto and Riverside-San Bernardino occupied the top four spots. Vallejo- Fairfield was seventh and Sacramento eighth.
Las Vegas had the fifth-highest foreclosure rate, Greeley, Colorado was sixth, Detroit was ninth and Miami was 10th
On the other side, if “58 percent of properties in the foreclosure process are linked to borrowers with subprime loans“, then 42% of these properties in the foreclosure process are prime or Alt-A loans. That’s over 2/5. Almost half.
Sure doesn’t sound like this problem is “contained”…
good point :-)!
on bloomberg- a wachovia wonk giving subprime the all clear
-what’s he supposed to say?
D’oh — look at the funny curves on these graphs…
http://www.markit.com/information/affiliations/abx/history
Wow, Stucco, even the AAA’s are getting blasted. Imagine if your anticipated return for a AAA MBS was 5.5%, and your bond just dropped in value by 7%. Scooby Do says it best: “Ruh Roh”.
haha, I love that page! It’s the new ARM reset graph.
Nice post, Stucco. It really shows nicely the advancment of the debt problem up through the grades as onths go by, Jan for BBB, Feb for A, late June for AAA, July for AAA. Sure, we expected problem with BBB’s, but not AA’s — and now AAA’s. Yikes!
Just keep in mind that the scales on those charts are different. The poo is getting flushed out to sea, but the supposedly good stuff is just doing a little bobbing. IMHO the problem is that there is little chance of this unwinding in the way that the models of the rating agencies have predicted. There’s likely to be alot more difference between middling risky tranches of securities made from insanely risky loans and insanely risky tranches mode from middling risky loans. This would mean that the ratings were wothless even at judging the relative risks of MBSs, not just inflated over all.
“…but the supposedly good stuff is just doing a little bobbing.”
The supposedly-good stuff has resets that don’t peak until about four years out. The really toxic stuff (aka subprime) has resets peaking right about this summer (shtf time!).
Oh I don’t think that there’s any way to prevent alot of alt-a paper form going down the crapper, I’m just saying it hasn’t been flushed by the invisible hand yet.
Didn’t Wachovia buy Golden West the California subprime company? I believe it was the couple who originated the business…yes, they clearly sold at the top of the market a couple of years ago.
Wachovia better pray subprime is “all clear” in this case, no?
Wachover better hope the unwashed masses believe their “subprime all clear” propaganda.
Spike
http://biz.yahoo.com/rb/070712/usa_housing_foreclosures.html?.v=2
Yeah, I love the spin in that headline. Then about 5 sentences into it they tell you that forclosure rates are still anywhere from 87% to 400% higher YOY, depending upon your city/region. Real objective journalism there. I get so tired of the MSM and their rear-view-mirror analysis.
Well, the could have titled it, “Foreclosures remain at 87% to 400% YOY,” but that’s not really news. The new info (news) is that foreclosures dropped from last month, but that a spike is expected. I’m usually skeptical of the headlines (like yesterday’s headline that suggested an NAR report was fact not spin), but I think this one is ok.
As an aside - I think it is dangerous for people to attack the credibility of the media every time they are unhappy with the facts of the reported story. The label “mainstream media” is a term coined by the extreme Republican Right Wing to discredit the media and give (undue) credibility to their minority opinions presented in non-traditional outlets (talk radio, right wing websites, etc….). Don’t buy-in to the propaganda.
“Don’t buy-in to the propaganda”.
So tell, what’s not propaganda?
Well, propaganda usually involves an intent to pursuade and change minds to accomplish a certain objective as opposed to an intent to report and inform.
“..what’s not propaganda? ”
That which I agree with.
That describes just about any media outlet these days (MSM or not). It seems everyone has an axe to grind.
Colorado, that’s not true. Many media outlets are just trying to make a buck. To that end, lots of reporting is based in sensationalism as opposed to an underlying agenda. Personally, I liked it when the media was generally suspicious of the government, regardless of who was in office. As the government is a propoganda machine, the media can serve a valuable role in public protection by generating counter propoganda. Alas, these days too many people have already bought-in to the government propaganda and the media has been kow-towing or too focussed on making a buck. A shame for the public.
Advertising=Propaganda
“A shame for the public. ”
As a part of this “public” you refer to, I don’t need the mass media to counter-propagandize me.. thank’s anyway.
joeycal -You don’t need the counter-propaganda, but a lot of the sheeple (e.g., duped subprime borrowers) do. And, btw, the terrorists are coming to kill us because they hate our freedom. Good thing we’re fighting them there so we don’t have to fight them here.
“these days too many people have already bought-in to the government propaganda”
Mikey(2). Apparently you haven’t heard of NPR, the NY Times, LA Times, Boston Globe, Washington Post or CBS, ABC and NBC. I know their “influence” is waning but suggesting that these major media outlets are mouthpieces for a Republican administration is utter nonsense. I’m all for criticism of EVERY administration but to claim “THE MEDIA” simply spews the “propaganda” of this administration is either complete ignorance or an outright lie. Scence I doubt know you, I’ll attribute the comments to the former.
Please, find a link to a news story by one of the above that endorses anything that Bush is doing besides increasing spending on AIDS in Africa. Find a position supportive of ANY PART of his efforts against terrorism.
You may believe there is no terror problem to be concerned with, I disagree. If you’d lost friends on 9/11 you might take regard this “issue” a bit more seriously.
Many media outlets are just trying to make a buck.
True, so they distribute other’s propaganda to make a buck (like the NAR’s lies).
I’m not saying the major media outlets are perfect, I’m just saying that attacking them as completely non-credible - which is what Bear-Cigar did - plays into the Right Wing’s attempt to do away with the media’s power against the government and stifle all (Republican)government dissent. Sig Heil!
jag - I’m not saying the major media outlets are Republican mouthpieces; on the contrary, they still retain their questioning attitude toward the government. I’m saying that there is a right-wing movement (Limbaugh, Hannity, Coulter, and other propagandists in the minority media outlets) to attack this traditional role of the media with the ultimate intent to stifle all government dissent. To a great extent, the Media has bowed to their corporate (Republican) owners and is less questioning of the government than historically. At the height of the 9-11 propaganda for invading Iraq, the major Media outlets were all on board, or at least gave more credibility to the government’s assertions than the facts dictated. We all took 9-11 seriously, and we all felt very vulnerable; and our government took full advantage of the public’s vulnerability, and here we are in Iraq. Even now a large percentage of the population believes that Iraq was responsible for 9-11.
If somebody involved is not upset by the content of a news-report, then it’s just a press release.
Jag -
I believe the real function of most of the “news” outlets you mentioned is to appear to be “liberal” and skeptical of the government without actually stirring up anything of any real consequence.
Case in point, I don’t recall any of those outlets you mentioned reporting that President Bush(the first one) was having breakfast with Osama Bin Laden’s brother the morning of 9/11.
I’m not saying there was anything overtly sinister going on there, but if the media were truly liberal as you probably believe, they would have DEMANDED an explanation for that, and not let it rest until the American public had a full explanation for why our former president was doing business with the(half) brother of the guy responsible for the attacks.
Instead it was pretty much swept under the rug and ignored.
There are many more examples of things a truly liberal media would be covering but don’t. What we actually have is a media which only pretends to be liberal for appearances.
Whatever you may thing of him and his other opinions, Chomsky was right on the money on this one.
Oh, and sorry to add to the threadjack, but I should add that the same dynamic I just describes is fully applicable to the media’s handling of the current RE situation.
They’re only reporting the downside now to save a modicum of their credibility(what there is of it) since ignoring it would be patently absurd and more that a little ridiculous.
Notice though that they still tend to spin in favor of the REIC more often than not even now.
My $.02
SR
You really sound like you want the goverment or some other authority to limit expression to what you personally approve of as “mainstream”.
I’m sure in your world HBB would be shut down, because it expresses “minority opinions” in a “non-traditional outlet”.
In the America I know, the more free speech there is, the better. If you don’t like certain TV or radio programs, don’t watch or listen. But don’t get upset because others have opinions different than yours, and choose not to trust certain media outlets.
If you’re reading this blog you’ve already made a “dangerous” personal judgement as to the “credibilty” of the media - and you’ve concluded (as the rest of us have) that they don’t have any, at least on the subject of housing bubbles!
az - I’m saying that people are stupid and buy-in to government propaganda - it’s notoriously successful - and labeling the media as non-credible is just a ploy to lure people away from the government’s greatest impediment to tyrrany: public awareness of the truth. I’m not against minority media outlets, except to the extent that they are spewing government propaganda.
You, apparently, have drunk the government Kool-Aid and believe that the major media outlets are not trustworthy. Just what the government wants you to believe.
Ummm, you know, it is possible to trust neither the goverment or the mainstream media. On most topics they are both wrong. For instance, both the gov’t and MSM really think it’s a good time for the average American to spend, spend, spend, hence the rosy “official” numbers and all the cheerleading and advertising on TV, etc. If the MSM said “there’s probably a recession coming soon, save your money” do you think their advertisers would be happy? Where do you think the $15 million per year to pay Katie Couric comes from?
Look, it’s good to question everything, government, media, or otherwise. What’s bad is the manipulation of media reporting by the government and its corporate owners who are in the government’s pockets (hence, the “official numbers,” “spend, spend, spend” and all those other reports that you dislike). There was a time when corporate advertisers did not dictate what the media said; that’s a fairly new development. But you can’t blame the media (and by “media,” I mean the people that actually do the reporting and investigating, not the suits) for the change -which is what spurred this discussion - you have to blame the government and its corporate favoratism. Right wing government sympathizers attack the media as a matter of government protection.
So that’s why the democrats now want to reinstate the “Fairness doctrine” that would have prevented conservative talk radio from derailing the “bipartisan” Bush Administration / Democrat controlled Congress amnesty bill, to keep the “alternate media” from railing against the mainstream media in defense of the government, right?
Without conservative radio the government’s grand amnesty scheme would have gone through unimpeded. And the MSM was right there behind it, cheerleading. Who exactly is protecting the government from the people here?
I get the feeling your “rules” are:
“Mainstream media agreeing with government when government is Democrat = good”
“Mainstream media agreeing with government when government is Republican = bad”
“Alternate media when agreeing with liberal politics = good”
“Alternate media when agreeing with conservative politics = bad”
“Mainstream media agreeing with Republican goverment on liberal politics while also disagreeing with conservative alternate media = good”
Is this about right?
Mikey - many of us know what you are trying to say and agree with you. The media feel asleep on the job for the last few years (even the most “liberal” mainstream ones) and did not question that which they should have. Personally, I want media that mistrust the government (no matter who is in office) and rides their asses over any decision that serves special interests over the average citizen.
I don’t know why the media is considered so “liberal” - it certainly hasn’t done a thing watching for fascism or the destruction of wealth (at the lower ends anyway) lately.
az -
I’m actually quite conservative, both socially and fiscally. What I recognize -and we discuss it here on HBB often - is the stupidity of the American public. So you get guys like “Cigar and Beer Guy” who merely parrot what the talk radio guys say without giving it any real thought. The Fairness Doctrine and other such regulations seek to educate the stupid, or at least stop them from being brainwashed - it’s sad that it’s needed, but it is. The media presented both sides of the immigration bill; not sure what cheerleading you’re talking about. Perhaps you were so angered by it that you perceived cheerleading, but there was none.
You gotta stop listening to that talk radio crap - you sound just like’em with that “amensty bill” and “MSM” talk. Amnesty for convicted felon Libby: good. You sound like a smart guy - use your brain instead of listening to those SS-agents.
Mikey,
If you support the so called fairness doctrine and the amnesty bill, you are pretty far from conservative.
“The Fairness Doctrine and other such regulations seek to educate the stupid, or at least stop them from being brainwashed - it’s sad that it’s needed, but it is.”
Did you ever stop to think that those who choose to listen to any form of talk radio are not stupid or being brainwashed? They just may be tired of listening to media outlets that do not support their views and beliefs. Perhaps they do not want to hear both sides. Do you want to force people to listen to neo socialist tripe just so they have both sides of the issue? What if more than two opposing views exist for a particular issue? What about the Libertarians, Communists, Fascists? I prefer freedom
I like the Fairness Doctrine because then “all” media outlets, MSM, CNN, MSNBC, and even Air America will have to allow the conservatives equal time. Just think about Rush or Shawn doing segments on Air America.
Tell you what, if you don’t like what you’re hearing or seeing, turn it off.
Oh yeah, Mikey, you may think you’re a conservative, but you’re off the reservation my a mile.
Lip
You’re confusing conservative and Republican. Not the same. Shall we open the door to Republican spending?
Testify Mike! Right on brother….
$282 Million Stolen in Heist at Private Bank in Baghdad
In an astonishing heist, guards at a bank here made off with more than a quarter-billion dollars on Wednesday, according to an official at the Interior Ministry
http://www.nytimes.com/2007/07/12/world/middleeast/12iraq.html?_r=1&oref=slogin
Why do I get the feeling I just lost another dollar?
just wonder what they are going to spend this $282M on …
Well if we we’re lucky it would be liquor and ho’s. Unfortunately I’d wory that RPGs and SA-7s are more likely expenditures.
nice one!
More from Massachusetts:
2,200 to get reprieves on foreclosures
Facing threat of a suit, subprime lender to let state review mortgages
Fremont Investment & Loan yesterday agreed to postpone foreclosure proceedings against 2,200 Massachusetts homeowners after state officials determined the lender gave subprime mortgages to borrowers who could not afford the loan payments.
http://www.boston.com/business/globe/articles/2007/07/12/2200_to_get_reprieves_on_foreclosures/?p1=MEWell_Pos4
Yesterday we announce that we are giving 250,000,000 dollars to refinance FB’s. Now today we stop 2,200 foreclosure proceedings. It might be cheaper to give the entire state a financial IQ test and give homes to lowest 10%.
This is getting old.
ma is going back to the taxachussetts days- what biz would mave there after seeing this and the FREEer healthcare plans
I love this line:
One such borrower was Patricia Sujballi, who in May 2006 purchased a two-family home in Dorchester. Fremont gave her a subprime mortgage for $529,000, even though she had just moved out of a homeless shelter, was unemployed, and her husband earned around $32,000 a year.
Sujballi can’t be helped, not by some “fund” and not by more time.
This “program” is a gesture. It won’t help those who are completely underwater. When people try to get this “help” they’ll quickly understand that they’ll be still be paying a fortune to stay in a property that is 40% less than what they paid. Even the “math challenged” can figure out foreclosure is a better option than feeding an alligator.
Applaud the foreclosure moratoriums - nothing will tighten up lending standards than the risk of not being able to foreclose.
And tightened lending standards means house prices come back into line with income.
No more will the person who is the most irresponsible or the worst at math be setting the prices for a neighborhood.
“No more will the person who is the most irresponsible or the worst at math be setting the prices for a neighborhood.”
I love that…
Yes — most excellently put.
Or even make lenders withdraw from lending partially or entirely in a particular county or state. We use to recieve notices from lenders all the time announcing restrictions placed on certain regions. So yes, I agree, they’re just compounding their own problems.
Boy, I would love to see some lenders announce that since the state is proscribing enforcement of their rights in property, they will no longer be making loans in the state (after all, if they have to hold on to these places for another x months, and the property value falls another few percentage points during that period, they’re just getting reamed…). It won’t happen though, they can already see the predatory lending political cases in the pipeline and no one wants to step up to the plate and get beaned…
And if they all bailed out like FL insurers, the state would probably get into the mortgage business in MA.
Isn’t there some kind of military maxim along the lines of: “don’t reinforce failure” ?
We’re just rewarding — and reinforcing — failure here.
Balancing foreclosure moratoriums is the transfer of tax money to risky lenders and borrowers who are risking defaults.
Bailouts will further prop up prices as lenders realize they can still make money making very risky loans as politicians will bail them out.
NAR is the third biggest political contributor. As the market slows, they’ll be looking for some return on their investment from the politicians they’ve purchased.
From the site:
The National Association of Realtors represents the nation’s real estate industry. While the bulk of its issues tend to deal with property management and control, the group also lobbies members of Congress and the administration on virtually every issue facing business, including health care reform, bankruptcy legislation and tax cuts. One of its biggest issues in recent years has been a move toward deregulating the financial services industry…
The top people in that industry are sharp. They know the score and what keeps this market going. Lax lending standards are at the heart of this bubble. But the realtor gets his commission off the inflated price. And that is ultimately the bottom line the NAR is concerned with.
Investors will not continue throwing their money away by buying the junk CDO’s, and lenders aren’t about to start servicing the garbage, so it’s curtains for prices, and the NAR.
No the NAR is only concerned with keeping the number of realtors high so they can rake in all that money. Even the realtors who sell nothing have to pay the dues. Commissions have no bearing on what the NAR collects.
This might be the BEST idea in along time, we are having trouble recruiting people for the military..so Bank takes the house, and NO foreclosure, no bankruptcy on your credit report and you serve a 2 year stint in the service.
———————————————
Or, she could make herself useful, and volunteer for the army.
Interesting thought. So many wouldn’t be able to physically do the job, and you’ve have to throw in credit card debt forgiveness, too, but still…
Yeah, that’s just the kind of person I’d want to serve with, NOT.
There are some good people in the military, but there are plenty that are in no way better than an FB working off debt. I wouldn’t expect the overall experience to get a bit worse than it already is.
“Fremont gave her a subprime mortgage for $529,000, even though she had just moved out of a homeless shelter, was unemployed, and her husband earned around $32,000 a year.”
Very similar to the strawberry pickers in Cali with their $700,000 home. The mortgage fraud is so completely over the top. No wonder subprime is melting down. The mortgage brokers were definitely in it for the fees.
You beat me to it - sorry for stepping on your toes!
Hey, no problem, I’m just glad you posted the story. It is interesting that Mass led the bubble and is now leading the “bailout” effort. Big difference between Romney and Patrick. I think Patrick means well, but much of his career has involved helping and defending victims. When you’ve got a hammer, everything looks like a nail.
From the Boston Herald:
Almost all involved loans that were “really problematic.” A common story emerged: Loan applications often stated much higher incomes than what the beleaguered owners were actually earning or said they reported earning, Pulster said.
http://business.bostonherald.com/businessNews/view.bg?articleid=1010842
But they still signed the documents, didn’t they…
On this fraud, the loan companies need to take the hit.
My solution is, let the homes go into foreclosure but don’t let it touch the buyer’s credit rating (where there was fraud). The buyers can start to rent again, without a record, and the loan company takes a hit.
YES!
“let the homes go into foreclosure but don’t let it touch the buyer’s credit rating (where there was fraud).”
There couldn’t be fraud without collusion on the borrower’s part–they had to go along and sign docs with fraudulent income statements, assets, and the like. Why should they get off scot free?
Ms. Sujballi can return to the homeless shelter from which she came…living once more on the taxpayers’ dime. Or, she could make herself useful, and volunteer for the army.
Or, she could make herself useful, and volunteer for the army.
Lately I’ve been thinking that illegal aliens will be able to get a green card by serving in the military. That solution would be more easily sold to the masses than re-instituting the draft.
Did you hear about the illegal alien lady who got naturalized when her husband went MIA in Iraq?
Spike, I understand your ire but..
1. Being a renter for the rest of your life is not scot-free.
2. If we decimate the individual homeowner (not the flipper mind you, but the naive homeowner) they become all of our social problem– you will be paying their welfare check as will I.
3. The only way to stop this problem from continuing and happening again and again is to make it unprofitable for lenders, bankers and mortgage brokers to prey on homeowners. Letting those who prey off scot-free is a greater sin by the power of 1000 - these predators had a fiduciary responsibility to these homeowners, to the industry and to the rest of us innocent bystanders (who may pay for the mess) not to hand out these shaky loans like candy in the name of short-term profit. They failed at their responsibility and they must be held accountable, or we have not solved the problem at all. Which brings me to:
4. It’s the predators who have the money to pay us back -not the individual homeowner
As this crisis goes on, there will be a lot of effort in the lending biz to deflect blame onto the consumer. (who, as I’ve repeated here before, listened to a constant drumbeat from realtors, bankers and the press that they had to “buy now or be priced out forever.” Don’t fall for the real-estate-industrial complex’s blame-avoiding propaganda — if we do, we make our much worse, not better.
housegeek said:
“The only way to stop this problem from continuing and happening again and again is to make it unprofitable for lenders, bankers and mortgage brokers to prey on homeowners. Letting those who prey off scot-free is a greater sin by the power of 1000 - these predators had a fiduciary responsibility to these homeowners,”
——————
But it IS unprofitable for the lenders already– that’s why 97 have imploded this year. It was temporarily profitable to book those pay options because of the way they could count a fully-amortized monthly payment as profit regardless of the actual amount payed (neg-am minimum in 80% of cases)… and that law should be changed. In any case, as those borrowers default, the profits have to be unwritten (Countrywide, I’m looking at you).
As for making it unprofitable for brokers to prey on borrowers. I assume you’re talking about fraud. Yes I agree that should be unprofitable, and it’s rather shocking how impotent the police are at enforcing the law. If you’re talking about a broker putting somebody in a 2/28 with a 3 year pre-pay with 4 points YSP when they could have qualified fixed A paper… well that goes back to the “fiduciary” thing. Only in California (that I know of) is the broker fiduciary of the borrower according to law. Everywhere else, they are just car salesmen, except that people tend to actually look at the cars they buy.
There are some changes we could make. Use digitally signed documents (appraisals, bank statements, VOEs, etc) to make the “white-out fraud” impossible. We could require brokers to use bold letterhead that states “This broker is not bound by law to act in your best financial interest.” We could set up a special agency that deals only in investigating and prosecuting fraud. We could attach early-payment default penalties to the commissions earned by brokers.
But the real issue, at the end of the day, is that the source of the crazy credit needs to be turned off. Someone was footing the money that was lent to put those borrowers in homes, and those people are the proud owners of CDOs. It’s dead money. Gone. Folks, this is a self-correcting problem. The correction will be violent, sure, but all the bail-outs in the universe can’t stave it off for long.
Ajas, the brokers and lenders reaped obscene profits charging fees on these loans (the riskier the loan, the higher the fee) and then selling them off as CDO junk to wall st -leaving someone else to hold the bag.
Ultimately, it is indeed an unprofitable biz to screw your customers (both the individual homeowner and the investors you sell your bad debt to) — but when you think like a junkie -that is, think in the near-term, as most businesses these days do, you just dont’ care that you wind up screwing yourself and the economy when it all falls down. Because you’ve made your money on the con.
Yes, a lot of naive homeowners rushed in, didn’t read the fine print, and got taken — whether by their own greed or fear — but focusing our outrage on the mark instead of the con man is going to take the con even furhter -by making the situation even more costly for all of us. We have to go after the avaricious -those who still have the ill-gotten bags of money in their pockets. Those people are NOT the homeowners.
Housegeek you got it all wrong man (was this a troll?). I’ll address your points in order.
1) You’re echoing the REIC propaganda that being a renter is worse than being an “owner”, like its low class. to rent. You can rent the same asset that you can buy when you rent money from a bank.
2) You are much to quick to accept that we have a social responsibility to risk takers and stupid people. When you subsidize something you get more of it- stupid people and risk takers.
3) When a bunch of individual people get burned speculating, they don’t do it so quickly again, they remember. Talk to people that lived through America’s first depression if you question this. This holds for businesses people as well. This is where market discipline comes from. You’re advocating for the nanny state, a place I would never desire to live. You let these people off scot free and they’ll be right back in line competing as your equal when you, as a responsible person, go to buy a place. Realtor will say “We have multiple bits on that place on the market for 6 months”. No I’m sorry, just as their existence drove prices above fundamentals, there absense will bring prices below. There are rules for the life of bad credit and value of good credit, don’t change them now that I’ve already made plans based on the rules.
4) Why don’t you get mad at maggots (originators) for feeding on the road kill because they’ve profited without effort. The investors in these securities are getting theirs as we speak. Where is can be proven the law was broken, punishment should be given.
Calling these bozo’s homeowners is just RE shill talk, they never owned anything. They owned an “option” at best. How much do you own when you lie about your income and then put nothing down on a house?
>> But it IS unprofitable for the lenders already– that’s why 97 have imploded this year.
The mortgage brokers don’t seen to be “lenders”, rather commission sales people.
“Where there was fraud”, yes, this is an excellent suggestion.
Unfortunately, it would be hard for many to believe that people with Sujballi’s story (forced to sign) were completely innocent. Maybe they were so dumb that they couldn’t fathom what they were getting into but I think a decent investigation into their level of stupidity would be very enlightening…….one way or another.
“Sujballi said she and her husband tried to get out of the Fremont loan at the closing when they realized they could not afford the $4,700 monthly payment, but said they were pressured by the bank’s attorneys to sign it.”
I wonder how long it took for them to realize that they couldn’t afford a $4,700 mortgage on $32k a year. Unbelievable.
Sounds like 10 seconds after they saw the payment. I feel bad for these people, pressured into signing.
What does that mean, “pressured into signing”?
Seriously - threat of bodily harm?
You can always get up and walk out.
We have ways of making you sign…
Here here, az.
I agree. You do have choices.
I agree guys, but look at the emotional side. Just like buying a car, they don’t slap you with fees and stuff UNTIL after you’ve decided to buy and have an emotional attachment with it somehow. It’s stupid, but it’s the way it is. These people wanted so bad to believe they could afford it and simply couldn’t. Hearing it wouldn’t be a problem from an attorney and loan officer doesn’t help the situation.
“They were pressured by the bank’s attorneys to sign it.”
Oh, yeah? do tell. So the bankers brought out their tech 9’s and demanded she sign or die? This is this dingbat’s story?
So, is she allowed to cross the street by herself, or does she need a leash and a handler?
If this adult is this incompetent she should be declared as such by the courts and placed in a group home with 24/7 supervision and a chance to earn her living by being taught to perform simple, repetitive motions, like stuffing envelopes.
That or ship her to Afghanistan, where she can annoy the Taliban.
Oh, yeah? do tell. So the bankers brought out their tech 9’s and demanded she sign or die? This is this dingbat’s story?
So, is she allowed to cross the street by herself, or does she need a leash and a handler?
LMFAO…rock on, spike66!
Surprised? Only for the fees? Was it ever differant? Lenders/mortgage brokers looking out for the borrowers and their needs and “safety”, being able to pay back loans were the chief concerns? What went wrong? A few questions will be asked and written. Look to common sense as reality brings this to a close.
Who exactly is responsible for determining whether a loan payment is affordable? Perhaps we should be teaching accountability and critical thinking skills instead of worrying about what offers are made to folks? I’m not excusing predatory lending OR obfuscating loan language BUT, the final determination of whether a payment schedule is affordable HAS to come from the person obligated to make the payments. Someone signing loan documents should thoroughly understand them and what payments could be in the future. I do have some issues with how this information is presented in these documents at times but why didn’t these folks ask the question? I think we all know why. Because RE only goes up and they can “always refi and use the new equity as the downpayment”. Dolts. Let the financial culling of the herd begin.
“Perhaps we should be teaching accountability and critical thinking skills instead of worrying about what offers are made to folks?”
Don’t I wish. But schools are being turned into bilingual education facilities and self-esteem/life-coaching clinics. Everybody is a star! Everybody is entitled!
But in well heeled communities we’re killing the kids w/our competitive nature. On Amazon:
The Price of Privilege: How Parental Pressure and Material Advantage Are Creating a Generation of Disconnected and Unhappy Kids
by Madeline Levine
This child psychologist started noticing a higher incidence of maladjusted clients from the “better” neighborhoods. Some of the reviews are also pretty eye opening.
Yep, let’s cull the herd. These borrowers in foreclosure, unable to pay their 1099s from the IRS–give them a choice. Either join the army or face a permanent cutoff of all welfare. Why support these fauds and deadbeats…put them in an environment where they will learn responsibility, the military, which is failing to meet it’s recruiting numbers. Citizenship is not a requirement.
Kills two birds with one stone. Literally.
Do you really want people with comprehension skills that low in the military?
Check out who the military has accepted the last two months…obese, ex-cons, lowered IQ and health standards…they just need bodies. google recruiting standards and check it out.
tattoos are a-ok…
Up to age 42, so Ben could enlist.
(but hurry, there’s no way they’d take a 43 year old)
“…HAS to come from the person obligated to make the payments.”
Not really. If my brother-in-law were a crack head, I would not loan him a dime, no matter whether he thought he could repay it.
Who exactly is responsible for determining whether a loan payment is affordable? Perhaps we should be teaching accountability and critical thinking skills instead of worrying about what offers are made to folks?
Funny, but how come foreclosures and liar loans are a huge problem these days compared to previous market cycles in real estate? I bought my house at the top of the previous bust in 1990 and had a traditional loan at 8.25%. I wanted a higher end model but the real estate lady in those days convinced me that my income was not high enough to get to that model, so I took a starter home. Are real estate agents and loan companies these days more crooked than in 1990? Or 1973? We do not need a high school class titled “House Buying 101″ in public schools.
What we need instead is to let the market take care of itself. Don’t bail out the stupid buyers and don’t bail out the stupid mortgage banks. They can rent or go to homeless shelters. Their credit scores should keep them out of home buying for the next 7 years or so after foreclosure/bankruptcy.
Where are the debtors prisons anyway? I was hoping they would start them up. Put the FBs in public works to clean toilets, do the landscaping and do laundry. When we send the illegals back, there will be a huge demand for manual labor.
Are real estate agents and loan companies these days more crooked than in 1990? Or 1973?
Well, people in general are slimier and more crooked than in the not too distant past.
I do not believe that. I have no facts, evidence or first hand knowledge - just faith. I believe that 20% of the people will always cheat, 60% will cheat sometimes and 20% will never cheat. IMHO this is human nature and has been that way for millenia.
I believe the lenders should determine the affordability levels of the borrower ,after all lenders have a obligation to the final loan investor to act in good faith and not pass on fraudulent loan packages . In part ,the lender that makes the loan is being paid a commission to produce a loan package without fraud within the loan guidelines .How can anybody say that these front line lenders that packaged these loans didn’t fail in their duty with this faulty junk loan paper they passed on .
Borrowers will always buy more than they can afford if a realtor and loan agent tells them they can do it . Also, the lenders qualified on teaser rates ,which was stupid if you are making a long term loan .As we can see, during a mania ,a borrower or speculator doesn’t really care if they can afford the loan or not .
Lenders have to make loans as if the market could turn on a dime and that would only leave the ability of the borrower to pay on a long term loan .Lenders should of always required down payments .
If someone buys a house for cash ,than they can do what they want ,but if your using loan money than rules should apply .There must be proof of a persons ability to pay a loan or the whole system breaks down as we are seeing today .
Loan risk use to only involve the fact that x amount of borrowers will lose their job, and x amount of borrowers will get a divorce or have some mishap that throws them into default .PMI insurance or a down payment would cover some of the potential loss for the lender . Now you have millions of loans that the borrower can’t afford the payment even if they keep their job . These faulty loans are time bombs waiting to go off . Wall Street had no right to rate these loans as investment material if they were going to base loan risk on real estate going up . It was so silly to rate a sub-prime low down/low doc. liar loan as anything but junk paper .
Now maybe Wall Street didn’t factor in the degree of fraud the industry would resort to so they could keep the party going ,but the risk raters didn’t factor in the fraud in their models or that real estate could go down .
I think it’s simply human nature - check out all past episodes like South Sea Bubble, Tulipmania, and many others. There are usually a few sharp and crooked minds that organize the fraud, and the vast majority plays along in the game of easy riches although many of them understand that something is wrong. As long as prices are rising, greed and probably even more the fear to be left behind is controlling their decisions.
Why do I keep recalling polls where increasing numbers of people admit that they are willing to cheat and lie to get ahead?
Here’s some data showing how the ABX indexes of MBS’s are going. The charts are for the 07-01 series.
(Check out the “AA” line, holy toledo . . .)
http://www.markit.com/information/affiliations/abx/history
Talk about falling off a cliff!!!
There are different values for the Y axis in the 3 graphs that paint a more pessimistic picture. For instance the first graph uses a y of 93-101, the next graph has y of 75-102.5 and the last has y of 45-100. All of the graphs should have the same y values.
We do not need anyone skewing the data to make the housing bubble appear worse than it is. The NAR does that - lets not join their camp!
Agree, and BBB- going from just under 100 to under 50 in 6 months is a story in it’s own right.
My emphasis on the AA line is that those tranches are supposed to be safe. For the 07-01 ABX (so we’re basically talking about an index of second-half 06 bonds), the market has sent them down 5% or so in the last week. The single-A has fared even worse, and in the last couple of days even the AAA has edged down a bit.
BBB- collapse is contained.
I suppose it is contained in the sense that it can’t drop below zero. Or can it?
“Or can it?”
Absolutely. Lots of leverage + price collapse = drowning (underwater!) hedges
There are different values for the Y axis in the 3 graphs that paint a more pessimistic picture.
Right, but a typical reader would see that — or not? Hmmm… well someone who dosn’t read their mortgage docs before signing probably would also misinterpret the graph.
From the look of it, it simply seems like an innocent auto-scaling function done by the coding that creates the graph, and it’s for readability. If the jump were upwards, it would do the same scaling “problem” in reverse, making it inadvetantly look like a sharper jump upwards (at first glance only).
Anyway, you might note that the initial dips in BBB and A were not too disimilar from AA is right now. Scary if you own those.
So what do these graphs mean? Am I right to believe that the sudden drop off means confidence in the risk ratings of those tranches is dramatically falling.
Also, what is the difference between the tranches as far as actual make up? Is the BBB- where they put all of the liar loan MBS’s and the AAA where all of the 50% down 30 yr MBS’s are. Or is the unknown content of these bonds the reason certain people are upset at the ratings agencies?
I’m confused.
If I’d known this situation existed, I would have squatted in this place myself, paid the taxes and who knows, maybe I could have gotten the deed by adverse possession. Interesting article. Maybe we renters ought to become squatters. What a waste, this place was really nice, too. Notice this company purchased all their properties between September 2005 and May 2006.
http://www.observernews.net/artman/publish/article_002288.shtml
Wow - 9.5 acres, the county owns it and has cleaned up the site, and they’re just putting a $25,000 lien on it. Offer the county $50k and build a small Florida-appropriate home on the land.
This would actually be a very good deal, no matter what the housing market looks like.
Good deal if you have money around to get a couple AK-47s for personal protection. That area of the county is stunningly beautiful but you never know when a) the next trailer park is moving in next door b) whether to ignore the doorbell or shoot first before opening the door after dark.
Translation = no zoning and not a safe place to live, especially alone.
So, in addition to the the AK’s get a few really big dogs.
Time to print more $
$282 Million Stolen in Heist at Private Bank in Baghdad
In an astonishing heist, guards at a bank here made off with more than a quarter-billion dollars on Wednesday, according to an official at the Interior Ministry.
The robbery, of $282 million from the Dar Es Salaam bank, a private financial institution, raised more questions than it answered, and officials were tight-lipped about the crime. The local police said two guards engineered the robbery, but an official at the Interior Ministry said three guards were involved
http://www.nytimes.com/2007/07/12/world/middleeast/12iraq.html
Don’t even get me started. Massive amounts of money have just “gone poof”.
It’s only paper.
sorry for the double post
HSBC owns Dar Es Salaam. I hope they’re insured.
HSBC wrote down and extra $1.8 Billion in US sub prime second mortgage losses ($10.2 B TOTAL) in the 1st Qtr 2007. So what is a little $.25 billion lost in Iraq. It pales compared to the theivery of the US mortgage brokers.
inside job…they are insured….
somebody gonna hang.
Once again the US taxpayer(me) is the insurer. Lucky me.
That sounds about what we lose in Baghdad just about every day.
Walmart same-store sales up 2.5 percent, better than expected. It’s going to be party time on Wall St. today, no matter what other bad news is lurking in the subprime mess. … “What subprime mess?” … Ugh. I can’t stand to watch CNBC today.
– Judge Smales
“You’ll get nothing and like it”
That’s Smails—no offense!
When people have to start cutting back, where do you think they will go? They stop going to the targets, hpome depots, lowes and fancy grocery stores and end up at walmart. Not to hard to see the reason for increase in sales.
EXACTLY!
going into some walmarts is a scary scene
the great unwashed and unneutered with thier thorngs of children buying all the cheap soda and junk food they can fit on their carts. no wonder there is an obesity epidemic in this country. fat people should not drink soda! or eat doritos or the other crap that is always on sale at walmart
add in JCPenny as another Walmart.
Wal-Mart and Penny’s up, Macy’s down.
Yep, the number of fat kids in our area appears to have skyrocketed. When I wuz a pup, fatties were relatively rare, unpopular and usually hassled in school. Yes, it was cruel sometimes. However, “acceptance” of obesity has probably contributed as much to the epidemic as eating. Just remember, “Everybody is a Star!!”
I actually think the elephant in the room of the obesity epidemic are the skyrocketing incidences of child abductions/sex crimes. My husband and I ran around out of sight of the home for hours. My mother had no clue where I was. Then I’d reappear for dinner. My kids don’t even go in the front yard w/o me outside.
Yes, even in beaucolic farm country we have far too many sex offenders and attempts to get children into vehicles. To make matters worse, the police won’t even take these stories seriously (coverup?) I think because it might hurt the towns “get away from it all” image. So where does that leave our kids? Parents have to have an e-mail network just to keep informed. Not good.
Hey CA - Interesting point about how keeping kids inside might contribute to obesity. Not sure that there are more incidents of abductions or whether they’re reported more than they ever were. Whatever the case, it’s the parents’ responsibility to see to it that their kids are active and are eating properly. Gotta change with the times, baby, not blame the bad people.
I’ve wondered about that. Do you think there really is an increasing per capita rate or are these types crimes simply more likely to make the news these days?
yeah. i was a fat kid (from age 5 to 17). I was made fun of in elementary school. But I did not let it get to me. I wanted to look good in high school for the girls so I started working out quite a bit at 17 and I have been fit for the last 31 years. When I tell people today I was a fat kid, they are surprised. My fitness routine is very disciplined and I owe it to intense workouts all these years that kept me youtful looking at age 48. I also owe it to lucky genes that my hair has just a touch of gray at the neck and I have no bald spot! It is very uninspiring to see so many fat Americans these days. When I was a teenager, I remember most older people were slim. Long distance commutes to work are not worth it just to have a POS house. Rent near your job so you can work out! Being healthy is far more rewarding than paying a mortgage!
Love the way you brought that back on-topic, Bill! Maybe fat people who buy the POS house could ride their bikes to work!
“I actually think the elephant in the room of the obesity epidemic are the skyrocketing incidences of child abductions/sex crimes.”
Excellent point! Lock up the sex offenders, and end childhood obesity. Steven Levitt would love that idea.
All the men laugh it off….but then again its more likely women would know what living with that nightmare is like…and would do anything to avoid it.
agree, y. people are gonna go where they can afford to go.
and oh by the way, can someone remind me why i give a damn about who’s crashing on wall st. or who signed up for a */*/ mortgage? let the chips fall where they may. caveat emptor baby.
Aldi should see an increase in sales - they are definitely a low-cost grocer. However, their margins are so low they don’t take credit cards, only cash and debit cards. So maybe their sales won’t go up much after all.
You’re probably right. The market is definitely still in a manic state. But people have argued in the past the increased sales at retailers like Wal-Mart are actually indicative of recession. Could be interesting to see how this is interepreted. (Probably through rose-colored glasses, but you never know.)
Federal income tax receipts trending up. Definitely an indication of a recession.
Now we know why Warren Buffet bought stock in Wal Mart (WMT).
NG,
While your Harley Davidson shares go down in a recession your Walmart shares go up. It’s like there’s no risk…..
Hakuna Matada.
Hmmmm, I always ride my Harley to Walmart………..
“Don’t underrated yourself Judge, you are a complete slouch”
Ty Webb
or
“Did you get a bowl of soup with that hat?”
One of the great movies of our times…..
Large mortgage fraud scheme near DC (Washington Post) -
http://tinyurl.com/ywq8sr
What was that famous quote?
Ah, yes…. “A fool and his money are soon parted”.
who would sell their house for a year ?
sounds like they were in on the deal
Maybe - but I think it’s more a case of Hanlon’s Razor (”don’t ascribe to malice what can be explained by stupidity”)
I wonder what impact the new stringent bankruptcy laws will have on the average rank and file foreclosed on, ex homeowner?
Any legal eagles care to chime in?
My understanding is that under the new law if you make less than the median income (not sure if that’s local, state, or national) not much has changed versus the old law. I believe that it’s those over the median that are pretty much locked out of Chapter 7 now.
So, that would leave everyone still on the hook for student loans and IRS bills for life (significant when 1099s are involved), but the blue-collar, lower middle class, and unemployed *should* still be able to make all the rest go away if they have minimal assets. I wonder how long you have to be unemployed from a high-paying job before you’re below median income? That could end up being an important timing factor in large numbers of filings.
Please feel free to cut and paste and send letter below to your local newspaper….let’s fight back.
Dear Editor,
Governor Deval’s $250 million public bailout fund to help delinquent borrowers of subprime mortgages is a slap in the face of every responsible Massachusetts taxpayer. Governor Deval expects taxpayers who responsibly avoided buying houses they could not afford to now contribute their hard earned taxpayer dollars to subsidize subprime home buyers. Would we the taxpayers have gotten a portion of any home appreciation had the value of these subprime home buyers’ homes kept rising? Governor Deval seems to be fine with laws that privatize profit while requiring the public to absorb any losses. No Governor Deval, reward without risk is not the American way.
Now if these home buyers were misled by subprime lenders and others they interacted with while purchasing their homes and securing financing, then it would seem that some form of civil action is possible. How about a class action suit against the subprime lenders instead of a public tax payer bailout. It would seem that such action is the most fair for all involved.
If Governor Deval’s $250 million unethical bailout goes forward, then we responsible taxpayers must hold the good Governor accountable come re-election time. It’s time we take back our state and our country from irresponsible leaders who refuse to take fiscally responsible actions to right our ship.
Signed
A Responsible Massachusetts Taxpayer
Good letter. All these politicians, corporations, victims, etc. seem to think decent, repsonsible middle income earners should foot the bill.
Good job. I also have been doing some writing. Its better than doing nothing and if enough people write in on these issues it has to at least get noticed.
Good letter, but the logic needs some reworking.
“Would we the taxpayers have gotten a portion of any home appreciation had the value of these subprime home buyers’ homes kept rising?”
Yes, property tax collections would rise.
Trade gap widens to $60b, and the DJIA shoots up like the Challenger space shuttle on the opening bell. Party on, dudes!
http://www.marketwatch.com/tools/marketsummary/
Rocket fuel. Bulls are behaving just like real estate flippers did back circa 2005, assuming they will always be able to repay their margin debt with the sale of ever-higher-priced shares. Never mind them paltry dividend yields, cuz stock prices always go up.
‘Margin Debt’ Hits Record $353 Billion on NYSE
By Peter A. McKay
Word Count: 419
Investors are borrowing record sums of money to finance trades on the New York Stock Exchange, according to data due out from the Big Board today.
NYSE officials attribute the trend to recent regulatory changes effectively allowing both small and big investors to take on more leverage, or borrowed money, from their brokers. So-called margin debt, a broad measure of leverage, jumped 11% to $353 billion at NYSE in May, up from nearly $318 billion in April.
http://online.wsj.com/article/SB118420803042864362.html?mod=home_whats_news_us
1929 redux…..the smell is in the air.
Just checked the marketwatch.com asset price page again, and what did I see?
BULLETIN>>
DOW JONES INDUSTRIAL AVERAGE REACHES ALL-TIME HIGH
Market Overview
Active Server Pages error ‘ASP 0115′
Unexpected error
/tools/marketsummary/Default.asp
A trappable error (C0000005) occurred in an external object. The script cannot continue running.
Investors are borrowing record sums of money to finance trades on the New York Stock Exchange, according to data due out from the Big Board today.
Didn’t this happen before the last stock market crash? Seems to me a lot of people lost their homes then, because they invested in the market with home equity money.
Fer cryin’ out loud…
Wall Street: to the shuttle…
Go for throttle up
BB must have respiked the punch bowl with crystal meth
GS, I thought you broke the meth habit? LOL
A supposition, since the dollar has been getting creamed and most foreign investors of US stocks have taken a pounding, are these foreign investors doubling up? If so then when the currency markets switch and the carry trade gets liquidated who will be able to buy these stocks at close (within 10%) to present prices.
Hmmmm….NYSE is unp 110 points in 30 minutes….
60 billion trade deficit for one month…
Oil up to 73 dollars a barrel.
Gold is up to 666 dollars.
With news like this you would expect it to go down 110 points, not up.
Is GetStucco’s PPT team in there sluggin’ for Wall Street this morning?
Just remember…
While the Fed is in the public room… yapping, yapping, yapping
The equities market liquidity keeps on a… tapping, tapping, tapping
While the mortgage asset classes equity keeps on…sapping, sapping, sapping
Private equity behind the marble walls, is…crapping, crapping, crapping
Except, liquidity *isn’t* tapping. Japan keeps paying lip service to higher rates and does nothing. Bernanke keeps telling the world that he’s “uncomfortable” with inflation — but does nothing either.
In other words: We’re accepting inflation as the next major monetary trend.
We’re acceptingThe Fed is tacitly igniting inflation as the next major monetary trend.and of course the ECB is not doing anything either …
so the party will continue, maybe the US housing bubble is taking a brake for the moment, but all other asset bubbles are still inflating.
There may be a market crash, but it won’t be in oil or gold.
The markets are rising because cash is being created at an unprecedented rate. That money has to go somewhere. Inflation is running rampant (and the American public is only just beginning to catch on to this) and oil and gold have only started to go bang.
Inflation adjusted highs for gold would put gold at over $2500/oz. We’re a long way from that.
Here we go…
“…and the American public is only just beginning to catch on to this…”
Not.
Inflation adjusted highs for gold would put gold at over $2500/oz. We’re a long way from that.
This seems to imply that gold is not a very reliable hedge against inflation.
The price of gold has been managed since at least the mid 90’s with the Clinton/Rueben “strong dollar” policy and it remains managed today. It has always been the barometer for inflation and remains so, which is why it was managed to begin with. How much longer the central banks intend/can sell into the market to contain the price is the $64,000 question.
It’s 1929 again…
BULLETIN>>
DOW JONES INDUSTRIAL AVERAGE REACHES ALL-TIME HIGH
Market Overview
Dow at 11,751 - “It’s 1929 again”
Dow at 12,000 - “It’s 1929 again”
Dow at 12,500 - “It’s 1929 again”
Dow at 13,000 - “It’s 1929 again” …
Good points, Bill, all of them!
Dow at 13,861.73 - “It’s 1929 again” …
Hey GS, reminds me of a story about Mr. Lincoln and a race horse contest…seems Ol’ Abe bet on a horse and lost…there was a braggart that kept throwin’ it in Abe’s face…”you see that horse that won…it didn’t even take a long breath”…”did you see that horse run, I’m telling ya, it didn’t draw a long breath”…on and on he goes.
Finally, Abe turns to the fella and says: Well, why don’t ya tell us all how many “short” breaths he took.
The helicopter money has to go somwhere. What I don’t get is why the interest rates are still so low with all this money gushing around?
“What I don’t get is why the interest rates are still so low with all this money gushing around?”
One theory: The PPT has an unannounced policy in place to suppress the l-t T-bond inflation risk premium.
some economist argue that all the money gushing around is the cause of low rates: it gets more difficult every day to get some return on your money (as almost everything is severely overvalued), so people are willing to accept lower rates because they see no alternative (as least as long as they worry about the return on their money instead of the return of their money).
Good point
If fiats go out of fashion, will there be a mad scramble for anything of value, be it a 36 pack of toilet paper, or 24k Gold Taels?
That’s the way is usually works on an individual country basis (see Zimbabwe for an extreme case, going on as I type)
“some economist argue that all the money gushing around is the cause of low rates:”
Low rates = low price of money, a consequence of high money supply (printing press running full bore to offset effects of subprime-induced credit crunch).
It’s a new era! The Fed has abolished the business cycle!!
Profit Outlook For Fourth Period Seems Too Rosy
By Scott Patterson
Word Count: 513 | Companies Featured in This Article: Home Depot, Sears Holdings, Marriott International, Blackstone Group, Hilton Hotels
Wall Street’s always-optimistic stock analysts would like to welcome you to the earnings trough.
Corporate earnings are in the midst of their weakest period in years. Second-quarter profits, excluding one-time items, among Standard & Poor’s 500 companies are expected to be up just 4.4% from a year ago, according to Thomson Financial. Third-quarter earnings are forecast to rise 6.2%, a far cry from the double-digit growth rates registered in the past few years. But analysts see a quick return to robust earnings gains — their projection for the fourth quarter is a 12.3% year-over-year increase.
http://online.wsj.com/article/SB118419907889964031.html?mod=todays_us_nonsub_money_and_investing
Out of curiosity, what are the implications of the rampaging bull for hiding or eliminating the problem of underwater subprime hedges?
UK mortgage crisis:
http://tinyurl.com/ywfack
Mortgage meltdown tsunami waves seem to be washing east from the U.S. across the Atlantic onto England’s shores…
Huge increase in those forced to default on mortgages payments
Buyers are being forced to borrow record amounts of money to finance their property purchases
Number of people defaulting on their payments this year has doubled to 77,000 each month
Fears are growing of a dramatic increase in the number of houses that are repossessed
By Martin Hickman, Consumer Affairs Correspondent
Published: 11 July 2007
Britain faces a mortgage crisis with payment arrears rising sharply as 18 million homeowners struggle to meet the fifth rise in interest rates in less than a year.
I hope the wave is coming, but don’t hold your breath. The crash of the UK property market has been predicted for at least 7 years now.
Crunch!
CDOs Are Hit With Fallout From Laxity With Subprimes
By Michael Hudson and Aparajita Saha-Bubna
Word Count: 852 | Companies Featured in This Article: Bear Stearns
Turmoil in the subprime-mortgage market fanned out yesterday, hitting a group of investments that are exposed to this struggling class of home loans.
Moody’s Investors Service said yesterday it may cut its credit ratings on slices of 91 collateralized-debt obligations, or about $5 billion of securities. It is a small percentage of the overall CDO market, but still an important development, because it is a signal that subprime fallout is rippling through financial markets to an important class of investments.
http://online.wsj.com/article/SB118419947763764004.html?mod=home_whats_news_us
The logic of all those bull=sh!t stories a couple of years back about rising rents is now clarified…
Fitch Sees Rising Shakiness In Commercial Mortgage Arena
By Ryan Chittum and Jennifer S. Forsyth
Word Count: 525
Defaults on loans backing commercial mortgage-backed securities could soon begin to rise, as some owners of buildings purchased for high prices find they were too optimistic about future market conditions, a credit-rating company warned.
In a report yesterday, Fitch Ratings said the fervid lending conditions from 2005 until early this year allowed landlords and real-estate developers to load up on interest-only loans and loans with high loan-to-value ratios that were underwritten with expectations for rent increases that appear “unrealistic.”
http://online.wsj.com/article/SB118420318007164143.html?mod=home_whats_news_us
Stucco, how soon do you think before the effects of this are felt on the ground (Main Street)?
Good question, and one I have no way to answer. But I remember asking myself the same question last December about subprime lending when I saw this article and its ominous graph (the first five points of the BBB- collapse, which was over fifty points as of yesterday!):
Mortgage lending
Subprime subsidence
Dec 13th 2006 | NEW YORK
From The Economist print edition
http://economist.com/finance/displaystory.cfm?story_id=8424086
Abanker friend of mine said that private equity groups have been buying up commercial properties and holding them off the market in an effort to artificially restrict supply & thereby increase rents.
I told him that that was an economically unfeasible strategy, and the only thing that that would result is lost money & decreased marketability of the property. Afterall, who wants to trust their business to a location that has been vacant for a lllong time, but wants top lease rates?
paul
“A banker friend of mine said that private equity groups have been buying up commercial properties and holding them off the market in an effort to artificially restrict supply & thereby increase rents.”
I believe this comment also applies to residential RE in San Diego. I cannot wait until the hedgies and private equity investors turn out to be the bagholders.
Paul,
I agree it makes no sense but I do know of a class “A” building off Rt 128 on the belt of Boston that has been empty for a long, long time. I don’t see how it works but someone seems to think holding out is a good strategy.
Will we see a broad selloff of 401k stocks, as fb’s, madly searching for money in all the wrong places, sell off their retirement? (at steep early withdrawal tax rates)
Why not?
“Why not?”
Because stock prices always go up and outperform every other asset class, in the long run.
Pick any 23 year period in the history of American stocks. In the 23rd year the major indices are higher than at the first year of the 23 years. I’d be a dam (sic) idiot to move my money out of stocks in my 401ks and IRAs and into bonds. I intend to work into my 70s.
That’s my point exactly, Bill — stocks always go up, in the long run, and by more than any other asset class.
What good will it do you to have a 401(k) portfolio of US stocks if the dollar isn’t worth more than toilet paper. No matter how far it rises it will always be chasing a falling dollar.
Didn’t any of you notice that for the past few quarters the only caviat the MSM constantly throws in about negative news regarding the markets is some form of “well it’s always a good idea to have some investments in foreign assets” you hear that every day from the talking head on CNBC. That’s a premeditated excuse they can use, in the future, when the bottom falls out and they can defend themselves for waving the flag on Broad & Wall.
Future quote for some talking head on cable “Yah, I know I called it wrong, but I’ve been telling you all along that there is nothing wrong with making foreign investments.”
You might start by adjusting for inflation…
Then adjust for position in business cycle…
Then adjust for historical ratio of corporate earnings to GDP…
Now you’re reasonably close to a measure which actually predicts future stock returns. And if you do all this, you’ll see that the current outlook for stocks is horrible — roughly as it was in 1929 and 1966:
http://bigpicture.typepad.com/comments/images/frew_chart_trailing_10_year.png
(an out of date graph)
This doesn’t help much in predicting prices a year out. But ten years out, well, if that’s your time frame, you should not be owning stocks unless you’re extremely good at picking them (say, as good as Buffett).
Sorry, I forgot to point out that that is Shiller’s research.
Also, if your time frame is say 20 years or more, it still doesn’t make sense to own something that is almost certain to be a better buy within 10 years (tax implications notwithstanding).
FutureVulture. You are correct as long as you are foolishly in ETFs and do not dollar cost average. DCA wins all the time.
I’m not sure what ETFs have to do with anything. But if you want to blindly DCA knowing that money put into stocks today is almost certainly a bad investment, go ahead. You can rest easy knowing that your bad investments today will be somewhat compensated by better ones 10 years from now. Assuming you have the self-discipline to stick with your strategy at the bottom of a horrendous bear market.
(I should add that Shiller’s research implies that you need an alternative which can hold its own against inflation, which may not be US dollars. I’m heavily into silver myself, but that’s my own somewhat risky choice.)
“DCA wins all the time.”
Any strategy that wins all the time eventually loses.
“Any strategy that wins all the time eventually loses.”
Unless this research proves correct:
Matthew Rabin, “Risk Aversion and Expected-Utility Theory: A Calibration Theorem,”
Econometrica 68 (2000), pp. 1281-1292
Any strategy that wins all the time eventually loses.
Greetings, GS. I’ve used this strategy (DCA) for 18 years. My basis is very low, to say the least. Most of the shares in my mutuals have been bought at levels that by today’s standards are depressed. I’m an engineer by trade, not a professional investor and proudly not a day trader. I do know one thing for sure: The imagination of the human mind is limitless. There are labor-saving products today that most people never dreamed about 15 years ago. I’m working on a product line right now that would never have been possible back when I started out from college 22 years ago. In general, products and services become better and more useful over the years as new ideas come about. Most people here do not think about this aspect. But it is the reason why investing in stocks in general, by way of index funds (S & P 500, Russell 2000, etc). is the best way to grow your net worth. And I will boldly say the major stock indices go up in the long term and will continue to do the 7% annual gain (already adjusted for 3% annual inflation). over the long haul. You folks are free to avoid hitting the “max” hyperlink for the Dow or S & P 500 in Yahoo finance if you want to make your own false reality. But economic growth will stop permanently only if all of humanity becomes retarded or dies.
“I’ve used this strategy (DCA) for 18 years.”
The Greenspan Put has been very good to you.
Also the Volcker put was good for dollar cost averagers in the 1980s, and the predecessor of Burns (before the 70s malaise) was good for those who averaged, and don’t forget the 1950s stock boom.
MIGFX was founded in 1935. It’s a large growth fund. If you inherited that fund from your father and grandfather, you would be sitting on lots ‘o $. The average annual rate of return over 72 years is in the 9% range on that fund.
I guess the PPT and its incarnations since 1935 was good for that fund too.
And PPT was good for VFINX. Established in August 1976 the ARR (with dividends reinvested) is 12%.
I love the PPT.
The only MIGFX I know is a currency trading fund that has been in existence for 12 years and averages 20+% per year. The only reason I don’t recommend is they are constantly short the dollar.
I love the PPT it makes it very easy to get out of marginal positions into good positions - somewhere else!
Yeah. There is a currncy exchange with same acronym. This ‘un’s different. Check it out:
http://finance.yahoo.com/q?s=migfx
Massachusetts Investors Growth Stock Class A
Annual rate of return since 1935: 10.70%
http://morningstar.aol.com/quicktake/standard/client/shell/NSC124.html?ticker=MIGFX&view=snapshot&CN=NSC124&valid=NO
inflation rate since 1935 annualized has been about 3%.
Number of “up” years: 53 , number of “down” years: 18; Best 1 year total return: 55.78% in 1954.
Like I say, in the long run, life is good, and so are stocks.
So why should I worry?
The market can stay irrational longer than you can stay solvent. -John Maynard Keynes
I suspect that subprime buyers have no or tiny 401K investments.
Alt-A buyers in expensive areas might have significant 401k investments. Maybe they will stop putting money into their 401Ks when the payments adjust.
About 5 months ago, a guy that worked for a larger loan outfit and knew his stuff, related to us here, just how broke America was, especially people you’d think would be bulletproof…
He got to look @ the credit (Dredit would be my new name for this oxymoron of a term) of doctors, lawyers, upper middle class type folks, on a regular basis…
And Dr. Loan was quite descriptive of many rather ugly diagnoses of upper denizens, upside down.
But these are America’s “successful” people, and they have to have those $80,000 BMW’s, expensive vacation homes, etc.
Having expensive things doesn’t mean you have a lot of money. It means you spent a lot of money.
Well, we know that. But Joe Doctor and Joe VP were taught that they should be driving a car that costs more than most people’s annual incomes, anything else implies that they are losers.
A lot of people have zero savings, even people with good incomes. If you have a mere $100,000 in your 401K you have more than 90% of the middle class.
That is the truly amazing bit. While the Kravis’s of the world worry about getting taxed at fair rates on their multiple billions, the middle class struggles to save a dime.
I have been mocked by friends who make much more than I do for saving for my retirement. When I ask them how they are going to retire they laugh and say things like “I’ll work till I drop dead” (he who dies with the most toys wins).
Hi Aladin sane, There is some evidence that last months #’s (May) showed 11.8B liquidated from 401Ks in the US stock market. These moneys could have been moved to overseas markets or withdrawn as cash in the US. It is not easy to determine where the moneys went other than pulled out of the stock market in the US.
And you better believe that the PPT was right there to fill in the breach and more. I know you bulls love the stock market, but let’s face it: the PPT is real and there are mechanisms in place to prevent another disaster like Black Monday or 1929. Additionally, at some point the dollar will die and the market will go with it. I know, Bill reminds us about all the previous warnings. Well, at some point the goose that lays the dolden eggs will be killed. While you will never know the exact timing, I hope you don’t have too much money in stocks when the floor finally gives way.
“Well, at some point the goose that lays the dolden eggs will be killed.”
That’s a serious drawback to the Greenspan Put policy. Making sure that stocks always goes up undermines the stock market’s important role for sorting out the chaff from the grain through Darwinian market discipline.
Do you think that only the US stock market will crash, or will all the major bourses go down with it?
I would like to say thanks to all that post here with different points of views. I think the discussions are vital and who is right or wrong not that important.
And you better believe that the PPT was right there to fill in the breach and more. I know you bulls love the stock market, but let’s face it: the PPT is real and there are mechanisms in place to prevent another disaster like Black Monday or 1929. Additionally, at some point the dollar will die and the market will go with it.
Well for pete’s sake don’t tell “Brad”, he might have a fatal epiphany!
Who’s buying those over priced Vegas homes? I appears most workers are hourly casino/service workers. I guess it’s a new paradigm.
For the number of residents employed in knowledge-based jobs that require a university education, Las Vegas ranked No. 325…. (Out of 330 cities in the survey)
From the Review Journal:
http://www.lvrj.com/business/8451737.html
“Who’s buying those over priced Vegas homes?”
Maybe investers who think BB’s Fed will successfully respark housing price inflation?
C’mon, *everyone* knows that Las Vegas is going to be America’s next “great city”, sometime soon eclipsing New York in importance. Get a condo on the beac, err, I mean, on the strip while you can, or be priced out forever.
Buy now and be watered out forever
I wonder how this is going to affect the HOT BOISE market?
Micron Technology (MU), struggling with sharp price declines for its memory chips used in PCs and other electronics, has cut 5% of its global workforce, or 1,100 jobs. The job cuts occurred in the Boise, Idaho-area, where Micron is headquartered, the company said in a written statement. “Workforce reductions are always difficult, but these initiatives are being pursued to support the longterm global viability and competitiveness of the company,” CEO Steve Appleton said. Micron is realigning its business in a bid to become profitable. For the three months ended May 31, the company lost $225 million, or 29 cents a share.
The key part in the statement IMO;…”in a bid to become profitable”
In other words, this may not be enough….
I am amazed tha Boise has weathered the Hewlett Packard layoffs so well. HP has its laser printer group headquartered in Boise, and they have offshored a lot of jobs these past years.
“Average prices for broker-handled sales in most places look no better than 2006 and in some cases worse. Although Milwaukee County climbed more than $13,000 to $192,768, prices fell by about $23,000 to $295,453 in Ozaukee County; more than $10,000 to $297,136 in Waukesha County; and by about $1,200 to $230,947 in Washington County.Some drops are shocking. Glendale’s average price has slipped to $201,448 from $217,245; Mequon’s has slid to $455,409 from $479,139 and Mukwonago’s has plunged to $269,581 from $299,404. Many communities are in the same discounted boat.”
http://www.jsonline.com/story/index.aspx?id=631999
http://tinyurl.com/yshvpk
Click Here to Buy a Condo
There may be an unusually large number of people using personal digit assistants (PDAs) in the Loop on Thursday evening, but they won’t be checking their e-mail or the sports scores. They will be buying condos.
The developer American Invsco, which is converting the 47-story apartment high-rise at 200 North Dearborn Street to condos, hopes to sell all of the building’s 270-plus units on Thursday night. The venue will be an innovative PDA-based sale that Arnold Schepel, the company’s marketing vice president, says is designed to “level the playing field.”
Although American Invsco has been advertising and showing the condos since May, no one has yet been allowed to buy (other than the building’s existing renters, who by law get first crack at their units). But at 7 p.m. tomorrow, up to 500 potential buyers, all holding PDAs handed out by American Invsco, get an equal chance to put dibs on the condos they want.
“You don’t come in to a sales center and find out that ‘these are the units that are already sold, but we still have these other units,’” Schepel says. “Everything is available that night.” Should allthe condos sell, American Invsco won’t have to invest in a sales center and staff, nor will it have to bear the costs of carrying the units until they do sell.
American Invsco is calling the sale its One Night Only Best Price Event, and true to the name, prices on anything not sold that night go up ten percent the next day. For the PDA sale, condos in the building are priced from $195,000 for a 570-square-foot studio to $482,100 for a 1,205-square-foot two-bedroom, two-bath condo. Schepel says that renters have already spoken for about 10 percent of the building’s 308 units. Floor plans, pricing, and other details of the sale are at 200ndearborn.com.
For the roughly 275 units that are still available, Schepel says, about 800 people have stopped by to take a look in advance of the sale. He has 500 PDAs at the ready. And if more than 500 people show up tomorrow? “I don’t know what we’ll do,” he says. “We don’t expect more than that.” Buyers must return the PDAs after the sale; American Invsco will use them to sell other buildings in the future.
I’d just go in there, and walk out with a nice shiny new PDA.
Paul
There’s a joke somewhere in this along with all those Applebees that waited in line for the i-phone last week.
I love how they threaten that anything not sold tonight will go UP 10% the next day. “YOU BETTER BUY TONIGHT DAMMIT!”
Seriously. And if they sell only 10% tonight? Do they really plan to hold out indefinitely, or even for any material period of time at all, to get those higher prices?
Does the developer rep and warrant that no unit will be sold at a per square foot price less than each buyer pays tonight within the next 5 years? (Let alone 10% higher than tonight’s buyers pay…) Not likely, and if not, the people who buy tonight will probably get badly burned compared to the guy who pays 20% less in a year…
That’s $340-400 a sq. ft.
OMG it’s a beautiful day!
Yolo’s plans stir up Davis
http://www.sacbee.com/101/story/268702.html
Finally a reason to get involved in local politics and I could be far away. I’ve been approached by Duke about very nice position at federally funded social policy center there. It’s a dream job. I’d love be around to watch these developments go in.
I have quite a few friends that work for our National Parks and they tell me visitorship is down, quite a bit this summer, compared to years past.
My thinking is, that because most of my countrymen, feel compelled to bring the $50k to $250k trailer/rv, to best avoid the sights, smells and sounds of what they came up to experience, is getting so expensive to do, with the price of gasoline being what it is, with their Goliatheciles getting such crummy mileage.
People are pulling in their horns, even on vacations.
Interestingly, my contacts at the South Carolina coast say that this is the busiest summer they have ever seen, esp in Myrtle Beach. We have been looking and there seem to be no bargains for rentals. Maybe because the bubble is still expanding in the Carolinas (Raleigh,Charlotte,Greenville SC,Columbia SC prices all up YOY) and people are HELOCing the vacations like the bubble area folks were doing in 2004-06.
Backyard vacation or at the most a 2 day trip in the general area of where they live.
If we’re channeling 1987 here, we should be near the top in the next week or so. Wave 5 of 5 if you’re into the Elliott thing.
Ditto on the Euro, 5th wave
On the S & P 500, the chartists are trading as if a major double top (2000 & 2007).
The dollars collapse, for most Euro nations, has been a good thing oil is down, gold is down, goods from Chindia and Japan are cheaper. But per the Economist Magazine’s Big Mac index - the Euro is 20 - 40% over valued. The Yen is 33% undervalued, the Yuan is 58% undervalued. The Big MAc index is a fairly simple but accurate historical tool for valuing other peoples currencies.
There was a discussion on yesterday’s blog about food inflation, per the Economist Magazine food inflation is 20.8%. But we don’t have to worry since it is not included in the CPI and we don’t have to eat, so it is hedonic inflation.
Forgot one other chart that the technical traders are looking at: The bonds broke the 25 year channel and just formed a beautiful “head and shoulder” formation.
I don’t know waves, but in both 87 and 29 there was a last fling throughout the summer that drove stocks up another 8 - 10% or so. I’ve been buying puts and short ETFs in recent weeks (ouch), but I’ve held back from my max shorting position in case we do get another brief but sharp leg up. Today sure feels like that will happen. But then I’ve never been great at short-term calls; I’m just thinking there might be some weird mania/crash psychology at work that will lead to a similar seasonal pattern.
Here’s 1987:
http://www.safehaven.com/images/miller/4002_b.gif
And here’s 1929:
http://people.few.eur.nl/smant/m-economics/images/1929dow.jpg
Well I am taking advantage of this euphoria to exit this market. I’d rather gain a meager 5 percent guaranteed returns than to risk possible big losses for how much more gain? Can’t believe the record margin buying at these levels. But we’ve seen it before and I’m sure we’ll see it again…
Me, too, Dave!
Not to long ago I was saying stocks were the least overpriced asset, but not now. I guess like the housing bubble this has gone on a lot longer than I could have imagined.
TxChick’s rotisserie plan strikes again… (this one really freaked out my wife — too close to home for comfort)
Brush fire burns 8 acres; spokesman calls it arson
By J. Harry Jones and Lisa Petrillo
STAFF WRITERS
July 12, 2007
RANCHO PENASQUITOS – A deliberately set brush fire that engulfed a hill and briefly threatened homes was brought under control by firefighters within three hours yesterday afternoon.
http://www.signonsandiego.com/uniontrib/20070712/news_7m12penfire.html
Time for playas to snap up beaten-down subprime debt…
July 12, 2007, 8:47 am
Who’s Afraid of the Subprime Slump?
Posted by MarketBeat Staff
The Wall Street Journal’s Craig Karmin has this report on one investor not spooked at all by the subprime swoon:
Even as credit agencies take steps to slash ratings on hundreds of bonds backed by subprime debt, some big institutional investors are licking their chops over these beaten-down securities.
http://blogs.wsj.com/marketbeat/2007/07/12/whos-afraid-of-the-subprime-slump/
July 10, 2007, 12:37 pm
High-Stakes Blame Game
Posted by MarketBeat Staff
The Wall Street Journal’s Jon Hilsenrath weighs in on S&P’s threat of a downgrade to subprime-backed RMBS:
http://blogs.wsj.com/marketbeat/2007/07/10/high-stakes-blame-game?mod=sphere_wd
I would say that the Stock Market(s) are saying (and have been saying) that when one looks at the “Big Picture” of the U.S. economy… the Housing/Mortgage debacle will slow GDP growth about 1%, and that’s it. No recession. No Depression. No collapse!
“…when one looks at the “Big Picture” of the U.S. economy… the Housing/Mortgage debacle will slow GDP growth about 1%, and that’s it.”
Coincidentally, that’s what our nation’s top economic spokesmen are saying as well.
U.S. Steel CEO, Surma calls health of U.S. economy “not great, but ok”
“not great, but ok”
Goldilocks on prozac
If US steels CEO says “not great, but ok” in this metals market then he is doing something very wrong! The industrial metal market has never been as good as it is today. Korea is building jumbo carriers for one way trips from Brazil to China. It is cheaper for them to get the ore from Brazil and deadhead the carrier back to Brazil pay demurrage and make moneys. This is the equivalent of the California gold rush when San Franciscans were sending their laundry to Hawaii to get cleaned.
If industrial metal was available in quantity I could sell it, but not in the US.
re-read his comment. Not talking about X, but about THE U.S. ECONOMY!
I would have but you failed to provide a link to your statement.
Of course not when brother Bernanke keeps printing money. It has to go somewhere. If the presses stopped tomoroow then it would al end for us. At this point, with the presses still going, it will only end when people realize that the dollar is worth a BIG FAT ZILCH. We can say all we want about China and India being connected to us, but if they ever stopped doing bidness with us, we are the toasted ones because our nutty federal decisions/laws and inability to produce anything other than debt/paper with dead people on it is all we have.
Oh, I forgot, GM and Ford will bail us all out.
How you gonna talk to somebody that makes “over the top ” statements like that …”The dollar is worth zilch” ?? I dunno!!
Hixson “the dollar is worth zilch” may be premature by a day, week, month or years; but history is on the side of OCdan et al.
In the entire history of the world there has never been a fiat currency worth more than the paper it was printed on.
I suggest you read up on fiat currencies and monetary inflation, then you might get a glimmer of why $8 Trillion dollars floating is worrisome. There is a chance of a US and world economic collapse this year. IMHO the odds are approximately 30%, in a normal year the odds are around 5%.
Just a side question do you buy lottery tickets and hope to win?
(The odds of getting hit by a life exterminating asteroid is 1:1 million over a 10 year span)
Some see the current problems as just a blip with no real economic impact, but I see a huge disconnect between main street and Wall street.
Per Bloomberg.com just today
US home foreclosures rose 87% in June
US trade deficit widened 2.3 %
Oil up to $ 73.48
And we all know real inflation is soaring
The stocks are up 156 Pt’s on news of Rio-Tinto-Alcon and Walmart?
Where is the logic?
WalMart says their sales are up, largely due to grocery sales. Yeah, we all know food inflation is off the chart. If not for food inflation, their sales would be off relative to “core” inflation.
65% of retailers were below expectations.
What the???
My guess is that people assume the large caps will be up again due to continued dollar weakness. When you make a big chunk of your money overseas, then profits jump on dollar weakness. But, how long can those profit gains last? Will the dollar continue to slide? How long can consumers continue to add debt?
WalMart says their sales are up, largely due to grocery sales. Yeah, we all know food inflation is off the chart. If not for food inflation, their sales would be off relative to “core” inflation.
I know Walmart took a beating on clothing this year. They way overbought and sales were way off.
Maybe housing doesn’t have that strong of an effect on the overall economy?
At some point you must admit this is true.
The poster house for idiot flippers has finally sold - but the flippers are crying over the price they had to take for it:
Oh, Mary, your house sold, so why aren’t the sellers smiling?
By Emily Gurnon
Pioneer Press (St. Paul, MN)
A Burnsville couple has found a buyer for the grand three-story Victorian known to many as the “Mary Tyler Moore house” of TV fame, but the sellers are not exactly throwing their hats in the air about the price.
The restored house at 2104 Kenwood Parkway near Lake of the Isles was listed in December at $3.62 million and eventually was lowered to $3.32 million. Though no one would divulge the selling price Monday, “it was a very strong sale, a very strong sale,” said Debbie McNally, one of the listing agents. “And our sellers are extremely pleased.”
Well, not exactly.
“We’re not happy with the final price, but we did get it sold, and we just have to move on,” said Don Gerlach, 60, a high school English teacher who bought the house in 2005 with his wife, Patricia, and her silent partner brother.
The sales price at that time was $1.1 million, according to Hennepin County property records.
The Gerlachs’ makeover increased the size of the house from 6,461 to 9,161 square feet. The renovation added a kitchen four times larger than the previous one, two bedrooms to the house’s original six and three bathrooms to the original six. It house has exercise, sauna, crafts, office and billiards rooms, and the garage is now attached, with a nanny’s quarters above it.
For Gerlach and his wife, the project was satisfying in the sense that they accomplished a beautiful makeover of the house.
But considering all of the effort and expense, “it wasn’t worth it,” he said. “Given the circumstances, I’d better remain an English teacher.”
The deal is scheduled to close July 20.
“Given the circumstances, I’d better remain an English teacher.”
Awesome, one less specuvestor.
lets hope the deal does NOT close on July 20 so we can watch another episode
Voice of San Diego has done the math on the San Diego foreclosure numbers from a couple of days ago:
http://www.voiceofsandiego.org/articles/2007/07/12/toscano/898foreclosures071207.txt
“The month of June saw 1,708 Notices of Default and 738 Notices of Trustee Sale.
Even when adjusting for San Diego’s growth, as the graph to the right shows, there were more NODs and NOTs filed in June than in any month during the entire 1990s housing bust.”
I know that DataQuick’s chief analyst will claim that his model shows the numbers will level out or drop, but I have a hunch we’re not even halfway there…
The 1990s spike in NODs played out against the backdrop of a recession, while the current spike has played out against the backdrop of very low unemployment. What this portends when the SD Index of Leading Economic Indicators has dropped month after month for many month remains to be seen.
Up $183 at 9:30.
Rage, rage against the dying of the light…..
Un-friggin-believable.
Albuquerque, NM
Report on the evening news that inventory is 2x what it was last year and YOY sales are down 37%. Sale price is slightly higher for the moment. Strangely (sarcasm), no mention of this story on their website today.
Also, 2 seperate arson incidents taking down 5 homes under construction in the outlying city areas in the past week.
CLASSIC! Broker outpost is doing a thread on “You know you’re a subprime borrower when…”
Here are some highlights:
your VOD comes back with less than a dollar on it. no joke here, either. 87 cents.
…
When your LO, for two weeks, swears up and down you don’t need to order an appraisal because they already sent it to you - only to find out they don’t actually know what an appraisal is and have in fact been sending title over and over and over again.
…
When the borrower tells you if they pay for the appraisal the loan has to go through and fund because they will definately be late next month.
…
…when you have to wait til the 3rd of the month to show your proof of SSI(make copy of the check before you cash it)!
…when you finance a brand new car by taking out a HELOC!(but at least your Kia is tax deductable!)
…when your 1st mtg is a line of credit!
…when you refuse to payoff your (4) American General or Citifinancial high rate revolving loans because ” they’ve been good to you.”
And last but not least…when you’re waiting on that settlement to come in (you know how many times I’ve heard them say they have a settlement coming to them–already been waiting 3 years)!
…
You save them from foreclosure and they show up to the closing with an SUV they just bought for 700 a month from a “second chance” dealer.
When you need a stated income letter from the borrower stating what they do for a living (ameriquest) and they fax you
I HAVE A JOB.
Signed Joe Borrower.
Yes, it happened.
…
LOL, I have one like that right now. Called today again and told me his sista wants to help him. I said *great*, how is her credit? He said, no problem there, she has good credit, pays for everything in cash.I thought hmmmm and ask, does she work? He said, oh no, she don’t need to work, she gets a check every month from welfare.
…
You know you are sub prime when you have a loan amount of $650,000 on a house you bought 15 years ago at $200,000 and bought your kids a $50,000 Benz and a $30,000 Corolla when they graduated from High school.
…
- Your borrower wants to quit claim his 98 year-old mother-in-law to the property so she can be a co-signer.(happened)
- Your borrower walks in to your office in his Waffle House uniform and wants a stated income loan.(happened)
- Your borrower asks you if he can (personally) borrow the appraisal money. (HAPPENED!)
- When you ask your borrower for his last 2 tax returns he gives you 2001 and 2004 (because he ain’t filed the rest yet).(HAPPENED!)
- When your borrower calls and asks you to bail him from his foreclosure, but when you pull public records, the house was titled to the bank 6 weeks ago (happened).
…
you might be subprime if…
youre banking on this cash out refi, cause you dont have the money for your next mortgage payment!
…
You tell the borrower what their payments are going to be on the new manufactured home and the five acres that go along with it and they say “Yeah, we can make a couple of those”!
I Kid you not.
…
When the appraiser shows up and the borrower shows him his neighbors house thinking he can get a higher value.
umm…
Countrywide Financial Chairman and Chief Executive Angelo R. Mozilo Sells 70,000 Shares
http://biz.yahoo.com/ap/070712/countrywide_financial_mozilo_insider_transactions.html?.v=1
SPF 70,000
Tan-zilo knows what is coming to his company and maybe even the economy. I would like to know “how” he is invensting the hundreds of millions of “Dollars” that he has made over the past year in options. It would be a clear indication of what he thinks is going to happen to the economy as a whole.
“I’ve never seen a soft-landing in 53 years, so we have a ways to go before this levels out,” Countrywide CEO Angelo Mozilo said. Countrywide recently announced plans to cut costs. “I have prepared the company for the worst that can happen.”
“Mortgage rate jump reverses declines
Rates on 30-year fixed-rate mortgages climb to 6.73 percent in the past week after three straight weeks of declines.”
http://money.cnn.com/2007/07/12/real_estate/mortgage_rates/index.htm
“NEW YORK (CNNMoney.com) — Mortgage rates gained substantially this week, nearly erasing the declines they’ve seen over the last three weeks, Freddie Mac reported Thursday.
The government-sponsored loan buyer said the average rate on a 30-year fixed-rate loan rose to 6.73 percent for the week ending July 12, from 6.63 percent the previous week.
Last year at this time, 30-year mortgage rates averaged 6.74 percent.”
“Rising rates, among other factors, caused industry groups like the Mortgage Bankers Association (MBA) and the National Association of Realtors to push back their forecasts for a home price recovery. Both groups are now looking to early 2008, compared with a previous outlook for mid-2007.
Doug Duncan, chief economist for the MBA, has said he expects mortgage rates to top out near 7 percent by the end of the year. When rates go up, would-be home buyers face higher monthly mortgage payments, cutting into overall affordability.”
Anyone cares to guess how many times this week we’re going to hear a Realtor use the expression: “historically low rates”?
http://money.cnn.com/2007/07/12/real_estate/bc.usa.housing.foreclosures.reut/index.htm?postversion=2007071206
“Foreclosure filings fell 7 percent in June to 164,644 after jumping 19 percent in May, but they remain 87 percent above last June’s pace, with one filing for every 704 households, RealtyTrac said in a monthly report.
“The outlook isn’t terribly optimistic for the rest of this year,” Rick Sharga, RealtyTrac’s vice president of marketing, said in an interview.
“There are, depending on whose numbers you believe, somewhere between $600 million and $1 billion worth of adjustable-rate mortgages that are going to reset in the second half,” he said. “We anticipate a fair number of those are going to go into default, so we really do expect probably to see another spike in the Fall” for foreclosures.”
I wonder if it’s the journalist or the vice president of marketing that’s having problems with the decimal point? How can you be off by 3 orders of magnitude?
Krakatoa, east of the Potomac…
DJ up 230 points
Short squeez melt-up +283
Wife just called wondering why milk is north of $6/gallon and the stock market is blowing sky high. It all fits a pattern of helicopter drops used to inflate stock prices, reward the super rich, trash the dollar and inflate away the labor income of middle America. Way to go, Fed!
Looks like there are heavy cheerleaders in the stock market.
Very bad news: ho hum
tiny goods news: huge gains
Very scary right now to be in the stock market. Very bad…
My bet is a triple blow-off top.
I think I’ll just spend all my savings and just be a dependent of the state when I retire.
What’s the point in saving anymore?
I have lived well below my means my entire life and have missed out on some things trying to insure that I will not retire destitute like my parents did.
“What’s the point in saving anymore?”
We should all follow Bill in Phx’s advice and dollar-cost-average into everything. Forget about $US savings.
Exactly, we stupid
Savings? Savings for most people is the remaining balance of your credit cards!
I keep trying to explain and ‘cuz you are my amigos - I will explain again.
As long as the “carry trade” is in effect the US stock Market will not go down. It does not make any difference on earnings or future earnings. Playing the stock market is playing the “carry trade”.
A tiny (1.3B) thought for this late afternoon. China has not bought any US T Bonds since March. China has been the single largest buyer of Yen, selling dollars to “carry trade” investors in exchange for Yen. (Who did you think was financing this debt?) This has allowed China to diversify out of dollars seamlessly into the Yen.
A big gamble but for large amounts of moneys less risky than buying US Treasuries and being subject to US laws. ‘Tis an interesting time we live in and a lot is going to happen in the next few months.
So there just might be a neo:
“Greater East Asia Co-Prosperity Sphere”
http://en.wikipedia.org/wiki/Greater_East_Asia_Co-Prosperity_Sphere
Breaking out again?
Try reading:
Hegemony, not anarchy: why China and Japan are not balancing US unipolar power
Peter Van Ness
The United States today dominates the globe and many regional geographical subsystems in an unprecedented way, maintaining a hegemonic order that is in no way similar to the ‘anarchy’ assumed in realist analyses. The global system today is not simply unipolar; it is a hegemonic system that is increasingly globalized, in which the basic concepts of realism (anarchy, self-help and power balancing) provide little guidance or understanding in explaining state behavior. This paper describes the US hegemonic system, analyzes the roles of China and Japan within this system, and examines how the Bush administration’s plans for missile defense might transform the system. The conclusion points to some critical implications from this analysis for realist interpretations of international politics.
It is stupid to expect US world hegemony to continue to extend to Asia. Whether China is planning world economic domination or just regional domination is open to debate, but either way it is Asia first.
‘As long as the “carry trade” is in effect the US stock Market will not go down.’
Thunk the carry trade was going down a few months ago. What keeps it going?
An explanation of the Carry Trade on Daily FX
http://tinyurl.com/2cenu9
GS and any others the above link is all you need to know about the carry trade. (If you wish to trade the Carry Trade- do your own research!)
The correlation between the S & P 500 and the Euro/YEN is 0.94.. What this means from a practical point is that when the “carry trade” has a Sharpe’s Ratio of greater than 1.20 - do the carry trade and buy US Stocks APY ~8.7%. The current Sharpe’s Ratio is 1.23 - Last week it was 1.27 (that is a lot of profit) .
I forgot to answer your question… “what keeps it going?”
What keeps the carry trade going is I can borrow moneys in Japan and Switzerland and loan (buy US Bonds or US stocks) these funds out overseas.
Until Switzerland and Japan raise their respective interest rates into line with the rest of the world. This is the singularly most profitable trade in existence. From a small traders view point one can lock in 9%/year (on face or 150%/yr on margin requirements) whenever the Trade is favorable.
The problem from a small traders view point is that max profit has been occurring weekly. Then you liquidate positions and start over. The profit is enormous. Last night’s Sharpe Ratio (against the euro) was 1.26.
The dilemma (and this happened in 1997) is massive liquidation of the Carry Trade at the same time. In ‘97 the Yen rallied 30% in 3 months (the carry trade for the most part involves being short the Yen). In 1997 China was not a player. I am concerned because the Carry Trade is larger than Japan can discern and when the short Yens must cover , who will be left to sell? I doubt China will sell, they have gotten out of the dollar. Why would China wish to get back into the dollar? So the Yen will become the currency of gold. If you hold Yen you are rich. If not another failed hedge fund.
“If you hold Yen you are rich. If not another failed hedge fund.”
OK, I’m sold. How do I get long Yen?
“BALTIMORE, MD (July 12, 2007) - Maryland Attorney General Douglas F. Gansler announced today that 12,340 Maryland consumers are eligible for $7,760,281 in restitution from Ameriquest Mortgage Company and its related companies as part of a $325 million national settlement of a predatory lending lawsuit against the company.”
http://www.oag.state.md.us/Press/2007/071207.htm
Wow! $628.27 per person. Lets’ buy a bigger home!
and the new Taxachusetts governor is a former ameriquest board member.
Weekly layoffs:
Ginn Racing Llc
Mooresville, NC
Daytona Beach, FL
Several in-shop employees were laid off this week from Ginn Racing as part of a re-evaluation of its organization, team officials confirmed Thursday. The team manager said last week the organization may have grown too fast and a re-evaluation was in order, particularly since two of its three Cup teams lacked full-time sponsors this season. A team spokesman would neither confirm nor deny additional layoffs were being considered. Last month, the team announced it was scaling back its Busch Series program, as it felt that driver Regan Smith was nearly ready for a move to Cup and needed more experience in that series before he joins it full time next season. This week, Ginn’s No. 14 Chevrolet driven by Sterling Marlin has sponsor Waste Management on the car while the No. 13 driven by Joe Nemechek carries a paint scheme honoring the nine firefighters from Charleston, S.C., who died in a warehouse fired on June 18.
Approximate Affected Workforce: N/A
Source: The Charlotte Observer - July 5, 2007
Campbell Mithun Inc.
Minneapolis, MN
Ad agency Campbell Mithun confirmed Monday that it laid off some of its employees last week in an attempt to better align costs and revenue. The CEO said that “a small percentage” of the agency’s 375 Minneapolis workers were told last week that they were being let go. The staff reduction, which took place immediately, was not the result of the loss of any account, he said. Campbell Mithun, the largest ad agency in Minnesota, has a number of high-profile accounts, including General Mills, H&R Block, Verizon and Alberto Culver.
Approximate Affected Workforce: N/A
Source: Star Tribune - July 3, 2007
First Data Corporation
Englewood, CO
Daytona Beach, FL
First Data Corp. will close its call center in Daytona Beach, Fla., by next spring, gradually laying off 400 employees, the company announced yesterday. Less than two weeks ago, First Data said it will lay off about 300 of its 400 call-center employees at its Tulsa, Okla. facility. First Data will transfer the call centers’ work to other facilities throughout the United States and the Dominican Republic.
Approximate Affected Workforce: 101-500
Source: Cardline - June 29, 2007
Hewitt Associates Inc.
Lincolnshire, IL
Chicago, IL
Hewitt Associates Inc. on Wednesday confirmed it plans to lay off 41 employees as part of its ongoing initiative to reduce costs. The jobs affected will be in Chicago and its Lincolnshire headquarters. The human resources outsourcing firm said it employs 6,300 people in the Chicago area.
Approximate Affected Workforce: 1-50
Source: Chicago Daily Herald - June 28, 2007
KB Home
Los Angeles, CA
Indianapolis, IN
KB Home said it would exit the Indianapolis market, a decision based on eroding demand from a shrinking population. The Los Angeles-based home builder said that it would consolidate its Indiana operations with its Chicago office and that layoffs would result. A KB Home spokeswoman said the company would not disclose the number of job cuts. It’s a very small division, she said, we’re consolidated, we only had small communities in and around Indianapolis. The company has 139 homes under construction in the Indianapolis area, she said.
Approximate Affected Workforce: N/A
Source: Los Angeles Times - July 12, 2007
ABN Amro Holding, N.V.
Amsterdam, The Netherlands
Chicago, IL
Troy, MI
LaSalle Bank Corp. said it plans to complete the layoffs of as many as 1,000 employees, including 300 in Michigan, as part of a company-wide cost-cutting effort by mid-July. The Chicago-based bank, which announced the cuts late last year, has about 4,400 workers in 261 branches in Michigan. Most of the job cuts will be on the commercial side of the bank and primarily at the Troy office. LaSalle Bank, whose Michigan headquarters are in Troy, is a unit of the Netherlands-based ABN Amro NV. The Dutch bank is in the midst of an international bidding war that could end up being the most expensive acquisition in the history of financial services.
Approximate Affected Workforce: 501-1000
Source: Detroit Free Press - June 28, 2007
American Equity Mortgage Inc.
St. Louis, MO
West Palm Beach, FL
Cleveland, OH
Detroit, MI
Las Vegas, NV
San Diego, CA
Portland, OR
The slowdown in the housing market is prompting American Equity Mortgage Co. to close offices in seven markets, the president and chief executive, said Friday. About 40 employees will be laid off in the closings. On July 31, American Equity will close one office each in West Palm Beach, Fla.; Cleveland; Detroit; Las Vegas; San Diego; and Portland, Ore. All but the managers and support staff in those offices have been let go. American Equity Mortgage is based in St. Louis. Its remaining offices are in 14 states. A combination of thin margins on loans, slowing housing appreciation and “dramatic changes in the non-prime market” has forced the company to pull back to its core markets. The company is keeping 24 offices open and retains about 250 employees.
Approximate Affected Workforce: 1-50
Source: St. Louis Post-Dispatch - July 7, 2007
American Home Mortgage Investment Corporation
Melville, NY
American Home Mortgage Investment Corp., the Melville-based real estate investment trust, has laid off hundreds of workers without notice or even time to clear out their desks, current and former employees said this month. The company, which holds diverse interests in mortgage-related securities and retail lending, was once considered a highflier, posting double-digit growth quarter after quarter in recent years. But as things turned south for many housing-related businesses, American Home has offered what one analyst called “overly rosy” earnings predictions. As of mid-May, American Home had employed about 1,460 people on Long Island. Analysts said that layoffs are inevitable due to the cyclical nature of the mortgage business and that they believe the company will ultimately weather the cycle. But several current and former employees, speaking on condition of anonymity for fear of reprisal, said there was a total of about 200 layoffs. American Home is particularly vulnerable because it does not have diversified operations in other areas of banking.
Approximate Affected Workforce: 101-500
Source: Newsday - July 11, 2007
Arizona Department of Transportation
Phoenix, AZ
Arizona Highways magazine, the glossy and iconic publication designed to promote the state as a vacation spot, faces tough times ahead. The state-owned magazine is operating at a deficit, circulation has dropped by an average of 10 percent in each of the past four years and state lawmakers’ raid of its reserve funds has left little financial cushion. The magazine will be $1 million in debt by 2010, even though the publisher has made steep cuts, including cutting staff by 45 percent.
Approximate Affected Workforce: N/A
Source: The Associated Press State & Local Wire - June 30, 2007
Alameda County Medical Center
Oakland, CA
Trustees of Alameda County’s financially stretched public hospital system approved a move to cut 21 positions, including 12 at the county psychiatric center, despite worries the change would compromise the quality of care to patients at the facility with a troubled past. The cuts were included in the Alameda County Medical Center’s $460 million budget, which board members approved Tuesday. The new budget provides for more nurses to meet state-mandated nurse-patient ratios, as well as the hiring of more administrative staff. The position cuts will not affect patient care.
Approximate Affected Workforce: 1-50
Source: Inside Bay Area - June 28, 2007
Emageon Inc.
Birmingham, AL
Emageon Inc. has trimmed nearly 10 percent of its work force this year following lowered financial projections. The Birmingham-based health care imaging company has cut nearly 40 positions since Jan. 1. The company ended 2006 with 438 employees, including 130 in Birmingham. The job cuts have been spread between the Birmingham headquarters and branches in Wisconsin and Ottawa, Canada.
Approximate Affected Workforce: 1-50
Source: Birmingham Business Journal - July 2, 2007
Good Samaritan Clinic
Waynesville, NC
Canton, NC
The Good Samaritan Clinic is taking a new direction, a move that the organization’s executive director says will allow more people to be served at the free health clinic. Two employees are leaving and a reorganization plan will reduce the number of paid employees at clinics in both Waynesville and Canton from six to two. Other staffing needs are provided by volunteers, and contracts with other providers will replace departing paid staff members. The N.C. Association of Free Clinics requires at least two months worth of reserve money for accreditation. Budgeted expenses for the Good Samaritan clinics are 415,000, while the financial support budget is only 9,000. Twenty-four percent of the organization’s revenue comes from restricted grants; while 15 percent comes from a small fee charged for medication assistance, 14 percent from individuals, 13 percent from churches and 13 percent from in-kind contributions, 8 percent from the United Way (25,000), 7 percent from the county and cities, 5 percent from unrestricted grants, and the remainder from businesses and civic groups.
Approximate Affected Workforce: 1-50
Source: The Mountaineer - July 9, 2007
Gwinnett Hospital System, Inc.
Lawrenceville, GA
After making $22 million in budget cuts, the Gwinnett Medical Center says it will be more efficient without sacrificing its patient care. The increased efficiency, though, has a human toll — 72 jobs were eliminated. Of the 72 jobs, 29 were administrative, 23 managerial, nine clerical, six support and five clinical. None were care-giving positions.
Approximate Affected Workforce: 51-100
Source: The Atlanta Journal-Constitution - June 30, 2007
HCR Manor Care Health Services
Toledo, OH
Bethleham, PA
Two chaplains who served Manor Care nursing homes in Bethlehem, Bethlehem Township and Palmer Township have lost their jobs, along with Manor Care staff chaplains across the state. The eight staff chaplains in the company’s Pennsylvania nursing homes had been among the only ones left in HCR Manor Care Health Services, which operates nursing homes and assisted living centers in 33 states and was bought out by a holding company last week. As medical costs have risen, many owners of health care facilities like nursing homes have been bought out or gone private. In addition, the demand for long-term care in nursing homes has plummeted as more seniors choose assisted living facilities or in-home nursing care. More patients now use nursing homes for short-term rehabilitation after hospital stays.
Approximate Affected Workforce: 1-50
Source: Morning Call - July 10, 2007
Sarasota Memorial Hospital
Sarasota, FL
Sarasota Memorial Hospital is laying off seven people from its emergency room as it restructures to find more work for nurses. Seven employees, two paramedics, four technicians and a materials specialist, will lose their jobs. Hospital officials said the moves will not hurt patient care, as nurses are shifting into those roles. The layoffs are part of a larger effort to staff units primarily with nurses. When the expanded emergency care center opened in late 2005, it had 19 nursing vacancies. The paramedic and tech positions covered that shortage. Since then, the hospital has recruited more nurses. About 70 are attached to the emergency care center. Shifts vary widely based on time and patient load. The move will make it easier to manage the unit’s rapidly changing demand. The shift to a nurse-centered staff should also maintain a 4-to-1 ratio of patients to nurses and help the emergency room meet its “30-minute guarantee” of service.
Approximate Affected Workforce: 1-50
Source: Sarasota Herald-Tribune - July 7, 2007
Southwest Illinois Healthcare Foundation
East St. Louis, IL
Centreville, IL
Kenneth Hall Regional Hospital in East St. Louis and Touchette Regional Hospital in Centreville, which are owned by the same non-profit foundation, will soon merge into a single hospital with two campuses. The marketing director for the Southwest Illinois Healthcare Foundation pointed out that the hospitals are just five miles apart and serve the same declining population base. Each hospital will continue to operate its respective emergency room to handle relatively minor injuries, such as a broken arm, for example. And Kenneth Hall will continue its trauma center to handle more severe injuries, such as those suffered in a car accident or a shooting. For now, the merged areas include radiology, the pharmacies and accounting. While those services will continue at each hospital, it will be done with fewer workers. The merger will reduce duplicate services and will cut the number of staff. Just how many jobs will be cut remains unclear, said the chief operating officer at the two hospitals.
Approximate Affected Workforce: N/A
Source: St. Louis Post-Dispatch - June 28, 2007