Bits Bucket And Craigslist Finds For July 24 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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U.S. Treasury Secretary Henry Paulson: Coming Financial Crash Shows Need for Immediate Monetary Reform.
http://www.globalresearch.ca/index.php?context=va&aid=6401
All right! A link to Global Research. I urge everyone to check out their site while they are viewing the link. They have a lot of info on 9/11 that is worth reading.
(sigh)
Haha.
9/11 is this generations JFK. You might as well just get used to the conspiracy theories.
you mean the two are related? I KNEW IT!
Here’s how they are related (currency + Kennedy): Kennedy passed an executive order empowering the US Treasury to print its own money instead of borrowing it from the Fed at interest. He was assasinated soon after. Lincoln tried something similar.
You don’t fool around with the money people.
Double sigh.
Here are some thoughts on the stock market from the Mogambo Guru:
” And the stock market may be going up because there is a huge, towering
overhang of short interest, and if there is one trick that the sharks of
Wall Street reliably pull to eat their fill when short interest expands
like this, it is by suddenly running the market sharply up and squeezing
the shorts, who buy in a panic to cover their enormous short positions and
to keep from losing more money if the stock price continues to rise,
making prices go up even more, spooking more shorts, who then buy to
cover, making prices go up some more, spooking more shorts.
And a lot of buying is resulting from lots of foreign investment money
coming here, too, as an FT.com article quotes Alan Ruskin, chief
international strategist at RBD Greenwich Capital as saying “One reason
why the dollar has responded in such a negative fashion is that corporate
bond inflows have made up half of the current account financing in the
past year.”
In fact, he says, “In the 12 months to April, the US received $509bn in
corporate bond investment inflows that helped finance the current account
deficit.” Half a trillion a year!
And the market is also going up because the Plunge Protection Team and the
entire rest of the governments, banks and financial services industry are
busily intervening in the marketplace, desperately trying to keep stock,
bond and housing prices up and rising.”
Richard Daughty wrote this for yesterday’s The Daily Reckoning.
that short interest thing is a lot of hooey. He should talk to John Succo of Minyanville. Now if you want to discuss the large numbers of index puts, especially in the QQQQ, that’s another story
I also have a hard time believing there is “plunge protection team.” Rather, it’s more like sophisticated black box computer systems from brokerages programmed to take advantage of every upward or downward tick.
I have a hard time believing the U.S. has a free press…
http://en.wikipedia.org/wiki/Plunge_Protection_Team
http://www.washingtonpost.com/wp-srv/business/longterm/blackm/plunge.htm
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/10/30/ccview30.xml
Mike, there is a PPT. But it is not a conspiracy. It was created by open executive order. I’m a free market type of guy, but I don’t think the PPT is any worse than taxation and regulation of our economy. It is just more of the same needless economic engineering in a mixed economy that is probably necessary to counteract other harmful economic engineering. Government is very costly, IMO. In actuality, if the PPT helps your portfolio, you may as well be happy.
“But it is not a conspiracy. It was created by open executive order.”
Thank you for that clarification, Bill. We can argue until we are blue in the face about what the PPT is or does, and probably get nowhere, but we should put a moratorium on questions about the PPT’s existence. It is documented in the Washington Post, for Chrissakes! Google is your friend, sheeple!!
Okay, I accept there might be a PPT that would create stability and instill confidence in case of a market crash. But I have a hard time believing that everytime the market drops 100 points or more, a government PPT team enters with buy orders.
“But I have a hard time believing that everytime the market drops 100 points or more, a government PPT team enters with buy orders.”
How do you explain the dearth of large (e.g. 1%+) 1-day drops in the headline U.S. stock market indexes since 1988? The empirical evidence for a change of regime is very strong for any financial analyst who gets off their lazy behind and checks…
I think you and I agree on one thing: this market is going down sooner rather than later and whether there is a PPT or not, it can’t save a market that has been riding on fumes for way too long.
To put my point in another light, what “catches” the headline indexes every time the DJIA drops 100 pts or more in one day?
http://www.marketwatch.com/tools/marketsummary/
You’ll see the PPT at the 200 dma for these indicies. IMO, the more recent stuff is nothing more than monkeys who have been rewarded buying every slight dip simply doing what’s worked for them.
The day is still young - I would not be surprised to see a 10 to 30 percent drop one of these days. And it will be fascinating to see how greed turns to fear and panic.
Agree - a bunch of trained monkeys that buy every dip.
I saw a column by Grandich on http://www.kitco.com the other day that says the PPT can only go so far. Eventually market circumstances will be far beyond the control of the PPT and they won’t be able to stop the market from crashing or gold prices from soaring. As a fan of Austrian Economics, I tend to agree, hence that is why I buy gold and platinum bullion several times per year.
just for the record, one can see very similar strange recoveries and plunge protection on the EU exchanges, e.g. the Dutch AEX. If some kind of support or trendline fails, someone with BIG pockets throws around some huge buy orders or the futures go up and the stockmarket rallies again. This has been going on from about 2003 without any serious correction (Dutch AEX index is now 2.5x higher than the 2002 low). One guess is that big institutional investors know how to rig the game, but it’s anyones guess whas is really going on. Does the PPT also rig the foreign exchanges?
I would think so and 2003 is the year this started for the most part so you have that right.
“Eventually market circumstances will be far beyond the control of the PPT and they won’t be able to stop the market from crashing or gold prices from soaring.”
I agree with this, and so does the Fed, at least by my reading of their constent behind-the-scenes handwringing over the issue of ’systemic risk.’ One can only override the market so far before the social engineering is overwhelmed by reversionary forces. The Corps of Engineers faces a similar problem with respect to their efforts to reign in the Mighty Mississippi through their levee system. And moreover, the systemic risk problem rears its head in both cases (PPT-stock market intervention and flood control), through the ‘levee effect.’
Flip through this powerpoint presentation for more on this fascinating topic (caution — .pdf file):
http://www.colorado.edu/geography/class_homepages/geog_3402_s07/lecture_412.pdf
All of the spooky market rebalancing since 1988 can be attributed to aggressive hedging expressed in programmed trading.
This is a fraud, right? Sort of like the tabloid press of the financial world? Because all I ever hear HP say is “Subprime is contained.” No crash warnings have been issued through MSM sources.
what absolutely silly recommendations… eliminate the federal reserve, okay, I’m with you there, but then have the gov’t guarantee income levels and issue credit, uhh, how can it do that without the fed to print the money? who is going to lend the gov’t money to lend to deadbeats? especially after recommendation #1 - cancellation of debt?
Argentina can default on its debt because the US exists. If the US doesn’t just default but cancels debt, thereby destroying the reserves of China, Japan, Korea, etc, who is going to do all the lending to give to Americans with little or no skill?
And did I catch a “real bills” doctrine citation there? Awesome. I haven’t seen that in a while.
What is so awful about just going back to a specie backed standard, or, absent that, free banking in competition with the fed?
“…the government can and should make direct cash allocations to individuals without recourse to taxation or borrowing.”
Crank up the printing presses, fuel up the helicopters! Hyperinflation, here we come.
Bull market may turn bearish, says study .
A stock market correction may be in the cards, thanks to a shaky global credit market, according to Morgan Stanley. Corrections in the equity market typically follow six months after the cost of debt goes up, according to The Telegraph.
The bank’s model predicts a 14% fall, The Telegraph said.
http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20070723/REG/70723024
So now is a good time to buy :-)??
Sorry, couldn’t resist.
I’m going to keep on buying during the stock market collapse. That is when the roaches run away and the rest of us profit by buying more shares at lower prices. Worked for me in 2001 through 2003 while the cowards ran away from stocks.
How did it work out for investors in the Japanese stock market circa 1990? (True confession: I was among them
).
I don’t know. However I fondly recall most posts on financial message boards on AOL were so negative on the US Stock market in 2001 and 2002. Small investors were all but gone from the market back then.
What I enjoy seeing now are value stocks near their 52 week lows (or at new 52 week lows) with yields increasing. A brick and mortar company that has been through several economic crises (when people were running to the hills) and with a low P/E ratio is the type of individual stock I like. Bank of America stock is under $48 today. I’m chomping at the bit and will buy a modest 100 shares when it’s $44 or in the month of September, whichever comes first. P/E should be below 10 and its yield will be about 5%.
How did it work out for investors in the Japanese stock market circa 1990?
I suspect it failed to work out for you - not because it is bad to buy when stock prices head south, but because you bought Japanese equities. In the 90’s, plain vanilla businesses like Toyota were selling for 100 times pre-tax earnings. Why did it make sense to value Japanese businesses on pre-tax earnings? The same reason that it made sense to value Internet stocks on revenues rather than earnings. In other words, stock price momentum. Which was a load of crock. But the rationale for Japanese stock market over-valuation held up for decades. Until it collapsed.
The US stock market isn’t seriously overvalued by traditional benchmarks. And American companies (although not savers with money market accounts) are benefiting from the recent declines in the dollar against other major currencies, which is helping to increase their overseas sales and profits. Since many of these firms get the majority of their sales overseas, it’s not exactly a surprise when their stock prices increase along with their earnings.
I understand some of the folks here think the US is going to hell in a hand basket. And that the grass is greener on the other side, which may have been the reason GS invested in Japan in the early 90’s. I recommend that you go abroad to where you think the grass is greener and actually live there for some period of time. I think you will find your preconceptions about impending Armageddon - stateside - shattered.
“I understand some of the folks here think the US is going to hell in a hand basket. And that the grass is greener on the other side”
No, no more green grass left….. it’s all going to hell in a hand-basket. Fair enough?
“The US stock market isn’t seriously overvalued by traditional benchmarks.”
Yes it is! It is 100% overvalued by traditional benchmarks. The historical PE ratio is under 9 the current PE ratio is 17 and going up.
Hoz, thanks once again for stopping BS in its tracks with actual data.
And Zhang Fei, thanks for supplying the trollish BS. We miss all of our trolls of yore on this blog, and it is good for a new one to pop up every now and again with unsupported claims to give one of the regulars the chance to play a round of wack-a-troll with actual verifiable data.
Hoz: Yes it is! It is 100% overvalued by traditional benchmarks. The historical PE ratio is under 9 the current PE ratio is 17 and going up.
I’m afraid that’s wrong. On a P/E basis, It’s either fully-valued or a little overvalued. But 100% overvalued is not even close. The housing market, on the other hand - I could see a 60% drop from current levels.
Here’s the link with a graph of historical P/E’s: http://www.investmentu.com/IUEL/2006/20060223.html
I’ll buy long when everyone I work with have abandoned the stock market. For the opposite reason, I just got out of my long positions, same as I did in early 2000. Market fall down soon, go boom.
I can tell the market is about to crash, because my financially-unsophisticated sister has recently been asking me whether she should “pull” her stock market investments — a proverbial shoe shine boy moment.
As contrarians, isn’t that a signal to buy? Seems like most posters on this blog expects that stock market to crash for some time now. Just like how the real estate market is suppose to crash two years ago. Timing has to be relevant, people. A broken clock is….
I can tell the market is about to crash, because my financially-unsophisticated sister has recently been asking me whether she should “pull” her stock market investments — a proverbial shoe shine boy moment.
Lemme guess. She thinks now is the time to get into real estate with her hard-won gains.
Dear Formerlahomeowner:
The real estate market did in fact peak two years ago. If you don’t believe me, ask Zillow.com or Altosresearch.com. You will see that anyone who bought a house in 2005 would have done better not to.
But here’s my thing about the stock market: I always predicted that folks who actually made $$ off the RE bubble would put their profits into the stock market, which would cause a mini echo bubble. I thought that was all over a few months ago when the stock market lost a couple hundred points one morning, but I guess that was just a fluke caused by Taiwan or something. Right now, I’m thinking this echo bubble has a ways to go, but I’m not betting my house money on it. Just my retirement, which is a long way off.
Anyone else here have similar thoughts?
Interesting thoughts. I too have held a belief that the funny money housing gains are being plugged into the stock market, and anecdotally have advised former funny money housing winners to invest in the market.
However, I have steared them into what appears to be an energy bubble, while I have been investing defensively…10yr treasuries, Gnne May, Gold, while plowing as much as possible in International and S&P on the retirement side.
why? bubblers want the crazy returns and and have little aversion to risk. some will win many will lose, but chasing bubbles is a dangerous thing as housing bag-holders are keenly aware.
I would also consider that hearing GS “financially- unsophisticated” sister pulling her investments an echo of talking to her brother on the phone.
“jungle_man”
Oh contraire! My crystal ball is far more cloudy than that of the herd of bulls and their cheerleaders who keep reassuring themselves that “Stocks always go up, in the long run” as they whistle their way past the graveyard gates.
GS,
just jerking your chain a bit with the echo comment, however, Long positions in retirment accounts for those who have a long time horizon (myself is at least 20 more years)….Im aching for the highest risk greatest return scenario….I dont need or want the money right now.
However, current investment climate has forced me to position defensively…holding a bunch of cash, and like Bill waitin for the big drop, cause like him, Im gonna be a buyer all the way down.
Its either that or do the Lenny “Spitball” Dystra and buy deep in the money calls…..whata maroon.
Jungle_man, exactly why most of my equities are tucked away in tax deferred plans that I don’t intend to tap for 20 years. Outside those plans I put more than twice as much $ into government securities and precious metals than I do into equities.
I’m going to keep on buying during the stock market collapse. That is when the roaches run away and the rest of us profit by buying more shares at lower prices. Worked for me in 2001 through 2003 while the cowards ran away from stocks.
Keep up the good work. Let us know how it works out for you.
Afterwards, that is.
1929: Stock Certificate
2007: Computer Blip
With $1M in assets, I’m still glad I bailed stocks 2 yrs ago. I sold as high as I dared…and I’ll get back in again on a regular basis when I think the mkt has gone as low as it will go…sell high, buy low, I say!
2 years ago - 2005 - wasn’t high if you compare to now.
it is tough (impossible) to time (predict) the true tops and bottoms… when i see capitulation, i then say buy big….
Great! Gives me an opportunity to short. Adjusting for continued purchases, has your portfolio even caught up to its Mar 2000 value yet? An incredible loss from April 2000 to April, 2003. Why suffer such an enormous loss? And to keep buying as stocks plummet? Was it fun buying Enron on the way down? Or Worldcom? I was shorting UAL at $0.25 / share in Bankruptcy - free moneys. There were plenty of buyers, were you one of them? The NASDAQ has recovered about 50%, The S & P 500 just reached its 2000 high (not adjusted for inflation).
Since 2000, if adjusted for inflation - you are down! If adjusted for currency valuation against the basket - you are down!
It is possible that at some time in the future, these US investments may be worth owning. But there were many knowledgeable investors that did not see their 1928 investments in the US stock markets return to break even until 1956. Many of these investors were dollar averaging, an unsound policy. The hardest thing for small investors to do, is to take losses. I do not buy (to get long) in declining markets. There is always a bull market somewhere - just for the last 7 years it has not been in the US.
And my parting words, an investment is either sound or unsound. If the US stock market declines by 50% (a greater than 25% possibility) or the dollar declines by another 30% (a 75% probability), how sound do your investments in the US look?
I’m down? Net worth is 17 times what it was in 1995.
*past performance isn’t necessarily an indicator of future performance
So, to summarize:
It’s now crystal clear that the Fed accomodative money pump policy (the “Do Nothing” Fed) is targeting “Bill in Phoenix” and others who share his investing beliefs.
If they can keep stimulating stealth inflation, crush the dollar (bringing in foreign institutions and propping international demand for US company products) as well as keep the 401(k)’s afloat, along with the Riskloves and Pig Men’s continued gorging at the trough of global liquidity, then they take will take some attention away from the economic impacts (individual and macro) from “everyone’s” deflating house asset.
As well as pay off entitlements in an easier fashion in the future.
A simple plan, really.
Yeah, but I asked what it has done since 2000 - not adjusted for additions. And it is down adjusted for inflation and dollar devaluation. I do not care what it did from 1995 to 2000 - there were a lot of people starting with nothing that made multi-millions in the markets during those years. Any mope can buy and if the market goes up believe they are geniuses.
Since 2000 the market has not kept up with devaluation and inflation. The purchasing power of the dollar aint what it used to be.
Your logic is the same as used by RE “the market only goes up” or “Buy now or be priced out forever”. I like this thought better. “Averaging down is a way to lower the average cost of a stock holding. It can also be a way to throw good money after bad.”
Hey you guys, I don’t know much about the stock market, but I appreciate the information and education.
I had a mutual fund I opened in 1997. I left it alone and it has grown from my $1500 initial investment to over $5000 today. Of course, this fund did not invest in stuff like enron or worldcom and it has stayed away from investing in real estate companies or financial companies involved in risky lending practices.
There’s going to be a lot of guilt by fraudassociation, that will take down where the lion’s share of where the moolah is…
Mutual Funds
I was shorting UAL at $0.25 / share in Bankruptcy - free moneys.
I thought that you couldn’t short bankrupt stocks or those stocks trading less than $5?
“There’s always some hope in people’s minds that because of the low price, perhaps the stock is a good deal”. Why would you think you cannot short stocks in BK? Rules now allow short sales of exchange-listed stocks only when the price is rising. Exchanges rely on a “tick test” that permits short sales if the last trade shows an uptick in price.
Reg Sho was not enacted until 2005 and it has more holes in it than Swiss Cheese. Big exceptions are to CSEs, members of the exchanges and options market makers are all exempted. LOL
Asians go condo crazy in Houston!
http://louminatti.blogspot.com/2007/07/asian-go-condo-crazy-in-houston.html
I’ll be buying!
My sis wants to buy a high rise condo in Clear Lake. Heaven help us.
I love Clear Lake(if any place near Houston can possible be loved), but a high rise condo? Now I’ve heard it all and can think of only one word…. apocalypse
I couldn’t get out of there fast enough (went to HS there)
The high rise there will give you beautiful views of the occasional Texas City refinery explosions.
It’s hard for me to express the satisdaction I felt when I saw the Dataquick numbers for socal yesterday>
The zip I track lost 12.5% MOM between May and June. It was down 11.3% YOY, putting the median sales price back to June ‘05, when sales topped out for the zip.
93552 Palmdale had only 27 closings in June, that equals the cycle low set in April. There have not been more sales than NODs in the zip since December of ‘06.
What a watershed day in my own little corner of the Bubble.
what is satisdaction? Is it a combination of satisfaction and redaction?
satisdaction — The pleasure of seeing smug real estate professional predictions from the past removed from present?
Satisdaction is satisfaction spelled at 0 dark thirty on my laptop in the parking lot while I wait for my building to open.
But I like your definition as well.
93552 Palmdale had only 27 closings in June
- That is a city of about 100k (of course it is like Compton CA)
City of 145K, more and more like Compton every day. It used to be a nice place to raise a family.
That being said, I’d pick the Antelope valley over the inland empire or any comparably priced local in the basin any day.
i thought the release of the la times zip charts was the most dramatic yet. it reminded me of that historical graph from the early 90’s being passed around showing the uptick and crash at the time. lots of areas in l.a. county were waaaay down off their peak and a few areas are still bubbling right along (studio city 91604 comes to mind)….just a wait a couple more months and every area will be getting creamed. 90035 is way down y-o-y….some call that west l.a……investorgirl, where are you????
Dont be mean to investorgirl. Just as with many other “investors”, she was probably in highschool during the last major downturn in L.A., so she has a false reference point. She hasn’t seen a downturn to understand that in L.A., just as in everywhere else in USA, it is possible for overleveraged people to be BK in a short period of time when the bottom drops out of the r.e. market. This is why I have all but given up on arguing with r.e. novices…
Funding Drain.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aG18rnNeuGxc&refer=us
July 24 (Bloomberg) — The Wall Street money-machine known as collateralized debt obligations is grinding to a halt….
Sales of the securities — used to pool bonds, loans and their derivatives into new debt — dwindled to $3.7 billion in the U.S. this month from $42 billion in June….
Crunch….Crunch….Crunch….
since the IPOs of all these PE “takeouts” seem to be projected for 2010, wonder if a nice 3 year bear market will create a good environment for selling worthless stripped out crap to the public. Hell, the public is barely in the market now, or so I read.
If half of the these take unders occur, I will be mildly surprised. The Tribune buyout debt is projected at 50/50, would you buy anything that you had a 50% chance of losing your entire investment? However if it can be packaged as a CLO, then the deal will go through. A couple of weeks ago, there were 77B in takeunders and stock buybacks looking for financing. Today there is over 300B looking for financing.
The reason for the 2010 IPO and reissue of the stock is the terms on the corporate loans are generally from 3 -5 years and most adjust from 2010 to 2012.
The only “deal” not relying on smoke and mirrors is Murdoch’s bid for Dow Jones.
Dead on. The announced deals are seen as good news, and the bulls don’t seem to want to stop to think about whether they’ll actually get financed. Another reason for the 2010 IPOs? Still virtually no appetite for them in the market after the dotcom debacle. PE firms keep raising money and keep buying companies, but they have no good exit strategy. And thus dividend recaps and PE-to-PE sales became all the rage. At some point, the LPs will catch on. Institutional investors aren’t exactly the smart money, but they tend to catch on a little faster than the Average Joe.
Right, hence my skepticism that there will be a market for these offerings at the prices they project privately to their investors in 2010. Maybe 2020?
Sounds about right. That will only require about a zillion extensions to the partnership agreements of these funds and all of the posturing and legal brouhaha that will be required for approval. If I were graduating from college right now, I would seriously consider law school. This mess is going to take a while to clean up.
They’ll sell them to the Chinese and other sovereign wealth funds?
Order of magnitude drop! Ouch!
Why aren’t we seeing the pain yet? Is it on tape delay?
The bottom line is debt has been so cheap, and savings so unrewarding, that the only people willing to invest have been those investing other people’s money and taking fees.
The other people are beginning to find out what their risk adjusted return actually is.
That’s one of the most succinct, yet brilliant, analysis I’ve read lately.
i was thinking the same thing..greay commentary…e.g., passbook at 1/4 %. would you rather have bling? j6p would.
“I’m not your best friend. I’m your only friend.
I don’t make anything? I’m making you money.
And lest we forget, that’s the only reason any of you became stockholders in the first place. You want to make money. You don’t care if they manufacture wire and cable, fried chicken, or grow tangerines! You wanna make money!
I’m the only friend you’ve got. I’m making you money.”
http://newmarksdoor.typepad.com/mainblog/2007/03/devitos_speech_.html
I thought that was a Cramer quote at first reading.
LMAO
Friend of mine used to work in a fly-by night broker and Boiler Room was full of EXACTLTY the sort of crap that he’d told me about. I bought him the DVD and told him that watching it was part of his pennance.
I’m going to sit here and laugh as the debt-burdened targets of private equity are forced back into the IPO market. They’ll need to raise equity capital just to stay alive when the small margin for error they’ve left themselves evaporates. In many cases the cash flow covers interest in the debt with little left over whie their sales are still growing. What will happen when recession hits hardly bears consideration. Always remember, today’s LBO is tomorrow’s IPO.
“…today’s LBO is tomorrow’s IPO…”
As long as the churn continues, Wall Street will keep making money, Main Street will enjoy the trickle down wealth creation effect, and it all will be good.
Daffy: “Hey Bugs, there’s a lot of noise & static on the space radio this morning…I think Martin the Martian is up to something…”
Bugs: “Turn the dial Daffy… while’s I walk around outside with this here antenna, … what’s it sayin’ now Daffy?”
Daffy: (Radio static & noise) something about, …”today’s LBO is tomorrow’s IPO”
Bugs:”eh, I think we are about to be invaded…I better put the steel door on the rabbit hole.”
Daffy: “Invaded, invaded…That’s Dissssssssssspicable”
I’m not laughing while these greedy hogs destroy good companies.
They’ve already destroyed good companies by placing a crushing debt burden on the balance sheet - that is done and over with. All that remains is the reckoning. What I’m enjoying is not the crime, but its just deserts.
The cheap credit era is so over…
Moin,
Countrywide is tanking pre-market…….
Ugly numbers…. time for them to announce another debt fueled buyback to delay the plunge to new lows…….too bad that this time they wont get the financing…..
Can´t wait for the conference call……
Per Bloomberg, their profit is down 33 percent:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a6Eycpwl9eOQ&refer=home
Again, as the chickens come home to roost, anyone with lower profits is doing WELL, and a possible survivor if the financial reporting is accurate.
I’m impressed when firms report massive LOSSES.
Countrywide shares off 9% in pre-open after profit falls 33%
By Greg Morcroft
Last Update: 8:41 AM ET Jul 24, 2007
…”"During the quarter, softening home prices continued to affect many areas of the country and delinquencies and defaults continued to rise across all mortgage product categories as a result. Due to these adverse conditions, the company incurred increased credit-related costs in the quarter, primarily related to its investments in prime home equity loans,” CEO Anthony Mozillo said in a press release. The company said it expects the second half of the year to remain challenging.
“… primarily related to its investments in prime home equity loans,”. PRIME loans?!? I thought that this couldn’t possibly happen? But then again, I also thought that there wasn’t a housing bubble. Then I thought that there was just a minor correction and prices would shoot back up any day. Then I thought that things would rebound in the spring. Then I thought that there MIGHT be a small issue in SOME subprime loans, but that it was such a miniscule segment of that market that it wouldn’t even matter. Then I thought, ‘So what, there IS a SMALL problem in subprime, but not every mortgage that goes into default actually gets foreclosed upon’. Then I thought there actually WAS a problem in subprime, but it was contained and would not effect the stock market or the economy. Then I thought that hedge funds blow up anyway and it was probably just coincidence that these were stuffed with CDOs- besides, it was contained to subprime mortgages. Then I thought that it might have spread a little to Alt-A mortgages, but not enough to mention. Then I thought that Alt-A was impaired as well and there was apparently rampant fraud throughout the entire market. But who would have thought that there could be problems with prime?!? Angelo- talk to me!
LOL!
Beer and Cigar Guy,
That was a great comment, I almost forgot about a couple of the: “and then I thought’s”…LMAO
Bugs: “eh, so what’s up Doc Mozillo? …feelin’ a little low, are ya? …here Foghorn Leghorn has just the medicine for you ”
Foghorn: (Bugs whispering in his ear) “Say What?…you want me to tell Miss Prissy…that Doc Mozillo is a rooster? …Oh, I see son, you what me to trick her in to “believing” that he’s a rooster, I get it , I get it…Oh, Miss Prissy, come here gal, I got something to tell ya…”
LMAO!
Per Countrywide via Bloomberg,
“reported a third straight quarterly earnings decline and reduced its 2007 forecast because of an increase in late payments by borrowers with strong credit.”
And
““Market conditions became increasingly challenging throughout the second quarter of 2007,” Sambol said in a statement detailing Countrywide’s loan data for June.”
“Market conditions became increasingly challenging throughout the second quarter of 2007,” Sambol said in a statement detailing Countrywide’s loan data for June.
Solid evidence that there is no floor in sight and conditions are actually worsening. Anyone who say’s otherwise deserves public humiliation.
From Marketwatch:
“Payments were late on 23.71% of subprime mortgage loans, up from 15.33% at the end of the same period in 2006.”
Did they say 23.71%?! Holy wtf, batman. Look out below.
I think an equally “Holy wtf, batman” comment is reserved for:
“Countrywide said payments were at least 30 days late at the end of second quarter on 4.56% of prime home-equity loans serviced by the company, up from 1.77% a year earlier.”
i have posted here that after the dust clears, 80% of subprime will be late/default
“increase in late payments by borrowers with strong credit.”
That’s the money shot. What kills me is when people look surprised at this.
The money shot? gwynster, what have you been watching?
I agree, implosion, movies that show violence against money are not appropriate for us here at the blog.
golf
And the other foot that has yet to fall is the unbelievable overhang of REO inventory they are carrying. They dare not mark it to market or all hell will break loose.
Countrywide now lists 2117 properties as REO in California alone. At last month’s reported median of 479K that’s $1,014,043,000 (1B). That’s 5.4% (1.014B/18.6B) of CFCs total market cap just in CA REO.
Just wait until they start taking inventory write downs like the builders. I think I’ll ride my short a bit longer.
I think I’ll ride my short a bit longer.
Am I mistaken, or did you folks who know how to play the market take possession of a golden goose when you first suspected that housing was going to tank?
First you went “short” on the HBs and now the lenders… right?
Wasn’t everything I’ve been reading on this blog for the last year-and-a-half sort of like being able to predict the future for you folks?
ld: Am I mistaken, or did you folks who know how to play the market take possession of a golden goose when you first suspected that housing was going to tank?
First you went “short” on the HBs and now the lenders… right?
Wasn’t everything I’ve been reading on this blog for the last year-and-a-half sort of like being able to predict the future for you folks?
No one *knows* and nobody can *predict* the future. I made some short bets on lenders and homebuilders - but only time will tell me if I was right. If I either *knew* or could *predict* the future with any certainty, I would have put my entire bankroll and levered up 20 to 1 betting against these companies. Anyone who did that is probably now worth tens of millions and not posting in this forum.
Shhhhh, don’t tell anyone, it’s our little secret.
Seriously though, being contrarian can be hell.
From Time magazine - The End of Easy Money:
http://www.time.com/time/magazine/article/0,9171,1645150,00.html
What a difference a couple of years makes!
http://www.time.com/time/covers/0,16641,20050613,00.html
Is Grantham suggesting the stock market is as dumb as a brontosaurus?
‘Then markets calmed, the Dow cracked 14,000, and the world got back to business. Don’t count on that happening forever–today’s jitters do probably presage something worse. “Rather like a brontosaurus that has been bitten on the tail and most of the body hasn’t noticed it yet, the signal is working its way up the vertebrae,” says Jeremy Grantham, chairman of Boston money manager GMO.’
Favourite comment ever:
People are ***smart*** (to some degree) but multitudes are ***dumb***. Why would Wall street be any different from main street?
“The End of Easy Money”
By the rule that Time magazine publishes all trends on the cover just as they end, wouldn’t this mean credit will now start to get looser?
“Dow component American Express Co. reported after the bell Monday that quarterly profit climbed 12 percent on record card member spending. However, the nation’s third-largest credit card brand said cardholders are also shirking more payments, which could weaken shares on Tuesday.”
Using credit cards, but not making payments. Not to worry, its just the binge drinking during the summer.
But there is always more alcohol where that came from, right? After all, the Fed’s job is to supply the debtoholics with a steady flow of cheap credit to make sure they can shop, shop, shop until the U.S. economy drop, drop, drops…
The Fed can create all the funny money it wants, but it cannot finance the US’s 7% of GDP current account deficit. Only foreign lenders can, and if they tear up Uncle Sam’s credit card, the party’s over.
Talkin’ credit cards…
We changed forever as a society, when they showed up in 1950.
“At the end of the meal with his two friends, McNamara reached into his pocket for his wallet so that he could pay for the meal (in cash). He was shocked to discover that he had forgotten his wallet. To his embarrassment, he then had to call his wife and have her bring him some money. McNamara vowed never to let this happen again.
Merging the two concepts from that dinner, the lending of credit cards and not having cash on hand to pay for the meal, McNamara came up with a new idea - a credit card that could be used at multiple locations. What was particularly novel about this concept was that there would be a middleman between companies and their customers.”
http://history1900s.about.com/od/1950s/a/firstcreditcard.htm
In poker, there is a saying “The man who invented poker was smart. The man that invented the poker chip was a genious”.
When you’re putting real money into a pot, you think about all you could buy with that cash. When you’re putting little chips into the pot, it is disconnected from what else you can buy with those chips. Those chips aren’t good for anything except putting into pots.
Credit card works much the same. I don’t have to choose between food and clothes. With a credit card, I can have both. It isn’t “real” money….right?
This is still true on the trading floor of the exchanges. ‘Real money’ is what I take home, play money is what I use to buy and sell. The funny part is the amount of time spent shopping to save a few hundred dollars.
But doesn’t Uncle Sam own his creditors, in the same sense that The Donald owns his and Aunt Fannie Mae owns hers (the too-big-to-fail sense)?
“cardholders are also shirking more payments”
This was bound to happen…
Dear Sec. Paulson and Chairman Bernanke:
The problem of debt has become so serious that your own Comptoller General is now talking about the risk of so many Treasury bonds in the hands of hostile foreign nations.
http://business.timesonline.co.uk/tol/business/markets/united_states/article2120735.ece
——————————-
David Walker, the US comptroller general, indicated that the huge holdings of American government debt by countries such as China, Saudi Arabia and Libya could leave a powerful financial weapon in the hands of countries that may be hostile to US corporate and diplomatic interests.
Mr Walker told The Times that foreign investors have more control over the US economy than Americans, leaving the country in a state that was “financially imprudent”.
—————————
If the Fed didn’t pummel savers by keeping interest rates so low, maybe Americans would save and not be dependent on Asia. Then we wouldn’t need to beg China to buy junky mortgage bonds and even our own government’s debt. Washington and Wall St have put our collective heads on the economic chopping block and handed the axe to China and OPEC.
Hear hear!
Mr. Walker has been saying this for years.
“To hear Walker, the nation’s top auditor, tell it, the United States can be likened to Rome before the fall of the empire. Its financial condition is “worse than advertised,” he says. It has a “broken business model.” It faces deficits in its budget, its balance of payments, its savings — and its leadership.”11/14/2005
USA Today
and
“Walker warned lawmakers to be prudent with the projected budget surplus, and to take into account a demographic tidal wave he says will begin to arrive just beyond this 10-year period. This wave, he said “can swamp our future fiscal picture and return us to the days of growing deficits if we are not prudent about our actions today.”
Lawmakers must enact needed reforms to entitlement programs such as Social Security, Medicare and Medicaid, he says, lest they “crowd out spending for national defense, our judicial system (and) the ability of future generations to make some of their own choices regarding what role government should play.” April 23, 2001
NPR
But he is now like the boy crying wolf, the Beltway and the Street ignore him.
But why, his statement in 2005 only shows that his prediciton in 2001 was absolutely correct! Maybe those in the Beltway and on the street just don’t want us young’uns to find out how our future is being robbed. Not because Walker was wrong, but because he was right.
Bad choice of words on my part - and I am sorry for comparing him to the boy who cried wolf. But like the boy in the story who is not believed, Mr. Walker is not believed. Fortunes have been made in the Beltway and on the Street over the last 6 years. Mr. Walker is not capable of convincing the mopes that ‘we have a problem’. He has been warning about a problem for 6 years and the problem seems just as distant now as then to the people that need to be convinced. These people have stuffed wallets and to them, everything looks grand.
That whurrrrring sound in the background?…that’s Sir Greenspent sharping the axe.
It is very late for this concern by Mr. Walker. The financial weapon is already in their (the potential enemy) hands. All they have to do is want to use it.
IMHO it doesn’t matter how much of our debt that they hold. What are they going to do, not cash our checks when we pay them back? The problem is that we rely on them to buy future debt. And if they decline finance us, then, we’re in trouble.
jim
If China doesn’t buy our future Treasury issues, that will be a headache but hardly the worst scenario. Yes, that would cause our interest rates to go up a couple of points and make it harder to get credit. But the nightmare is that they will take the hundreds of billions in bonds (possibly over $1 trillion soon) and dump it all in the marketplace in a short period of time. That would cause massive disruption of the credit markets, crater the dollar and cause interest rates to soar overnight.
I hear economists saying that China wouldn’t want to destroy the value of their bond holdings. But their leadership might just look at it as an investment - in replacing us as the global superpower. China is very ambitious and hostile. This is a nation whose generals have threatened to nuke LA on more than one occasion. It’s stupid of us to give them this kind of leverage.
Dollar index at 79.95 (futures)
79.95 (fumes)
It is pretty sad that the dollar is collapsing against the Yen. We all knew it was going to happen, but it does not make it pleasant. The dollar losing 2% to the Yen in the last 3 weeks. The incredible thing is that even after this round of profit taking the “carry trade” still has a Sharpe’s ratio of 1.26. I will truly hate to see how far the dollar drops when the carry trade unwinds. As long as Japan keeps its lending rate unchanged and Europe raises its rates - carry on.
Over the last half hour the DX has been dropping while the TNX (yield) has been rising. Look out below if this continues for long.
I’ve been tracking dollar-to-yen conversions for a while. On Dec 11, 2006, a dollar would get you 115.49 Yen…so it’s been lower than it is now.
Yep and it was at 108 in 2001. But the carry trade with rising interest rates world wide (except Japan) has created an artificial short. On a price comparison scale (see Economists Big Mac index), the Yen is 35% undervalued.
Thanks for the explanation.
now 79.89 where are the props?
http://www.weblinks247.com/indexes/idx24_usd_en_2.gif
Ouch… I don’t think it has ever closed below 80.something. We could be seeing a new record, and not in a good way.
Anecdotal story from a nicer area of West Michigan…
Yesterday hubby and I got a Starbucks iced mocha to share while doing the grocery shopping. (There is one inside the supercenter we frequent.) I asked the gal working if she had noticed any slowing of business with the economy slowing down. Her eyes got as big as saucers and she said, “OH YES.” She said business has been way down - probably half of what it was. I asked how long it had been slower and she said she noticed it had started slowing a couple of months ago. She said there has been a huge difference.
She also said that she thinks McDonalds getting into coffee has cut into their business. She remarked that if people don’t have a lot of money to spend, they will go for cheaper rather than quality.
I guess when McDonalds notices a drop off in their coffee business we might know that we’re making progress toward the bottom.
And so it was especially interesting to read on here yesterday that just up the road from this same supercenter they plan on switching from building 20,000 square foot homes on the golf course to 1,200-1,500 square foot condos starting at $300k. What are they thinking?
Starbucks pushing up prices by an average of .09. I guess that one way to make up for less customers coming in.
Stupid is as stupid does. You can’t raise profits by increasing prices when demand falls. Just ask any homeowner whose overpriced home sits unsold on the market for month after month…
I hate coffee and don’t drink it but even if I did, there’s no way I’d pay (what is it?) $5 for a cup of something? Insane!
What do you drink?
The brewed coffee is far less than $5 per cup at Starbucks. I usually make my own coffee anway. Safeway has a good coffee section of various flavors of beans. I like grinding them myself for the freshest coffee.
Diet Coke.
Woman after my own heart.
Best to buy beans that have been recently roasted. Ideally you should grind the coffee right before you brew and brewing should be done 6-25 days after roasting. Dont put your coffee in the fridge either. SBux coffee is horrible over roasted crap in most cases.
“Diet Coke”
That aspartame will cause many health problems.
I have close encounters with rattlesnakes every summer on the ranch. I also got bit by a centipede and stung by a jellyfish in Hawaii.
Aspartame is the least of my health concerns.
TX Chick:
I love Diet Coke. In Costa Rica, they call it “Coca Light”, even though “light” isn’t a word in Spanish. But I think Coca Light is easier to say than Diet Coke, so when I order it from Spanish-speaking people, I always try to say it that way.
Splenda has replaced aspartame for the most part.
“Splenda has replaced aspartame for the most part.”
Only in Diet Coke w/Splenda. The rest is still aspartame, but if you read the article that links Diet Coke with heart trouble, it’s only because people eat chips and other fatty foods while drinking soda.
I drink Diet Coke a lot too, and I’m not worried about disease.
Beware of Coke, Pepsi, Dr. Pepi and numerous other “dark” sodas; especially if you’re a woman over 40. They all contain phosphates which destroy bone density. You can get a phosphate-free cola at Whole Foods but it isn’t diet.
a while ago the soda gun broke where I used to bartend: syrup was coming out of the handle. When the repair guy came I told him the problem and he said “its the Diet Pepsi button, right?” I asked how he knew- he said the nutrasweet in the diet sodas would always eat through the tubes in the soda gun handles. He then talked about how nutrasweet caused blindness in lab rats, and how unironic it was at the time that a blind person was the spokesperson for Diet Pepsi (Ray Charles)!
BTW, that originated from under his tinfoil hat, not mine.
I had a double shot of espresso at Starbux yesterday that set me back $2. Not bad.
There are so many different theories about sodas. One thing is certain, everything has a risk. You can drink water and each wheat cakes every day and come down with cancer or cholera. I doubt that diet soda is any worse than the high-fructose corn sryup that is added to regular cokes.
There have been a couple of excellent scientific studies done in the last few years that show drinking diet sodas causes obesity. Even CBS did a rport on it.
“What didn’t surprise us was that total soft drink use was linked to overweight and obesity,” Fowler tells WebMD. “What was surprising was when we looked at people only drinking diet soft drinks, their risk of obesity was even higher.”
In fact, when the researchers took a closer look at their data, they found that nearly all the obesity risk from soft drinks came from diet sodas.”
I’ll stick to something healthy! Like scotch
who doesn’t love a little benzene w/their fries and burgers?
They use a lot of milk, syrups and sugar.
I feel quite bad for some farmers here in Maryland. Corn is going up but they might not benefit from it with the dry spell we are having in some areas. They spent a lot of money in planting this spring, some taking out loans. The ears on some of the corn around here are pitiful and they are going to have to buy feed. For those that didn’t sell out to developers, they might lose the farm anyway.
Tasseling has started to occur, however all bets are off if the plants undergo any additional stress. We need rain.
US drought monitor.
http://tinyurl.com/29zg2b
McDonalds just announced a $700 million quarterly loss. It’s due to $1.6b write offs in Latin America, still doing OK in continuing operations.
McDonald’s sold its Latin American assets to continue operations, not a brilliant long term strategy.
They could do really well in a Great Depression like scenario, though.
Depends how hard they’re hit by food prices rising and whether consumers will accept meat-flavored soy burgers. (They ought to sell straight soy–no risk of Mad Cow.)
Starbucks has two main obstacles ahead in its path:
1) They have overexpanded.
2) The home-equity-cashout ATM, which funded many Starbucks purchases at a higher price per gallon than high-priced gasoline, has shut down.
The average mocha or cappuccino at Starbucks works out to $29 a gallon, or more like 10x the average cost of a gallon of gasoline.
As someone who loves Starbucks, let me say that McDonalds Coffee is actually really good.
But if you’re just getting a large regulary coffee (which is all McDonalds sells), then the prices are about the same.
In fact, McDonald’s beat Starbucks in a blind taste test done by Consumer Reports. Many people convince themselves that Starbucks tastes better when in actuality it’s the idea of treating yourself to an luxury that makes people think it tastes better.
I drink black coffee. Starbucks house blend, in my opinion, is bitter stuff.
It takes a shot of mocha to make it palatable.
Very bitter. I like to buy a medium (grande) and ask for it in a large cup (Venti), then I fill it to the top with cream. So my drink there is about 1/3 cream.
I can count on one hand the number of times I have been to starbucks in the past 5 years. And two hands is the number of cups of coffee I’ve ever drank.
Tea (unsweet) and water here.
Dunkin’ Donuts has sold a similar coffee for years, however, and has been quite successful. (Over-roasted Arabica beans, although Dunkies’ has less flavor than Starbucks’, imo. Actually, without the two creams and two sugars of the “regulahh coffee”, it tastes like burnt toast to me.)
Columbian vs. French Roast or Dark Roast or Arabica or some exotic Java or Sumatra blend is just a matter of taste. I love Columbian because you only add a little bit of cream, no sugar. But a bitter coffee is probably good with donuts.
Locally, in California, give me Peet’s any day over Star*ucks.
Not much competition where I’m at since McDonald’s sells Starbucks (actually Seattle’s Best which is owned by Starbucks).
That’s because Starbucks coffee has more caffeine than any other brand, which is also why I like it so much.
Good point John. That is advertising at its best. I always tell my wife, whatever you want to sell, just price it very high (higher than everything other comparable product), put it in a better package and watch the money roll in. And if you are particularly savvy, sell a small interest to a celebrity/athlete so they can pimp it for you on tv and at large social events.
Actually, back when I needed caffeine to get through my CVS work shifts and had a choice of Dunkies, SBX, Seattle’s Best, and Peet’s, I discovered that Dunkies, for all its working-class aura, did not have the cheapest price on drip coffee!
I got the “fancy” drip coffee for 10 to 15 cents less per cup, and I got such amenities as self-serve cream or milk, fancy sugar, cinnamon sprinkles, etc.
For only 20 cents over Dunkies I could even get cafe au lait.
The “Fourbucks Coffee” phenom comes from the practice of purchasing expensive espresso drinks, NOT from the price of regular coffee.
(McD’s IS cheaper, but I didn’t have one near the CVS back then … only Dunkies, which wasn’t.)
I’ve had Starbuck’s Frappucino and Dunkin’ Donuts’ Coolatta. I prefer the Coolatta. I can also get the Coolatta in more places than I can get the Frappucino. I’m done with Starbucks for a while.
I’m the opposite: had the Coolatta a couple of times and decided it was nasty.
Their iced is good, though. Really hits the spot in the summer.
Interesting view from the ground … but the McDonald’s comment confuses me. Are they selling lattes now? Not at my local Micky D’s. They’re selling the same hot Columbian coffee they always did, although not as hot as it used to be, thanks to that famous lawsuit.
I love the taste of McDonald’s coffee. It takes absolutely nothing like Starbucks coffee, because Starbucks uses Arabica beans and they over-roast them. (McDonald’s uses 100% Columbian, which has a smoother flavor.) Also, their drip coffee never seems as fresh as McDonald’s’ in the morning. (Old McD’s coffee is not so nice, naturally.)
I patronize SBX too (mainly b/c of location), and I do love a good Frappucino on a hot day, but it seems strange to me that someone would consider them interchangeable.
Then again, maybe I’m just a snob.
I drink a lot of Americanos from Starbucks (4 shots of espresso + water = getting through my mornings intact). It’s the cheapest espresso drink there, and not much more expensive than the regular coffee. I prefer espresso over coffee and have thought about getting my own machine for home. Probably should.
Anyway, my own observations are the same as this particular barista. I haven’t seen nearly as many people at any the Starbucks in this area as I did even a year ago, though they are mostly still reasonably busy. But then, I haven’t noticed crazy crowds at ANY retail location in at least a year. I think we’ve been in an ‘uncalled’ recession for at least three or four months.
Hey Chris:
Just letting you know that, if you get your espresso machine, you should make sure that it is capable of producing brewing pressures of at least 135 psi. Also, try using “full city roast” instead of espresso roast. If the beans are of high quality, then that’s better.
I drink what is called a “Ghetto Iced Latte”.. it is a no water iced americano and I add my own milk and save over a buck. My friend who works at Starbucks said that’s what they call them.
you should try macdonalds coffie, it beats starbucks any day, and as a senior citizen i get a cup for $0.70
I’m doing a long distance job search from Ohio to Los Angeles, and I can’t tell you how many postings I come across for marketing / publications editors and managers for various RE shills and organizations.
I’ve told my husband that no matter how badly we want to move, I’m not selling my soul to those bastards.
Not to mention my firm belief that most will be belly-up by Spring.
So long as we are on the topic of the drying up of the easy money cesspool…
——————————————————————————
… And Expedia slashes share buy-back plan
Expedia, the online travel agency, slashed plans on Monday to buy back its own shares, blaming unattractive financing conditions in jittery credit markets. Plans to finance a $3.5bn share buy-back of 25m shares – or 8 per cent of its stock - with new debt ran aground as funding costs have risen due to a heavy pipeline of new buy-out related debt and fears that the US subprime mortgage crisis could spread to other asset classes.
http://ftalphaville.ft.com/blog/2007/07/24/6075/%e2%80%a6-and-expedia-slashes-share-buy-back-plan/
Is it common for companies to buy back shares with debt?
Very common. Especially when executive want to exercise options and sell the stock. They in effect sell their newly created shares to the corporation. It makes me wonder what the lenders were thinking when they made the loans. I was taught many years ago that a loan’s purpose should be related to the repayment source. A loan to fund a stock buyback creates no new repayment source so it simply becomes a drag on the company’s profitability. Very risky business for the lenders. In the last few years these type of lenders sold off the loans through participations or securitized them and sold off the securities (should sound familiar). Now a lot of the lender-underwriters, mostly investment banks, are getting stuck with the loans; they can only sell them off at significant discounts. This is part of the “credit-crunch” that is expanding from home buying to LBOs.
wow.
“Especially when executive want to exercise options and sell the stock.”
AKA pump-’n-dump operations…
Nice table here to show the bottom dropping out of the LA Basin market…
Southern California Home Sales
Hit Slowest Pace in 14 Years
By June Fletcher
From The Wall Street Journal Online
http://www.realestatejournal.com/buysell/markettrends/20070724-wsj.html?mod=RSS_Real_Estate_Journal&rejrss=frontpage&rejpartner=wsj_hpp
Busy news day in Chicago. Here are the headlines…
Freefall in local homebuilding market picking up steam
Sagging condo market takes a toll on Corus
Lakeside Bank forecloses on Sauganash condo project
Aldermen blast Madigan in tax-cap fight
Local building slows down
Found out yesterday that a condo conversion of an old “four plus one” went Tango Uniform to the tune of $13M to the bank with almost $7M in leins against the developer. An ugly building - its on the corner of Balmoral & Winthrop.
Out of curiosity I looked into the Tampa Craigslist furniture for sale section and was not prepared for what I found. While I have a clue as to what is going seeing pages upon pages (for one day) of personal belongings for sale was still shocking.
A remember garage sales from the 1970s. A symbiosis between those who need to raise cash and those who can’t afford new, now limited to items too big to sell on Ebay. Got plasma screen?
Yeah, my neighborhood (which is still trying to deny the big price declines it’s experiencing) is rife with yard sales this summer. Personally, I don’t bother with them. It’s easier to just donate to the Salvation Army, and I don’t really need the 10 bucks that I might pull in between 6 AM and noon on a Saturday anyway. I figure these neighboors must really be hurting for cash.
Sometimes I think that I’m the only one who has taken the Red Pill about real estate. Of course, everyone here has pretty much taken it as well. I believe we are all happier being “unplugged”…well, except for LAInvestorgirl. She probably wants to be plugged back in and forget all about this “truth” stuff.
I’ve said for two years that she will one day make a great client for a bankruptcy lawyer.
Whatever happened to her? A year ago she was a very frequent poster.
She appears on California threads to whine about prices not dropping in Santa Monica (a backhanded way to let everyone know how wealthy she is).
Oh yeah?
According to Altos Research (an unbiased source of information), Santa Monica is faring quiet unwell:
http://research.altosresearch.com/research/CA/SANTA+MONICA/552
Hey,
I just want to apologize to everyone for horking up the Vegas thread last night.
I’m a programmer, a web developer specifically, and I entered a post that didn’t show up. Then I entered four more that showed up immediately.
That set my teeth on edge and I kept entering the same original post over and over, changing things slightly, trying to figure out why it wouldn’t show up in the first place.
I honestly hoped to find something I could tell Ben about and use to avoid “missing” posts in the future.
Obviously, things did not turn out so well
I will now refrain from “troubleshooting” Ben’s blog (fingers crossed)
No problem, but Ben’s pretty nice about answering questions on stuff like that.
My Realtor MIL is always broadcasting the soundbites like “now is a great time to buy, you’ll be priced out forever, real estate always goes up.” So just recently she updated the line to “prices will be back up in 2 years.” My question is where do they get this? I mean, she isn’t known for her original thoughts and her foresight is always backwards looking. Where do Realtors get this stuff? They aren’t reading it, or researching it. Does the NAR actually sit them down and “explain” the market to its members? Do they distribute memos around the local real estate office that contain these talking points?
Ignoring the rest of the post, if prices will be back up in 2 years, why shouldn’t I just wait 1.9 years to buy?
Didn’t you read it? Because ““now is a great time to buy”… Jeez.
Here is a new term I heard yesterday when I asked a neighborhood guy where he was living; he told me he had an “abandominium” on the other block.
I couldn’t stop laughing when he said that.
LMFAO!
LOL!
There are a lot of “abandominium” buildings and new ones going up in San Francisco near the Ballpark.
I’m going to start using that term, since almost everyone here is trying to ignore that fact.
Now to me, “abandominium” implies one of those projects that’s only half finished when the money runs out. Next year, we’ll se a bunch of ‘em. I’ve always liked “dark towers” for projects that were finished, but mostly unsold/sold to flippers.
Oh, I thought it was a condo that was abandoned by its owner. Either way, works for me!
I think the SF “abandominium” is more benign.
They’re just empty, quiet and often unsold or sold to speculators.
I thought he was a street person taking up residence in a vacant condominium.
Realtors are just using the sales tactics that have been proven to work in the past. They know nothing else. I’m not even sure that the average ‘joe realtor’ is being dishonest at this point… just ignorant. The ‘leadership’ knows the deal, but the rank and file? These are not the best and the brightest of our society…
The shadow bailout continues:
Loudon County government offers home loan assistance to couples making $135,000 or singles making $108,000.
Even though they’ve stopped talking about a bailout, the middlemen, the brokers, such as NAR have been big political contributors. They are one of the groups benefitting from high prices. They, and others who benefit from high prices (NAHB, lenders) are going to keep putting pressure on to support these stratospheric prices the only way they know how - using taxpayer money.
So, not only did you not buy due to financial prudence, you get doubly screwed because your tax dollars are being used to maintain the warped market, by giving assistance to people making up to 135K or singles making 108K!
Too bad the fiscally conservative don’t have a lobbying group.
it worked in Europe, so better get used to it … even politicians can learn something if it suits them.
It’s ‘Loudoun’, not ‘Loudon’
And, yes, if they’d stop propping up the market, prices would come down, and we wouldn’t be subsidizing mortages for individuals that make $108k!
This kind of stuff is so disgusting…
Who would want to live in Loudoun anyway? The location isn’t the best, for one thing. Ugh.
Arlington County has been doing this for a long time; wife and I looked into it, but we make too much money. Though the maximum incomes for the Arlington program were lower than that. In our early married years we lived in a hell of student loan debt, and we will never go through that again.
Whatever shadow bailouts are taking place are doomed to stimulate more overbuilding and a worse glut of unsold homes on the market. Bailout away!
So the 2nd earner only gets to make 27 grand? Obvious pandering to the upper-middle class man who supports his wife and family. Rich people taking subsidies from the middle class. Ugh.
This is off a MSN money debt board:
Hi and thank you for taking the time to review this for me.
I am 50, married with 2 kids, 13/14. Our household income is approx $125K. My 1st mortgage balance is $400K and I have have a home equity line balance of about $65K. I could sell my home for about $550K. I have additional debt of $12K on a car loan and $4K in credit cards.
I’ve been in my home for 13 years and have basically used it as an ATM, refinancing several times, paying off credit cards and doing home improvements. I’ve had substantial appreciation in my home. I took out a “pick a pay” mortgage about 2 years ago because I thought I might be switching jobs and I wanted the option of lower payments. I didn’t switch jobs and now I have an interest rate of about 7% on the first and 10% on the 2nd.
I’ve made several extra payments on the first to pay it down but have recently been making just the required P&I payment, which is about $2.8K. I pay about $400-$500 on the equity line per month. My car payment is $355.00 and I try to pay $500/mo. on my $4K Visa balance.
These payments along with everything else, insurance, food, utilities, kids etc. are leaving me at a breakeven at best every month. I also save in a 401K, IRA and kids college fund every month ($600/mo total).
I only have about $20K between my 401K and IRA. Some business opps gone bad and foolish investments have put me in this position of having to scramble to save enough to be able to retire someday, but that’s a long story.
I’m thinking of selling my house, renting and getting totally out of debt and then start to save as much as I possibly can. I know I’ll have tax consequences without the mortgage interest. I might wait a year or so and buy a smaller home/condo with a smaller, more manageable mortgage.
I guess my other option is to stay in my house, refi to a fixed rate and continue to whittle away at the balance. I live in Phoenix which is going through a bit of a correction right now but I feel pretty confident that my home will continue to appreciate at a moderate rate and I could use that future equity as a part of my retirement fund.
We have excellent credit, 730 or so fico. Both my kids will be going to college. My future employment outlook is very good.
What do you think?
Thanks
Yikes!
If he is in PHX, then his 13 year old house can not be sold for $550k. Co-worker just bought a brand new home, that would have been “worth” $550K two years ago, for about $400K.
This isn’t a good situation, but I see much, much worse on a regular basis. He is perhaps capable of pulling out of this nosedive since he has decent income & so long as he is willing to make the major lifestyle adjustments that he spelled out.
He almost has to make it work since he is well above the median income for a family of 4 in AZ, so a chapter 7 probably wouldn’t be available to him anyway.
Irish, I agree with you to a point - ho does have decent income and if he is mature he can still make it.
But some issues:
He currently has good income - we dont know what he does for a living and how stable his job is. He fails to mention that in his posting - which is one of the problems in this day and age. A job is temporary, and if it is in sales or based on disposable income, forget about it.
Further, he states that he has good credit, but that may change as well very shortly, especially if one of them loses their job. Can you say BK and foreclosure? That would mean a 200 point immediate score drop - try to find a job paying over $30,000 with poor credit.
He is drinking a lot of koolaid if he thinks his house is going up in value at this time…
Chris, I agree with you on all points that you make. My point is that he may have be able to get out of this mess, if he makes some serious lifestyle adjustments and he gets a few breaks, i.e., no job loss. Others are not so fortunate. Within the last two weeks, I’ve seen (1) a couple in their mid 20s who have already racked up ~35K in CC debt (they’re in Ch 7), and (2) a “financial advisor” who has — I kid you not — 95K in CC debt to finance keeping up with the Joneses — no medical bills or anything tragic. Compared to these two situations, he’s not in desperate straits.
BTW, do the last 3 letters of your screen handle refer to a certain school in LA that has a fondness for all things cardinal and gold? Might a white horse and a song with the words “Fight On” also be involved?
Yes, and we also have a fondness for shouting “beat the Irish!”
Go Bruins!
On Wisconsin!
Irish, you are correct in your assessment of this person’s situation. And I too have observed that lots of others are starting to shows signs of being int he same financial situation - tightening budget, lowering income, etc.
“BTW, do the last 3 letters of your screen handle refer to a certain school in LA that has a fondness for all things cardinal and gold? Might a white horse and a song with the words “Fight On” also be involved?”
The 2007 Trojans will be in the hunt to win another national title and to capture their sixth straight Pac-10 title, according to various pre-season prognosticators. The following have USC ranked first in both the nation and Pac-10: Athlon, The Sporting News, Street & Smith’s,Lindy’s, Phil Steele’s, USA Today Sports Weekly, CBS Sportsline.com, Scout, NationalChamps.net and SI Kids.
Chris, My friend, As an individual that happened to go to another Pac 8 school up north, I got very tired of hearing the dumb, da, da ,da dumb school song - let alone watching the cheerleaders do push ups! It is with great pride that in my 4 years, we won 2 Rose bowls! Should USC get in the position to win again great. But I hope it is against Wisconsin. :>)
(I may have gone to school on the westcoast, but Wisconsin gets my taxes and the tax dollars might as well send us to the national championship. I will not go to the Rose Bowl unless it is a Pac 10 agin a Big 10. I have little interest if USC beats/loses to Podunk U.
Hey, if he has some equity left in his house, some college savings and some retirement savings, he is WAY above average.
And he has the right plan, but he’s got to dump it now.
I agree with the other comments. This guy’s not in great shape, but he’s not at the “drop out and join the Foreign Legion” stage yet. His first step should be to stop digging the hole any deeper. Tear up the credit cards etc…
The one thing that really jumps out at me here is $20k in retirement assets. I’m about 20 years younger than him, I have about three times that amount, and I still feel way behind… didn’t really start contributing to the 401k in earnest until about 4 years ago. Oh, and I have no dependents.
Yeah, but this is the guy who will use up all the SS money, and you’re the guy who will have to pay it back.
From the sporting news, a little common sense about housing:
“One current NBA referee, who remained anonymous to honor the league’s gag order, claimed that Donaghy once bragged that his home “cost $1.1 million. I mean, how in the world can this guy live in a million-dollar house? His salary had to be in the $150,000 to $160,000 range by now, and the playoffs is good for bonus money. But that kind of house — that’s way out of our league.”"
It seems to me that in today’s (or perhaps yesterday’s) house buying environment, a purchase of a home of that price relative to that income would be almost conservative.
$150K in income?
$1.1 million house?
Welcome to the lower end of the “nice” areas in the Alt-A Bay Area.
[Alt-A Bay = SF Bay]
This NBA referee lives within walking distance from me. His house was put up for sale a couple weeks ago. Here it is:
http://www.peenspropertygroup.com/galleryofhomes.php?assoc_id=75
What do you think this property should really be selling for?
http://treasure.craigslist.org/rfs/380816884.html
I’d say it’s an above average home, so maybe $200, but I’ve never been to PSL, so not really sure. Guess it also depends on how the area is around it. Look for that pendulum swing. Pick up for $150k?
Nice place.
Makes this Seattle-ite say, umm, dang. 1/2 the price of Seattle homes with comparable sq feets. Depends on the neighborhood of course, but Google maps has me guessing that’s a purty nice spot.
Thanks Chad and txchick,
I really like this place.
I spoke with the builder today. I think he is a small operation and has only built this home in the last couple of years.
I asked him about renting it out, but he really needs it sold. He still took my number and said if he doesn’t sell it he will call me.
So, I could rent it out and maybe buy it after the crash…hmmm…
“should” be selling for? If the bubble of the past 6 years had not happened, I’d guess that the lot value approaches $0 (maybe $5K or $10k max) so you are looking at the cost of building the house minus a year’s worth of depreciation, since houses in towns like this depreciate with age. So again, with no bubble, I’d say it would sell for about $165K.
HOWEVER, due to the overcorrection that will come with this unwinding (due to massive oversupply, esp in FL), I would guess that this house will sell for $90k to $120k within the next 3 years.
Whoa, I was guessing 175,000…it is still so hard even for me a religiously firm bubble watcher to think 90 to 120K…
Just remember that for new loans, folks will have to bring 20% down and full doc. I can imagine an average hardworking joe saving $18k-24k for a downpayment. I can’t imagine the average joe saving $56k.
125 when all is said and done - like 2010+
Crap there’s already a lot on here today. But, if anyone makes it this far down the page, check out this meaningful price reduction!
June 27th
http://rockies.craigslist.org/rfs/361956176.html
Then July 20th
http://rockies.craigslist.org/rfs/378229785.html
What a bargain!
At this rate, at $2000 a month in price reductions, they could be chasing down this market for years to come.
Found another “meaningful” reduction in Colorado ski country.
July 17th
http://rockies.craigslist.org/rfs/375354693.html
July 23rd
http://rockies.craigslist.org/rfs/380544620.html
Hey, if they come down $5,500 per week, this place might just be okay in another 4 to 5 months.
REOs in Temecula, CA are starting to make things ugly for “Wishing Price” sellers.
Even the REO is over-priced. However, you know the seller, 5 doors down and in the exact same model must be in total denial since the only price adjustment they have made is UP. Idiots.
http://tinyurl.com/32hjls *REO
http://tinyurl.com/26fbwo *GF
Warning: ZIP realty login required.
Still too expensive for the weeks you get.
http://rockies.craigslist.org/rfs/354450897.html
hahaha, yeah, screw agents.
http://rockies.craigslist.org/rfs/361345099.html
JOKE!!!! Gee, only $200sf existing property, and low, low HOA’s of only $513 per month. Let’s jump on this one!
http://rockies.craigslist.org/rfs/372762600.html
God, does that HOA include groceries too?
Who would pay that??????????????
It’s dropping like a Led Zepplin in Temecula, CA. My wife and I looked at several local builders in Wolf Creek and Temecula Creek North. It was amazing. One year ago, places were going for the “low $600K”. Now, the same places are in the mid-to-high $400s. The builders are leading the market down. At Wolf Creek there was almost a ‘desperate’ atmosphere. Worse, Temecula Creek had a new phase release from Warmington Homes. None of the new phase was sold. In addition, we drove through some of the finished streets only to see “For Sale” signs everywhere not to mention a few REO. It’s gonna get ugly.
Then on ZIPRealty, we searched within a 1/2mile of the new Temecula Creek North models. We came across a FB hoping a GF will save them. Here is a former model (so the bank claims) and a stuck seller who is still asking for 2005 pricing. Same model and only 5 doors down the street. Almost $200K difference. Amazing. Think the FB is sweating much?
The REO even has a slightly bigger lot! DOH!
http://tinyurl.com/32hjls *REO
http://tinyurl.com/26fbwo *FB
ZIP login required.
Double post. My bad. Must be heavy volume on here today. Posts used to show up right away.
For the Portlanders:
http://tinyurl.com/3altl6
“Williams says they sold 30 to 50 condos a month when they started. “That wasn’t sustainable,” he says. “A lot of it was investors, speculators.”"
Confirms my suspicion that South Waterfront condos aren’t selling and when they were, it was mostly investors.
This might be obvious to people on this blog. But during the heyday, Portlanders were assured that Portland condo builders weren’t making the mistake of those in Phoenix, LV, SD, and LA and selling to investors.
This guy Homer Williams is held up as a pillar to Portland development. Just a greedy, pave over anything shyster in my book….
I grew up in Portland, and Portlanders have raised the self-delusion of “it’s different here” to an art form. In all walks of life, not just RE.
Hey, but if you buy on the South Waterfront, you can take the tram to nowhere. Woohoo!
From the July 20th AP story “Salem’s real estate market hums with small-city trend
Housing” - “‘Our corner of the world has really held up pretty well,’ said John Mitchell, an economist for U.S. Bancorp, based in Portland. ‘We’ve got very strong population growth, we’ve got good employment growth and we didn’t have the kind of speculation you saw elsewhere.’”
Also, in Lake Oswego, one of the wealthiest suburbs of Portland - I’ve seen at least 2 houses for sale that say right in the listing “seller has not seen the property.” These are single-family homes in nice neighborhoods. One is listed for $600,000, last sold on 07/20/2006 for $762,000; the other is listed for $499,000, last sold on 01/25/2006 $767,000. Some how not having seen the house you bought is different from the kind of speculation seen elsewhere…
LOL, do you have MLS links?
As we’ve discussed previously, I’m in that ‘hood and would be interested to check them out. Not to buy, mind you, but as a continuation of perverse entertainment.
http://www.hasson.com/vp/SearchServlet?ListingSearch=TRUE&SITE=HASSON&ScreenID=SEARCH_LISTING_P_MLS MSL#s (map shows the address in driving directions) or http://www.rmls.com/RC2/UI/search_mlsnumber.asp MLS #s: 7057031 and 7061819. Big surprise the second one price dropped $50,000 to $449,000 since I originally wrote this post on 7/22….
Heh, heh. Perhaps there’s hope for a happy ending in Portland afterall. Thanks.
Perhaps you’d also enjoy the 3/2 lakefront house sold for $927,500 renting for $1850/mo (ouch)…
The stock market seems to be making a little more sense now. Yahoo Finance is reporting stocks down, yet, my precious metals fund VGPMX is going up. In the past this was not the case. PMs uncoupling finally?
Hello friends. Rock coming atcha from out of the blue in the Watchworld.
For all of those wondering when is the time to buy Key West Real Estate, let me assure you, it is not now.
When is an “Original” price in the MLS not the first asking price by the seller?
Realtors and sellers alike are now playing this game with listings whereby the homes which are not selling at just reduced prices are suddenly taken off the market. There are several benefits for listing, de-listing, and re-listing the exact same property so as to keep the unknowing and shrinking flock of Snowbirds from figuring out this game of 3 Card Monte.
Case in point:
The complex where I rent was For Sale in 2005 for only $5.5 million.
When I moved in to my place in September 2006, the new asking price for the whole compound of three cottage style homes, with a smaller cottage in back and community shared swimming pool was $4 million.
In the MLS listings, you did not see Original Price: $5.5 million, Reduced Price: $4 million because my landlord took the complex off the market before re-listing at $4 million.
Recently, my landlord took my $4 million listed housing complex off the market in April or May of 2007. He then changed Realtors.
He told me before he listed the new price he would be asking $1.95 million for the complex. A few days later, it was officially listed at $1.885 million in June 2007.
So in a few months time, the asking price was shaved by more than a cool $2 million, yet this price reduction never showed in the MLS listing. On top of that, there was a previous drop of $1.5 million asking price and that reduced price never showed in the listings.
So what was the last thing showing in the MLS for this property?
You got it, $1.885 million with a start date for Days on the Market in June 2007. Nowhere is there any mention in the MLS how many real reductions have taken place. Nor was there a true accounting for Days of the Market which by this time would have shown over two years on the market
And this has been going for awhile now…
Hello friends. Rock coming atcha from out of the blue in the Watchworld.
For all of those wondering when is the time to buy Key West Real Estate, let me assure you, it is not now.
When is an “Original” price in the MLS not the first asking price by the seller?
Realtors and sellers alike are now playing this game with listings whereby the homes which are not selling at just reduced prices are suddenly taken off the market. There are several benefits for listing, de-listing, and re-listing the exact same property so as to keep the unknowing and shrinking flock of Snowbirds from figuring out this game of 3 Card Monte.
Case in point:
The complex where I rent was For Sale in 2005 for only $5.5 million.
When I moved in to my place in September 2006, the new asking price for the whole compound of three cottage style homes, with a smaller cottage in back and community shared swimming pool was $4 million.
In the MLS listings, you did not see Original Price: $5.5 million, Reduced Price: $4 million because my landlord took the complex off the market before re-listing at $4 million.
Recently, my landlord took my $4 million listed housing complex off the market in April or May of 2007. He then changed Realtors.
He told me before he listed the new price he would be asking $1.95 million for the complex. A few days later, it was officially listed at $1.885 million in June 2007.
So in a few months time, the asking price was shaved by more than a cool $2 million, yet this price reduction never showed in the MLS listing. On top of that, there was a previous drop of $1.5 million asking price and that reduced price never showed in the listings.
So what was the last thing showing in the MLS for this property?
You got it, $1.885 million with a start date for Days on the Market in June 2007. Nowhere is there any mention in the MLS how many real reductions have taken place. Nor was there a true accounting for Days of the Market which by this time would have shown over two years on the market
Buh buh Kelly Cunningham just said in last week’s Sunday SD Union Tribune Home section that defaults are not expected to be much of a problem…
California Home-Loan Defaults Rise to a Decade High (Update2)
By Daniel Taub
(Enlarge Image
House for sale, San Diego)
July 24 (Bloomberg) — California mortgage defaults rose to the highest level in a decade in the second quarter as falling home sales and higher interest rates battered the housing market.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aSpC95beQckk&refer=home
I would just like to point out that today is July 24, 2007, the day I picked for the official start of the bust some time ago. Countrywide announced 33% drop in profits. Other lenders announce over the next few days. Bear Stearns must begin accounting for its losses at the end of the week and into next month, and other, similar CDOs, MBSs and derivatives must adjust. It finally began to sink in on Wall Street that there is no more easy mortgage money. The Dow dropped 200 points. Although there will be periodic bursts of optimism from time to time hereafter, the bull market is officially over, and there’s nowhere but down from here. Cheers!
Kudos, and I hope you’re right.
I disagree…housing-wise, the bust *started* summer 2005 (at least in SoCal) when the Easter Bun, erm, I mean, the Spring Selling Season failed to visit us, so no one got candy, brightly colored eggs, or multiple offers.
As far as bull market in stocks, the plane is shaking from stall forces, but we still have some lift forces and a little momentum going up before we start plummeting to Earth.
Steve, Sleepless near Seattle:
There’s also a group of three $999,000 dollar homes on Highway 43 that have been for sale for a year. They’re all kind of smashed together on an acre and a half lot… one of them sold the other day, don’t know the price.
I have a teardown near me in West Linn - tore out a home built by owner in the late 50s, split the lot, and put two 699,000 dollar homes on it… er, strike that… living space over both detatched garages.. four homes…. what was that? A price reduction? Well, since only about ten people have come to see these homes in five months… we’ll RAISE the price to 750k for one, 730k for the other.
The “Free Market’ is begging to hand this developer’s head to him. Can’t wait.
There is a teardown right on Bryant (busy) in Lake Oswego. The house was purchased for $330k. The proposed house which is nearing complettion will be 3800+ square feet (including dog washing area). I can only imagine how much they need to sell it for to cover what they’ve spent (excluding profit) - $700,000+? All of the surrounding houses are modest 60s and 70s ranches and split-levels. The house right next door is a boring ranch on the market for several months at for $409,000.
Steve:
Try Mapleton Drive in West Linn… in 1/4 mile drive … two lots, and four houses for sale, another lot cleared for infill development. They WERE talking about a seven home development down by Nixon ave, but cooler heads seem to have prevailed. Also three people on the street have taken out BIG Helocs to improve their homes… also have not one, but TWO mortgage brokers on the street (ok, still in houses but soon, maybe not).
A good recession will clear out the neighborhood. It’ll leave all of us middle aged or older folks with no debt, and older, smaller homes. And no jetskis.
Like I said, it can’t happen soon enough for me.
That’s a lot of action. Lake O doesn’t get as much as most areas cheap enough for mult-lot infill doesn’t have sewer. I wonder how long it will/could take for the Cedaroak area to return to its middle-class roots…