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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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Name:Ben Jones
Location:Northern Arizona, United States
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From Jim Rogers…“This is only time in world history when people were able to buy houses with no money down and in fact, in some cases, the builders gave them money for a down payment,” Rogers said. “So this bubble is the worst we’ve had in housing and it’s going to be the worst we’ve had cleaning it out.”
So if we are going to see credit tightening in the mortgage lending arena, then how can that not affect the rest of our economy as the FED would have us believe. Take crack away from a crack head, cold turkey and you have a problem on your hands.
I don’t think it is a question of “if we are going to see credit tightening in the mortgage lending arena”, we are seeing it. Just how bad did Alt-A get hurt yesterday? Just grazed, or was yesterday really a gut shot like many people think? How long until conforming follows the same path?
Wells Fargo just raised the interest rate on their jumbo mortgage to 8% this morning. Last week the rate was 6.78%. The meltdown is in full swing. Hold on the drop is going to be very steep. Ouch!!!!!!!!!!!!
Did anyone see that the senior vice president at Wells Fargo Home Mortgage was in and survived the bridge collapse?
That’s what made him raise the rate to 8%.
Senior vice presidents in a bank the size of Wells Fargo are as common as ground squirrels.
I’ve also heard that Wells Fargo is cutting out the mort. brokers, meaning they will only loan their Alt-A products directly… Anyone else get chills when they read the CEO of IndyMac’s letter? http://www.theimbreport.com/
“While we have very strong liquidity, a good amount of excess capital and there are no realistic scenarios that I can foresee that would impair Indymac’s viability (thanks to our Federal Thrift structure), as I said on the earnings conference call yesterday…we cannot continue to fund $80 to $100 billion of loans through a $33 billion balance sheet….unless we know we can sell a significant portion of these loans into the secondary market…and right now, other than the GSEs and Ginnie Mae….the private secondary market is not functioning.”
Chilling factor = yikes!
“P.S. We will still originate product that cannot be sold to the GSEs…just less of it and we will have to assume we retain it in portfolio (until the AAA private MBS market recovers).”
This line really gets me. Translation: We will not be able to pawn off our usual fraudulent worthless loans onto the private markets and therefore we actually need to qualify and underwrite going forward.
Does this statement not clearly indite the whole mortgage oprigination industry?
“and right now, other than the GSEs and Ginnie Mae….the private secondary market is not functioning.”
HAL: I’ve just picked up a fault in the AE35 unit. It’s going to go 100% failure in 72 hours.
2007, a Housing Bubble Odyssey…
YAAAAAAHHHHOOOOOOOOOO!
Love that rollercoaster ride…..especially when you do a freefall from the peak….. HOLD ON HERE IT COMES
YAAAAAAHHHHOOOOOOOOOO!
BRING IT ON BABY!
volatility
confusion
these are the reborn fundamentals in the market…
wild rides, folks………
there’s money in them thar hils, yehaw
I think it is a matter of going back to what always protected the buyer and the lender…dealing direct…
When lender dealt directly with the buyer, no mortgage lender, the buyer got what they could afford and there was alot less fraud..we are going to return to those days since it is the only way the lender will have control over the transaction.
Yes, I was discussing some of the aspects of this with my sis the other day. Like the reaction of FBs who might never have qualified for a house under normal circumstances. At first, when they got their homes, the reaction was “Pinch me, I’ve got a house!” I’m not talking about people who intended to flip, I’m talking about people who just wanted a place of their own. They take an interest in their property and maintain it and then start taking an interest in their neighborhood, etc. They start out with a certain amount of pride. And then the rug is pulled out from under them and they find out they are FBs. I would imagine the resentment in a case like that could be pretty fierce, resulting in trashed homes and trashed neighborhoods. For many FBs, no matter how we may flame them because they should have known better, they probably thought if the lender would lend to them, they must be able to afford it. What’s happening now, with all the foreclosures, is a cruel joke on these people.
Also remember that everyone down the line with a fiduciary duty to be truthful to the buyer — the bankers, the real estate broker, the mortgage insurer, the appraiser, was in on the scam — and all were telling the buyer, yes, you can afford it, and if you don’t buy now you’ll never own a house because as we all know, prices always go up.
This is exactly what happens….happened in Austin TX in the late 1980s.
I recall going next door to the foreclosed 3-2 1400 sf house one winter morning and turning the water off because a pipe broke and water was pouring out the front door with the entire house full of water. The house had been damaged before the water too.
On the other side, I cut the front yard periodicallly.
Those houses both sold for $40K +/- as RTC foreclosures after selling for $70K-$80K five +/- years before. More than 50% of the people with 20% down walked away between 1988-92. Almost all that had 10% down or less walked as well even though they could afford the payments and qualifed under old fashioned guidelines. This was an established neighborhood that was built in 1979-82. Austin has 3% unemployment.
We are very early in this cycle. In 2009, 10, 11, when people figure out that their homes are worth $300K-$400K and they paid $600K-$700K for them and are upside down to a significant degree, most will walk even if the payments are easily made.
From the WSJ, FINALLY a return to sanity?
Lenders Broaden Clampdown on Risky Mortgages
Jittery home-mortgage lenders are cutting off credit or raising interest rates for a growing portion of Americans, extending well beyond the market for subprime loans for people with the weakest credit records.
This worsening credit crunch threatens to put further pressure on the housing market, where prices are flat to declining in much of the country.
• The Trend: Nervous home-mortgage lenders are returning to more-conservative practices and are raising interest rates and cutting back on a category of loans between prime and subprime.
• The Issue: The worsening credit situation threatens to put more pressure on the housing market, where prices are flat to declining in much of the country.
• What’s Next: Economist Thomas Lawler said he expects the credit squeeze will make “the late summer home-sales season even worse than the dismal spring season.”
Lenders say they are being forced to raise interest rates and stop offering certain loans because mortgage-bond investors have lost their appetite for a broad range of mortgages considered risky. That includes those dubbed Alt-A, a category between prime and subprime that often involves borrowers who don’t fully document their income or assets, or those buying investment properties.
Lenders are tightening standards and “raising rates like crazy,” said Melissa Cohn, chief executive of Manhattan Mortgage, a New York mortgage broker. She said Wells Fargo & Co. is charging 8% for a prime jumbo 30-year fixed-rate loan that carried a 6 7/8% rate late last week. (Jumbo loans are those too large to be sold to government-sponsored mortgage investors Fannie Mae and Freddie Mac.) A Wells spokesman said rates are lower on loans made directly by the bank than on those through brokers.
The market for mortgage-backed securities is “very panicked,” Michael Perry, chief executive of IndyMac Bancorp Inc., another big lender, said in a message on the lender’s Web site yesterday.
It will take more than just the tightening of credit to change this market. Realtor are still pumping prices higher. Just walk into a Realtors office or open house this weekend in the Bay Area. I have seen sellers get one offer and the offer was 10-15% above asking. WTF?
What do realtors tell buyers. “We expect multiple bids”
They are still making up fake bids to creating offers over asking no matter if sales are down 50% and inventory is up 100% and now we have forclosures doubling year over year adding to inventory.
What we really still need is to make it illegal to have these “phantom bids” pumped by realtors.
i don’t mind them wringing the last few drops of insanity out of the market.. desperate salespeople are prone to do that.
But post-bubble, Unrealtors may find a new world lay ahead.. one in which they have far less influence.
“Unrealtors”………….LOL
I guess that takes care of its prior oxymoron.
The answer to this WTF is fraud! Simply put when transactions occur in this type of market when the closing price is greater than the listing price it usually means that there is cash being given back to the buyer at closing..This is the new gimic to get the sellers properties sold by having the seller, buyer, realtor, mortgage broker and appraiser working together. The buyer agrees to buy is cash is given back, the seller is desperate and want to sell and it doesn’t cost them anything so they agree, the mortgage broker gets the loan(business is slow happy to have it) and agrees on doing the scam, the appraiser (business is slow happy to do it)finds a bunch of homes “fake” up the comps and at closing $$$ to the buyer!
This is rampant everywhere and no one does anything about it. Even the lender is at fault for not questioning or researching why this home is selling for more than the asking price..It damages the community by creating a “fake” comp and comparable sale..
I say, take a tape recorder to all meetings and procedings regarding buying or selling a home.
proceedings, not “procedings”
This is because most people think this is a short term aberation or that is is really not happening in CA, or wherever, but is a problem elsewhere. They have a hard lesson coming…most of them. There is no reason to be bidding above asking price anywhere unless the house is truly special, unique and priced well below comps.
Yet I have seen 6-8 of these in Missoula in the past several months. They’re often on fixer-upper type houses. Is there a chance that the lender is aware of the difference and has agreed to increase the loan to cover the costs of improvement?
Whether the difference is for kickbacks or improvements, this inflates the comps, so it’s a boon for realtors.
Jumbo rates goes to 8% !!!!!!
that covers most of urban,east coast, west coast SFH’s
Longs, longs time ago, as far, far back as 2002. It used to be said NEVER flip a 750-800K house, because you can’t get $1 million+ for it after you invest 50-100K in the flip — because…..JUMBO mortgages are hard to get, and most people with that kind of cash are very discriminating! Boy how times have changed. So many generations.
So if they are behind and need to refi, they are screwed. I think another thing is they have to cover their risk now. Who’d a thunk that prices would fall? (besides us). You had the NAR touting that prices have never fallen and they wouldn’t. Oh how times have changed. The whole model they were using screwed them over.
Agreed. $150,000 is about the tops that I would flip a SFR. First off you need to make sure that if you rent it out, that eventually after credit repair, your tenant can qualify to buy and still make you a reasonable profit. I just could never understand the idiot flippers of the past 36 months telling me they were gonna buy at $450,000 or $500,000 and flip for an extra $150,000 profit…I guess for a brief period of time there were some FB’s, but not now.
Not so much a weekend topic - though maybe it could be:
BEA came out with their monthly stats the other day. Remember all the hubbub about the negative savings rate the last couple of years? Well, turns out it was all wrong! At least according to the BEA update. They adjusted their numbers a lot - going back to Jan ‘04. Now aside from one anamoly and one brief dip, it’s been positive all along (though still lower than h
Month Pre Post
Jan-04 2.1 1.9
Feb-04 2.3 2.2
Mar-04 2 2
Apr-04 2.2 2.2
May-04 1.5 1.6
Jun-04 2.1 2.2
Jul-04 1.7 1.8
Aug-04 2 2.2
Sep-04 1.2 1.4
Oct-04 1.4 1.5
Nov-04 1.2 1.4
Dec-04 4.3 4.5
Jan-05 0.9 1.2
Feb-05 0.6 0.9
Mar-05 0.2 0.9
Apr-05 -0.4 0.6
May-05 -0.1 1.1
Jun-05 -0.5 0.6
Jul-05 -0.9 0.2
Aug-05 -3 -2.3
Sep-05 -0.5 0.5
Oct-05 -0.3 0.5
Nov-05 -0.3 0.8
Dec-05 -0.3 1
Jan-06 -0.3 1.1
Feb-06 -0.3 0.8
Mar-06 -0.4 0.8
Apr-06 -1 0.4
May-06 -1.6 0.1
Jun-06 -1.5 0.5
Jul-06 -1.7 -0.3
Aug-06 -1.5 -0.1
Sep-06 -1 0.4
Oct-06 -0.8 0.4
Nov-06 -0.9 0.5
Dec-06 -1.1 0.3
Jan-07 -0.8 0.8
Feb-07 -0.8 0.9
Mar-07 -0.4 1.5
Apr-07 -1.2 0.6
May-07 -1.4 0.4
meant to say “lower than historical norms”.
They took a page out of the CAR’s playbook. If you don’t like what the numbers are telling you, then “update” your methodology and “revise” your calculations retroactively for good measure.
That’s what I was thinking. Can’t really know for sure without knowing the details though, and no time to dig deep. Anyone know off the top of their head if this is legit?
OT: I just got the following from a friend:
Analysts. Highly paid cheerleaders who figure out ways to make stocks appear cheap
Bad news. Events that cause the Federal Reserve to cut interest rates so that share prices go up
Bears. Sad, lonely people who don’t appreciate why equity prices invariably move higher
Brokers. Specially-trained relationship managers who convert mere mortals into super-bulls
Bulls. Well-bred equity investors
Bond market. The place where stock market bears are sent out to pasture for their wayward views
Cash. Realized gains that equity investors spend on fancy vacations and assorted luxury items
Dividends. A positive influence on stock prices
Economy. An irrelevant side show to what happens in the equity market
Fear. An emotion that bulls experience when they are not 100% invested
Federal Reserve Board. A group of public officials who do their best to ensure that bulls are happy
Fundamentals. Anything that can help explain why stock prices rally
Greed. The only emotion that matters when it comes to playing the stock market
Hedge funds. Aggressive investors who use lots of leverage to ensure that stock prices eventually go up
Interest rates. A factor that occasionally serves as an explanation for why stocks rally
Leverage. The fail-safe strategy of using borrowed money to boost returns as share prices rise
Losses. The net result of selling short and listening to bond traders
Mutual funds. Investment vehicles that enable bulls to remain fully invested in the equity market at all times
Short-sellers. Dour individuals who scramble to cover bad bets as stock prices rally
Strategists. Highly paid cheerleaders who figure out ways to make stocks appear cheap
Wall Street. The place where bulls congregate and fawn over one another
Topic title suggestion: Housing Bubble ABC’s
“Leverage. The fail-safe strategy of using borrowed money to boost returns as share prices rise”
Now that’s funny…
How about this topic.
Prime Mortgage holders are in trouble for 3 reasons. Housing values are falling, borrowing is getting much tougher, and people who do buy their homes, will have to come up with money down.
Can people suggest other reasons why they would be in trouble? Job losses in the RE industry?
Well, that would come under the heading of “Depression or Recession, You Decide!” Either way, there are job losses and people are in trouble.
I would say all those reasons aren’t separate but linked effects-wise. A prime mortgage holder (includes myself) is affect by falling house values they go to sell their house (or try to get a HEL or HELOC). They’re not affected by borrowing getting tougher or by requirements for higher down-payments, since they already have the mortgage.
Job losses is definitely a big thing. See 7,000 or so people who are losing their jobs today at American Home Mortgage, for instance. Auto industry is getting killed. Homebuilders of course.
Somehow however the government is managing to increase employment despite revenues falling dramatically (scratches head).
We are in the midst of helocing on our house, to pay for our solar power system…
The math works out a-ok, and we took a fixed loan out and our payments will be right around the same, as what we have been paying on our electric bill, sans solar.
I think it’s aMEWsing that we are doing this…
I got to thinking about the certainty of hyperinflation, and as i’m not tied to the Dollar Americano, and my interest rate is locked in, the amount we eventually pay on the loan, could be quite a bit less, over time…
May you live in interesting times
Perhaps by just deciding how to compute the number to get the desired outcome, in order to keep people from panic…?
Ben, could you try to find more info about effects in Hawaii? TIA
I used to have several posts about Hawaii every month, but they seem to have much less news these days. Believe me, they have all the bubble conditions there, maybe worse than other places. I’ll keep an eye on it.
firr
Which island are you on? One of my clients is a banker in Honolulu and he keeps me updated. The outer islands are under tremendous pressure, especially the luxury condo segment where there’s almost zero sales activity.
Honolulu looks kinda like LA 6 months ago. Prices flat but set to roll over. Sales dropping but not enough inventory built up so far to really push things down. SF market seems weak but probably not a disaster for now since the percentage of houses that sold during the bubble years is quite a bit lower than most places. New supply is way out on either the Ewa Plain or Wahiawa - the local equivalent of the Inland Empire market.
Condos are the real pending disaster in Honolulu. Huge new supply coming on. Limited land doesn’t matter when you can keep buiding UP. Too much of it is aimed at the high-end and there’s not enough demand to absorb it all. You should start seeing the flippers coming out of the woodwork as the units complete.
This editorial made me think about the topic of capitalism and the housing bubble:
‘Let the market work.’ This capitalistic creed works most of the time. But when Adam Smith’s hidden hand motions in the wrong direction, people get slapped. Take the Treasure Coast housing market. Flush with cash, investors and speculators sent our real-estate prices soaring in the first half of this decade. Then, almost as quickly, the bottom dropped out.’
‘Now, beset by a succession of declining quarterly sales reports, Realtors and others associated with the development business keep searching for silver linings. As their predictions for a turnaround recede further into the future, they chirp, ‘It’s a great time to buy.’ But it’s definitely not a great time to sell. For anxious homeowners, the ‘let-the-market-work’ mantra is small solace.’
‘But let’s not blame everything on the greedy capitalist pigs. The public sector — your local elected officials — has a major stake in this mess. They helped to create it, and they’re prolonging the pain. How? By approving development after development. The not-so-invisible hand of county commissions and city councils set the stage for this carnage. They bent comprehensive plans. They flexed zoning rules. They jacked up densities. They toyed with ’smart growth,’ ‘clustering’ and ‘towns and villages’ as tools to promote more development. Elected representatives just couldn’t say no.’
‘This threw the door wide open to land speculators. It also attracted big national builders whose global advertising reach put a bull’s eye on the Treasure Coast and created demand. That lured still more investors and absentee landlords.’
‘Yes, we live in a capitalist society. We also live in a representative democracy that’s supposed to promote the public’s welfare. That doesn’t necessarily mean promoting development or facilitating the next land deal.’
‘Nor should it mean hiking local government spending 99 percent in the past six years to subsidize that growth. Mocking free-market thinkers from Friedrich Hayek to Milton Friedman, our public servants perversely socialize costs to privatize profits — which isn’t exactly ‘letting the market work.’
Let’s not talk about “capitalism” when sooooooo many social engineering tax loop holes, abatements, grants, GSEs and other NON-invisible claws showed this bubble down our throats. We live in a kleptocracy and plutocracy.
heres a free market scenario for “service locusts”:
large call centers from say companies like Dell negotiate tax free locations in small towns for say 7 years, get the center up and running, pay a service wage, and when the tax deal runs out, close up shop and move on to the next town…..
a move that ensures small town growth, and large tax free operations for short runs
Greeeaaat… Just what you want for your small town, more minimum wage service jobs… Seems like if you were a small town operator, you’d want manufacturing, not call centers…
Seems like if you were a small town operator, you’d want manufacturing, not call centers
Which is why manufacturers can and do hold out for even better deals. Cities actually place economic incentive bids to get them to locate there. The manufacturer gets to play them off one another and will eventually settle in some location where they can pay absolutely nothing for the longest period of time.
I think that’s called “effective government.”
Speaking as a former practitioner of the trade, something has gone wrong with city planning in the last 40 years. It used to be you would set the plan so everyone knew the rules, then let the market build it out. Instead of a plan, however, now you have deals.
Smart growth is only smart with infrastructure. I do think, however, that in the end some of the high-density urbanesque areas will become good middle class communities, subdidized by lenders who thought they were building “luxury” areas.
“Instead of a plan, however, now you have deals.”
Yes, that’s exactly right and part of the problem.
“Instead of a plan, however, now you have deals.”
and it happens everywhere from big cities to teeny little hamlets. The citizens don’t seem to notice except for a few comments here and there kept on the down low so no one thinks them “negative”.
Like any civic-minded, symbiotic local, you find that money changes everything.
City Councilmen can’t get anywhere following a “plan” it’s more fun when you rezone an agricultural dairy farm next to an airport into dense housing instead of that old fashioned notion of putting commercial/industrial in like that silly urban planner intended. Don’t ask questions about any sweetheart deals.
I really like this topic. Perhaps we can reach a consensus on what capitalism really is or what it should be, and address the thesis that “free markets are not really free”.
Love the “capitalism/socialism” debates.
We really need to explore capitalism’s shortcomings and how we can best avoid the greed, power-hoarding, market distortions, etc. that are intrinsic to a truly free capitalist society.
What does a truly capitalistic or socialistic society really look like? Which is preferable from a social perspective and from a financial perspective?
Every place I’ve ever lived, the planning boards and city council are full of real estate agents and builders. So goverment and market are fused. That was Marx’s critique of capitalism, you know: business runs the state. That’s why workers get screwed.
Ben,
After recently reading “The Wealth of Nations,” his reference to an “invisible hand” is made once. Taken in context, he is explaining how each society is made up of individuals. The total output of a society, and hence its total exchangeable value, is the sum of each individual’s output. Therefore, whether each individual realizes it or not, they are contributing to the wealth of their society. He refers to this phenomenon as the “invisible hand.”
This statement is often used to describe all sorts of other conjectures, but those references are obviously taken out of context, and in most cases I’ve seen, are fallacious.
He speaks of a market economy. Laissez faire is also referenced, and it doesn’t imply hands off. It implies an economy where the consumer determines the rules. If the product is not desirable, either the manufacturer changes the product, or goes out of business. We, by the contract signed by the states in 1878, are supposed to have an economy which is supposed to resemble a market economy to the maximum extent. This is obviously not the case.
Adam Smith published his work in 1776, and it should be obvious that it had a profound influence on the Consitution (from historical documents stating the founders read it, as well as the distinct similarities in the language used in the two documents.
It is certainly worthy of a weekend topic. My advice for those so inclined would be to read the entire text. It is well worth the time. It is frustrating actually, since we are repeating the occurrences documented in the text that happened in other societies prior to his writing.
The 1878 should be 1787. Quite an error.
A topic suggestion: The affects of the coming mortgage drought on the subprime & Alt-A homeowners. Will the “new, improved”
lending standards kite the foreclosure rates through the roof? Will LA (where a shack is ONLY 1.2 Mil+ gulp! ) finally tank?
Anybody else considering solar power?
We are getting our system put in next month…
If I owned a house I would TOTALLY consider it. I have a bunch of outside solar lights including solar bug zappers. The sun’s the way to go.
I would love it; however, I live in the ‘burbs where any deviation from the norm is verboten. Oh, the horror of a clothesline! I can only imagine what the neighborhood conformity police would do if I put up solar panels!
Form wins out over function…
The n.i.m.b.y. States of America
Very cool guys. The type of home I want doesn’t seem to be available in the towns I want it in (executive style ranch w/w/o basement. So we’ll build when it is time again. Definitely planning on green. Out here I might be able to have my own windmill depending on what town I decided on. It would be nice to get a credit from National Grid.
Carrie,
Have you looked at some of the excellent prefabs that are coming out? You’ll find a lot of green building, passive cooling and solar. I’d love to have one of these.
http://www.dwell.com
I looked at wind a couple of years ago, the recapture was around 20 years. I’ll look again. Have a great weekend all.
imo, at this point, solar is a fun educational and rewarding (if somewhat expensive) hobby.. unless it’s necessary.
I’d still do it because I get a kick out of harvesting “free” energy, even if it costs me money to do so.
So looking into solar when our time comes to buy - as well as full insulation for the house, and a grey water tank for the yard.
i’m thinking active insulation systems.. movable.. perhaps even automated.
If only insulation weren’t so bulky…
Ditto.
I think the next wave of building will be green & custom/semi-custom.
We are waiting for the market to drop in order to buy land and build our own house. Definitely will have lots of green technology & have always wondered why homes/lots in So Cal haven’t been designed to harvest & recycle water.
Hi there, A. Insane. I’ve a couple of solar utilities, (gate openers, security for the north forty,) but have always been put off by the battery issue. Has the technology gotten any more efficient for large-scale generation and storage, or do you just let your excess run back into the grid? Who is your manufacturer?
Thanks. Oh, and thanks, too for your periodic book recomendations. I’m immersed in “Cadillac Desert” right now and loving it!
I would like for Ben to do some history on his path to start this blog. I came to this blog late 2006. At that time it was still “5 percent increase” for 2007 from all of the NAR-sayers. I got in at the right time to see the tone change in the articles and the news shows. How interesting that things change just as the financial quarters pass. My wife thought I was crazy with the time I had spent on this site. She doesn’t complain any more! THANKS BEN! I will be contributing to your site soon for my “tuition”.
Don’t forget kids, Bubbles are for Bathtubs! lol
“I came to this blog late 2006.”
Rookie.
Its funny, I think I’m one of the original posters here. Used a different name at first, was banned at another site, changed everything (at all sites) to my middle name. Anyway, at first you posted under “anon” here and referred back to someone by adding their time to their “anon” id. If that makes sense.
Strange but don’t remember exactly when that was though.
Spring 2005. I used to copy & paste the post I was replying to. Still do that now.
Maybe the question we should be asking is what (not if) the Freddie Mac and Fannie Mae bail out will look like? I do not think the politicos can keep there hands out of this, so they will ultimately arrange to have Freddie and Fannie swallow as much sewage as they can so that it can be spit back into the private markets as ‘government’ backed securities.
This move will only compound the problems, prolong the housing correction, encourage a whole new breed of shady mortgage brokers and cost us tax payers money as we are fleeced for the buyback cost of mortgages gone bad (in order to maintain the markets appetite for the freddie/fannie products).
It makes me sick to think that I will have my taxes used to support fraudulent loan origination.
Fed Rate Hikes? Not Now, Thanks
http://www.investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=270861118204031
We’re hearing some urge the Fed to raise rates again, fearful of what the rising price of oil and a weak dollar would mean for U.S. inflation. But a Fed rate hike would be a huge mistake.
Some $265 billion in subprime loans will be readjusted at the end of this year. If the Fed were to hike again in this cycle, things would immediately get worse, not better. And that recession we thought we had dodged might just come knocking anyway.
Curious to hear fellow HBB bloggers’ opinions on rate hikes.
Higher unemployment increases the probability of a rate cut.
And as of yesterday (before weak employment release), the Fed Funds futures market was pricing in a rate cut to 5% by Jan 08 at 100% probability.
So I think not.
What will housing related data look like when home prices bottom?
[HAL won't let Dave into the ship]
Dave Bowman: All right, HAL; I’ll go in through the emergency airlock.
HAL: Without your space helmet, Dave, you’re going to find that rather difficult.
Dave Bowman: HAL, I won’t argue with you anymore! Open the doors!
HAL: Dave, this conversation can serve no purpose anymore. Goodbye.
I would like to ask that we could non-housing related insults down. Someone yesterday made some pretty insulting remarks about Joseph Smith, the first Mormon prophet who is held in high esteem by members of said faith. I would ask that if someone does wish to make a religious (political or other non-housing) comment, please make it factual or a positive so it won’t be considered insulting. Of course, please continue to make fun of stupid housing decisions and the fools that do such dumb things. Ditto for politicians that want to bail out said idiots with our tax money. Ditto for idiot developers wanting to build where they have no business building. Thank you - a long time loyal fan of HBB and regular contributor.
i dunno.. At this point, pounding on FBs, politicians, developers and other housing-related Fools is like shooting fish in a barrel.. I want fresh meat.
Stoopidity is stoopidity…in all its guises. Perhaps what you’re asking for is civility? A bit more of a challenge certainly, but all the more satisfying for its being so. If anyone can pull it off, Ben’s readers can.
Any thoughts on why the same private equity buyers always seem to be waiting in the wings to snap up housing bubble casualties on the edge of BK? And on how many of these bottom fishing expeditions may blow up in the buyer’s face?
Examples:
-Blackstone
-Cerberus
-Citadel
——————————————————————————
Hedge Fund Sowood Suffers 50% Loss, Plans to Wind Down
Topics:Hedge Funds
By Reuters | 31 Jul 2007 | 01:15 AM ET
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Hedge fund Sowood Capital told investors on Monday that it would shut down after losing half of its assets on soured bond market bets, becoming the first-high profile fund forced out of business by recent market turmoil.
The Boston-based fund, which managed money for Harvard University and other prominent clients, saw assets dwindle to roughly $1.5 billion from $3.0 billion in less than four weeks.
Its Sowood Alpha Fund Ltd declined approximately 57% during the month, while the Sowood Alpha Fund LP dropped approximately 53%, fund manager Jeff Larson wrote to clients late on Monday.
Speculation spread through bond markets on Friday that a Boston-based fund was in deep trouble, but by week’s end, a person familiar with Sowood’s operations said it had lost 8% in July and had met its margin calls.
That message clearly changed over the weekend when Larson, who had launched the fund with great fanfare in 2004, decided the only way out was to transfer a portion of the portfolio to Citadel Investments Group, a hedge fund with roughly $14 billion in assets under management.
“Citadel offered the only immediate and comprehensive solution,” Larson wrote to clients. Citadel rescued failed hedge fund Amaranth Advisors’ energy portfolio last year.”
http://www.cnbc.com/id/20027080
Great topic, esp. since Citadel, Fortress and Cerberus have so many ex-politicos and heavily connected folks on their boards. Tracking their action might be instructive.
“so many ex-politicos and heavily connected folks on their boards”
Exactimento, amigo.
Hedge funds prepare to buy amid credit woes
Marathon, Silver Point raising money; Citadel already snapping up positions
By Alistair Barr, MarketWatch
Last Update: 3:00 PM ET Aug 2, 2007
SAN FRANCISCO (MarketWatch) — Rising subprime mortgage delinquencies and pulled leveraged loan deals are roiling global credit markets, but some big hedge funds are preparing to buy and others have already begun stepping in to scoop up distressed assets.
Earlier this week, $15 billion hedge fund firm Citadel Investment Group LLC bought most of the portfolio of Sowood Capital Management LP, another hedge fund that lost more than $1 billion in the corporate credit market in July. See full story.
http://www.marketwatch.com/news/story/credit-market-wobbles-some-hedge/story.aspx?guid=%7B82E6055C%2DACB5%2D4C70%2DB53E%2D867030A3685E%7D
“.. scoop up distressed assets..”
i’m no hedge fund, but that’s my plan too..
I think maybe it is time to revisit the ever popular “unintended consequences” topic. But I mean really really unintended. I think last time we talked about businesses where sales/prices would go way down because of the bursting of the bubble. Furniture and other stuff people buy when they move into a house was obvious. Cars and everything else (the wedding industrial complex, anyone?) people finance with HELOC’s and other MEW’s was less obvious. Let’s go way out on this one.
My first thought? I was looking at my Consumer Reports for this month and saw an article. It mentioned that some people lack insurance not because their employers don’t offer it, but because they can’t afford what their employers’ offer. Will people give up on their mortgage payments first or will they give up their health insurance? Or go to those high deductible plans which may sound good on paper (when people have to pay more of the cost of health care they will be more sensitive to prices, comparison shop and bring down their overall costs) but don’t necessarily work that way in reality. Let me explain. High deductible policies are supposed to go hand in hand with putting money in a Health Savings Account and those contributions are tax deductible. Good deal for someone with a combined marginal rate of over 40%, not much help if your combined marignal rate is 15%. And I have been talking to representatives of hospitals for work, and they consider most low income people who have those high deductible policies as future recipients of charity care just like they would be if they had no insurance.
So my first unintended consequence is severe impact on emergency rooms and hospitals. They are going to be providing primary care for a lot more people.
My other unitended consequence is a little vaguer because I don’t have the background facts at my fingertips. A lot of countries are going to be pissed at us because the MBSs and CDOs they bought are worthless or will be soon. Who has the most exposure here (not just absolute but as a % of foreign investment)? Are they likely to take revenge in some small way? Some large way? Not necessarily an organized action by the government - what if the citizens just do a reasonably well organized boycott of american movies and TV reruns? I’m under the impression the foreign market is a large chunk of the profit from Hollywood action movies. Will this mean we get a large increase of low budget flicks and many few with expensive special effects? (PS - This is not a good thing in my book. I HATE chick flicks.)
Anyone else? Connect a lot of dots. We know you’ve been thinking about it.
In my neighborhood, the Jones’ gave up the health-care insurance and kept the house. It might be why Mrs. Jones has a tooth abscess that is so severe it’s visible on her jaw-line. I haven’t had to wait for a dental appointment for quite awhile.
On the foreign angle, the general credit meltdown is hitting borrowing costs of foreign governments and corporations pretty hard. Generally, these institutions in developing nations have lower credit worthiness than their counterparts in the West so the widening spreads are especially harmful to them. Could easily trigger an Asian or Latin debt crisis. It will be blamed on the US and the subprime market since everybody needs a scapegoat.
[on Dave's return to the ship, after HAL has killed the rest of the crew]
HAL: Look Dave, I can see you’re really upset about this. I honestly think you ought to sit down calmly, take a stress pill, and think things over.
How many hedgies have completely blown up w/o reporting it thus far? And how long can these elephants stay hidden under the living room rug?
Hedge Funds: First, You Get The Good News
By Gregory Zuckerman
Word Count: 792 | Companies Featured in This Article: Bear Stearns
For some hedge funds, it was like Christmas in July.
After a difficult two-month period for many hedge funds, firms are now beginning to share their July results with investors. And an early look suggests that some funds were able to rack up big profits amid the markets’ woes, usually by betting on problems in the subprime-mortgage market.
But with the recent collapse of several big hedge funds, investors remain on edge. Some predict big losses could soon emerge because many funds, particularly those that trade debt that doesn’t change hands frequently, haven’t shared their results.
http://online.wsj.com/article/SB118610173884386844.html?mod=todays_us_nonsub_money_and_investing
HAL: I know I’ve made some very poor decisions recently, but I can give you my complete assurance that my work will be back to normal. I’ve still got the greatest enthusiasm and confidence in the mission. And I want to help you.
HAL: I know I’ve made some very poor decisions recently, but I can give you my complete assurance that my work will be back to normal. I’ve still got the greatest enthusiasm and confidence in the mission. And I want to help you.
The first time I saw the words “IndyMac”, I felt sure it was an microwaveable pasta concoction, but no…
You heat it up by sticking it in a pot, over an open flame~
I spent this last week orchestrating the abduction of my ex-husband and his subsequent commitment to an appropriate psychiatric facility. Although I’ve participated in this ritual on previous occasions, this one was germain to HBB in that the triggering event was his attempt to purchase a half-finished spec home on top of a dirt road overlooking…Temecula. No reliable water, no road, (he bought a H2 Hummer thinking it would navigate the cliffside,) no landscaping, decking or interior finish. It had apparently been on the market for three years and he thought he was getting “the deal of the century” for 1.2 million. (No down, 30 year fixed at 7.2%–yeah, right.)
A month ago, when we first got wind of this folly, (the last time he went off his meds, he married a Thai lap-dancer he’d known for all of 48 hours and took her home to meet the family for Christmas,) I called both the broker and the real estate saleslady, and explained that Dr. _________ had a history of mental disorder and was in the throes of a manic event. I told them that I would be glad to work with them on getting him an appropriate house when he was stable and competent to make financial decisions. These women actually called me back and thanked me for relaying the information. They told me that they had been in the business for 20 years and were proud of their ethics and their professionalism. They agreed that he was in no condition to be purchasing such an expensive home and that whomever picked up the loan was going to lose a lot of money on the deal. Somewhat relieved, I took off for JiuZhaiJu, Northern China for a month (extraordinary place, incidentally, like a hundred Yosemites back-to-back,) and returned to find that the ex was scheduled to sign mortgage papers this last Tuesday at Tarbell Realty in Temecula, CA. The agent, a Ms. Jill Hardy, had apparently had a change of heart over that $15,000 commission, and decided that Dr. ___________ was mentally competent to sing contracts after all.
His psychiatrist disagreed, however, and he is now safe in a locked ward somewhere overlooking trees and flowers and the blue Pacific.
My topic suggestion:
What, if anything, would be an appropriate response to these two “ethical” women? Shall I turn them in, or did I just do so? Thanks everyone. This blog keeps ME sane.
Turn them in.
Turn them in, BUT since your ex didn’t actually sign the papers there is very little that anyone can actually DO to them, I suspect. Local law enforcement almost certainly can’t do anything (though conspiracy to commit fraud would be appropriate) and do you really expect the local real estate people to police their own?
Best would be to write a column in a local paper with no names, no locations, no identifying marks, etc. and warn the community that such unscrupulous people exist in their community and if they will do that to an insane man, what will they do to you if they get a chance?
As a matter of fact, don’t do it in a local paper. Do it in a paper as far away as you can - does USA Today have a method for accepting unsolicited editorials/op eds? I bet they are looking for real estate horror stories that the average Joe can understand since the asset backed markets are so complicated. Maybe they will assign a reporter to the story so it doesn’t have to go out under your name…use a pseudonym if you write it. What about an e-mail to 60 Minutes?
And talk to a lawyer informally first to make sure that you can’t get sued. Keep as much written information from this incident as you possibly can to defend yourself and/or hand over to the reporter.
“…there is very little that anyone can actually DO to them…”
You mean legally, of course. I can think of quite I FEW things I’d have done to them already.
I liked the part of the story about the Thai lap dancer
I’d like the address of the facility if it is in Temecula Valley. I hope it has enough room.
My in-laws and the entire in-law’s in-law family have moved into the Temecula area in the last year. (YES, I tried to educate them, but was dimissed as a jealous renter) Not only did they buy places to live in, they managed to pick up some Flips turn rentals along the way.
You and I will need to start an support group.
Oops. “sing”=”sign.” Interesting slip, neh?
The poster Pen put this in the Wall Street thread, but I’ll repost it here:
‘OT…but I think this will get some great posts..’
‘Do you care whether or not your friends, family, etc. homes plummet in value, if it means you get what you want at the price you want?’
‘I’ll start..nope, I don’t care.’
So, my friends and family have been burned by a fraud that makes them think their house is worth more than it actually is. Now you want me to commit financial suicide to help you keep them in the dark a little bit longer? No thanks.
“Do you care whether or not your friends, family, etc. homes plummet in value, if it means you get what you want at the price you want?”
I have what I want - good health and a loving (8-1/4 month pregnant) wife. Both come at the reasonable price of a little proactive care.
Wow! Congratulations on the baby!
As to wishing prices would remain high for friends & family…not a chance!
Others never offered me any cut in the action of their home purchase on the way up on the price melt-up. Why should I even care if I can find a place affordable to my budget at the cost of others going into foreclosure?
Where do bailout prospects currently stand? Is one already underway behind the scene?
—————————————————————————–
Will government bail out mortgage market?
Congress, Fannie and Freddie might provide only limited help
By Alistair Barr, MarketWatch
Last Update: 2:55 PM ET Aug 3, 2007
SAN FRANCISCO (MarketWatch) — The crisis in the mortgage market has increased the likelihood that the Federal government could intervene in some way to alleviate a credit squeeze.
However, Congress and government-sponsored enterprises like Fannie Mae and Freddie Mac might only offer limited support.
Some parts of the secondary mortgage market have ground to a halt in recent days as investors shun many types of mortgage securities that don’t conform to Fannie and Freddie’s standards. See full story.
A broker at Ace Mortgage Funding LLC, a leading mortgage brokerage firm, estimated on Friday that 90% of these so-called non-conforming home loans have disappeared in the past three days, leaving home buyers with far fewer options. The broker declined to be identified because they didn’t want to be seen as exacerbating housing market problems.
The crisis in mortgage availability could prompt action from Congress, several mortgage market experts said.
“The chance of government intervention in the marketplace in response to current events has increased significantly,” said Andy Chow, portfolio manager at SCM Advisors LLC, a $14 billion San Francisco-based investment firm specializing in fixed-income and structured-finance markets.
Mike Perry, chief executive of mortgage lender IndyMac Bancorp said on Thursday that he got a phone call this week from U.S. Sen. Christopher Dodd, D-Conn., who asked whether Congress can help the U.S. mortgage industry in any way.
At a hearing in Washington D.C. on Thursday, Dodd said that he’d spoken this week with several mortgage bankers “to solicit their opinions as to what they thought was happening and what solutions may lay out there to try to deal with this seizing up of credit that is really getting rather dramatic.”
http://www.marketwatch.com/news/story/any-bailout-home-loan-mess-would/story.aspx?guid=%7B07CF1D1D%2DC6E1%2D4A01%2DAEE8%2D30CD0B81D772%7D
Translation of mortgage-speak:
“can’t sell loans on to other investors” = we ran out of GFs with bank
“could dramatically increase the cost of home loans in expensive regions” = could dramatically increase the availability of affordable housing in expensive regions
Parts of secondary mortgage market freeze up
Many lenders can’t sell loans on to other investors, market experts say
By Alistair Barr, MarketWatch
Last Update: 8:59 PM ET Aug 2, 2007
SAN FRANCISCO (MarketWatch) — The secondary market that supports a big part of the U.S. mortgage industry has ground to a halt in recent days, a development that could dramatically increase the cost of home loans in expensive regions, experts said on Thursday.
“Unlike past private secondary mortgage market disruptions, which have lasted a few weeks or so … our industry and Indymac have to be prudent and assume that this present disruption, which appears broader and more serious, might take longer to correct itself,” Mike Perry, chief executive of home loan specialist Indymac Bancorp, said.
http://www.marketwatch.com/news/story/parts-secondary-mortgage-market-freeze/story.aspx?guid=%7BD9CA32E7%2DF43A%2D4C62%2DBBB4%2DAC120A34C615%7D
Lenders Broaden Clampdown on Mortgages
By The Wall Street Journal
Last Update: 11:46 AM ET Aug 3, 2007
Jittery home-mortgage lenders are cutting off credit or raising interest rates for a growing portion of Americans, extending well beyond the market for subprime loans for people with the weakest credit records.
This worsening credit crunch threatens to put further pressure on the housing market, where prices are flat to declining in much of the country.
Lenders say they are being forced to raise interest rates and stop offering certain loans because mortgage-bond investors have lost their appetite for a broad range of mortgages considered risky. That includes those dubbed Alt-A, a category between prime and subprime that often involves borrowers who don’t fully document their income or assets, or those buying investment properties. Notably, (AHM, , ) American Home Mortgage Investment Corp., which stopped making loans earlier this week, said late yesterday it would cease most operations, slashing its work force to about 750 from more than 7,000.
http://www.marketwatch.com/news/story/lenders-broaden-clampdown-mortgages/story.aspx?guid=%7B17A04224%2D46C3%2D4D7E%2D8ACA%2D25AE2AAF1339%7D
Lenders are in a mutually-assured-destruction death spiral of credit tightening…
Risky loans get harder to come by
Lenders pull back on Alt-A offerings, raise jumbo-loan rates
By Amy Hoak, MarketWatch
Last Update: 7:20 PM ET Aug 3, 2007
CHICAGO (MarketWatch) — Some nontraditional mortgage loans have vanished from lenders’ menus, while others have gotten more expensive during an eventful week for those in the mortgage industry.
But a looming credit crunch for riskier mortgage debt has not yet spilled over to traditional, creditworthy borrowers, who can still obtain conventional financing at market rates, mortgage lenders say.
“What we’re seeing is because of the mess in the subprime market world right now. It is definitely blowing over to the [parts of the] prime market,” said Ginny Ferguson, co-owner and broker of Heritage Valley Mortgage in Pleasanton, Calif.
http://www.marketwatch.com/news/story/mortgage-borrowers-turmoil-lenders-cut/story.aspx?guid=%7B40E39D2A%2DC310%2D4E25%2D9CF8%2D1B5C15A2AE27%7D&dist=hplatest
Check out the cover of THIS WEEK’s “BUSINESS WEEK” Magazine
“Bonfire of the Builders: How they helped bring on the housing crisis”.
Or just check out the story as well…
http://www.businessweek.com/
Some have argued that this is not truly a housing bubble, but a credit bubble. The housing inflation is merely one of its by-products.
Interesting would be a topic on other by-products. Such as the bubble in college tuitions and fees. I’d suggest that the only reason these tuition prices have risen 10-15%/year, year-after-year, over the last few years is that people were a) willing to engage credit to pay it, and b) able to get credit to pay it.
What happens to the tuition bubble when loans are no longer forthcoming, and people are no longer able to pay those charges? Will colleges, like local governments, feel a sense of entitlement, that those revenues must not only remain high, but continue to increase at a similar rate to pay for the new student workout center?
Yes, colleges, governments, private citizens all think their prices should remain high and that their “clients” should be indebted for life in order to pay for their goods & services.
IMHO, take credit away & we’ll see the true price of everything. Since around 1982, cost inflation has skyrocketed, largely due to tremendous amounts of credit being unleashed into our financial system, IMHO.
[HAL's shutdown]
HAL: I’m afraid. I’m afraid, Dave. Dave, my mind is going. I can feel it. I can feel it. My mind is going. There is no question about it. I can feel it. I can feel it. I can feel it. I’m a… fraid. Good afternoon, gentlemen. I am a HAL 9000 computer. I became operational at the H.A.L. plant in Urbana, Illinois on the 12th of January 1992. My instructor was Mr. Langley, and he taught me to sing a song. If you’d like to hear it I can sing it for you.
Dave Bowman: Yes, I’d like to hear it, HAL. Sing it for me.
HAL: It’s called “Daisy.”
[sings while slowing down]
HAL: Daisy, Daisy, give me your answer do. I’m half crazy all for the love of you. It won’t be a stylish marriage, I can’t afford a carriage. But you’ll look sweet upon the seat of a bicycle built for two.
Interesting here in Salinas that ‘for sale’ signs are starting to reappear. One house that I posted a picture of on Ben’s pic site is still ‘for sale’ after 20 months. Some houses that were ‘for sale’ last year and wouldn’t reduce their prices are now vacant, growing weeds and I assume are in some state of foreclosure. The beauty is that the scum RE people here can’t qualify ‘unqualified’ buyers into the low entry loans. Three houses in my neighborhood just sprouted ‘for sale’ signs this past week.
It is interesting that the powers that be have encouraged people for years to spend, spend, spend and then complain that the savings rates of individuals have dropped.But herein lies the dichotomy of our present situation:
1) Wall street fears that people will seize up with fear and stop spending and start putting money into savings. That will drive the economy into a recession.
2) How can people stop spending and put money into savings when they don’t have the money to begin with. The money was never theirs in the first place. They bought houses for zero down and then took out money based on the blue-sky principle (HELOC). The money pool dried up and they don’t have to save money to cause a recession, recession will arrive compliments of a banking industry that chose to grub stake a motley collection of financial misfits into an illiquid asset.
3) Do you see the similarity between the RE lending and CC lending? The CC lenders were charging that segment who paid on time the same higher rates to off set their losses from the financial misfits or miscreants who they knew would default. The RE lenders just assumed that the A and AltA mortgagor would carry the subprime mortgagor without any regard to their financial acumen and that the game would have to end at some point. I really believe that these people were so far removed from the real world that they believed in the PAP they were spreading. For me the scary part of this whole fiasco is the number of people who buried their heads in the sands in the face of the facts and sound reasoning.
It’s fingerpointin’ time. Any predictions on whom history will stick the blame for the bubble?
Amid US Mortgage Woes, Sen Dodd Criticizes Regulators
Dow Jones
August 03, 2007: 06:26 PM EST
WASHINGTON -(Dow Jones)- Senate Banking Chairman Christopher Dodd, D-Conn., citing persistent U.S. mortgage market problems, on Friday delivered sharp criticism of federal banking regulators.
Continued troubles in the mortgage market helped push stock prices down Friday, with Dow Jones Industrial Average falling 281.42 points to 13,181.91. American Home Mortgage Investment Corp. (AHM), one of the largest U.S. mortgage lenders, said it would lay off more than 6,000 workers and stop taking mortgage applications as it struggles to avoid bankruptcy.
And Bear Stearns Cos. (BSC) saw its outlook downgraded by Standard & Poor’s amid problems with hedge funds.
“It highlights, once again, that regulators were too slow to react to subprime and other lending practices that were clearly unsustainable,” Dodd said in a statement.
http://money.cnn.com/news/newsfeeds/articles/djf500/200708031826DOWJONESDJONLINE000899_FORTUNE5.htm
It seems as though The Economist editors are trying to crash test the markets for bad news with the current edition…
The credit squeeze
Abandon ship
Aug 2nd 2007
From The Economist print edition
Investors sail into a credit storm amid worries about the debt markets
http://economist.com/business/displaystory.cfm?story_id=9587542
How about another hand grenade, just in case two is not sufficient to get the job done?
The effect on financial firms
Holiday horrors
Aug 2nd 2007 | NEW YORK
From The Economist print edition
There are losers, but some winners too
“I KEEP thinking how nice it would be to turn off my computer and not come back until September,” says the head of leveraged-lending at a large bank. As the spasms in the credit markets claim more casualties, and unsold bonds and loans for funding leveraged buyouts pile up, wails of pain are echoing across Wall Street and beyond. But they are interrupted by the occasional hoot of pleasure.
http://economist.com/business/displaystory.cfm?story_id=9602178
Have a good time but remember
There is danger in the summer moon above
Will I see you in September
Or lose you to a summer love
(I’ll be alone each and every night)
(While you’re away, don’t forget to write)
See you (bye-bye, so long, farewell)
In September (bye-bye, so long, farewell)
I’m hopin’ I’ll
See you (bye-bye, so long, farewell)
In September (bye-bye, so long, farewell)
Well, maybe I’ll
See you (bye-bye, so long, farewell)
In September (bye-bye, so long, farewell)
Is there a silver lining to the world’s most massive credit crunch ever? The Economist magazine’s editors think they see one.
But just wait until today’s subprime crisis morphs into tomorrow’s covenant lite crisis. Or when it comes to light how many of today’s underwater hedges have drowned by tomorrow. You ain’t seen nothin’ yet…
Market turmoil
A good time for a squeeze
Aug 2nd 2007
From The Economist print edition
Tighter credit conditions are just what the markets need
Aidan Potts
BANKERS and investors might not agree, but the recent sell-off in financial markets is good news. It may, at last, have brought people to their senses. For the past few years, too much money has been lent too cheaply and too easily to too many people, whether it was speculators trying to make a fast buck in Miami condominiums or private-equity groups financing their latest multi-billion-dollar takeover. This wake-up call came too late to save the American housing market from frenzy and subsequent bust. But it may have arrived in time to stop the takeover boom getting out of control—and when the world economy is strong enough to cope with the consequences.
http://economist.com/opinion/displaystory.cfm?story_id=9587517
How about a thread on how small investors can start buying PM. Does one buy actual, physical Gold and Silver, where do you keep it? What about PM related equities or funds. Where would one buy fractional coins or bullion? Is it a myth that PM purchases are tracked?
I’d like some advice on how/where to find a good bear fund money mgr. My current broker is very trustworthy, but far too optimistic for me!
Sally
David Tice at the Prudent Bear Fund (BEARX) is one of the best in the business. He’s one of the few dedicated short-sellers still in business after a whole series of bubbles. I was very impressed with him on the 2 occasions he came to speak at his alma matter back in the 1990s and his website is also a valuable resource.
Thanks, Deron!