It’s An Adjustment Period, Not The End Of The World
It’s desk clearing time for this blogger. “While most of the nation is already in the midst of a residential real estate slump, industry watchers say New York City is about to experience a reality check. ‘It’s getting very scary,’ said one generally optimistic high-end broker. ‘We’re just waiting for the other shoe to drop.’”
“‘The recent volatility of the mortgage markets on Wall Street have the potential to impact the housing market here in New York in several ways,’ said real estate appraiser Jonathan Miller. ‘Bonus income may be impacted as profits in the financial-services market begin to recede.’”
“With foreclosures mounting around the city and across the state, abandoned homes in some of the city’s low- to moderate-income neighborhoods are falling into disrepair. ‘All over the neighborhood, you see foreclosed homes boarded-up, and there are kids breaking in and hanging out inside,’ said City Councilman Terrence M. Hassett.”
“Hassett hopes that groups like Rhode Island Housing can work with the banks to find new owners for the properties — but that will only happen if the banks drop the prices on the homes, he said.”
“‘The banks that own these properties should lower their rates and sell these houses to first-time home buyers,’ Hassett said. ‘If they make them affordable, they will sell them. In the meantime, I want these banks held accountable.’”
“Prices of existing houses in the St. Louis area were up for the second quarter over the same period last year. Still, some in the local real estate market believe the numbers are masking the possible loss facing many sellers who bought houses in the last couple of years and now need to sell.”
“Broker Tom Malone has seen several deals in which sellers had to offer the buyers incentives ‘bring money to the closing table’ to help close the deal.”
“‘In many cases, what new homes are selling for is less than what the home is worth,’ said Dennis Norman, president of the St. Louis Association of Realtors. ‘But the builder has to consider the difference between offering a discount and having the carrying cost of a home.’”
“Canada’s strong economy and dearth of high-risk mortgage lending should help the real estate sector withstand the volatility that’s been buffeting the equity markets.”
“In the U.S., loans given to high-risk borrowers at low interest rates, known as subprime mortgages, created ‘artificial demand’ that sent house prices soaring, said economist Benjamin Tal. This was exacerbated by speculators buying investment properties and trying to flip them at a profit.”
“It wasn’t many years ago when homebuyers could expect gold-plated light fixtures for a $300,000 house. But in the last few years, the housing market has changed dramatically.”
“‘We saw a massive increase in prices last year,’ said realtor Ken Braat. ‘We saw 50-per-cent increases overnight in some places.’”
“‘Our proximity to Calgary is what drives our market. They’re one and the same now. Now you’re ending up with the reality that $300,000 is an entry-level home, Braat said.”
“In Shaunavon, (a) town of 2,000 has experienced rapid economic growth in 2007, a pace which will continue when its first Subway restaurant is built later this year. ‘Things are changing here at a very fast pace,’ said Shaunavon Mayor Sharon Dickie. ‘We will now have a Subway, which is really just one of the signs of our progress.’”
“In Shaunavon, increased demand has lots now costing $5,000, a 500-per-cent increase from three years ago. Similarly, Assiniboia now has about five real estate lots available, down from more than 50 last year.”
“As Wall Street continues to stumble under a subprime mortgage crisis, local real-estate brokers and experts said Thursday the crisis has reached Schuylkill County as well.”
“‘A homeowner wishing to sell will have more trouble than before,’ said Austin J. Jaffe, a professor at Penn State University. ‘It’s an adjustment period. It’s not the end of the world.’”
“‘Because of the subprime mess, credit is getting tighter for everyone,’ said Erica Ramus, owner of Realty Executives, Pottsville. ‘You have people who may have been approved six months ago, or 12 months ago, who have OK credit, who are being rejected. The bank is saying, ‘Show us more. We want more money down.’”
“The closing of First Magnus could have a negative and positive effect on the Tucson Housing Market. ‘This is my equity, this is my retirement,’ said James Shirkey, seeing that equity and his retirement slip away as the housing market takes another hit with the closing of First Magnus.”
“‘A year and a half ago, according to appraisals, I had about $140,000 worth of equity and now I’m getting down to $70,000 or $80,000 and it still isn’t selling, so it’s very terrifying,’ he said.”
“Shirkey’s hopeful. He says he’ll just ride the ripple and hope for the best. ‘I’d like to tell everybody it bottomed; now it’s time to go out and buy a house, but I don’t know that that’s reality.’”
“As lenders tightened the screws on mortgages nationwide, Tom Jacobs called an emergency meeting Thursday morning at his Tigard mortgage company. ‘I told the guys they have to tune themselves to a psychological survival mode,’ Jacobs said. ‘The survivors will be the ones who adjust.’”
“Jacobs’ direction: Don’t waste time trying to make loans to borrowers with spotty credit. ‘We have to focus on where we can do our business,’ he said.”
“That message is being repeated across the region. ‘People who were marginal buyers in the past can’t get a loan now,’ said Rick Rosvall of Sunrise Mortgage in Oregon City.”
“‘A year ago or two years ago, we could make a loan to just about anybody,’ Greg Mirecki, managing partner of Premier Mortgage Resources in Portland.”
“That era is over even in Oregon, which is below the national rate for foreclosures and delinquencies. ‘It ain’t what it used to be. The sweetness is gone,’ Jacobs said.”
“For the longest time, Orange County residents have gleefully watched their home values escalate nearly beyond reason. It was almost too good to be true, for homeowners, anyway.”
“Unfortunately, the housing bust, or at least its current slow deflation, could be leaving a lot of wreckage in its wake. So home values are falling, and many owners who are upside-down in their homes are walking away from them.”
“The housing market, though, is working itself out. The government should not intervene with either bailouts or regulations. Lenders are becoming more careful, unqualified buyers are now less able to get loans, and home prices will no doubt start coming back to reality.”
“That’s how markets work. There is no way to avoid some pain. As one an old saying puts it, ‘capitalism without failure is like religion without sin.’”
What a week! My thanks to those who support this blog. Please check back this weekend for news, your market observations and topics.
Here is an observation. With the cut in bank rate today, the US is inching toward Japan. There will be stagflation. But the danger of not cutting rate was just too large; many gigantic hedge funds were on the verge of death. The financial market was just about to be out of oxygen. And that would be a world of hurt for everyone. Any thoughts, anyone.
If the hedge funds or banks are truly insolvent then this rate cut doesn’t solve the problem, just delays the inevitable. As Warren Buffet said today, these agents have still avoided fully marking their junk collateral assets to market. They are running to the fed for help because, they claim, “there is no market” for these debt-backed holdings. Nonsense. Of course there is a market, but the market price is much lower than face value, and a true mark to market would wipe out a number of large players. I love Warren’s suggestion that banks/hedgies holding debt-backed instruments sell off a few percent of their holdings to determine market price. (The reality is, of course, they don’t want to know the true market value.)
A loan from the Fed will only help if the market for these debt-backed instruments returned to something close to face value–and that simply won’t happen.
http://money.cnn.com/galleries/2007/fortune/0708/gallery.crisiscounsel.fortune/index.html
You know, I just hate to love Warren. I hate him because he epitomizes the worst in our economic system, i.e., he’s a billionaire, and he’s never done a productive thing in his life. But I love him because he recognizes it, and he sympathizes with the workin’ man in this country. He is an enigma wrapped in a riddle.
sounds like a Napolean of capitalism
Good one, Kevin…
“…he’s a billionaire, and he’s never done a productive thing in his life.”
I thought people on this board were smarter than that. Just because he doesn’t dig ditches or smash his fingers up in a machine shop doesn’t mean he isn’t productive. Providing capital to the markets where it can be best utilized is a very useful and productive function. Using your money and clout to go into companies and restructure them so they actually function properly is very productive and useful. If we didn’t have such people, then we’d be in a world of hurt.
Nothing productive, except delivering solid returns for a very long time for his shareholders. One of the most common-sense, rational thinking investors around.
get rid of billionaires and they will complain about millionaires.. get rid of them and thousandaires become the target.
When everyone’s a hundredaire or less, they will wonder why they don’t have a job.
Never done a productive thing in his life?
Hate to break it to you, but reducing inefficiencies in the market means two things:
1 - Capital is allocated more efficiently for higher returns than otherwise, which means:
2 - The economic pie grows for everyone.
Warren Buffett has done more productive (if defined as bringing benefits to everyone, on average) work than perhaps anyone in business today.
the debate of -x-flation is done. were getting indestag-flation. Punish all for the excess of so few.
game on
The real trick is how to transfer all the bad loans now held by Wall Street to the public. I expect they will increase the loans amounts FNM and FRE can take so the gamblers can offload the junk on the public.
It is going to happen very soon. No way these Gangsters get stuck holding the bag.
It’s only a matter of time.
Countrywide announced today that they want 90% of their loans going forward to be Fannie standard unlike 50% today.
this is not a real rate cut, just a cut in the rate of an emergency loan to avoid a bankruptcy.
i’ve also read that supposedly this was leaked yesterday due to the mysterious market late day advance yesterday. these things happened before, but the short interest must have been crazy and the Fed could have planned this to wipe out the hedgies that helped make this credit bubble possible and leave the big boys with the emergency funding
today was options expiration
today was optimisms expiration…
That means FNM is going to have to take much bigger loans with much worse standards. Hey, it the public’s money. Screw em!
I lived in Japan from 1990 to 2000. I remember a Japanese friend of mine buying a condo in Tokyo in about 1995, and he received a mortgage of 2.5%, issued by Japan’s Housing Agency. I believe mortgage rates got as low as 2%. However, those low rates did not result in a revival of Japan’s market. It was definitely sluggish.
Having said that, I follow the monthly chart of the 30-year Treasury and it has not yet broken the final channel line on my chart, but the moving average has turned up and it looks like rates are heading higher.
The central banks will have to do more than cut the discount rate to save all the hedge funds. Looks like a fed funds rate cut in Sept.
Makes me think of a quote from Carlito’s Way
“You think you big time? You gonna fu-kin’ die big time. You ready? HERE COMES THE PAIN!”
I love this movie. just watch it again tonight on Bravo.
Here is another one: “Klinefeld (or Bernanke) You’re not lawyer(or a banker) no more. You’re a gangsta now. In the gangsta’s world, the rules are different. And it ain’t something you can learn in school. And it ain’t smart when you start late.”
I am paraphrasing. love this movie.
Was just reading a yahoo finance story about this (http://biz.yahoo.com/ap/070817/fed_interest_rates.html?.v=8)
and I think I discovered the source of all of these problems!
Quote:
“The nation’s once high-flying housing market has been sinking deeper into gloom, and credit, the economy’s lifeblood, is drying up.”
Credit is our lifeblood (ha), I hope it doesn’t clot…..
Just left the FED discount window. I borrowed $500,000,000,000.
I am going to lever this up 20 to 1 and buy out some stocks and real estate. Does anyone know where I can find a good (or bad) deal?
I only have 30 days. So let me know - email ThanksBernanke@cnbc.com
That’s funny…
We actually got a sell signal from the FED today. Their actions and statement show that the FED is losing confidence in the economy. If we get a rate cut in the coming months, that would be a confirmation that the FED thinks the economy is headed towards recession. We would be heading into recession as mortgage resets ratchet up in earnest, over the next year. We have two years ahead of extreme ugliness in the housing market. Soon people will want nothing to do with housing and will develop a healthy fear of taking on a mortgage. Today was false hope. We have a lot more pain ahead.
On the upside, I have a 5/1 ARM ($350K, currently @ 5.5%) that resets in just under 3 years. I figure I’ll have the opportunity to re-finance to a 15 or 30-year fixed mortgage at a lower rate sometime before the reset. LTV is (currently) less than 50%. Rate cuts are coming to those with conforming loans and good credit.
The bad news is you could have gotten a fixed loan a year ago and locked in 4.4% for 30 years.
Not to mention that a year from now in much of the country your LTV will be 100%.
Tulip: 4.4% 30-year fixed in 08/06? In what alternate universe was that?
dude: I agree, LTV could decline significantly. Prices would have to go down ~60% for us to be underwater, however, in which case I guess we’d either live with the new rate or pay off the balance with cash.
“We have a lot more pain ahead.” If ever there was an understatement uttered, you uttered it.
And crispy, let’s use my model! I’ve got a really good one, just like the hedgies and Pig Men.
We’ll be “fat city” sitting on the fees we generate, no matter our strategy, and we can buy depreciating real estate, cash!
Exactly what the Street banks did today. All thanks to BB (Banker Buddy™). Get an action figure with every withdrawal.
Is the action figure it made in China?
Good one, Crispy. Earlier today, Chicago Bubble Blog said “The Fed blinked” and Professor Bear replied “Wall Street winked”. That pretty much sums it up.
booya, sell sell sell
“the Fed blinked”, “Wall Street winked”, and the FB’s turned up pregnant.
OT — did anyone see that bizzare rant that Cramer did on CNBC some days ago? Stating that the Fed had ‘NO IDEA!” of how bad things were? It was kind of frightening due to the fact that it was such an obvious acting job. And a BAD one at that. It makes one wonder what his true motivations are.
Umm, yeah that is old news on the housing bubble blogs.
Oh, don’t be so hard on him. I giggle every time I think about it. Thanks, Garrett.
Oh, don’t be breakin’ balls. I giggle every time I think of The Rant. Thanks, Garrett.
oops, I didn’t think the first one took, so I tried again, with a little embellishment. Sorry …
old news sure, but still haunting me lol…
Did people see him on the Colbert Report, pretending to have been watching out for the little guys about to lose their homes when he had his infamous meltdown!? I think the meltdown was real tantrum to save his buds calling and saying, hey Cramer, have you no power? we’re all gonna lose our bonuses!
But the Colbert performance was just bad acting…
cheers!
“We’re just waiting for the other shoe to drop.’
LOL The first one has yet to fall… by the time the second shoe falls many of you realtors will be pushing daisies..
“We’re just waiting for the other shoe to drop.’
We are on shoe 3 of 30…
FB shoe size:
Alt-A, single-wide
Sweet Jesus, now that’s a Ben’s Blog classic!
“Sweet Jesus …” Is there any other kind? Except for the sadistic one who’s looking down all giddy and shit?
I’m going straight to hell, aren’t I?
You’ve been coming up with some good ones.
‘We’re just waiting for the other shoe to drop.”
I think I see a nickel on the floor there, why don’t you pick it up….
sssscccppphupnt!!!… YEEEOOOOOO!
This time shoe don’t drop…. Shoe get shoved up A$$…
I live about 50 miles south of Houston. There’s a Montrose street in Houston that’s famous for it’s gayness. The running joke is - if you drop your car keys while walking down Montrose, kick them to Westheimer St. before bending over to pick them up.
what was that old rallying song? Old Shoe, somthin like that.
Or pushing lawnmowers, displacing hard-working mexicans from their jobs! WON’T SOMEBODY PLEASE THINK OF THE ILLEGALS?
“Jacobs’ direction: Don’t waste time trying to make loans to borrowers with spotty credit. ‘We have to focus on where we can do our business,’ he said.”
Any guesses on how much the destruction of sub prime, the evaporation of alt-a, and the increased risk premium on prime 30 year jumbos will effect sales in California (and elsewhere)?
In other words, what percentage of sales were buyers in sub-prime, alt-a (including stated income/liar loans and 100% financing), and 30 year jumbos?
40%? 60%? 80%? Anybody want to guess?
My guess is the buying pool of qualified buyers has been cut down by 60% or more from a couple of months ago .
The lenders can’t continue to make bad loans because the buyers of bad loans have dried up .Serves them right for passing on junk.All the easy money loan makers did was end up drying up funds because of their actions in recent years . I hate watching the cheerleaders crying for more .
I’m going to go with Wizard’s 60% of the buyers are out of the pool mid-term. In a few years they’ll accumulate their down payments and be ready to re-enter the market.
Short term, this just kicked 80%+ of the buyers onto the floor. But that’s nothing a price drop won’t fix. It really will only take a 20% price drop to get people buying. Note: I’m not calling that a bottom. I’m just saying that’s what its going to take to get enough knife catchers to restart this market.
Between now and the superbowl, the market is done. The number of sales will set interesting new lows. How low? I wish I knew. But August will be well below July… that wasn’t such a hot month itself.
Got popcorn?
Neil
I think you’re spot on with the 20% price drop! In my market, Ann Arbor MI, a house I had an offer accepted on (not my idea, hubby forced me) a place that just sold for 20% off what we would have paid for it a year or so ago, and another property that caught his eye as not so badly overpriced was sold when he called about it, at what was also about a 20% price drop (from what other houses in the same development were still asking for). The albeit liar realtor (I knew her) said oh yes that was one hot property, because of that low price lol.
I think it might start dawning on the realtors that if they can price it 20% below asking for similar properties, they will get some sales, elsewise not.
But frankly, it didn’t seem quite enough.
What happens after the knife catchers do you think?
What happens after the knife catchers do you think?
More knife catchers.
Actually, due to the depth of thsi drop, we’re certain to get a “bear trap” which is a period of (local) rising prices (2 to 5 months) followed by the majority of the drop.
The earliest possible “bear trap” will be May of next year, but if it happens that early, it would be a really short one.
Or it could happen later… If I knew the answer, I’d be buying my home cash.
Got popcorn?
Neil
I like it - bear trap! Very funny!!!!
I tend to disagree with the “dead cat bounce” theory on housing prices. In order for that to occur you have to have a massive reduction in inventory which just isn’t going to happen. Not only is supply inceasing, but demand is a well. And it will get worse, because in addition to tougher lending we still haven’t seen the fallout from job losses which are on the way, despite the reassurances of officials in Washington (Paulson) that all is well in that dept. I think the buying pool will continue to get even smaller.
Lol, again I say Shel, you need a new hubby who won’t force you to do anything…like me. Turns out I’m right in your area.
Seems to me those 20% drops would start feeding on each other, once all those liars…I mean realtors, saw it as their only way to buy groceries.
Really? As for me, I LOVE watching the REtarded cheerleaders crying for more. Merriment galore, and time to get out the popcorn with extra butter.
70 to 80%. In some locales, it’ll break 90% easy. Puts the future effects of the current ‘tightening’ in perspective.
In So Cal I would say at least 80% of the buyers (Dreamers) are out of the market.
nevermind home sales.. this is gonna trickle down to cars, washing machines, stereos, baskets of groceries on CCs ..
got scratch?
In CA I believe the stats were running 20% subprime, 40% Alt-A, so 60% of buyers is about right.
Don’t forget jumbos. Median in CA is well over the $417K limit.
my friend told me about an earthquake in LA, He said somebody tried to cash a $5.00 check at a countrywide branch.
Credit isn’t drying up. It is just regrouping. The gangsters already have act II locked and loaded. The game plan is to get conforming loan limits way up, so they can continue the insane lending practices and pass off the bad loans on the public. They also need to make sure they can offload the current garbage on the public the same way too.
FNM and FRE are going to swallow the entire thing, and then you and I are going to get screwed.
Another awesome story to tell your Wall Street Gangster buddies after a round of golf. Great job!
I think your right Joe . I have had a sick feeling lately that the master plan is to unload on FNM/FRE,(who else would buy the bagholders inventory of bad loans ). It’s all about passing the buck and avoiding the punishment . Makes you want to spit on them .
I don’t want a weaker dollar and more taxes in the future .
“It’s all about passing the buck and avoiding the punishment. Makes you want to spit on them.”
I’d like to see a final solution.
Here is a snippet from Frontline Weekly Newsletter, The Panic of 2007 by John Mauldin August 17, 2007,
“The newer mortgage products, such as ‘piggyback,’ ‘liar loans’ and ‘no doc loans’ accounted for 47% of total loans issued last year. At the start of the decade, they were estimated to be less than two percent of total mortgage loans. As a result, homeowners have never been more leveraged: the average amount of debt as a percentage of a property’s value has increased to 86.5 percent in 2006 from 78 percent in 2000.”
There is going to be a whole lot of J-tree insertion happening for quite a while.
Slim checking in from Tucson. It seems that First Magnus isn’t getting much love around these parts. For example, in the comments following the online version of this story:
http://www.azstarnet.com/sn/related/196811.php
we have comments like:
This happens all to often in Tucson. McCulloch, Weiser Lock, Foster Grant, Slim-Fast, AOL, Intuit. They’ve all done this to one degree or another. Either the entire company or a division is just sent home one morning, and told not to come back. No signs that it was coming, no indications that anything was (or is) wrong. Just, “See ya… wouldn’t wanna be ya”.
And corporate America wonders what ever happened to employee loyalty. It’s crap like this that makes the whole concept of ‘two weeks notice’ seem obsolete.
The employees (who, we’re told, didn’t see this coming) are also getting some heat in the StarNet story comments. Such as:
Oh please. You’ve got to be kidding me if you think this was a genuine surprise to the majority of these employees.
Getting laid off sucks (I’ve been there), and many times it IS a surprise. That said, I was told a month before that my project was ending, so I had time to plan. It’s too bad that these folks didn’t…but at the same time, THEY WORKED FOR A MORTGAGE COMPANY.
Didn’t they watch the news? Read any news stories about defaults, “exploding ARMS”, massive stocks of houses for sale in a market that was once “red hot”? FIFTY THOUSAND homes for sale in Phoenix, and NO buyers, and foreclosures adding more inventory every day.
The fact that they were still employing so many people is frankly a shock to me.
You can enjoy even more snarking at:
http://regulus2.azstarnet.com/comments/index.php?id=196811
I think there are a lot of potential HBB recruits on StarNet today. Local real estate stories didn’t used to get so many comments.
“They know nothing !”
tee, hee…
Schultz: “Col. Hogan if you ever escape…”
Hogan: “Yeah?”
Schultz: “Be a good fellow and take me with you.”
Colonel Klink: Ah, General Burkhalter, what a pleasant surprise.
General: Klink, shut up!
They were drinking their own Kool-Aid. These people are primarily sales. I challenge you to find a good sales person that doesn’t believe in what they are selling. I tried it. Needless to say I am no longer in sales. I wouldn’t be surprised at all if the spin their bosses put on things lulled them into a sense of security.
“Tom Jacobs called an emergency meeting Thursday morning at his Tigard mortgage company. ‘I told the guys they have to tune themselves to a psychological survival mode,’ Jacobs said. ‘The survivors will be the ones who adjust”….”Jacobs’ direction: Don’t waste time trying to make loans to borrowers with spotty credit. ‘We have to focus on where we can do our business,’ he said.”…”It ain’t what it used to be. The sweetness is gone,’ Jacobs said.”
Candy is for closers.
Somehow, I don’t think he meant filing for BK when he said “Always Be Closing!”
Cause that’s what a lot of mortgage shops are doing!
This blog is so filled with funny, clever people. Thanks for this BIG laugh!!
I believe the speech he was giving last summer was “Slap some lipstic on this pig and get it sold” from Boiler room
“Candy is for closers.”
hope they like “chocolate” candy…..
the soft serve kind
Who am I?
Im the guy who payed more for this Rolex than you made last year, and I’ll throw that in too if you buy my Stucco McSh@tbox.
“Shirkey’s hopeful. He says he’ll just ride the ripple and hope for the best. ‘I’d like to tell everybody it bottomed; now it’s time to go out and buy a house, but I don’t know that that’s reality.’”
Shirkey should have sold two years ago and pocketed the windfall. It’s race to the bottom now. He can say that it’s time to go ot and buy a house, but he is facing a reluctant lender and a hesitant buyer, so his words will fall on deaf ears. Reality is that whatever gain he thinks he has still left in the house, is gone! Easy come, easy go.
Fortunately for his retirement, Micky D is hiring! Or at least they will be if the Gov is serious about enforcing employment laws.
Shirkey, with no retirement plan other than a soon to be upside down house, is toast. He says “he’ll just ride the ripple and hope for the best.” Doesn’t he really mean that cheap Ripple booze that bums usually go wild for? LOL
‘This is my equity, this is my retirement,’ said James Shirkey
And this is the sound of manical laughter “bhawhahahahahaha.”
Reality really bites sometimes.
Alas, Shirkey’s attitude is all too common in Tucson.
Oh, here’s the Schadenfreude that I’ve been enjoying today: One of the local “First Magnus is toast” stories quotes a lady who has the same name as the mother of someone who used to live in the house across the street from me.
Her daddy bought her this house so she could have a place to live while attending the University of Arizona. I think that the strategy was that she’d live there while in college, then sell the place for big money. She seemed like that type.
She moved out this past March, and I think she’s living with a boyfriend in another part of town. The house is now being rented to (and run down by) students. (I guess that getting rich in real estate means that you don’t have to keep your property up to snuff.)
When I moved into my house, this now-departed kiddo was commuting to campus in a Jaguar. Which her mother had purchased for her. Kiddo totaled the car in March ‘05, and it was replaced by an SUV.
Something tells me that Mom isn’t going to be of much help to her for the foreseeable future. And that the family’s getting rich in real estate dreams are being dealt a bit of a setback.
Umm, I should have said that I-think-she’s-Kiddo’s-mother is one of many now-former First Magnus employees. That’s why she was quoted in the aforementioned news story.
All baby boomers, please repeat after to me: “A house and/or it’s equity is not a retirement.”
Yes, your parents retired in paid for little houses but they a)actually owned them outright (equity was a high flauten accounting concept to them) and b)with an amazing amount foresight, boinked enough in their younger years to significantly increase the population to have someone to sell their houses to if they needed to move. Such conditions do not apply today, especially to 4 bed/3 bath McMansions which I personally as a Generation Xer would want someone to pay me to own. Even then I’d probably turn it to rubble and build something human sized and energy efficient. So good luck with that whole house=retirement thing you’ve got going on.
And ignore the typos in my rant…*sigh*…(with apologies to those baby boomers here who simply live in their house and don’t see it as their road to riches…)
After living in my house for a very short period of time, I realized that it would do anything BUT make me rich. I mean, the dang thing kept costing me money! Still does, in fact.
Lesson learned. I will seek my fortune elsewhere.
Vermonter,
It astounds me how many Californians cannot retire in their primary residence (as my folks did). It doesn’t matter what generation they’re from, when you hit the retirement age, you need to have a plan.
Otherwise you see the people in their 60’s nervous that they won’t be picked up for consulting work.
They have (had) the toys. Why the heck didn’t they wait just a bit to pay of the mortgage?
And who on a 75k salary (+wife’s, unknown amount) buys a 600k house?!? Sigh… These people need to walk to save themselves.
Got popcorn?
Neil
“… you need to have a plan.”
Adm. Painter: “What’s his plan?”
Jack Ryan: “His plan?”
Adm. Painter: “Russians don’t take a dump, son, without a plan.”
I have to agree - I have no idea why paying on the mortgage wasn’t a priority. I know of only person nearing retirement age who has paid off the mortgage (my dad). Less than 2 years I ago, my MIL was complaining how much income she would need in retirement to pay her mortgage. I was flabbergasted that the retirement plan did not include burning the mortgage. I pointed out that if she had paid off the house, her income requirements would significantly decrease. She seemed to acknowledge the point but I don’t think she changed much of her retirement planning. She still has at least 13 years to go on her mortgage.
(Hanging out with the low-carb pork rinds as thing unravels)
13 years into retirement?
Ok, my folks mortgage was ~$354/month. You can do that in retirement.
I’m not thinking your father/MIL is in that situation.
I’ve actually been on a low carb diet myself. But I cheat for the popcorn.
Alas, my doctor would have words for me if I had pork rinds! But enjoy. 
Got popcorn?
Neil
Agreed completly. The BB’s continue to screw things up out of there own greed and self centeredness (not sure if that a word). I know some X’er got caught up in the “housing is an investment.” and that “real estat only goes up!” mentality. But I think a lot of us just couldn’t afford the prices so we were forced to sit out. In the end it was a godsent. I hope the market crash like a 747 into the ground and Prices return to something of normal. Heck I acutally hope prices go back to what they were in the 70’s when I was born. I’m not holding my breath but one can hope.
My comment was in response to Vermonter. Forgot in my angst to put that in there.
Please stop bashing Baby Boomers. We didn’t ask to be born, and certainly not in such numbers. Blame the “Greatest Generation” for that. We have faced extreme competition in every phase of our lives. I wanted to get a job in the early 1970s at my local McDonald’s and was number 40 on the waiting list and was too far down the list to ever have been hired. In the near future, we will be vying for nursing home rooms.
My parents are rich, having bought coastal San Diego real estate properties in the 1960s. Having come of age in the Depression, they decided I and my sibs needed to make it on our own. I paid my own way through a state university and bought a house the old-fashioned way — with my own money.
Please stop generalizing.
I hope that, too. I think most homeowners who have owned longer than a decade don’t realize how out of hand prices have gotten. Unfortunately, I do know some generation x’ers fell into the “gotta have it now or be priced out forever” bit. One of my friends in particular lives the lawn tractor “up to their eyeballs in debt” commercial lifestyle. I worry about the long term effects on her family.
One of the worst parts of the run up is that home ownership is seen as a right of passage into adulthood for the Gen Xer’s and Y’s. We’ve owed a house since we were about 22 (right before the run up). I was sooo proud to have owed a house so soon. Of course, for the last decade we’ve had practical zero money to put towards anything else but paying down mortgages or maintianing/fixing up houses. Renting is sooo much easier.
Anyway, we do plan someday to own a house again (outright this time) as part of an overall retiremtn plan which includes factoring in the money to maintain the house. This blog and the bubble have gone a long way to changing my attitude towards home ownership for which I am very grateful.
bayparkwatcher -
Sorry about the generalizations but generational rants are especially easy because they involve blaming your parents.
I suspect since you are on this blog, you and I might share a very similar world view. However, in my personal circle my statements about baby boomers ring true. I’m cynical enough to think “The Greatest Generation” had it’s share of faults, however I have been almost always been able to relate easily and better to any of the WWII generation than the baby boomers.
So what I guess what I’m saying is that I know that greed, lazy, and stupidity no particular generation. Unfortunately, that makes a really lousy personal rant.
Bayparkwatcher, you don’t have to justify yourself to the “whine” with the “who move my cheese” crowd. Eff
‘em. I agree with you completely.
Vermonter–
Thanks. I had to rant because my parents now need a lot of emotional support and my kid (19) who works hard for the money during the summer is always asking me for money because college costs, even at a private CA college and with a substantial merit scholarship, are ridiculous. The BBs, or many of us, can’t be squeezed at both ends. I saved up a lot in a 529, but it’s quickly running out and my kid will only be a sophomore. The kid could have gone to SDSU, my alma mater, but with the scholarships, etc. the private college is just as cheap…er, just as horribly expensive.
Palmetto, thank you.
bayparkwatcher I understand as a individual your not a bad person or your that your not out to screw anyone over. But you have to understand that even if I did work my butt till It fell off. I couldn’t afford a house and still have any prospects to ever save for anything else. Do your really believe my Gen could have caused this? Do you think people from the greatest Gen Caused this? I’m sorry but no way do I believe that. And I not going to sit down and take it. As person to person though I hope you and your daughter make it through ok. If there is only on reason to go into debt it for education.
As for palmetto. I hope your a boomer. Cuz will see who’s whining when my Gen and Gen Y takes your wealth away. At a discount no less.
bayparkwatcher -
There would be so few posts here if “generalizing” were against the rules.
Blame goes to those who do not vote.
How come NONE of the McMansions have super insulation R36-65 or solar panels….for $500K+ you would think a buyer would want his energy bills to be as low as possible
—————————————————————
Even then I’d probably turn it to rubble and build something human sized and energy efficient.
Maybe it’s because solar panels don’t work?
Now about the super insulation - that’s another story.
‘This is my equity, this is my retirement,’ said James Shirkey
This is my rifle, this is my gun…
“‘In many cases, what new homes are selling for is less than what the home is worth,’ said Dennis Norman, president of the St. Louis Association of Realtors.”
Wrong, Dennis. A home is worth what willing and able buyers are willing to pay at any given point in time. So, the homes are selling for what there worth today. Next month, next year they’ll be worth less.
Time and time again a realtor makes a dumb comment like this.
Drinking their own kool-aid.
I really think that people (e.g., real estate agents) just don’t understand the concept of a “clearing price”.
Will Fed’s cut work to restore calm, save economy?
Most economists say Bernanke and company more work to do.
However, borrowing from the discount window is no panacea, Crescenzi said, calling for a full-fledged rate cut. The discount window is rarely used because there’s still a stigma attached to using it. No bank wants to acknowledge that it’s not solvent enough or credit-worthy enough to obtain the funds it needs on the market.
“It definitely changes the mood, but it doesn’t fix the problem,” said Owen Fitzpatrick, head of U.S. equity group at Deutsche Bank. “Challenges in credit markets and subprime markets remain. We have to see what additional fallout there is from hedge funds or institutions trying to come to the market for liquidity.”
The Fed move “cannot fix the subprime mortgage business for financials, it cannot fix the [collateralized debt obligation] business and the unwinding and the de-levering of the leveraged credit and it cannot alleviate some of this asset-backed paper gone bad,” said UBS U.S. financials analyst Glenn Schorr.
ummm………..
and further……………..
“If the Fed does cut, it will be rooted ultimately in the collapse of the U.S. housing market, which we have consistently emphasized as the main force driving the U.S. slowdown,” wrote Goldman Sachs economists in a note to clients.
“Even if the current financial distress subsides quickly, the downturn in the housing market still has a long way to run,” Goldman economists said.
http://www.marketwatch.com/News/Story/feds-friday-rate-cut-work/story.aspx?guid=%7B7F1852B4%2DDC22%2D40BA%2DB624%2DD00C98E64091%7D
Boy oh boy. From ’sub-prime is contained’ to ‘Challenges in credit markets and subprime markets remain. We have to see what additional fallout there is from hedge funds or institutions trying to come to the market for liquidity’ in what? 3 or 4 months? Where will the analysts be New Years Day? Hiding under rocks crying about a falling sky?
I’ve been reading this line all day and it still cracks me up:
“The discount window is rarely used because there’s still a stigma attached to using it. No bank wants to acknowledge that it’s not solvent enough or credit-worthy enough to obtain the funds it needs on the market.”
They don’t want to admit they are insolvent? They are complaining that this cut isn’t good enough because it doesn’t make them look good when it bails them out?
Hilarious! These guys live on a different planet.
I just heard that the cut in the discount rate has inyected $120bn in the market.
Do you think banks and brokers will start lending to everyone again now that they have a new easy credit line from the Feds?
Today I was thinking that the market would finally got the down direction but the Fed cut took me by surprise, and I didn’t like what I saw.
Is this just the bailing out of their bankers friends? are we going to have to wait for the year-end results to see if companies are affected by the end of the equity loans and easy credit?
Are they going to be able to stop this recession? if so, does it mean the housing prices will go back to high appreciation and we will have huge inflation? I am really confused…Looking at the numbers and the economy I thought this bubble couldn’t last longer than 2007.
lenders don’t need a handout to lend money .. they have plenty of money.
What they need is for their loans to be backed by solid investments and solid borrowers.
Homes are anything but a solid investment. Instead, they are quickly dropping in value, with prices falling until, eventually, they match people’s incomes and so increase their ability to repay the loans.
as far as a recession, it’s in the bag, imo.
Prices inflated to the moon.. that’s inflation. Now they are receeding.. that’s recession. Housing is just the spark that ignited it.. the flames will spread to everything remotely related.
nam, your supposed to be confused. Thats the plan.
Deflation signals are all over the economy (houses, elctro gadgets, and cars), Inflation signals are all over the economy (food, energy, medical).
Whataya gonna salvage? Banks, Hospitals, and Farmers.
So, its inflation then…..oi vey, might be time to buy a house, Too big Too Fail Banks, dry goods, and milk… all made in America.
might wanna think about powdered milk, short term CD’s, and and soon, a reasonably priced home.
Still don’t see how it matters/helps. If you can’t get financed, you can’t get financed, houses or businesses.
“Symbolic” = red herring to me……
“A rise in house prices here has been sparked by real demand rather than speculation and compensates for the stagnancy of the market between 1992 and 1997, he added.”
Yeah right. Talk to all the flippers here in Vancouver oblivious to the latest financial market conditions.
Natural resources drop and the States slips into a recession were just as screwed.
“Canada has not experienced the same woes because “we did not push the envelope in terms of exotic mortgages,” Mr. Tal said.’
Well whatever you want to call 105%+ stated income financing or 40+ year amortizations, Mixer mortgages there just as stupid.
Wedging an euphoric J6P into a house they really can’t afford should things change in the slightest is still a recipe for a disaster no mater where you live.
Even the North pole.
Eh Santa?
“A rise in house prices here has been sparked by real demand rather than speculation and compensates for the stagnancy of the market between 1992 and 1997″
******
That’s asinine.
‘92 to ‘97 was retrenchment due to speculation and the runup in prices in the period prior.
“It’s the cycle, stupid!”
“Canada has not experienced the same woes because “we did not push the envelope in terms of exotic mortgages,” Mr. Tal said.’
- ‘Oh Canada, Oh Canada - you are screwed!
Tee hee! J6P definitely has a wedgie.
The amount of appreciation in Canada has been unreal. Houses in Edmonton and Alberta that were built in the 60s: 300 to 400 thousand dollars. And don’t get me started on Regina. Yeah everyone wants to live here.
Alberta=Calgary
Primarily due to oil and gas, period.
“‘In many cases, what new homes are selling for is less than what the home is worth,’ said Dennis Norman, president of the St. Louis Association of Realtors.”
“Good boy Dennis” a realtor said, handing Dennis a cracker.
“Dennis is a good boy, Dennis is a good boy, Squawk.” Dennis exclaimed.
King Arthur: “Old woman!”
Dennis: “Man.”
King Arthur: “Man, sorry. What knight lives in that castle over there?”
Dennis: “I’m 37.”
King Arthur: “What?”
Dennis: “I’m 37. I’m not old.”
King Arthur: “Well I can’t just call you ‘man’.”
Dennis: “Well you could say ‘Dennis’.”
King Arthur: “I didn’t know you were called Dennis.”
Dennis: “Well you didn’t bother to find out did you?”
King Arthur: “I did say sorry about the ‘old woman’, but from behind you looked…”
Dennis: “What I object to is you automatically treat me like an inferior.”
King Arthur: “Well I am king.”
Dennis: “Oh, king eh? Very nice. And how’d you get that, eh? By exploiting the workers. By hanging on to outdated imperialist dogma which perpetuates the economic and social differences in our society.”
Looking ahead, those who stick it out and get by will find in 5-10 years that their tax break is going away as they finally begin to pay down principal. The fall out of this bubble is not going away next year.
and she told two friends, and they told two friends…..
Ok, I have what is probably considered a dumb question at this point but is today’s rate cut really going to make that much of a difference? Is Countrywide & other mortgage brokers now ok, or just more ok than yesterday? Did this slow down the inevitable & if so for how long. I can’t imagine anything saving all of the Arms that are going to reset. What are people’s predictions for the rest of the year?
this wasn’t a rate cut. the Fed cut the discount rate which is the rate banks pay if they are in a liquidity crisis. the fed funds rate is still 5.25%.
The Fed didn’t want Countrywide to go belly up, have almost a trillion in mortgages hit the open market and send conforming fixed rates to 8% or higher. Pretty much everyone one CNBC and Bloomberg agrees that housing is toast for years to come and this is just to avoid a real crisis.
‘this wasn’t a rate cut. the Fed cut the discount rate which is the rate banks pay if they are in a liquidity crisis. the fed funds rate is still 5.25%.’
- Very true, however Juan Sixpack doesn’t know the difference.
Ok, thanks. I was just confused because Jim Cramer was saying how people can now keep their homes. CrAzY week!
Did he? What a douche! The banks need to borrow the money to loan for 30 years, not 30 days.
he didn’t say that, pretty sure he said it was too late. this was just to bail out the financial system
“Canada’s strong economy and dearth of high-risk mortgage lending should help the real estate sector withstand the volatility that’s been buffeting the equity markets.”
Only to a point. There may not be as many Option ARMs and IO loans, but there are still plenty of ARMs due to reset at some point and not nearly the down payment requirements there used to be. That and plenty of fraud. The end is nigh when housing booms are being reported from rural towns in Saskatchewan.
Whenever industry people claim that “we don’t have those kinds of loans” in Canada, I laugh. My partner arranged for his mentally ill brother to take over the mortgage on their family’s house. He has a disability income of about $800 per month. The mortgage broker just charged them an extra $500 to approve the deal.
there are still plenty of ARMs due to reset at some point
ALL mortgages in Canada are ARM’s. You cannot lock in a fixed interest rate for the full 25, 30, 40 (whatever) years. I think 5 or 7 years is the limit.
‘Things are changing here at a very fast pace,’ said Shaunavon Mayor Sharon Dickie. ‘We will now have a Subway, which is really just one of the signs of our progress.’”
HAHAHAHAHA. Did someone convince Mayor Dickie they were building a real subway under her one-horse town instead of just a crappy sandwich shop?
Has anyone driven by a countrywide branch today? Are the lines out the door?
http://www.latimes.com/business/la-fi-countrywide17aug17_jmw1lmkn,0,7174900.photo?coll=la-home-center
“Please have a seat in our comfortable waiting room and watch this informative video. We know you have a choice when it comes to investing your life’s savings and appreciate your business. We’ll be with you shortly.”
From the Roubini blog…………..(tin foil hats on now)
August 17-19, 2007 — The financial shenanigans behind the global financial meltdown
publication date: Aug 17, 2007
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August 17-19, 2007 — The financial shenanigans behind the global financial meltdown
WMR has learned of a number of international financial swindles that have led to the current tremors adversely affecting worldwide national economies.
One scam is the large-scale counterfeiting of Hong Kong $1000 notes (worth about $USD 128). Hong Kong and Shanghai Banking Corporation (HSBC), one of three banks authorized to print Hong Kong currency under the authority of the Hong Kong Monetary Authority, has kept the counterfeiting scheme, which even copied the colored thread in the bank notes, under wraps.
HSBC has been accepting the fake Hong Kong thousand dollar notes even as the Hong Kong dollar plunged in value against the Chinese reminbi (RMB). Hong Kong’s financial elite have pressed China not to float the RMB against the plunging U.S. dollar lest its own currency also drops in value. Nonetheless, many Chinese who maintained Hong Kong dollar accounts have exchanged the currency for the stronger RMB.
In addition, practically perfect counterfeit Hong Kong $100 and $50 notes are also appearing on the open market lending to financial woes in the center of Asian finance. The British elite class in Hong Kong are also rushing to trade their Hong Kong currency in for RMB and Japanese yen.
There is reason to believe that the culprits behind the counterfeiting scheme are the Bush administration working with Rev. Sun Myung Moon’s criminal elements operating through various North Korean-controlled money laundering operations in Asia and Europe. The paper stock used to counterfeit the Hong Kong bills came from the Netherlands and there is evidence that Israeli mob and Moon-connected diamond and gold traders, gambling, and fake cigarette sellers are involved in dispersing the counterfeit Hong Kong currency. Essentially, the Moon “Unification Church” organization represents a reunification of the pre-World War II Korean criminal syndicate.
HSBC, as has been reported previously by WMR, has been fingered as a major launderer of Saudi, Emirati, and Pakistani funds for Islamist militants in Afghanistan, Chechnya, Turkey, and the United States.
WMR has learned that the Bush administration may have also substituted counterfeit U.S. currency for real dollars in a North Korean account held at Banco Delta Asia in Macau. After freezing the North Korean account, the Bush administration agreed to release the dollars to North Korea after North Korea agreed to resume negotiations over its nuclear weapons program with the U.S., Russia, China, Japan, and South Korea. However, Pyongyang may have received counterfeit currency injected by the U.S. into the account, a move that would further weaken the value of the U.S. dollar along with the Bush administration’s helter-skelter printing of legitimate currency in order to increase the M3 money supply — a move that is similar to Weimar Germany’s printing of practically worthless marks during the Great Depression.
Written by Paladin on 2007-08-17
http://www.waynemadsenreport.com/articles/20070817
Well, that just made my brain hurt. That’s what we wacky conservatives refer to as ‘Bush Derangement Syndrome’ or BDS for short. Why does Austin Powers’ ONE MILLION DOLLARS come to mind? Conspiracy theories are good but I always feel like my brain is melting while trying to digest the info.
Just to clarify your post, the article may have been posted on Roubini’s blog, but it is not Roubini’s views.
Trash.
testing
An apropriate end to the week, thinks I:
“…’Gentlemen,’ concluded Napoleon, ‘I will give the same toast as before, but in a different form. Fill your glasses to the brim. Gentlemen, here is my toast: To the prosperity of The Manor Farm!’
There was the same hearty cheerings as before, and the mugs were emptied to the dregs. But as the animals outside gazed at the scene, it seemed to them that some strange thing was happening. What was it that had altered the faces of the pigs? Clover’s old dim eyes flitted from one face to another. Some of them had five chins, some had four, some had three. But what was it that seemed to be melting and changing? Then, the applause having come to an end, the company took up their cards and continued the game that had been interrupted, and the animals crept silently away.
But they had not gone twenty yards when they stopped short. An uproar of voices was coming from the farmhouse. They rushed back and looked through the window again. Yes, a violent quarrel was in progress. There were shoutings, bangings on the table, sharp suspicious glances, furious denials. The source of the trouble appeared to be that Napoleon and Mr. Pinkerton had each played an ace of spades simultaneously.
Twelve voices were shouting in anger, and they were all alike. No question, now, what had happened to the faces of the pigs. The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.”
The infusion of cash will not help Countrywide and other lenders who kept their loans in house, thus have rising inventory of REOs on the books.
I guess deadbeats are constituents
‘If they make them affordable, they will sell them. In the meantime, I want these banks held accountable.’”
what wrong did the banks do ?
They let the house sit empty. They need to maintain the houses they repo’d or sell them for a price that will get someone in.
But that would mean marking the house price to market and taking a huge write-down in assets. Better to let those REO houses sit and rot until the Wall St. bonus checks clear the bank!
” ‘This is my equity, this is my retirement,’ said James Shirkey, seeing that equity and his retirement slip away”….”Shirkey’s hopeful. He says he’ll just
rideguzzle the ripple and hope for the best.”“Thunderbird” from a brown paper bag.
This is my tulip. This is my retirement.
have home sales and prices picked up yet ?
just checkin
lemme look..
nope.
“‘Because of the subprime mess, credit is getting tighter for everyone,’ said Erica Ramus, owner of Realty Executives, Pottsville.
Buying an overpriced crapbox in a place called Pottsville: Priceless . . .
Sure you don’t mean Pottersville?
“In Shaunavon, (a) town of 2,000 has experienced rapid economic growth in 2007, a pace which will continue when its first Subway restaurant is built later this year. ‘Things are changing here at a very fast pace,’ said Shaunavon Mayor Sharon Dickie. ‘We will now have a Subway, which is really just one of the signs of our progress.’”
hahaha!! I don’t know whether to laugh or cry. If a subway sandwich shop is so coveted there, it must really suck.
On the other hand….that subway should bring about 5 new jobs, so they better buy now or be priced out forever!!
FYI, 250 miles of empty prairie lies between Shaunavon and the nearest city of any size (Regina, pop 200,000). Over 300 miles in the other direction lies the nearest city of over a million, Calgary. Yellowstone NP lies not much farther away to the south on the other side of Montana.
Most of these Saskatchewan small towns have a smaller population today than in the 1920’s and have a big inventory of vacant lots which can easily be sold to suckers, er, “investors”.
Take a look
So Poole was in on the scam, and did his part, on Thurs. saying no cut barring a “calamity”, then enacting a charade to cover the Fed’s secret meeting. What a sleaze–and it’s your money he’s playing with.
“William Poole, president of the Federal Reserve Bank of St. Louis, kept dinner plans last night to avoid tipping the Fed’s hand.
In a surprise announcement in Washington, the Fed today cut the discount rate it charges banks for loans by half a percentage point to 5.75 percent, after a 6 p.m. teleconference late yesterday. Poole, in Arkansas for a speech, skipped the Federal Open Market Committee call to have a meal as scheduled at the University of Arkansas at Little Rock.
“He didn’t want to run the risk that it looked like the FOMC was holding an unscheduled meeting,” St. Louis Fed spokesman Joseph Elstner said in a telephone interview. “He thought it was more important to stick to his schedule.” …
Poole, a voting member this year of the FOMC, was not available for comment…
The meeting occurred a day after Poole told Bloomberg News there’s no sign that the subprime-mortgage rout is harming the broader U.S. economy. Only a “calamity” in markets would require the Fed to convene and cut rates before its next scheduled meeting Sept. 18, he said in the interview. (per Blomberg).
Not to mention that the Fed made its announcement prior to the market opening on options expiration day, of all days. They couldn’t wait for mid-day trading, they couldn’t wait til Monday, it had to be announced first thing this morning. Way to not interfere in the markets, Ben.
Kinda makes that little 300 point uptick in the last 25 mins. of yesterday’s trading very suspicious.
didnt see much of the top brass stating the economy was all good, unemployment very low, great interest rates, low inflation.
When Cindarella’s slipper drops….no comment.
“Calamity - (1) An event resulting in great loss, (2) The distress that results from some disaster.”
Poole obviously has not been paying attention. Didn’t we pass calamity a few months ago?
OT I was listening to the edge on the way home the guy said that Thursdays 300 point ralley came from leaked insider info about the rate cut
Why does Countywide Funding get a 11 billion loan from the Feds ?Mark to Market Countrywides worth and doesn’t seem like a loan of merit . Oh I forgot ,Fannie and Freddie are going to buy all those loans on the books at Countrywide . Always thought the Fed .discount window was a short term loan based on real assets of merit .
That’s what you get for thinkin’…
http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm
Thanks for the link Sue . It explains the way BB might react .
I couldn’t believe my ears this evening. This may be posted elsewhere and I didn’t have time to read all of the comments from today yet, but before I left for a dinner out, Cramer called Poole a disgrace, basically stated that everything is better and that he was vindicated. He said that the fed listened to him, NOT Poole. He got right up into the camera when he said that.
Man he is setting himself up for a serious crash and burn, even if the market does not crash.
This guy Cramer started out telling the homeowners to walk . Than he starts the rant to the Feds to cut interest rates based on the premise that hes trying to help 7 million homeowners from foreclosure .
Cramer just wanted a bull -run in the stock market and this Bear Stearns thing that came out caused his stock picks not to rise .(I don’t think he is known to have a great record anyway , who couldn’t pick stocks during a bull market run up .
What kind of a show would Cramer have during a bear market with the stock market anyway ,the show would be cancelled .
That being said ,the stock market doesn’t deserve to go up with the recession that is around the corner and people will just lose money unless they are holding long term .
I am glad Greenfart is still alive to see the mess he created.
Some see a mess where others see an opportunity to clean up.
http://www.financialsense.com/fsu/editorials/2007/0817.html
“This signals to me that there may be a couple of banks with problems in the system.” Interesting…..
This morning, in a surprise move, the Federal Reserve cut its discount rate by 50 basis points from 6.25% to 5.75% in order to provide additional liquidity and restore normal operations to the discount window. The discount window is used to provide short-term liquidity to financial institutions and provide a source of funds for lending in the federal fund window.
During the recent panic, the Federal Reserve has been injecting the banking system with short-term flows of capital in order to keep the system liquid and functioning properly. The Federal Reserve will take collateral in return but it is the collateral and margin requirements which have been causing the most problems.
The Federal Reserve Board (FRB) noted in the first sentence that this rate cut was temporary so expect an increase or non-cut balancing out a cut in the Fed Funds rate when liquidity improves.
The more interesting points come later in the statement when the FRB notes that they have extended the borrowing term to 30 days, renewable by the borrower. This signals to me that there may be a couple of banks with problems in the system. If so, this provides additional liquidity and gives the banks more time to sort through their problems.
The Federal Reserve can and has been accepting home mortgages and what may appear to be mortgage backed bonds and CDO’s (they use the term similar instruments) as collateral for borrowing at the discount window. That is no surprise as they have been doing this for years and is a part of their guidelines. But, they are not changing their existing collateral margins. So as the value of the mortgages and securities used as collateral drops the banks are required to place additional securities to make up for the deficit. This is where we had the liquidity drain the past week. As levered hedge funds watch the prices for their mortgage backed bonds and CDO’s drop, they received margin calls and this spilled over into the banking arena.
For clues as to where the problems are located and what banks may be involved, just look to the final sentence. The request for a reduction in the discount rate was submitted by the Federal Reserve Banks of San Francisco and New York. Because the Federal Reserve Bank of New York hold so much clout over the committee it would not be surprising if San Francisco initiated the request after receiving backing from New York.
What happens next? From past experience, if a bank is in trouble the Federal Reserve will bail it out the bank by arraigning for a friendly merger with a larger bank. The larger bank will get some favorable terms with the FDIC on the lending side in order to assist in the assimilation of the loan book as well as a favorable purchase price.
“Countrywide, based in Calabasas, Calif., borrowed the entire $11.5 billion available in bank credit lines Thursday ”
uh, do you think this was a no-doc, stated-income loan?
Centex commercial on the radio was proclaiming that service men and women could get 3% off a new home. They were calling it “Hero’s Sale” or some such.
Talk about a LOL moment! I bet you could walk into a Centex development and get 10% off just by asking. Or more. If they only give 3% off to service persons, then they are screwing our heroes big time.
Plus, I doubt most service men and women could afford a new home in So Cal, which is where I heard the commercial. What a joke.
speaking of commercials, i saw one tonight.. first time for me, probably cause i don’t watch much TV..
People spending money right and left on useless stuff.. solid gold toilet, shiny bling of all kinds, etc.
A hip woman dressed to the 9’s with arms full of shopping bags jaywalks in right in front of an SUV, which hits the brakes with a squeal.. camera on the female driver’s face shows exasperation.
Slogan: “Spending money like it’s going out of style is out of style”
Instead, you should save money buying some Toyota (or something).
got me thinking.. someone in their ad dept is catching on to a new trend: The days of wasting money on useless crap are over.
in 1990, there were magazine covers touting “the new austerity.” “Your Money or Your Life” was a popular book and so was that pennysaver newsletter. Sooner or later you’ll see that all again.
Another “we can’t give you your money back because we lost it” fund.
http://biz.yahoo.com/rb/070818/sentinel_bankruptcy.html?.v=1
It’s just a reflection of the culture.