Bits Bucket And Craigslist Finds For August 21, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Capital One quits mortgages:
NEW YORK (Fortune) — Capital One’s shuttered GreenPoint Mortgage is the latest mortgage banking explosion to bump Wall Street’s panic meter up a notch, and industry insiders say it is just another indicator that retail banks will be stung by the credit mess they helped create.
http://tinyurl.com/yu6wsl
I can’t quit you GreenPointe
Lender I think i’m going to have to “put” you down for awhile
I can’t quit you GreenPointe
I…think you were the biggest pile
I said you messed up many a home
Made people mistreat their finances all the while
You built my hopes so high
Lender, then you let me down so low
You built my hopes so high then ya let me down… so low
Don’tcha realize sweet lender?
Lender I don’t know… which way to go
GreenPointe I can’t quit you babe
I think I’m gonna put you down for a while
Zeppelin!
Squeeze my CDO lemon baby ’til the yield juice runs down my leg
Squeeze my CDO lemon so hard babe I fall right out of my Wall Street Fed-pampered bed
Or something like that. Sorry, I had to try…
Everybody has a song in em’…
Good job~
LOL!
And of course as expected on this news, combined with Cap One’s announcement of reduced earnings expectations for 2007 - their stock is up almost 2%.
I don’t care what expectations are, unless the entire planet shorted this turkey, these movements just sometimes don’t make sense. That are no one but institutionals hold it for index purposes :/
Gee, they stopped the money losing business after only about 99 competitors crashed out of it. I’d pay more for them now, yes sir. Must be “New Management”
From what I’ve been reading, someone knows someone who knows someone that thinks Warren Buffett’s Berkshire Hathaway is going to be buying up a chunk of countrywide.
http://biz.yahoo.com/rb/070820/countrywide_buffett.html?.v=1
“NEW YORK (Reuters) - Billionaire investor Warren Buffett may buy parts of beleaguered mortgage lender Countrywide Financial Corp (NYSE:CFC - News), some investors are speculating, according to The Wall Street Journal.
Countrywide’s debt-servicing business and its portfolio of mortgages and mortgage-backed securities may be attractive to Buffett, the Journal reported on its Web site on Monday, citing unnamed investors.”
In other words, it’s a baloney stock bounce.
Ncinerate
Maybe Buffett is buying parts of Countrywide or maybe some jerk decided to start the rumor to bring the stock up so he can sell.
Well that was exactly my point. An “anonymous speculator” says Buffett is going to buy up some countrywide. Sounds to me like someone high up in a certain company is looking to unload some stocks at a slightly higher price tag ;). I just CAN’T BELIEVE the WSJ is printing this drivel.
Why don’t we all just post anonymous “in the know” baloney tips to the WSJ. Hell, I think the fed will drop fund rates at exactly 7:00EST time on Sep 4th. Thats right, buy now or be priced out of stocks forever! While were at it, aliens will land and bring mortgage-relief cash for all the FB’s next tuesday! You heard it here first from this “anonymous speculator”!
Sheesh,
Ncineration
Dollar question to the great minds of this blog…
Okay, I have been thinking of inflation…
On the one hand, the FED prints dollars like mad, deficit, debt, etc…
On the other hand, the middle east and China are huge exporters whose currency is defacto dollars (all pegged more our less to the USD).
As we draw down the dollars value, do the huge trade surpluses and account balances of defacto dollar countries prop it up?
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value”
~ Allan Greenspan in The Objectivist newsletter published in 1966.
volume 5, number 7, page 11 … Gold and economic freedom by AG.
Our poor little Objectivist, where did he go wrong …
“China raised interest rates for the fourth time since March to cool the world’s fastest-growing major economy after inflation surged to a 10-year high.
The benchmark one-year lending rate will increase 0.18 percentage point to 7.02 percent tomorrow, the People’s Bank of China said on its Web site. The one-year deposit rate will rise 0.27 percentage point to 3.6 percent.
China’s economy grew at the fastest pace in more than 12 years in the second quarter on investment and exports. Consumer prices climbed 5.6 percent in July as the cost of food soared, while the central bank later cautioned that inflationary pressures were broadening.
“This is a reflection of the central bank’s concern about inflation and asset bubbles,” said Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong. “We can’t rule out another interest rate hike this year.” (per Bloomberg)
while the FED and ECB are slashing rates to help the big speculators and increase the War on Savers, China opts for the only real solution by raising rates (again).
on a slightly related noted, I’m noticing lots of China bashing in the Dutch newspapers and TV news lately; seems like a coordinated effort to divert the publics attention from the real issues.
Correct. Same here in the US. Chinese produced items like fish, cosmetics, toothpaste, toys, etc, are being whacked on a daily basis with bad publicity via the US governments public relations outlets. CBS, NBC, ABC and a few others. First, these problems hasve been around for several years and it didn’t suit the governments interests to blow the whistle. Now the threat of just how powerful China has become and how trouble financially the US is, means the government must do something so they resort to the usual practise. Soft brain washing. Nothing unusual. Same modus operandi.
So you think media conspired to keep poisonous toys from China secret?
Nobody ever questions the toxic financial instruments we export to the world. Instead, the outrage is toothpaste and Fisher Price toys. The head of the Chinese FDA equivalent was executed not long ago. I predict that the economic pain will be deep enough in this country that the masses will call for some Wall Street heads to roll. After all, it was Cramer’s gang who packaged and exported these highly toxic financial instruments to the rest of the world.
The media is a pliant tool, subject to manipulation by those who know how to do it. This is a result of journalists being energetic and tending towards sensationalism, but not being scholars or deep thinkers.
Ask yourself why, when covering stories on housing, they almost always go to housing market cheerleaders such as Lereah and various other NAR representatives; when doing stories on abortion, they almost always go to pro-choice advocates; when doing stories on the death penalty, they almost always go to anti-death penalty advocates; when doing stories on stocks, they almost always go to those with vested interested in seeing a high stock transaction volume; etc.
Journalists want sensationalist stories and they want easy access to sensationalist sources.
With the China thing, with the massive recalls, it has now caught the public imagination, and thus they are going to pile on. And sources who want to encourage this will make themselves available with dramatic (but perhaps not new) information.
So, not a conspiracy from the media, but rather the media acting like a trained dog, responding to inputs from those who know how to make it respond.
“This is a result of journalists being energetic and tending towards sensationalism, but not being scholars or deep thinkers.”
In part, but the real fault lies in the viewers who watch typical *news* papp. Most J6P’s readily and willingly absorb anything the media throws at them. They find comfort in being lemmings.
Perma bears and perma bulls also are lemmings. Easily led around by the nose, frequently spouting words of doom and gloom, as well as ‘prices always go up!’ Frequently quoting information, analyst opinions, *news*, etc., that supports their already established world view.
Lemmings must be a resilient bunch. They sure get burned a lot.
RE: Importation of “toxic” goods from China
China has asked many American companies to pay for the recalls. The reason is that these items were produced by American owned companies that manufactured these items to the parent companies specifications.
It is not just a China problem. It is American companies that have manufactured the items in China.
I hadn’t heard this. Interesting. I have no problem with China asking American companies to pay for the recalls if it’s American-owned companies producing the toxic products there according to American specs.
Something smells wrong about this, however. Are American-based companies really so stupid to think that they wouldn’t get caught using lead-based paint in products destined for the USA? Maybe. But maybe not.
I have done analyses and worked with lots who have done the same of these supply chain issues. In many cases, strict guidelines are set down, they are implemented, and then later the process is changed by the chinese producer to increase their bottom line, for example substituting something chemically similar but cheaper… such as using a plastic in a toothpaste.
This would be like you picking up dinner from your favorite take out and suddenly they change the ingredients to things unfit for human consumption.
Should better quality controls be in place? Now? Yes. Then? Probably. But consider it in reverse. If someone ordered a Boeing 747 and suddenly the flight electronics were replaced by a bunch of seiko watches wired together, would it be the consumer’s job to recognize this change in method of production?
The Chinese always respond that it is downstream sub-contractors who substituted posionous or substandard materials. Efforts to track down these “sub-contractors” usually is pointless, as they have conveniently gone out of business, relocated, or simply can’t be found.
On the other hand, American and European manufacturers are pressing the Chinese to produce at the cheapest possible price point, at very thin margins, which leads to sub-contracting the work to any source that can pump up their profit line.
China has asked many American companies to pay for the recalls. The reason is that these items were produced by American owned companies that manufactured these items to the parent companies specifications.
It is not just a China problem. It is American companies that have manufactured the items in China.
Well these American Co wanted cheaper labor to boost their bottom line, so let’s see how much this bailout cuts into their profit.
Additionally, global financial crises with a flight to quality into s-t Treasurys prop up the dollar.
The dollar has been selling off. The flight to quality has been US investment houses, banks and pension funds investing in short term Treasuries. Last week foreign CB were net sellers of US Treasuries. We’ll know tomorrow if they are still net sellers.
ProfessorB~
RE: Additionally, global financial crises with a flight to quality into s-t Treasurys prop up the dollar.
How can anybody regard the purchase of fiat government paper from a burned out debtor nation; populated largely by legions of lazy, obese people, intellectually doped up on episodes of American Idol and Dancing with the Stars; and incapable of producing anything of material substance (save for John Deere and Catapillar tractors); be considered a “flight to quality”?
Agreed. It used to be flight to quality, now treasuries are a deathtrap. Lose money on a price drop and receive interest rates far below inflation = lose-lose.
In my town, the independent tractor factory is gone. In its place in the prime real estate is a new water park.
Liquidity crunch uh-huh thats why the treasury T-bills are being bought like crazy , looks like plenty of liquidity to buy treasuries just not bad mortgages.
Another FB on Craigslist : Oh yeah, we borrowed a hell of a lot than we should have, but hey, you cant expect us to face the consequences of our actions!!!
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Can you help? We bought 2 houses and then had a turn for the worse
——————————————————————————–
Reply to: hous-401304083@craigslist.org
Date: 2007-08-20, 9:21AM EDT
Bought 2 houses when income was high, then income dropped. We would like to have some kind of solutions to our situation. Either we’d like to rent or sell the houses or refinance them or we’re open to other suggestions. We don’t want to lose our shirts and we don’t want to be left with a bill if there’s a short sale or something along those lines. Since we recently purchased the home, there is not much if any equity to work with. We ARE willing to offer seller financing, to offer an option on the house (1 or 2 year option) so that if you think the market is going to go up (which it’s supposed to in 2008) you can lock in a price now for a future purchase, to offer a lease option purchase (rent to own) where part of your rent goes to a down payment… Be creative. Current mortgage is $349k. In Land O Lakes, $500k.
Call XXXXXXX or respond to this email if you have a decent solution in mind.
thank you
——————————————————————————–
LOL, I saw that one yesterday. Was thinking of posting it, but you beat me to it.
If the market is going up in 2008 why worry? Oh yeah, and why just flip one house?
so that if you think the market is going to go up (which it’s supposed to in 2008)
I just spoke with someone yesterday who expressed a similar sentiment. And he doesn’t even own a house, nor does he want to.
OK guess it’s time to shut down the blog, FB #4,672,198 just told us the market is supposed to go up next year. Wow, so happy we all have time to buy on this winter’s dip!
Not specifically a comment to this post, but the other day I was flipping thru the AM radio and there was a Realestate show on and they were still advocating the idiotic idea that people flip houses (Florida program). They also stated that yesterday was their last day on the air. But after that I flipped to another channel that focused on real life financial issues and a caller brought up their Idea to do a flip and the host flat out stated that he thought it was a stupid idea. There is hope out there. Also as long as I am writing about Florida…A realestate agent that I know of, who has stated all is great in realestate, is now looking for a non-realestate job. From what I understand he currently has SEVERAL properties that he can not sell and apparently can not get rented out and what he is asking in rent is not out of line. Just bought a Mercedies SL recently, wonder how long he drives that?
What part of Florida is you realtor friend in?
Pinellas County mostly Dunedin, Clearwater, Palm Harbor area. Not my friend just someone that i know.
Any fairy godmothers out there? Come on, “Bippity, boppity, boo!” Wave the magic wand and make the problem disappear.
So, the current mortgage s 349k and they are desperate. But they are offering it for sale for 500k? I don’t get it. Why not offer it for about what they owe and walk away.
they own 2 houses
Which leads to another question………
They say the recently purchased the properties and don’t have much equity………
I would guess this was a 100% finance and in reality they have NO EQUITY, unless you give them $150 for their trouble.
The game goes on.
1/2 a million bucks for a house here in LOL. Is it worth 200k?
F*ck ‘em. We’re beyond the tragedy stage and into the statistics stage.
First the FB states “…there is not much if any equity to work with.” Then we are told the “Current mortgage is $349k.” Finally the asking price is $500k.
It sounds to me the FB is brazenly asking $500k for a house worth $349k.
Correction, probably asking $500K for a $150K house. LOL
As has been mentioned before here, anyone who wants to avoid dealing with a bank vis a vis a house purchase will be able to find tons of owner-carries out there, I’m seeing it in my neck of the woods (W. Colo.). FICO will become irrelevant in many such deals, as the sellers will deal with anyone just to sell. Same with rentals - no credit checks, zip, please just take the place.
I wonder what recourse the seller will have when the buyer defaults. There’s a reason why banking is a business and not a hobby, ya know.
I want to know how an FB does an owner finance sale anyway. Apparently, this is a simulated FB.
179,599 foreclosure filings were reported during July, up from 92,845 in the year-ago month of July.
Foreclosure filings rose 9 percent from June to July and surged 93 percent over the same period last year
http://biz.yahoo.com/ap/070821/foreclosure_rates.html?.v=3
It’s all contained luckily
–
Contained to idiots?!
Jas
The same way Wonko the Sane’s inside-out house “contained” the world in an insane asylum, for their own safety (from Douglas Adams’ “So Long And Thanks For All The Fish”).
Yup! Contained.
Jas, What do you think about Indian Real Estate?
Jai
“While 43 states experienced year-over-year increases in foreclosure activity, just five states — California, Florida, Michigan, Ohio and Georgia — accounted for more than half of the nation’s total foreclosure filings,” said RealtyTrac Chief Executive James J. Saccacio.”
Well, Florida has always been a California wannabe and by God, we’ve finally achieved parity on one area! Our politicians must be so proud.
Politicians up here in Michigan are always looking for ways to compare us to the California’s and Florida’s of the world…..well hey, here ya go!!! : )
Nevada is worst on per-household basis, with Georgia moving up fast.
“U.S. home sales dropped to a four-year low in the second quarter and prices fell in a third of U.S. cities, according to the National Association of Realtors. Foreclosure rates are one indication of how many more homes may flood the falling market as banks sell those they take over. In June, a nearly nine-month supply of houses were on the market, up from a four-and-a half- month supply two years ago.
“We are estimating that we will see about 2 million foreclosure filings this year,” said Rick Sharga, RealtyTrac’s executive vice president for marketing. “We honestly don’t see it getting much better before it gets a little bit worse.”
California foreclosure filings totaled 39,013 in July, about triple the previous year. The state led the nation in foreclosure for the seventh consecutive month.
Florida ranked second with a 78 percent increase to 19,179 foreclosure filings. Michigan replaced Ohio as the state with the third highest number foreclosures: 13,979.
On a per-household basis, Nevada ranked the worst with one foreclosure filing for every 199 homes, about three times the national average. Georgia’s rate jumped from eighth to second highest in the country with one foreclosure filing for every 299 households.
In all, 43 states reported more foreclosure filings than a year ago.” (per Bloomberg)
Wow. Texas got knocked out of the top five….
Not for long.
Georgia is a surprise. Not too many places in the state, aside from Butthead, are driven by the need to be pretentious.
Atlanta IS the Land Of The Deal, tho, so maybe that explains it.
There was a tremendous amount of mortgage fraud in the greater Atlanta area. Inflate the appraisal, get cash out at closing, never move in or make the first payment. Maybe that’s what is putting Georgia so high on the list.
Plus, I heard that for a long time the Georgia Real Estate Investors Ass’n. emphasized buying houses for appreciation rather than cash flow. Just sounded like a huge investor-generated Ponzi scheme to me. Anyone else know about that??
It must be…though it’s still hard to fathom because housing prices in Georgia didn’t skyrocket as in numeorus other places. An exceptionally large cohort of flippers maybe?
What you say seems quite plausible, considering Atlanta is for all practical purposes the eastern-most suburb of Los Angeles.
Does anyone still make Buckhead beer???
There’s a city called Butthead in Georgia? There’s one called Hell in Nevada.
I am from Atlanta and have family & friends there.
Reasons: Crooked appraisers and mortgage brokers. Mortgage fraud. Aside from that there were “investors” who went into low-income ghetto or almost ghetto areas, did a bit of cosmetic work, baited low-income people with teaser rates, got people who can’t read into houses, and now the piper must be paid. The “investors” are long gone enjoying the fruits of their unethical efforts, some of the brokers have left also to apply their skills elsewhere and the lenders…who knows? They financed the houses that weren’t worth spit as my late grandmother would say. Stupid.
It is not only low-income areas that have been affected by mortgage fraud. Mortgage fraud also occurred in the best neighborhoods as well. People of every economic class took on “creative” mortgages to get into bigger homes and McMansions. If people weren’t buying a house, then they were looking to “invest” in houses for fixing up and flipping. All of this was encouraged by crooked appraisers, realtors, and mortgage brokers. The effect of this on Atlanta has no economic or class bounds.
For the longest time my little CNY village/town had 6 foreclosures. That was it. I checked today and there are 4 new ones including 2 of my not so far down the street neighbors.
The list doesn’t even include some of the people I know that moved here and then immediately wanted out for the various reasons. One was a divorce w/multiple homes involved. I can only matter how that sit. is going. They’re not on the foreclosure list so for now they’re hanging in there. In a year, they’ve only decreased the price $13k on a 2 year old 2200 sq ft transitional. They should just reduce and be done before the figure they’re trying to save is needed for their kids therapy.
–
Unless the Fed and our all-knowing benevolent govt. finds a way to stop decline in home prices no amount of liquidity in the financial mkts will help the economy and the rising defaults.
With supply-demand of homes in such imbalance there is little chance to stop falling home prices. Rising home prices led the economy up and falling home prices will take the economy down. Watch out when Home ATMs run dry.
Jas
This is one point on which we can agree.
Which means a big round of deflation, right?
Should be, but some posters on this blog are predicting an inflationary bailout. My question is: What happens if the bailout succeeds in causing inflation, but fails to help out FBs?
I’ve been keeping track of foreclosures in my area, perhaps to buy but more as a way to monitor the carnage. I’ve noticed that most of the foreclosures are from loans obtained between 2002 and 2005. Most are from the big lenders; very few from local banks, leading me to guess that at least a portion of these loans have been packaged into bonds. I began to wonder who is processing these foreclosures. So, when J6P got a loan: the mortgage broker got a cut, then the investment bank (or whoever) turns it into some sort of bond and got a cut when it sold it to the investor. Now if I understand things correctly, if J6P defaults within a certain amount of time the investor can force the bond originator to buy back the loans hence the subprime implode-o-meter. What happens if J6P defaults after that time has expired? Who is in charge of the foreclosure? And does the processing cost get passed on to the investor who purchased the bond?
Normally the company servicing the loan handles foreclosure and sale for the holder of the note.
Hey Hobo, the fix is in…The Salem Evening News had a small spot which noted that the Mazz Housing Authority was underwriting new refinance packages for subprime borrowers.
The pits in Cop-Land.
Great, maybe they could just divide up the people not in mortgage trouble into groups of ten to twenty….assign each group to a subprime borrower and we could take turns making their payments.
LOL, no kidding, eh?
Great, maybe they could just divide up the people not in mortgage trouble into groups of ten to twenty….assign each group to a subprime borrower and we could take turns making their payments.
Great point for a letter to the editor of the feckless Globe
I think Duval Patrick’s ambition is to be worse than William Weld. There’s no other explanation. All that’s missing are some unapproved fires in the governor’s mansion, a speeding ticket on I-95, and tax deduction shenanigans.
Tranche ‘em, the deadbeats!
We are number 1!!!!!!!!!!!!!!!!!!!!!!!!!!!!
In what?
Roubini on CNBC………….
http://www.cnbc.com/id/15840232?video=477902343&play=1
WOW. Tell it like it is Dr. Roubini. I don’t think that is what they had wanted to hear.
You gotta love a guy who goes on national TV with a tie that looks like it was just thrown on over his head.
Looks like the economy is grinding to a halt.
“we’re going to have to pay the price for the excesses of the last few years.”
No one needs an advanced degree to figure that one out.
–
It has already halted and is switching into the reverse gear.
Jas
The economy never halted, it just went from high speed to reverse.
Yeah, and now the transmission is jammed. Crap!
A friend was driving his automatic transmission corvette out to palm springs with his girlfriend and they got amorous en route, and the gearshift accidentally went into reverse.
Blown Engine
Not to mention the other parts which were also blown . . .
CNBC should just dump all of the babblers they have now and put Prof. Roubini on the air all the time.
I love how the anchors of this segment seem panicked at the notion that the Fed can’t just wave it’s magic rate-cut wand and make this all go away. Something sort of cult-like about that, eh?
My in-laws, who have chased every each bubble, hang onto the “Fed will save us” mantra for dear life. My husband (before he consulted with me) discussed our anticapted PM purchases with his mother. He told me that she “freaked” and she spent quite a bit of time outlining how a Fed rate cut will turn everything around. She was wondering what they were waiting for…*sigh*
Needless to say, I discouraged my husband from discussing our investment decisions with his parents after that conversation.
Tried to talk my mom out of computer blips that will sink many ships, financially, the past month…
She’s an old school buy and holder and is well diversified as far as stocks go.
My less than gentle persuasive attempts were for naught, despite what I thought was my amazing assessment of the situation @ hand.
She’s like a lot of people, set in their ways financially.
Vermonter…no matter what, just get some PMs and do it yesterday. I’m lucky in that my family and few friends are all hedged in PMs so we don’t have the awkward moments of having to explain why gold is anything but barbaric. Just get some PMs - as much as you can afford right now - and sit on it.
Could anybody tell me what a ‘PM’ is? It’s still early out here and I can’t figure it out. Thanks!
D.B., is that you?
Thanks all for the advice. It took us a long time to get started because it’s very foriegn and awkward to us. Our second purchase is coming up today. Cooper - PM stands for precious metals.
PM = Precious Metal (Gold/Silver/etc)
Okay, I think y’all have convinced me. It’s time to buy some gold. What is the easiest, safest, most economical way to buy physical gold?
Do you keep $10,000-$20,000 on hand in case of emergency? Or is the goal to have it be a percentage of your net worth?
Any and all comments welcome!
Thanks!
“Do you keep $10,000-$20,000 on hand in case of emergency?”
Yes, you should. And also post your address and what hours you plan on being out of the house…
I meant in the safe deposit box!
Safe deposit box isn’t ideal either–the gov’t can confiscate contents of those as well, and there is also the issue of getting access when you need to.
What? Is this true? What is your source of info for this assertion?
“All safe deposit boxes in banks or financial institutions have been sealed… and may only be opened in the presence of an agent of the I.R.S.”
- President F.D. Roosevelt, 1933
Will history repeat itself?
Vermonter,
How are you going about the purchase of PM’s? Are you buying physical gold or investing in PM funds?
I think you and I have a similar approach to finances based on past comments. Seeing that you’re taking the plunge, and as I have been thinking about it for a while, it’s probably time to do something about it.
Kris -
We settled on gold coins to cover a lot of “back of our mind worries” all at once. I found a lot of good info at http://www.usagold.com and decided to go with them because we have no good local coin shops.
It’s worth calling them. We’ve had very good service and they knock 3% off the price if you pay by check. I had a long conversation with one of the sales people before we bought. It was no pressure and they sounded alot like the people on this blog.
If you want to buy PMs online, I suggest Tulving.com if you want say $5K or more worth. The website looks amateurish, but the guy is very well known in PM-land, and trustworthy, and because it’s a small operation, you get good prices. I’ve also bought more than once from ajpm.com and mjpm.com, and liked both (and they have smaller min orders).
Then again, if you don’t care about having the metal in your hands, I’d just buy the ETFs SLV or GLD, or the fund CEF.
As for the question of how much to buy, it’s a personal preference of course. Back in the day, advisers used to recommend 5% to 10% of your portfolio. I have way more than that, but I’m weird.
Google will tell you if somebody’s naughty or nice…
Please check twice~
“5. Hannes Tulving Rare Coin (X900050) A consent order was signed by the court on June 22, 1992. The financial records for this case show that the defendant complied with the order and made all payments between 1992 and 1997. There has been no payment activity since December 1997. As of 09/30/99, there was $245,309 in the account. According to the FTC attorney, because so little was collected relative to the value of the scam (estimated at $10 million or more), redress was never considered.”
http://www.ftc.gov/oig/agingmemo.shtm
That’s interesting, aladinsane. All I know is I’ve used him many times, and I know others who have as well, and he’s been extremely reliable. This is going back to year 2000, so if he was a scammer, he must have decided that an honest business works better. In any case, thanks for the link.
My mother in law is freaking out at some of our plans too. They never seem to want to get into the details. When I try to, they just say, the market goes down but it always comes back up (as if companies never go bust.)
She doesn’t understand that when at 73 they decided to do a $50k upgrade w/a HELOC on their condo kitchen, that they lost all credibility.
Yeah, my MIL lost credibiilty ages ago. I’m starting to use her as an example of what not to do. If she’s freaked, I’m probably headed in the right direction.
My ML visited last weekend, and started hinting around that we should consider buying a house soon. She had no clue whatever that a historic credit crunch was underway, not to mention the implications of a credit drought for home prices.
I hope you’ve asked them an open-ended question about how much money their grandchildren will have to cough up for their stupidity.
Yeah, I imagine you’ll want to rephrase that line a tad. Then again, maybe not.
I find it’s best, if your in-laws are especially difficult/nasty, to alienate them so completely that they will never speak to you again. Then you have peace
When my brother looked for a wife, he had three criteria:
1. She had to work.
2. She had to have no kids.
3. Her parents had to be at least a thousand miles away.
The first three criteria worked out very well for him. Maybe he’d still be married if he’d added to his list -
4. She had to be sober.
5. She had to have no gambling problems.
3 out of 5 isn’t bad!
IMHO his criteria were silly for picking a wife or husband. Numbers 4 and 5 make sense.
“Something sort of cult-like about that, eh?”
Published: 1951…good starting point for young’ins:
http://en.wikipedia.org/wiki/The_True_Believer
Here’s a gem:
“People whose lives are barren and insecure seem to show a greater willingness to obey than people who are self-sufficient and self-confident. To the frustrated, freedom from responsibility is more attractive than freedom from restraint. They are eager to barter their independence for relief of the burdens of willing, deciding and being responsible for inevitable failure. They willingly abdicate the directing of their lives to those who want to plan, command and shoulder all responsibility.” — Eric Hoffer “The True Believer”
Great stuff. Thanks.
I mentioned elsewhere in this thread that a fellow poster download and listen to Evan Sayet (’The Closing of the American Mind’) on the web. Based on this, I think you’d like it, too. I strongly recommend that you seek him out.
The way someone explained it the other day on CNBC is that the discount rate is only on the fund that helps finance institutions already in trouble and sometimes they’re so far under a rate cut won’t matter. Does anyone know exactly how this works?
Think of it a like a large dance hall that has a good mix of men and women on the dance floor, and a dark corner with lots of shady dealings. When a guy heads over to the corner (and they transact in the corner there, do you think he’s going to have much success finding a future dance partner?)
Normally the Fed changes the cover charge for men or women as needed to make sure that the dance floor has a good mix of people (changing the Fed Funds target rate), but they also can set the prices in the shady corner (the FED discount window). While cutting the prices in the shady corner means someone could get the job done, by the time most institutions are desperate enough to head over there, they are in pretty serious trouble.
well whatever happens to all these professional speculators, they deserve it. The problem w/ America now is the lack of critical mass in science, engineering and technology professions and the real estate and hedge fund boom made that problem worse. There are plenty of jobs available, its just that they require more brains and advanced degrees than what it takes to turn into an asset flipper.
Of course anyone can see this too right ? The least discussed part of this real estate boom/bust is the lack of competitiveness its now causing America in the global economy. Once the dollar collapses, people will figure that they need something other than the Fed to save them.
The head of the OCC was right…Rome indeed.
That was funny. Everytime I hear someone “telling it the way it is,” the host seems to start clearing his throat louder and louder until the guest takes a breath, upon which the host breaks in and strangely enough they go to commercial ;). Roubini was a 6 hmmm-er and three ok, Ok, OK
Palmetto,
check out this house that I have my eyes on in Pensacola. It’s one of the best examples of the concrete block construction and low roof line that you and I both love. The guy who built this house really knew what he was doing. This bad boy is perched high and dry on a 1 acre parcel with protected waterfront with Gulf access (about three miles to the Pass) in a very good part of Pensacola with no seawall (I hate seawalls and that rip-wrap crap). This house meets all my subjective requirements except price and with a little luck and more credit tightening maybe that last bit will fall into place.
You will need to input the MLS No. 324928 into the search. I couldn’t get a direct link to work. Also tiny garbled up the link.
http://www.pensacolamls.com/(3zikaja32ad1ed55pbzmolbu)/propertySearch.aspx
You’re looking for $1.5M houses?
Can I be your butler? LOL
Nice place. I like it too.
Well, I havn’t lived in Russia for fifteen years because of the cuisine! LOL.
Borscht ochen6 ploxo?
Chelevek ne vas moshna jevu na borsht, kapusta, kartofel, e chorny hleb vez jesn. Ya dayel.
P’cola…
Sweet house, but what’s the hurry to buy?
“This property is zoned R-1AAAAA allowing the subject lot to be divided into 2 lots. ”
That would be an absolute travesty.
Awesome house. You can tell it was owned by a military officer family. I wonder what the story with them is - who they were (not why the house is being sold - that I can guess).
Looks like the guy in that photo was an admiral - 2 star?
There was a beautiful house in S. Salinas (CA) on 3 lots that was purchased in 2000 for $1.1M, split, and 2 $800K McMansions were built on each side. Bastards, I wanted that house!
I posted this late yesterday, from Bankrate.com Mortgage Matters Blog, but kinda interesting I think and worth more looks:
‘Jumbo rates are another matter. They have risen steeply, although if you look around, you can find a good deal — especially if you’re willing to document your income. A mortgage broker tells me that Countrywide slashed its jumbo rates late last week, essentially betting the company on the hunch that things will settle down soon in the private mortgage-backed securities market.’
So CFC is is betting that 11.2 Billion credit line that someone (Freddie Mac maybe) will step up and buy the Jumbo paper they are printing at conforming loan rates. They obviously will not be able to insure this paper or sell it at those rates so it will accumulate on their books.
This seems to me to be a losing strategy, unless the fix is already in.
The fed is buying all of the jumbo paper now at a new low rate. CFC is essentially now a GSE. Let the good times roll.
Wow! Looks like more housing price inflation is in the bag. Time to go out and buy me a McMansion, before I get priced out forever.
It’s like Mozilo helmed CFC into 106 degree temps with Santa Anna winds… (bad for fires, but great for tanning)
Excellent point!! Since CFC has a thrift under its umbrella, it has access to the Fed’s “discount window”. They can borrow as much as they need, and I’m sure the Fed is accepting their MBS crap as collateral. The fix is DEFINITELY in!
They can try to “fix it” all they want. But all of those mortgages will still give off a nice toxic odor.
And here’s some more Bullsh!t from the spin doctors at the WSJ.
Warren’s gonna ride in, on his white horse & save CFC
After the Tumult,
Is It Buffett Time?
The bond market has seized up, stocks are in turmoil, private-equity funds are sidelined and hedge-fund managers and lenders are hosting fire sales.
Now, with the shakeout in the subprime-mortgage market forcing the end of easy money and the distressed sale of assets — such as Thornburg Mortgage Inc.’s sale yesterday of $20.5 billion of its top-rated mortgage-backed securities — many see Mr. Buffett, the 76-year-old chairman of the giant Berkshire Hathaway Inc. holding company, as one of the last buyers standing.
Some investors speculate Berkshire could be a buyer for parts of mortgage lender Countrywide Financial Corp., whose stock price has been hit hard by subprime worries. Countrywide’s assets, including its debt-servicing business and its portfolio of high-quality mortgages and mortgage-backed securities, could be attractive to Berkshire, these investors say.
http://online.wsj.com/article/SB118765494900503539.html?mod=hpp_us_whats_news
Wow, a whole 50B. After all the fed injections the Street thinks Buffet is going to save the day?
Why would Buffett waste his money, when its value is appreciating quite nicely as deflation takes hold? This makes slightly more sense than the Hovnanian rumors that were spread about Berkshire last month. But only slightly more sense. Stock prices are going a lot lower so like housing, there’s no rush to buy.
First it was foreign buyers would save us, now its Mr. Warren Buffett. Oh well, on to the next bubble. This ones toast.
Hasn’t Warren Buffet been a vocal HHB’er since 2006? I’ve read quite a few statements from him explaining why these derivatives are time bombs and why we should all be avoiding them.
Maybe they just did it to try and impart a false sense of confidence among its depositors. Kind of like their crazy high savings account APY.
…”Subject to withdrawal limitations…”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aosVPIhxcCCg&refer=home
Wow!
But I thought the subprime issue was contained? Now it has the ability to collapse the German state-run banks?
The more I learn the more scared I become.
Its very telling that most of the blowups reported to date (outside of the MLs) have been overseas.
It’s especially ironic that there have been a couple of blowups in Germany which to the best of my knowledge is the only Eurpean country that did not participate in the housing bubble.
yes, very telling … apparently Germany participated in another way as the other EU bubble countries.
But don’t worry, ECB reports today that it is shrinking its weekly liquidity injections. Good to know that they plan to do this on a weekly basis only, instead of 80 billion or so every day ;-(
The germans know how to tell it like it is. The US however, needs a little more of this. Explicit instructions on WHO, WHEN, and for WHAT can report the really horrifying news is, let me say, cloaked (with the daggers of investors) behind every door.
Since these are “state-owned banks” they’d probably be under tighter scrutiny. It seems weird though - state-owned? I wonder if these are remnants of the East Germany days?
The more I learn, the more disgusted I become.
I’ve learned enough as well. There is a war on savers and the middle class. Wall street is printing themselves income checks. I can explain it to anyone who cares.
At this point, additional information is contributing more to my personal frustrations then to any new insights.
Arlington:
This isn’t over yet. The housing and stock markets will continie to crash simultaneosly. The only “uncertainty” is in what failing measures will be taken to try to stop it. Remember, there are good guys out there too. Democrats will take over next year, and the voter is fed up. Our system is dynamic and will respond. You must hang in there!
amen brother/sister
Yep, just look at the massive dollar amount of bonus checks from 2006. And 2005. And 2004…..
Most of the foreclosures our paper are either Countrywide or Deutsche Bank. I’d never even heard of them before the last few years.
I’d never heard of Deutsche Bank before the last few years.
Both are on the list of 21 “primary dealers” that trade in US Govt securities with the Fed. BNP Paribas, the French bank that almost collapsed last week is another. These banks are key components of the monetary system.
Seems like this subprime toxic waste is everywhere………..I wonder where it will bob up next.
we still haven’t heard anything from the EU pensionfunds that probably own the largest chunk of the toxic waste.
And I’m not even talking about al the EU waste that is going to be higly toxic once the ECB stops supporting the big speculators and the risk appetite in Europe declines to current US levels. Total outstanding mortgage debt in the EU is probably higher than its US equivalent.
we still haven’t heard anything from the EU pensionfunds that probably own the largest chunk of the toxic waste.
Now that should give people an instant headache.
‘“I would have never thought that IKB or SachsenLB would get into so much trouble,” said Wolfgang Gerke, president of the Bavarian Finance Center and a former professor of banking and finance. The events will accelerate consolidation among state- owned lenders, he said.’
I predict there will be lots more serprized finance and economics perfessors all around the globe over the next few weeks. I confess to even being a bit surprised myself. Though I never believed that “subprime is contained” line from HP & BB, I also could not have imagined that U.S. subprime borrowers were the plankton which kept whale-sized European banks alive.
Was it not a series of banks in Austria and then Germany in 1931 that suddenly collapsed that eventually rolled into North America by 1932 and cause the whole system to basically shut down by beginning of 1933? Calls by other banks and runs by the depositors like a set of dominoes.
Scary parallels??
who in the hell would buy 1b in bad loans from LEND? Somebody supposedly did. Maybe Chris Dodd put it on his visa.
Or Hillary took out a HELOC.
Even constructive political commentary may not fit on this blog, but I don’t see how your comment is either constructive or housing related.
The posters are indirectly referring to housing bailout plans floated by these two presidential candidates.
Think “sarcasm.”
The Fed will do a 30-day repo.
Dodd (a Democrat) is either VERY stupid or VERY sleazy. Either way, he has zilch credibility with me.
From http://channels.isp.netscape.com/pf/story.jsp?flok=FF-APO-1310&idq=/ff/story/0001%2F20070821%2F1236647759.htm&sc=1310&floc=NI-mo3
Fed Vigilance Urged on Credit Crunch
By JEANNINE AVERSA
WASHINGTON (AP) - Senate Banking Committee Chairman Christopher Dodd urged Federal Reserve Chairman Ben Bernanke on Tuesday to use “all the tools available” so that a spreading credit crisis doesn’t undermine the national economy.
Dodd, a Connecticut Democrat who is seeking his party’s presidential nomination, met with Bernanke and Treasury Secretary Henry Paulson - two men playing key roles in trying to ensure that problems plaguing the financial markets don’t get worse.
While urging policymakers do all they can to ease the credit crunch, the senator told reporters after the closed-door meeting that he did not specifically ask Bernanke to lower a key interest rate called the federal funds rate, which has stood at 5.25 percent for more than a year.
So far the Fed has been reluctant to reduce the funds rate which is the interest rate that banks charge each other on overnight loans and is the central bank’s main lever to influence economic activity. A cut in the funds rate would cause commercial banks to lower their prime lending rate charged to many consumers and businesses.
While a lower funds rate could have positive implications, Dodd stressed that he did not want to appear to be putting “political pressure on the Fed.”
Dodd said he welcomed the Fed’s steps thus far to deal with the credit problems. The Fed last week sliced its discount rate to banks and has been pumping billions of dollars into the financial system. Dodd said he was impressed with these actions.
The meeting with Bernanke and Paulson went well and was positive, Dodd said.
Right -
“Dodd stressed that he did not want to appear to be putting “political pressure on the Fed.”
Sorry if a re-post. Dodd, IMHO, is either incredibly stupid or incredibly sleazy - either way, he has zilch credibility.
http://channels.isp.netscape.com/pf/story.jsp?flok=FF-APO-1310&idq=/ff/story/0001%2F20070821%2F1236647759.htm&sc=1310&floc=NI-mo3
Fed Vigilance Urged on Credit Crunch
By JEANNINE AVERSA
WASHINGTON (AP) - Senate Banking Committee Chairman Christopher Dodd urged Federal Reserve Chairman Ben Bernanke on Tuesday to use “all the tools available” so that a spreading credit crisis doesn’t undermine the national economy.
Dodd, a Connecticut Democrat who is seeking his party’s presidential nomination, met with Bernanke and Treasury Secretary Henry Paulson - two men playing key roles in trying to ensure that problems plaguing the financial markets don’t get worse.
While urging policymakers do all they can to ease the credit crunch, the senator told reporters after the closed-door meeting that he did not specifically ask Bernanke to lower a key interest rate called the federal funds rate, which has stood at 5.25 percent for more than a year.
So far the Fed has been reluctant to reduce the funds rate which is the interest rate that banks charge each other on overnight loans and is the central bank’s main lever to influence economic activity. A cut in the funds rate would cause commercial banks to lower their prime lending rate charged to many consumers and businesses.
While a lower funds rate could have positive implications, Dodd stressed that he did not want to appear to be putting “political pressure on the Fed.”
Dodd said he welcomed the Fed’s steps thus far to deal with the credit problems. The Fed last week sliced its discount rate to banks and has been pumping billions of dollars into the financial system. Dodd said he was impressed with these actions.
The meeting with Bernanke and Paulson went well and was positive, Dodd said.
Yeah, right, Dodd..
“While a lower funds rate could have positive implications, Dodd stressed that he did not want to appear to be putting “political pressure on the Fed.”
“Dodd, a Connecticut Democrat who is seeking his party’s presidential nomination, met with Bernanke and Treasury Secretary Henry Paulson - two men playing key roles in trying to ensure that problems plaguing the financial markets don’t get worse.”
This is part of his sleazy D-ratic prezidential campaign strategy. If the financial markets recover quickly (particularly if any of his bailout proposals are adopted), he will brag about the outcome on the campaign trail. And if things turn out badly, he will wash his hands and dump all the blame on BB, HP and GWB. This guy makes me want to heave.
Anybody have any news on who or what bought that $20.5 billion shat sandwich from Thornburg yesterday? Noticed that little piece of information was left out of the news blurb. Gotta be somebody big.
at least they lost $900 million on that $20 billion sale….
I would have thought their loss would have been a lot greater, given what we’ve been hearing. That’s only 5%, is that so horrible??
Calculated Risk had a discussion on that yesterday. From Peter Slatin of Slatin Report, best guesses are Starwood, Blackstone and Sam Zell. None chose to respond to questions on issue.
Cool. Thanks Spike.
that’s a 5% haircut, probably 10% from what they valued it at last month, not a bad deal for aaa jumbo paper, probably ups the yield close to 10% (beats a three month treasury). crazy.
The talking heads on TV are saying that the number of deliquencies “right now” is low. What they fail to indicate is that there are still tons more that will be resetting.
I think the big players are buying positions such that the Fed will reduce the rates. Who really benifits from the reduction in rates? Interestingly when the Fed cut the discount rate the financial stocks jumped, alot of other stocks droped. I have devulged myself of almost all of my stocks and will wait for some cheaper deals come.
RE: Your talking heads should be called for what they are: Propagansists on the order of Joe Gobbels and his ilk.
The demented lies and disinformation emanating from just about all sectors save the internet blogs borders on the criminal.
http://biz.yahoo.com/ap/070821/foreclosure_rates.html?.v=5
WTO warns that subprime problems could slow economic, trade growth
The Associated Press
Published: August 14, 2007
GENEVA: Global economic and trade expansion could slump in 2008 because of increased risks in financial and property markets, the World Trade Organization said Tuesday, citing concern about credit problems that started in the market for subprime mortgages.
The global commerce body said market uncertainty caused by defaults in U.S. subprime loans, combined with large trade imbalances in goods and services, are already hampering global economic growth, which it said would be around 3 percent for the year.
Global goods trade growth for 2007 will slow to about 6 percent, compared with 8 percent last year, the WTO said in a 119-page report.
“If the problems in the subprime market continue or are aggravated, we’re looking perhaps at a bigger impact on economic growth and trade growth next year,” Robert Teh, acting director of the body’s economics division, told The Associated Press.
http://www.iht.com/articles/ap/2007/08/14/business/EU-FIN-ECO-WTO-Global-Growth.php
CYA Time for Moody’s
“The credit crunch triggered by a rout in the U.S. subprime housing market doesn’t pose a “systemic” threat to banks, Moody’s Investors Service said.
“The `core’ of the system is still comfortably shock- resistant,” Moody’s said in a statement today. “U.S. and international financial institutions have a high pain threshold.” …
“Confusion and uncertainty of risk is creating this liquidity problem,” Moody’s Senior Vice President Pierre Cailleteau said. Sometimes banks are affected indiscriminately, “requiring more frequent market-stabilizing operations,” he said. ..
The Moody’s statement comes as it, Standard & Poor’s and Fitch Ratings come under criticism from fund managers and politicians who say the companies failed to provide timely warnings to investors about problems in the subprime market.” (Bloomberg).
Moody’s and Warren Buffet, from Russ Winter…
“Buffet also owns a 19% stake or 48 million shares of credit rating agency Moodys, so what better way to restore some measure of credibility than to have him buy the majority stake in some nice cozy deal, and put the born again, grace of God blessing on the whole tawdry affair? And I can easily visualize a large 3-4% rally on Wall Street and about 10% in Moodys on that one. Now I can feel the stirrings among the more questioning and intelligent of my readers. Warren Buffet was and is a large influential minority holder in this credit rating agency, so why didn’t he impart some of his solid, righteous “Sage of Omaha” ethics and morals on it before? “
Warren Buffett… is the Mark Spitz of equities…he has the Gold & the good looks.
http://en.wikipedia.org/wiki/Mark_Spitz
M-O-O-D-Y-S + S-T-A-N-D-A-R-D-A-N-D-P-O-O-R-S= Arthur Andersen.
The rating agencies have been lying for quite some time now about the extend and depth of the fiction paper many institutions hold and if the “refs” are corrupt, the whole system is.
An nba ref bets on rigged games, the nation is shocked.
A couple of refs allow bets on rigged financial games, the nation is asleep.
nothing new under the sun. it’s a fixed shell game, and always has been. if we were as good at manufacturing product as we are at manufacturing bullshit, we’d be an unbeatable force.
You are right.
http://tinyurl.com/2sowp7
“U.S. and international financial institutions have a high pain threshold.’’
I have a name for the pain:
“Where’s my money?”
or
“What do you mean… you don’t have the money to pay what is owed?”
I truly hope that Moody’s is correct.
I do not believe the US can afford $1T to bail out banks.
Hoz, it’d be interesting to see how U.S. banks are set up internally. How independent is each department’s income stream is from the others? The smarter institutions have departments that operate as independent operating/profit centers so that if one department goes belly up, the others are not directly affected.
The mutual fund company I used to work for was set up this way. Each of the funds/managers essentially obtained a license from the parent to be associated with the brand name, yet operate as its own profit/loss unit. In such a scenario, if one fund tanked due to market conditions or poor management, there’s no spillover to the other funds. Their performance is not affected and investors aren’t fee’d up the whazoo.
Instititions should be as fiscally nimble as you and I strive to be.
For the foreseeable future at least, smart money doesn’t lock itself into something it cannot get out of.
Operating as independent profit centers is acceptable for accounting purposes for Mutual Funds. Conceivably an investor in a mutual fund could lose her entire investment in oil futures, but the losses to those futures would not infect the investors in the insurance markets. Mutual funds are playing with other peoples money (OPM), their profits are management fees.
Banks cannot take a loss in one department and separate those losses from the entire bank performance. So a bank may have a profit from the mortgage section, but a loss from the commercial lending sector can wipe out a banks profits for a year.
Every bank I have looked at runs separate departments for internal profit analysis, but as Capital One showed last night, they are still on the hook for GreenPoint Mortgage losses.
I’m still not convinced. Why can’t they operate that way? Because they don’t now? Because of accounting rules? Change the rules.
They could certainly split their departments into separate profit-loss centers that buy into (and pay an operating fee to) a larger, overall bank brand that interfaces with the Fed.
In this scenario, the banks would oversee their “licensee” departments rather than be tempted to conspire with them. Meanwhile, any outfit that wants to become a licensee (to offer mortgage products, for example) must by law go through a bank in order to tap into any taxpayer funding (say the Federal Reserve).
The banks are charged with oversight of these departments, and when things go bad, the individual departments suffer the direct hit and the bank gets heavily fined by the Fed (in the form of a higher discount rate than the bank’s competitors pay, for example).
Well, Eudemon, what your saying seems to make sense from our point of view, bit I don’t think banks would do it that way, since they usually open up as lenders from the get go, and only offer savings accounts as a way to fund their loans.
What is to keep them from bundling up all the bad stuff and putting it into one garbage can to go bankrupt? Why didn’t Fastow think of that? Oh wait, that is Wall Streets method, except they sell the garbage.
The CEO of the bank my son works for was on CNBC the other day and he said their bank is 70% deposits and 30% loans, and that they don’t do a high percentage of mortgages. So some banks will fare better than others. I did see that National City Bank had something like 27% of their mortgages out in subprime loans to mortgage companies.
Plenty of banks will be just fine.
Those that can’t weather the mess they created we are better off without.
This Chinese will gladly offer $1.5 T…if the US dares take it.
Now that we are so suspicious of Chinese imports, wouldn’t it be wiser to just print $1T at home?
Why can’t the US just print an extra $1T?
Just print the dam money. See that wasn’t hard to do.
Oh, what a tangled web we weave …
Now Moody’s has to defend itself, which means it has no choice but to join in the “no need to cut rates so much” camp. Ha!
Foreclosure rates make headlines, but with the most current July ‘07 foreclosure stats showing Georgia and Nevada leading with 1-in-300 and 1-in-200 foreclosures respectively, it’s not close to a bell-ringing disaster out there. I’m waiting for the other shoe to drop, if and when it does, before I begin my house hunting in the United States of Debt.
I think the other night on TV they said of the houses in Las Vegas for sale, 40% were vacant. Stands to reason if their foreclosures are so high.
Dutch housing bubble update:
Dutch home prices as reported by the official ‘Kadaster’ posted another all time high last month at EUR 250K, up 1% from the previous month and up nearly 300% compared to 1995 (this +300% vastly understates the real price gains because of a huge shift in the types of homes that were sold). Sales numbers were slightly lower than in the same month of the previous year. The prices reported by the Kadaster are a bit lower than those reported by realtor organisation NVM, which quotes an average home price of close to 260K euro but unlike Kadaster does not cover all home sales in Netherlands.
also today, Dutch homebuilders are sounding the alarm: they say home sales are the worst since 1987. Production of new homes has dropped significantly last year despite all kinds of measures to increase building permits etc. Reality is that the demand for new homes has fallen much more than production, obviously because of idiotic prices (an average new home costs about 10x median Dutch income). So lack of production is certainly NOT the problem.
Yesterday the builders organisation suggested that the government should start a new incentive program for new home buyers, offering 50-75K free money for every newbuilt home because otherwise there are no buyers. A Dutch starter household can officially afford a home of about 135K euro, and builders say they cannot build anything below about 200K euro. They don’t say that the biggest chunk of this 200K is the price of the land that is owned by these same builders and on which they make record profits year after year. So in fact they suggest that the government should subsidize their already super fat profits from owning the land. Doubt it will happen on that scale, because the Dutch government is having some budget troubles lately.
According to the Dutch realtors organisation, the difference between number of homes for sale and actual sales numbers is bigger than ever before, but they still expect home prices to keep climbing ‘because the economy is sound and incomes are increasing’. Of course, just like in the US real incomes are NOT increasing, except maybe for the highest paid managers and those in heavily subsidized industries like building/RE.
question: Is the population in the Netherlands growing? If it is, is it mostly low income immigrants? And if it is, how are 10 Euro/hr immigrants supposed to be able to afford new houses?
No wonder your builders want huge subsidies. I imagine that it won’t be long before our “corporate” home builder will get the same idea and start lobbying Washington for programs like yours.
the Dutch population has more-or-less stopped growing. Many people (mostly the better educated and wealthy ones) are leaving the country; most of the growth is indeed low income immigrants (and a large chunk of the newborn Dutch citizens can be found in the big families of former immigrants). Some population experts say that the net population will start shrinking this year, but according to government sources the number will keep growing slightly for at least 10-15 years. I don’t think the immigrants have trouble affording houses in general; if you don’t have any money you either get a free home from some kind of government office, or (if you have steady income from a job or welfare) you can sign up for a huge mortgage where the government assumes all the downside risk. Obviously, affording new houses in the 300K euro range is a bit more difficult, similar to Mexican families who are buying McMansions in CA.
I still can’t believe that Europe & Canada isn’t paying attention to what’s happening here. Do they think they’re day won’t come? Can’t they see that true affordability has to figure into home prices or it will take down their markets as well?
We are going to go through a recession soon. & the more we try to put it off, the worse it will be.
whoops, was going to say “they’re immune”…oops.
I’m still reading articles in the papers on a weekly basis that explain that homeprices in the Netherlands can only go up. It’s the same psychology as in the US two years ago, except that people are more convinced here because it has been like that for one generation (the last real housing crash in Netherlands was in 1979). Our politicians are at least as dumb as those in the US and can only focus on keeping the pyramid game going with ever more subsidies.
Sometimes the shills who write about the housing market demand lower interest rates from the ECB or lower transfertaxes ‘to help starters and low income families’, just like the builders and RE brokers are asking for more starter loans etc. every time. So they must sense that this party cannot go on forever …
Funnily enough, I’ve been having the same conversation with some people over in the UK - still in denial about the (non) afforability of the UK housing market, and lots of ‘its different here’ comments.
Interestingly, there’s a complete disconnect between what’s happening in the US and conditions in the UK. No one seems to see the connection between the international financial markets - ‘the US economy has nothing to do with us’…etc
I’ve pretty much given up - I posted the URL to this blog and told them to figure it out for themselves…
God forbid that a company should take a loss. Charge it to the taxpayers! Well, even with all this annoying intervention over there in the Netherlends, it sounds like the bubble over there is finally starting to deflate.
I have only recently found this great blog. Thanks to everyone here, I think I have learned more about the state of the market in two weeks than in the rest of my life combined.
I have a couple of questions related to the actual process of how the bubble worked. As near as I can tell, it moved as follows (parens are where I lack understanding or have a specific question):
1) J6P feels entitled to more house than they can afford. They contact a mortgage broker who puts them in a 100% LTV I/O loan on a $400,000 dollar house.
2) The Broker is working with a wholesaling originator such as IndyMac or one of the 128 other imploded lenders. The broker takes 3 to 5 points and disappears
3) Originator packages the loan along with a bunch of others into a MBS. Here are my first questions (are all the loans in this particular MBS of the same quality, or does it mix prime and subprime? How large is the typical MBS issue? what is the average interest rate? How do they account for the expected rate adjustments on 2/28s etc?)
4) An investment bank buys the MBS, along with a bunch of others, which it uses to creat a CDO. The CDO pools a bunch of the MBSs and is then sold off in tranches. The tranches are based on who get’s guaranteed payments, with the bottom tranches exposed to a J6P default first. (Q: Again, do they mix different risk levels in a single CDO, so that the J6P loan is sitting there along with wise borrower with a fixed rate at 50% LTV and perfect credit?)
5) The CDO is evaluated by a ratings agency. (Q: How in the world did they determine risk of delinquency and default on an instrument that pools perhaps thousands of different borrowers with different types of loans, FICO scores, interest rates etc.?)
6) The CDO tranches are purchased, with leverage, by hedge funds and other investors. The CDO is attractive because it appears to offer a higher interest rate than treasuries, especially in the lower tranches. (Q: What were/are the actual rates of return on the different tranches? For an investor, I would assume the top tranches must have been a point or two above treasuries and bottom tranches must have promised much wider spreads to attract attention, but I really have no idea.)
7) The Hedge funds borrowed money in the carry trade to purchase the CDOs. (Q: Why would hedge funds see such potential upside in what is essentially a fixed income instrument? How did they profit holding these CDOs, only through the carry trade?)
The entire system is reliant on convincing more J6Ps that real estate only goes up.
So, my broad question, is this an accurate description of the actual process? Am I missing steps? Are there other players after the MBS is created that influence the game?
Thanks again to everyone. I think it would be useful if we could arrive at an accurate and detailed explanation of how this market worked (say from the perspective of a small investor that wanted to participate in the game)in order to understand the implications when the cards come tumbling down.
Well, you actually misunderstand the origins.
Cheap money from the FED drives down borrowing costs.
People are then able to pay a higher payment for the same house.
This causes brokers to RAISE house prices to get more out for the owner.
The BUYER only cares about the monthly payment and DP.
This causes an increase in housing prices 20% a year to start.
With only 5% down on a 100k house, the new owner has realized a $20,000 gain on $5000 plus payments. Much better than the stock market.
More people see the gains as prices rise again from lower rates.
More people buy at higher prices, keeping payments about the same.
Prices go up 30%, an unprecedented rise, and now, everybody wants in on the real estate “property ladder”………
With higher rising prices, average buyers cannot afford them.
Mortgage companies readjust their lending standards to keep the payments the same, thereby creating the ZERO DOWN, negative Am mortgages…………….this starts the big spiral in price increases, because now EVERYBODY wants to buy, no matter the price……………………….
From there on out, your analysis sums up what has happened.
——–d.
Your questions 2-4 are pretty similar, normally the loans in an MBS (and the MBS in a CDO) are of similar terms (generally spread through the nation but FICO of a given range, LTV of a given range, they’re all about the same age (or seasoning). If you’re really curious about one the trust issues a monthly report that describes all the factors (with a particular focus on prepayments because in normal times that is the huge risk you take on with a mortgage).
The rating agency is then consulted and looks at the quality of the loans, and attempts to decide how the loans will perform based on statistical relationsips. From this they advise that XX% can be grouped for a AAA rating, with YY% in the middle ratings (down to BBB, then there’s an equity tranche (or z tranche) which is normally held by the originator (they can hold any other portion as well and their collected holdings are termed the residual). Any offering document for securitized paper will have the proportions (there are normally several tranches of the upper ratings depending on how quickly payments are expected to occur).
The spreads were as low as LIBOR +5-20 bp for AAA paper and in 2006 were only LIBOR +150 for the low grades. Here’s the offer document for an Accredited securitiziation. You can see the ratings, proportions, and spreads in the first table and the loan characteristics are described on page S-31
http://sec.gov/Archives/edgar/data/1017017/000119312506131942/d424b5.htm
Hedge funds acted as insurance companies or minature banks (borrowing at LIBOR and lending at a spread) in the game. Unfortunatly borrowing at LIBOR usually requires that you roll your loans pretty regularly when the hedge funds became unable to do this, they started having severe trouble.
The business of securitization doesn’t require that anyone believes that house prices mus continually rise, that just assures that you will have both a steady stream of new business and that defaults will likely be below expecations. Securitization will likely return (perhaps in a new form with a new name) once the bubble has popped and markets recover, if for no other reason than it captures a portion of the gains that would have flowed to buyers capitalized well enough to build a portfolio). The risk reduction in the upper tranches is possible due to the same concept that is behind modern portfolio theory. The big basic error was that correllation was presumed to be much too low (and when you are levered the range of correllations that don’t topple the cart is quite narrow).
Those are the main steps, there are lots of things you can do with different tranches from different firms (especially when you add credit insurance into the mix).
I have a couple of questions related to the actual process of how the bubble worked
Your questions deal only with the financials.
You also need to understand that much of the underlying collateral for all these housing mortgages are heavily depreciated or shoddily built houses in marginal locations.
Liar appraisals contracted by the L/O’s duped the underwriters into believing otherwise.
So…
So if you have homes which have essentially no remaining or seriously diminished remaining economic lives, with perhaps a negative estimated fair market value (cost to environmentally demolish is worth more than the site)… exactly what are those pieces of paper really worth?
And exactly who will be on the hook for all the enviromentally impacted properties of which I can assure there are thousands?
Ugly, ugly, ugly…
Hi jer:
Try going to http://www.patrick.net for a good explanation. That’s the site that started me on this whole HBB thing.
-Big B
I mean Big “V”.
Same here, Big V - that’s good advice you gave. Thanks to Patrick & Ben, I feel I’m prepared for what’s coming down the pike.
Paulson is reported by MarketWatch to be on CNBC shilling again. Supposedly doing the “Global Economy Will Save Us” jitterbug.
The Global Cargo Cult Net has many a hole in it…
Really?
Seems like that the rest of the world might be rethinking that right now.
Yeah, really. Think for a moment about the 1-1.5 billion people in China and India who in the past 10 years have seen or gotten an actual taste of materialism for the first time in their lives.
The difference between what the Have’s have (Western-style economies) and what the Have Not’s don’t have (most of Asia, Africa and significant areas of Central and South America) is huge.
I remember seeing a statistic in 1995/6 that 48 percent of the world’s population had never USED a telephone of any sort, much less owned one. (An estimate from a U.S.-based telecommunication industry group - I don’t remember the name of the group).
Look around you. Think of all the things you have that they don’t — electricity, refrigeration, electronics, cars, ROADS, surgical equipment, construction equipment, etc., etc.
The opportunities for future growth are unbelievable.
Right…all those things require energy. I’d say because of a shortage of energy and the speed w/ which it will need to be produced from oil, coal and natural gas, the world is going to have a huge energy problem soon. Opportunities for growth are always unbelieveable but everyone is ignoring the elephant in the room.
Actually, Shake, lots of countries aren’t dumb enough to follow this U.S. policy on energy (which is dictated more or less by environmentalist moonbats).
Nuclear power is huge in France, which now exports energy to Germany. Brazil is nearing self-sufficiency in energy. China and India are building nuclear power plants by the dozens. Russia is up in the Arctic drilling oil at a frentic pace, knowing that now is the time to drain any potential for the USA to do the same.
Meanwhile, here in the USA, we continue to do jacks**t relative to energy. We haven’t in 35 years. We don’t build new plants or refineries, we don’t drill for new resources. Hell, we’re still using natural gas to produce electricity and coal for heat. But use nuclear? That’s blasphemy!
Instead, we waste our time with pie-in-the-sky environmentalist wet dream endeavors such as solar panels, wind turbines, ethanol and nickel-laden electric car batteries (all these Prius owners are screwing up the environment even more).
None of these environmentalist ‘technologies’ are efficient or cost effective. A thorough waste of time and natural resources.
Dear Eudemon:
I certainly hope you’re not implying that environmentalists are moonbats. I, for one, am an Earthling. I have no way of flying to the moon and living there when/if Earth becomes uninhabitable by humans.
I think the nonenvironmentalists are more easily likened to moonbats.
Yes, I am implying that.
And before you respond, consider this: how many people do you know (including *nonenvironmentalists* such as myself) that want to live on a filthy planet and drink polluted water?
Answer: None, if any.
The difference betwene me and the typical moonbat is that I do not advocate *environmental* ideas, procedures and technologies that are more problematic than those that already exist. Unlike today’s moonbats who proscribe to and promote ideas, procedures and technologies that either damaging (like nickel-based bar batteries), unfeasible from a cost point of view (solar power, ethanol), or both.
I also think Al Gore’s Global Warming and carbon credit *philosophy* is a complete sham, but that’s for another time and place. Not this board.
Ask the ex-residents of Pripyat about the efficacy of nuclear power….
Then GWB is the biggest moonbat of them all … he’s the one who pushed ethanol. Also, US gov’t under Clinton pushed hybrids (because the oil co’s freaked). Conservatives and libertarians (with a couple of notable exceptions) hate sustainable hydro- or coal-powered 600V DC steel-wheeled traction … they prefer spending billions per year on asphalt and asthma … not to mention discretionary wars to help out the oil companies who make it all possible.
A real patriot would support coal.
http://bigpicture.typepad.com/comments/2007/08/real-income-fai.html
The IRS says that using the official CPI statistics (which some believe underestimate inflation), people still make less money than they did five years ago.
But that doesn’t prevent the criminals from Treasury and the White House from insisting that the economy is roaring and wages are up. please…. enough of these cretins…
People Are Smart
I have only recently found this great blog. Thanks to everyone here, I think I have learned more about the state of the market in two weeks than in the rest of my life combined.
I have a couple of questions related to the actual process of how the bubble worked. As near as I can tell, it moved as follows (parens are where I lack understanding or have a specific question):
1) J6P feels entitled to more house than they can afford. They contact a mortgage broker (or Countrywide) who puts them in a 100% LTV I/O loan (or some other crap product) on a $400,000 dollar house.
2) The Broker is working with a wholesale originator such as IndyMac or one of the 128 other imploded lenders. The broker takes 3 to 5 points and disappears
3) Originator packages the loan along with a bunch of others into a MBS. Here are my first questions (are all the loans in this particular MBS of the same quality, or does it mix prime and subprime? How large is the typical MBS issue? what is the average interest rate? How do they account for the expected rate adjustments on 2/28s etc?)
4) An investment bank buys the MBS, along with a bunch of others, which it uses to create a CDO. The CDO pools a bunch of the MBSs and is then sold off in tranches. The tranches are based on who gets guaranteed payments, with the bottom tranches exposed to a J6P default first. (Q: Again, do they mix different risk levels in a single CDO, so that the J6P loan is sitting there along with wise borrower with a fixed rate at 50% LTV and perfect credit?)
5) The CDO is evaluated by a ratings agency. (Q: How in the world did they determine risk of delinquency and default on an instrument that pools perhaps thousands of different borrowers with different types of loans, FICO scores, LTVs, interest rates etc.?)
6) The CDO tranches are purchased, with leverage, by hedge funds and other investors. The CDO is attractive because it appears to offer a higher interest rate than treasuries, especially in the lower tranches. (Q: What were/are the actual rates of return on the different tranches? For an investor, I would assume the top tranches must have been a point or two above treasuries and bottom tranches must have promised much wider spreads to attract attention, but I really have no idea.)
7) The hedge funds borrow money in the carry trade to purchase the CDOs. (Q: Why would hedge funds see such potential upside in what is essentially a fixed income instrument? How did they profit holding these CDOs, only through the carry trade?)
So, my broad question, is this an accurate description of the actual process? Am I missing steps? Are there other players after the MBS is created that influence the game?
Thanks again to everyone. I think it would be useful to establish an explanation of how this market worked (say from the perspective of a small investor that wanted to participate in the game) in order to understand the implications when the cards come tumbling down.
Is this for a homework report?
P.S. I may have hit submit twice. I apologize if it shows up again. Sorry.
However they slice up this toxic pie of loans , the foreclosures will create big losses . It’s weird how they set up these MBS investment trenches ,but apparently the lower trenches take a hit first ,but they were paid the highest yield for the risk .I get the impression that they mixed the good loans with the bad loans and of course their models were based on real estate going up and people with good credit will pay their mortgage in spite of having no skin in the game .
Apparently fraud and faulty appraisals were not considered in the risk ratings .
So it looks like the lower trenches blow out first and go bust and than it works its way up . Without real estate going up ,of course it will work its way up to the higher investment trenches .For whatever reason ,currently they don’t seem to know how to mark to market these MBS’s and CDO’s if the investor wants their investment money or they want to sell at a discount ,but if loans were made on these notes apparently margin calls are issued now .
Really ,they don’t seem to know right now how to price or discount this loan paper ,but new greater fool bagholders are hard to find and the money gets tight when new investors don’t want to buy into high risk anymore .
jer, go to amazon.com and search for Frank Fabozzi.
Thanks, droog. This looks promising:
“The Handbook of Mortgage-Backed Securities”
A bit pricey for my skinflint ways, but that’s the advantage of being married to a library director.
The worst is still yet to come, all those 2 year ARM loans made in the second half of 2005 and up until say June 2007 still have to reprice. These people are dead in the water; 1 they can’t refi now because their loan to value is probably over 100%,; 2 no more sub prime loans are available; 3 can’t do stated income or liar loans; and 4 even if they can by some miracle get a new loan they won’t be able to afford the interest rate which the market is now demanding. This is going to keep getting worse.
Has anyone looked at a subprime loan document.. the index is usually LIBOR plus 650 basis points which in todays market is around 12%.
Those of you looking for a price drop in the Seattle area may have a long wait in store. In fact it may be the next down cycle in real estate. The reason for this is the highly successful 787. Boeing may open a second assembly line and this would add over a thousand jobs at Boeing. Many people say that for every 1 job Boeing creates 3.4 are created in the area.
WAman, you might be right, but my sense of this mess is that it extends far beyond local economies. The micro might indicate price increases, but the macro (tightening lending) is having an impact already in Seattle. There are two houses on my morning walk to my cafe in Ravenna. Both have been on the market for over two months, and both have dropped their prices significantly. Yet they sit and sit in what I’ve been told a highly desirable area.
Further on Boeing: I’ve read a number of times that Seattle is immune to the bubble popping because of the strength of Boeing and Microsoft. IMO, it seems that Seattle’s reliance on two companies makes them particularly vulnerable to recession. Call me crazy, but two things I’ll cut back on if my income drops would be travel and software.
I walked through Cowen park to the UW every day for years, uphill both ways, and occasionally through blizzards where there was at least an eight of an inch of snow on the ground.
So, you’re basically saying maybe I’m not exiled for life?
While its true that Boeing’s 787 is backordered for years, it is also Boeing’s most outsourced, offshored plane ever. And how many people on Boeing’s assembly lines can afford a Seattle priced home without resorting to a toxic loan?
“And how many people on Boeing’s assembly lines can afford a Seattle priced home without resorting to a toxic loan?”
Amen! We hear the same thing in Pullman, WA at a very different scale: Schweitzer Engineering is hiring and that will keep the local housing market afloat.
The problem with this line of thinking: most SE employees are not that well paid and cannot afford homes at current Pullman prices. The only thing that can support bubble prices in WA state would be dramatic pay increases and that isn’t happening in Seattle or Pullman.
Affordability, Affordability, Affordability! How come the MSM can’t grasp such a simple concept?
Inventory of SFH for sale in King County is over 10,000; Snohomish County inventory is over 5,000. This is an increase of over 40% YOY. Even supposing one thousand additional jobs at Boeing translates into 4,400 new jobs in the area, and being crazily optimistic, we will assume that every one of these 4,400 new jobs translates into a new house-buyer, then inventory is STILL increasing.
Boeing is not going to save us.
Preach it, Brother!
Boeing itself has 1/2 the number of employees it did 20 years ago, and much of the component manufacturing which used to happen locally is now spread out around the globe (in exchange for promises to buy from Boeing and not Airbus). I seriously doubt that the 1:3.4 job multiplication factor is still correct due to this fact.
Microsoft is no different, outsourcing work to development centers in India, China, Ireland, Canada, etc.
I have a question for all of our PPT naysayers (dba, KIA, etc.) who frequently come on this blog and tell those of us who suggest intraday price stabilization may be used to shore up the bid on headline U.S. stock market indexes that there is no PPT, etc.:
Yesterday saw a bigger drop in the 3-mo Treasury yield than on Black Monday (Oct 19, 1987), yet the DJIA ended the day higher than the opening. How could this possibly occur without plunge protection measures to prop up the DJIA?
Fed Fails So Far In Bid to Reassure Anxious Investors
By Serena Ng, Greg Ip, and Shefali Anand
Word Count: 1,684 | Companies Featured in This Article: General Electric, Comcast, Bank of America, Citigroup, Deutsche Bank
Investors largely shrugged off the Federal Reserve’s attempt to restore order to the credit markets and bought up the safest government securities, triggering the biggest drop in yields on short-term Treasury bills in nearly 19 years.
While the stock market rose, conditions improved in currency markets and several companies successfully sold new bonds, investors refused to take any risk with their cash holdings. Instead, they accepted sharply lower yields in exchange for the safety of government bonds.
http://online.wsj.com/article/SB118765387419803527.html?mod=hpp_us_whats_news
The Prof asked: “How could this possibly occur without plunge protection measures to prop up the DJIA?”
Fear!
fear is supposed to bring the djia down, not up.
Short sellers’ fear of fed surprises.
LOL
Fear of doing anything. If short or long why add? Funds regardless of the market are constantly obligated to buy. The lower volume suggests this.
Hi, TN Here -
Do yourself a favor and do some Googling on the phrase “wall of worry” or “climbing the wall of worry”.
Oftentimes, the stock market climbs (moves ahead) on the wall of worry. Yes, contrary to what you might expect.
Why did it climb the wall of worry so well yesterday but not on Black Monday? I don’t buy it…
The stock market has been climbing the wall of worry for a long time now…starting in March 2003.
Huge numbers of people have sworn off the stock market in a predictable knee-jerk response to what happened from 2000-2002. They lost their shirts out of greed and ignorance. Lemmings. (Sound familar? - it should. It’s a scenario no different than real estate). They blamed the stock market for their stupidity ever since.
Lots of people will now swear off real estate forever - also due to their own stupidity. But they won’t accept their own failings (note that a subscriber to the entitlement culture rarely does accept culpability).
Neither the stock market nor real estate are loser’s games. Both are inherently neutral.
It’s up to the individual to be smart and disciplined enough to succeed in either.
“Neither the stock market nor real estate are loser’s games. Both are inherently neutral.”
Yes, unless policy measures are taken to subsidize them (which is the case in the U.S. of A.).
Fear of losing the bonus. Commercial paper lenders have a single goal, don’t get fired. If you lose money, ever you get fired. Because they couldn’t discover how much risk was in any single entity on the short end of the curve, they pulled from everyone. There are a ton of commercial paper lenders who didn’t want to roll anyone’s paper from Tues-Mon,
So now they have all this cash coming in, and they have to invest and they have to invest in short term paper. So where to all of them go? To treasuries and similar paper. The T-Bill market starts sloshing with liquidity and all sorts of institutions pull the credit lines and pay some extra interest. The extra interest will reduce profits but not by a huge amount, so you have the stock market independantly reaching a different conclusion, without intervention.
If there was an active PPT, it should be buying commercial paper and you wouldn’t have seen the huge spread opening between treasuries and commercial paper.
BOING!
http://www.marketwatch.com/tools/marketsummary/
orderly selling please, Hank said it takes time to play out. Oh, and dont forget that slowing growth going forward, not stoppoed, b u t s….l ow ing…..
wow, I almost fell asleep.
Bank CEO warns of German crisis
By Steve Goldstein, MarketWatch
Last Update: 5:28 AM ET Aug 21, 2007
LONDON (MarketWatch) — The chief executive of one of Germany’s largest state-backed banks warned that foreigners were increasingly loath to extend credit to financial institutions in Europe’s largest economy, which could spark a crisis.
“We sense reluctance on the part of foreign partners to extend credit to German banks,” WestLB CEO Alexander Stuhlmann told journalists on the sidelines of a bank event, according to wire service reports.
“If we have a banking crisis in Germany with other countries cutting us off, then other banks will also face difficulties.”
http://www.marketwatch.com/news/story/bank-chief-warns-german-banking/story.aspx?guid=%7B4C9FE094%2DEAB3%2D47F7%2DB327%2D6E087AB1D5EE%7D
Got yesterday proposed taxes letter from Sarasota. My property is 10% down by their estimate.
I wish I could say the same.
Hillsborough County raised my vacant lot next to my house 25% two years ago, 50% last year and want to push it up another 50% this year, from 24k to 37,000 dollars. For an empty lot in an undesirable area. I just got off the phone with them.
I will probably need to contest it. I doubt it would sell for 24k.
But your house is truly worth about 35% less!!! What a mess Sarasota is right now…..
OK. There are many financially savvy people that post here and I need some help. About a month ago I moved everything in my 401k to the fixed account (money market). Since then, I haven’t made much, but I haven’t lost anything either.
In light of all of the recent volatility, what’s the best approach for those of us with 401k funds over the next few months?
Here is a e-mail alert I received from Martin Weiss yesterday afternoon:
by Martin Weiss and Mike Larson
Dear Subscriber,
Martin and Mike here with an urgent afternoon update.
Despite the Fed’s biggest cash infusions since 9-11 …
Despite the Fed’s surprise discount rate cut on Friday …
And despite its desperate efforts to persuade big banks to borrow the money …
Panic Is Now Hitting U.S. Money Markets!
We are witnessing the most dramatic — and potentially most consequential — panic rush to safety in modern history.
We can’t tell you exactly what set off today’s new fire. No one knows yet.
But we can clearly see the smoke. It’s all over the money markets!
Here’s what’s happening:
Some of the world’s largest and most “professional” investors, so cozy in their complacency just days ago, are dumping short-term loans (commercial paper) like hot potatoes, especially those backed by mortgages.
And with virtually no one willing to buy them, the rates that borrowers have to pay on these loans have gone through the roof.
Meanwhile, investors are so utterly desperate for a safe haven, and so anxious to throw more money into short-term Treasury bills, they’ve caused one of the greatest plunges in T-bill rates of all time …
The 1-month T-bill rate has plunged from 4.52% last Tuesday to as low as 1.25% today. That’s not a typo! It was actually down by more than THREE full percentage points in just four trading days!
Today alone, the 3-month T-bill rate was down by over one full percentage point before recovering a bit.
The all-critical spread, or difference, between the 1-month T- bill and 30-day commercial paper rates is now as much as THREE times bigger than it was just a few days ago — another confirmation of panic in these markets.
Things are happening so fast, even the nation’s leading news organizations are having trouble keeping track.
At noon today, for example, Bloomberg sent out a release saying that today’s decline in the 3-month T-bill rate was the biggest since the Crash of ‘87. Then, a half hour later, they quickly followed up with another release saying that it’s actually the biggest decline since they started collecting data in 1983.
We’ve looked back at our records and we can tell you flatly: In percentage terms, today’s decline in Treasury-bill rates is the largest since World War II, another indication of how severe this panic has become.
Here’s what all this could mean to you …
First, even investors in the shortest-term debt market are shunning any kind of loans with risk attached to them. They don’t want sub-prime paper. They don’t even want prime paper. They just want ultimate safety — short-term Treasury bills backed by the full faith and credit of the U.S. government.
Your action: Stick with your stash of safe, conservative investments we’ve been recommending all along.
Second, if you’ve got a chunk of your nest egg in one of our favorite short-term Treasury-only money funds, good. It means you already own what nearly everyone else now wants.
But if your fund has an average maturity of just a few days, don’t be surprised if your yields start dropping sharply very soon.
One way to help offset that drop: Favor Treasury-only money funds that have a longer average maturity. Examples: MTB U.S. Treasury Money Market Fund (VSTXX) with an average maturity of 45 days and Weiss Treasury Only Money Market Fund (WEOXX) with an average maturity of 51 days.
Third, don’t be surprised if the panic in the U.S. money markets soon becomes a panic in the U.S. stock market. Heck, if investors think normally-safe commercial paper is so risky, why should they believe stocks are any less risky?
Your action: Use stock market rallies as an opportunity to unload any stocks you’re seeking to get rid of.
Fourth, with the yield on U.S. Treasuries plunging, watch out for another, even more severe plunge in the U.S. dollar, especially against the Japanese yen.
Your action: For protection and oft-dramatic profits, consider buying foreign currencies. Years ago, that would have been very cumbersome. But fortunately, today it’s easy as buying almost any security traded on the NYSE or Amex. (See this morning’s Money and Markets for details.)
Fifth, brace yourself for more. Today’s panic in the money markets is just a sampling of what’s possible in the days ahead.
Best wishes,
Martin and Mike
Before taking anyone on this blog for advice on allocation of your investment assets, ask them to produce audited tax returns for the past 10 years showing their exact investment results. Then make sure the ones with the best returns weren’t just lucky, and follow their advice. But remember that past performance is not a guarantee of future results.
Or start reading on your own. Your local library has lots of superb books on investing free for the taking. Biographies of Warren Buffett, “Reminiscences of a Stock Operator” by Lefevre, “The Only Investment Guide You’ll Ever need” by Tobias, “The Intelligent Investor” by Graham, any of several books by John Bogle would be a good start. For books on what can go wrong, start with “Only Yesterday” by Frederick Lewis Allen, and “The Great Crash” by Galbraith.
Thanks for your reply. I’m trying to get more of a current assessment based on what’s going on with the credit and mortgage meltdown and what’s to come in the next couple of months.
The information in classic investment books should give you a clue as to how to behave today.
Will do and thank you
Essessemm:
By the time you get done reading all those books, this thing will be over. Whatever you do, don’t jump into the stock market or buy a house. Your 401K money should probably stay in the MM fund.
Why do you think MMs are safe?
I agree. Very strongly.
I cannot believe that anyone alive today has actually read “Only Yesterday”! I have and it’s on my bookshelf.
I’m a bit flabbergasted….
I have a suggested book for you, Boston Bruce — “Blood In The Streets’ by James Dale Davidson. The title is unfortunate, as is the last half of the book…a diatribe in doomsday sensationalism.
Get it for the first half of the book. It is excellent. Lots of fact-based coverage of Pax Brittanica and Americana (and what might end the latter eventually), the hegemony of power, the fall of communism (book was written in 1986), megapolitics, cycles of progress and decline, etc. Also, if you want to know more about the Middle East and the rise of OPEC. I was turned onto it by my dad, who bought all of his kids, nieces and nephews a copy.
I’ve read Only Yesterday too. Probably most living people who have, are on this blog
Essessemm, nobody has more than wild guess as to what will happen over a time frame of a couple months (although many short term traders might disagree). I second Bruce’s reading suggestions, especially the Buffett and Graham stuff.
Clarification: For STOCK PRICES, we can only guess over short time frames. Other things are more predictable (there will be lots more foreclosures, probably), but they don’t help much in predicting stock prices.
I liked “Investment Biker” by Jim Rogers…
Good used reading from 1 Cent (plus $3.99 shipping, ha)
http://www.amazon.com/Investment-Biker-Around-World-Rogers/dp/1558505296
I read it many years ago when it first came out. Fortunately I did not follow their advice. They (Davidson and Rees Mogg) are examples of extremely intelligent and literate bears. They are always bearish, however. Anyone who is always bearish is going to be wrong about 90% of the time.
I’m referring here to both “Blood in the Streets” and “The Great Reckoning”. Great reads — lousy advice. I got their newsletter for a year or two. Lots of microcap uranium stocks. This was in 1992-3. Hate to say it, but you’d have made way more money for ten years following an idiot like Harry Dent. Smart people aren’t always good investors.
Agreed. Sadly, we have to expect interminably poor investment *advice* from the Intelligensia bears of the world.
But Hary Dent?! Egad.
Incidentally, Boston Bruce - have you downloaded and listened to Evan Sayet’s (of ‘The Closing of the American Mind’ fame) online speeches? If not, you most definitely should. I highly recommend doing so.
” “Blood In The Streets’ by James Dale Davidson. The title is unfortunate, as is the last half of the book…a diatribe in doomsday sensationalism.”
Why do you think nothing “bad” or “really bad” can happen? The date 9/11/01 should stand as a reminder that bad things really can happen, as should the date 1929.
I didn’t say nothing horrible and long-lasting cannot happen.
What I am convinced of is that current market conditions (real estate, stocks, jobs, incomes, etc.) are nothing to freak out over. Are they good? With the exception of real estate, yes.
Will the fall of real estate ruin the economy? No. There’s not nearly enough people nationwide that have bought two or more properties, have HELOC’ed themselves to death, etc. The morons that have will put a drag on our economy, but they won’t derail it.
And on the fiscal side of things, there’s all sorts of protections in place to CYA the little guy. Today’s environment is nothing like 1929 relative to how the little guy will be affected by it all. Anyone who disagrees should start reading about our financial regulation activities in 1933 and 1934.
Yeah, today’s and tomorrow’s taxpayers will get nailed, but the pain is monetized over a long period of time. I disagree with bailing out today’s fools with tomorrow’s money. It’s why I went to the Fair Tax rally in Ames, Iowa a week ago and will attend others if Boortz & crew show up in Illinois, Indiana and Wisconsin.
Note that I do agree wholeheartedly with those here who reference the War On Savers. Sadly, it’s been going on for several decades (since FDR) and will do so for decades into the future. Eventually - 200-400 years from now - this country will be toast. It will be due to other economies catching up with ours in terms of GDP - economies that don’t rape their citizens monetarily like ours does.
Our entitlement *because we DESERVE it* mentality will eventually do us in.
Or cheap weaponry will.
(Incidentally, maintaining a bearish outlook on the world and life puts the individual in a real bind financially. Fear stops them from making good decisions. Few bears are successful financially because they are always missing the boat).
Thanks for the explanation.
I don’t often go around quoting the Bible, but Ecclesiastes 3 seems appropriate here -
“To every thing there is a season, and a time to every purpose under the heaven.”
Probably, being a bear forever would be very difficult on one’s physical and mental health. But there are times when caution - and bearishness - may be necessary, don’t you think?
“But there are times when caution - and bearishness - may be necessary, don’t you think?”
Definitely. Luckily, I’m both fortunate and smart enough to often spot big picture economic events/trends before they happen. For example, I moved 90 percent of my stock market assets out of the market on December 31, 1999 after being in the market since 1991 (the 7 percent increase I saw personally that December spooked the hell out of me - way too good to be true or long-lasting, and after 17 years of stock market growth to boot).
I also sold my house in 2003 thinking that things were getting way out of control. Turns out I sold it about two years prematurely. I could’ve made more, but so what as I’m not a bag holder now.
Not being a follow-the-masses populist lemming has saved my behind on several occasions. When most people are in panic mode, I tend to be the opposite.
Vice-versa also is true.
How about “My Adventures With Your Money” by Mr. Rice….wonder 20’s and 30’s era book on mining stocks and how they were pumped up, mines ’salted’, etc.
Never heard of that one, crapburner - but I’ll make it a point to seek it out. Love the title!
“My Adventures with Your Money”
I’ll check into it. I like the title already. Thanks.
Borrow as much as possible out and invest it yourself. The “fixed account money market” may be loaded up with toxic waste.
TxChick,
I got a TRIN reading of 0.36 (now 0.16) about five minutes ago which I understand is a “euphoric” or bullish indication althought the markets were fairly solid in the red. Doesn’t a low TRIN usually signal a pullback? What do you think?
Low TRIN usually is S-T bearish. It is especially useful when stocks are falling. Spikes in the TRIN usually indicate capitulation and often a selling climax. When stocks fall and the TRIN stays low, that tells you that there a significant attempts to buy weakness or “buy the dip” which typically provides future sellers to fuel further decline. I personally don’t use it that much but there are serious traders that incorporate the TRIN as a major part of their strategy.
Right. I’ve used the tick and trin as my sole indicators for ten years. They’re the best ones I know of.
Can you explain what those are, chick, please??
http://www.worden.com/TeleChartHelp/Market_Stats,_TICK_and_TRIN.htm
I started using them around mid-1997 when the markets began to get very volatile with the Thai currency problem and Asian contagion. They are the easiest ways to follow program trading which is now well over half of all trading.
Two other things that are good if you’re into this kind of thing
Market Delta
Market Profile
Both have a learning curve but are worth the effort.
Awesome…..thank you!!!
Thanks Deron and TxChick. Now the damn thing has hit 20.47!! Shiite!!
Oh my word. A trading app? Wordin Brothers?
if any of you guys ever decide to compile a reading list please let me know….I’m completely fascinated with how some on this board predict the movements of the market….I’d love to know how you learned to do it.
With all due respect to Txchick, if it was as easy as plugging numbers into a computer, we’d all be rich. In the short term, it’s a competition, and other people have computers too — usually smart people. Not saying Tx isn’t successful, just that to the extent she is, there’s a lot more to it.
Certainly not. You have to know what it is you’re seeing and have a head full of other info to interpret whether or not you can make any money from it.
I’m just saying that I’d like to read up on the topic. I’m poor and saving for the future. I cannot afford the risk but I thought it might be fun to learn.
and one more thing. Outlier type readings in the tick and trin are usually fairly good signals that one can try to trade the other way with a stop. For instance, anything over +1000 or -1000 on the tick is usually a short term exhaustion of the move up or down. However, on a trend day one way or the other, the tick can run that way for a long time. In 2002 for instance, the minus 1000+ tick was a daily occurrence. I use it to guage the buy or sell programs’ (”machine stock”) running out.
Cool. Saved your comment. Thanks TxChick!
Wow, check out Housing Tracker at http://www.housingtracker.net/
55 markets are tracked and inventory up in all but 12 and asking prices are down in all but 4 markets. The rout continues. It may be another 2 years of downtrends to reach bottom.
Will be interesting to see what, if anything comes out at 11:00 Eastern. I get the sense that the spike off of the bottom yesterday and today’s sideways action were driven by hopes and dreams of desperate buy and holders looking to be bailed out. Perhaps there will be a housing bailout proposal from Dodd after Bernanke tells him to create hype or the stock market will crater.
What is money? Well, thats complicated. Hank told us this morning how complicated everyting is. One thing is getting a bit more certain, the unknowns are getting known at a pace the top brass isnt comfortable with.
Im moving the recession memo up to coincide post back to school pre-Halloween.
oh boy I couldn’t wait to post this one:
http://losangeles.craigslist.org/lac/apa/401597099.html
This posting has been flagged for removal
(The title on the listings page will be removed in just a few minutes.)
- I’ve got this.
vannuysrenter, what was that? I got -only:
This posting has been flagged for removal
$275 LIVINGROOM / APT SHARE - AVAILABLE ASAP
Reply to: hous-401597099@craigslist.org
Date: 2007-08-20, 11:45AM PDT
LIVING ROOM FOR RENT - PLEASE READ !
I am looking to rent my living room out. $275 per month
Me: I am professional working 2 jobs trying to establish a new career. I need help with rent to keep my apartment. I don’t smoke, do drugs, or party much. I enjoy going out but keep must of that fun at the bar (ya know what I mean). I am extremely clean. I work 50-60 hours a week. I am often up VERY late.
You: I am looking for somebody with: a job, already in the area, some sort of references. This would be perfect for a student or somebody new to LA (actor/actress). NO FURNITURE or a lot of stuff. Has money and ready to move in. No smoking or drugs, doesn’t party much, no pets, not a light sleeper (not bothered by noise) yet tries not to make noise, and clean. I prefer to live with females but all emails will be considered.
The place: Is a very large one bedroom apartment. It is already furnished. Living room has TV w/ cable, computer w/ internet, wireless internet throughout apartment, air conditioning, heater, sofa. There is very little storage. There is no parking (street only). I am 1 block from public transportation, 15 minutes from Hollywood, 5 minutes from Burbank, 5-10 mintues from Glendale Community College.
Please email a description of yourself. DO NOT JUST SEND YOUR NAME AND NUMBER. Include a link to a myspace if ya have one. Include your day time telephone number and the best time to call you.
Thank you!
(attached are pictures of a smallish living room full of furniture)
People are idiots
I guess the “prefer to live with females” got him yanked. May seem silly , but that qualifies as a discriminatory preferance, I guess.
I can’t imagine what else whould have gotten that pulled. $275 a month to crash on a sofa in LA would seem like a good deal if you were verrrry marginally employed. You could make your rent on 2 or 3 days worth of work.
Why would something like this be flagged? I just don’t understand Craig’s List. Anyway, thanks for posting the text.
Some people have been busted on CL for similar ads which were basically “I provide so and so, and you provide sex” and were considered solicitations for prostitution. Or something to that effect.
Or Marriage.
I think that the woman is providing CHILDREN in a marriage, not sex.
Are you by any chance from Africa?
I just say that because the last person who told me that the woman provides the children in a marriage was originally from East Africa. Americans (and I hear the French) tend to agree with the GP.
On CNBC earlier, some clown actually said that consumer spending might increase since people aren’t paying their mortgage so they have more spending money. Why are these people allowed on TV???
It’s called “Freedom of Speech.”
The clown is onto something, although “spending might fall off less drastically” would sit better with me. While foreclosure will deal the fatal blow to many FBer’s credit reports and end the vacuum-cleaner-financing gravy train, it’s undeniable that cash tied up in a toxic mortgage is cash not available for discretionary spending. It’s going to be an interesting world where “even” the furniture stores and auto dealerships find themselves increasingly courting cash as they scramble for survival.
I too think there’s something to what this guy on tv said.
Not that the freed up cash will mean anything significant, but it may help blunt some of the losses at retail. After all, cash will be back in the hands of those who best know how to let it burn a hole in their pockets.
Jeez - the world is amazing sometimes, isn’t it?
Here is something I have been thinking about for a while. If the UAW’s pension money is floating on a toxic swamp then who gets to pocket those losses? The car companies or the PBGC?
Got 10% down?
Interesting question. It’s been floated that maybe the car companies might want to unload the pension fund totally onto the UAW with a one-time funding from the Big 3 (or is it 2 now?) that would get it off their books totally. Then the UAW is totally responsible for whatever happens to it. So I suppose if that happened it would be the PBGC??
GM (IIRC) borrowed money to leverage their pension fund and made serious profit and are out safe now and well funded. If only they could make as much money selling cars…
http://tinyurl.com/yulofr
“Richard Hagar, a veteran real estate appraiser and expert witness, also blames appraisers. According to him, many of them puffed up home values to make deals work. “We saw some really Mickey-Mouse things,” he said, “A $200,000 house would come in at $300,000. When appraisers puff up values, they can be sued; I heartily recommend it.”"
Is it me or are we seeing a lot more RE folks turning each other?
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahT1jZJxYUUM&refer=home
Aug. 21 (Bloomberg) — Federal Reserve policy makers don’t expect to know for days whether their Aug. 17 discount-rate reduction will succeed at calming markets, Fed watchers say.
Yields on three-month Treasury bills yesterday fell the most since the 1987 stock-market crash as money market funds dumped asset-backed commercial paper in favor of the shortest- maturity government debt. Fed officials, who said they would accept everything from home-equity finance to municipal bonds as collateral for loans, expect some disruptions because banks are more cautious about what collateral they themselves accept.
“What the Fed wants to do is buy time to sort these things out,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.
Chairman Ben S. Bernanke and New York Fed President Timothy Geithner are listening to the concerns of senior Wall Street executives, and following markets closely. They are assisted by William Dudley, executive vice president at the New York Fed in charge of markets, and Brian Madigan, the Fed’s director of the Division of Monetary Affairs. Dudley is a former Goldman Sachs Group Inc. economist.
Bernanke would prefer not to resort to an emergency cut in the benchmark interest rate, which hasn’t happened since 2001, said Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York.
“The Fed doesn’t want to bail anybody out,” LaVorgna said. “If they can get through the next couple of weeks, maybe cooler heads will prevail.”
I don’t understand why they don’t just call Cramer and find out what is really going on.
Looks like First Magnus is the Tucson-based mortgage company that was. And there’s that LITTLE matter of paying its now-former employees:
http://www.azstarnet.com/business/197349
And, in the online story comments, you’ll see a lot HBB-type sentiments:
http://regulus2.azstarnet.com/comments/index.php?id=197349
Poor First Magnus. It just wants to be loved.
First In Last Magnus
I like that one where they are renting out the living room. If you rent out only the bathroom, do you get a discount?
Please note: Only the LR is being rented, is there an extra charge for using bathroom? (Ha!)
In SF during the dotcom frenzy, people were renting out kitchen larders, closets and crawlspaces — if you could lie down in it to sleep, somone would try to rent it. Insane.
Chris Dodd on CNBC now sweating up a storm and begging for increased Fannie Mae loan limits to protect his bankster constitutents…call him up and let him hear your rage, 202-224-2823.
Done.
Or send a comment through a web form:
http://www.senate.gov/general/contact_information/senators_cfm.cfm#
Dear Senator Dodd:
Please end your efforts to convince the Federal Reserve Bank and the US Treasury to bail out insolvent banks and homedebtors through too-low interest rates and doomed securities purchases. Such efforts amount to a gamed market, and will only exacerbate the fated corrections in the housing and stock markets.
Sincerely,
Big V
Old School Subprimer, Sisyphus: as imagined by Titian
http://en.wikipedia.org/wiki/Image:Tiziano_-_S%C3%ADsifo.jpg
Looks like he lost his shirt!
By Eric Martin
Aug. 21 (Bloomberg) — U.S. stocks rose on speculation the Federal Reserve will cut interest rates, spurring economic growth and reviving this year’s record pace of takeovers.
The Standard & Poor’s 500 Index increased 4.22, or 0.3 percent, to 1,449.77 at 11:36 a.m. in New York. The Dow Jones Industrial Average climbed 15.12, or 0.1 percent, to 13,136.47. The Nasdaq Composite Index gained 7.51, or 0.3 percent, to 2,516.1.
Stocks erased an earlier decline after Senate Banking Committee Chairman Christopher Dodd said Fed Chairman Ben S. Bernanke agreed to use “all of the tools at his disposal” to restore stability to markets roiled by mortgage defaults
I wonder does that include helicopters to drop 20 dollar bills out of ?
May need to drop $100 bills before this is over…
So what changed? Hasn’t he already said that? BB is basically saying not to expect a rate cut because he has other cards in his pocket. Suckas.
I am curious about what tools BB has at his disposal to put the housing bust paradigm shift genie back in the bottle?
“Once we built tall condos, up to the sun,
Built them ten at a time.
Once we built tall condos, but it’s done –
Now it’s a new paradigm.”
Lacker just shot down the market with his “Fed policy must be guided by economics, not markets” at exactly 12:30. The morons in the market are relying on “Hope”.
Hopefully Lacker’s not a sorry azz liar like Poole.
Poole is 70 and about to retire…what a sad, stupid way for this guy to end his career
Fight the Fed.
http://tinyurl.com/2yfrre
Have half a trillion dollars to spare? The Fed will like to speak with you. From Bloomberg:
The $1.1 trillion market for commercial paper used to buy assets from mortgages to car loans has seized up just as more than half of that amount comes due in the next 90 days, according to the Federal Reserve. Unless they find new buyers, hundreds of hedge funds and home-loan companies will be forced to sell $75 billion of debt, according to Zurich-based UBS AG, Europe’s largest bank.
Those sales would drive down prices in a market where investors have already lost $44 billion, based on Merrill Lynch & Co.’s broadest index of floating-rate securities backed by home- equity loans. That may hurt the 38.4 million individual and institutional investors in money market funds, the biggest owners of commercial paper.
http://www.bloomberg.com/apps/news?pid=20601109&sid=a0eWRcMYfbqg&refer=home
This should be no surprise! When 75% of the S&P companies debt is rated “junk” and repackaged as a CLO with a AAA rating, this is the primary concern of the Federal Reserve.
The housing bust is media concern, the potential bust of the American business model is the Federal Reserve’s concern.
The Federal Reserve will do anything and everything to try to keep a larger CLO collapse from happening.
They better hurry……..
If they don’t find buyers, they will have to sell.
What?
How can you sell without a buyer?
If they can’t find buyers for the short-term paper (asset-backed CP) they will have to sell the underlying assets. In the process, they will delever, just like the hedge funds and RE entities are doing already. This destruction of credit will further collapse an already shrinking money supply and accelerate deflation - especially asset deflation.
“A severe economic slowdown is unavoidable given the seizure we’ve had in the financial markets,” says Tom LaMalfa, managing director of the mortgage research company Wholesale Access. “As providers become fewer, it will increase the cost of mortgage financing until you get to the point where no one can get a loan.”
For those who say the housing meltdown is contained this disputes that theory
http://money.cnn.com/2007/08/20/news/companies/capitalone_fortune.fortune/index.htm?postversion=2007082106
My favorite part:
Nearly 120 mortgage lenders in the past nine months have closed their doors, declared bankruptcy or been sold off to the highest bidder …
Well, the number is up to 130, but who is keeping score, anyway? (At least they did not say “a few,” which is the usual number cited in MSM articles…)
http://ml-implode.com/
http://home.att.net/~mwhodges/debt.htm
QUESTION:
How much of our economy is controlled
by federal, state & local government ?
ANSWER:
44% of our National Income
($15,356 per man, woman and child - or $61,424 per family of 4)
I’ve got a question for you New Yorkers:
My husband has to go to Newark on September 11. Being a very supersititious person, I don’t like this at all.
Do you think the security at the Newark airport has slacked off any in the past 6 years? I really am considering putting my foot down and saying, “no” to this trip that week.
txchick57:
A former NYer and a current DCite I think they are more vigilant than on any other day, on Sept. 11.
Your apprehension is understandable, but, if anything, Sept. 11 should be the safest day to fly in the entire year. My inlaws & extended family fly in and out of Newark all the time, nothing different about Newark security compared with other airports.
(Formerly PDXrenter - BTW my new alias is a few weeks old, not aimed at you)
So,
We’ve devolved financially into the proverbial housewife that can’t be overdrawn, as she still has checks in her checkbook…
“I cannot believe that anyone alive today has actually read “Only Yesterday”! I have and it’s on my bookshelf.”
I’m alive (last I checked, but after a crushingly dull meeting at work this morning I’m not so sure), and I’ve read it, along with Since Yesterday, his follow-up book on the Depression. Not rigorous academic studies by any means, but wonderfully readable social histories.
LOL. Thanks for that.
I’ve heard about Since Yesterday, but haven’t read it. Any good?
Well, if you liked Only Yesterday, you’ll like the sequel. It gives a good account of the immediate aftermath of the crash and the banking crisis in early 1932, the effects of the New Deal, etc.
Pandering for a Wall Street bailout… I guess Dr. Kellner figures that no matter how much they rob or scam the rest of the country or charge Main Street for record Wall Street bonuses, what’s good for Wall Street is good for America?
IRWIN KELLNER
Why the Fed needs to drop the other shoe
By Dr. Irwin Kellner, MarketWatch
Last Update: 1:15 PM ET Aug 21, 2007
HEMPSTEAD, N.Y. (MarketWatch) — If the Federal Reserve is to truly fulfill its role as lender of last resort, it must do more than cut its discount rate - it must lower its federal funds rate as well.
http://www.marketwatch.com/news/story/why-fed-needs-drop-other/story.aspx?guid=%7B371082B1%2D5F88%2D46DF%2D8751%2D40F9248190BB%7D
Kellner is a another paid shill.
Dr. Irwin Kellner is chief economist for MarketWatch. He also is the Weller professor of economics at Hofstra University and chief economist for North Fork Bank.
“This will not only enable these subprime buyers to hang onto their homes - it will also improve the quality of the securities that were created from these loans.”
OK, now we get to the crux of the matter. According to this dork, a bailout is needed to keep people in houses they never should have been in from the beginning. Well, that and bail out Wall Street by subsidizing the garbage bonds they fabricated out of the bad loans. Yep, subsidies for the worst actors among lenders and debtors. No moral hazard there, of course!
Is the Fed now taking orders directly from the Senate Banking Committee? I wonder if Dodd ordered BB to lower the FFR, raise GSE conforming loan limits, or both?
Money markets hit reverse on hopes for rate cut
By Krishna Guha in Washington and Saskia Scholtes n New York
Published: August 21 2007 15:39 | Last updated: August 21 2007 18:54
Money markets on Tuesday staged a dramatic reversal of Monday’s flight to safety, after an influential US senator fuelled expectations that the US Federal Reserve would soon cut interest rates.
Christopher Dodd, the chairman of the senate banking committee, told reporters after a meeting with Fed chairman Ben Bernanke and US Treasury secretary Hank Paulson, that Mr Bernanke had told him he would use “all the tools” at his disposal to contain market turmoil and prevent it from damaging the economy.
http://www.ft.com/cms/s/0/d341a7a0-4ff2-11dc-a6b0-0000779fd2ac.html
Dude, people are SO misinterpreting this statement. Sounds like BB is saying that he’ll do what HE thinks is right, using HIS preferred tools, and Senator Dodd can take a hike. Doesn’t it?
That’s the trouble with Fed-speak. It always leaves plenty of leeway for any and all interpretations.
That article equates lower prices - higher yields on T-bills as “a dramatic reversal of Monday’s flight to safety” but this is not correct. For a reversal to have occurred, there would have to be a corresponding surge in demand for junk ABS commercial paper. But I haven’t been able to find any indication of that, either in this article or elsewhere. So if there wasn’t a big surge of buying in trashy paper, what happened?
It looks to me like the only change was that the Fed released an overwhelming supply of its own T-bills, swamping demand. This article from Bloomberg helps to explain what happened:
“The Federal Reserve Bank of New York lowered the fee that bond dealers pay to borrow its Treasuries to a record low in a bid to ease a shortage in the market for loans backed by the securities.
The New York Fed cut its so-called minimum fee rate to 0.5 percent from 1 percent after a surge in demand for the highest- quality investments caused interest rates on loans with Treasury collateral to plunge. The Fed said in a statement the move is “temporary.” ”
http://www.bloomberg.com/apps/news?pid=20601009&sid=aFhWILT_OTzA&refer=bond
If I’m reading this right, the Fed is now accepting MBS as collateral for repos. They are also allowing banks to borrow the Fed’s inventory of Treasuries at unheard of low cost. So, presto chango, a portfolio full of shaky mortgages now becomes a gold-plated all-treasury Fort Knox for a nominal fee. What a deal! Where do I sign up?
Just incidentally, the Fed’s action killed the 30 day T-bill auction today, causing government borrowing costs to rise drastically. Another hidden subsidy for the scumbag bankers.
The following link is to a running message board that is quite popular. You know when one of the topics on a running message board is “Government Mortgage Bailout…Yea or Nay?” the masses are taking notice.
http://www.letsrun.com/forum/flat_read.php?thread=2082651
Sharpest drop in consumer comfort in more than 21 years
By Rex Nutting
Last Update: 5:00 PM ET Aug 21, 2007WASHINGTON (MarketWatch) — The U.S. consumer comfort index fell 9 points last week to negative 20, the sharpest decline in more than 21 years of weekly polling, according to a report released Tuesday by ABC and the Washington Post. It’s the lowest reading in the index since Hurricane Katrina hit the Gulf Coast nearly two years ago. “The decline is broadly based among population groups, and there seems not to be a single negative event to blame, but a confluence” of factors, ABC’s Gary Langer said, citing the stock market, housing and credit markets, the Fed’s warning about the economy, high gas prices, and even the war in Iraq. Fewer than a third of consumers polled said the economy is “good” or “fair.”
Fitch to Review $92.1 Billion of Subprime Securities (Update1)
Bloomberg
http://tinyurl.com/2ksbqv
Do you think these guys are too big to fail?
Aug. 21 (Bloomberg) — Residential Capital LLC, the biggest privately held mortgage lender, has more than a 40 percent chance of defaulting on its debt in the next year, trading in credit- default swaps suggest….
ResCap, based in Minneapolis, may lose access to the short- term debt markets, Bank of America Securities LLC said last week, and Fitch Ratings said today that the lender’s “weak operating performance” would make it harder to absorb a higher cost of funding. ResCap’s bonds began trading at distressed levels last week as concerns grew that the company may be unable to finance itself amid a slump in demand for securities backed by mortgages….
Lenders have found themselves unable to rely on short-term debt known as asset-backed commercial paper that allows them to fund new loans and other operations. Investors balked at buying the debt as the subprime crisis spread….
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_iSMCtbGF0w&refer=home
I think the number of too-big-to-fail financial entities is too-big-to-save.
dqnews.com
The July numbers are out, and boy are they horrendous!
So someone paint the worst case scenario for me so I can start planting my winter crops and ordering my solar back up generator.
No one will be able to get loans?
I would like to know the life of J6P–in 2008
J6P life - miserable at best.
HBBrs life could be quite exciting. I can’t wait for the real auctions to start. We won’t bidding against each other. As soon as a bid is entered, we will just drop out until the next house as there will be more than enough to go around.
I can’t wait for some idiot realtor to tell me someone else is interested in the house I am looking at. At that point, I’ll just let the realtor know that the other party can have it and move along to the next.
I can’t wait!!
IMF warns of risk to global growth
By Krishna Guha in Washington
Published: August 22 2007 00:37 | Last updated: August 22 2007 00:37
Turmoil in the financial markets will affect growth worldwide, John Lipsky, the number two official at the International Monetary Fund, said on Tuesday.
In the first interview by a senior IMF official since the market turmoil intensified, Mr Lipsky, a former senior banker at JPMorgan, told the Financial Times: “This undoubtedly will dampen economic growth.”
He said that emerging markets had so far withstood the challenge well, but added: “It is far too optimistic to assume there will be no impact.”
http://www.ft.com/cms/s/0/58aa3200-503d-11dc-a6b0-0000779fd2ac.html