The Last Days Of The Old Order
Some housing bubble news from Wall Street and Washington. The Street.com, “Housing prices across the U.S. fell 3.2% in the second quarter from a year earlier — the largest decline in at least 20 years, according to the S&P/Case-Shiller home price index. The even worse news is that this data measured price activity up until June, which was before the sharp reduction in mortgage lending this summer, stemming from the broader credit crunch.”
“The worst-performing market was Detroit, where prices fell 11% in one year. San Diego, Washington D.C., and Tampa, Fla., were the next biggest duds, with housing prices falling about 7% in each market.”
From Bloomberg. “‘The pullback in the U.S. residential real-estate market is showing no signs of slowing down,’ said Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, said in a statement.”
“Shiller and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s. Shiller’s 2000 book ‘Irrational Exuberance’ predicted the stock market would slump and a second edition, published in 2005, said housing was in the midst of the biggest speculative boom in U.S. history.’”
The Wall Street Journal. “U.S. sales of existing homes fell slightly in July, but a surge in inventories set the stage for a steeper slump and sharper price declines in the months ahead. Sharply rising inventories are a sign of homeowners trying to sell their homes before prices tumble more, said Joseph Brusuelas, chief U.S. economist at consulting firm IDEAglobal.”
“‘There are going to be no happy endings here,’ he added. ‘It’s the last days of the old order.’”
From MarketWatch. “Shares of a $18 billion Dutch investment fund run by a Carlyle Group affiliate dropped Tuesday after it received its second bailout in a week, prompting an apology from its chief executive, and a warning that the current round of credit-market problems are worse than the problems that brought about the demise of Long-Term Capital Management nine years ago.”
“Carlyle Capital Corp. said it’s taking a loss of $30 million to $40 million after being forced to sell $900 million in assets.”
“John Stomber, CEO of the fund and Merrill Lynch’s former treasurer, said conditions are worse than in October 1998, when the Federal Reserve intervened to compel banks to bail out Long-Term Capital Management.”
”Unlike 1998, the market for AAA-rated U.S. agency floating-rate capped mortgage-backed securities issued by Fannie Mae or Freddie Mac was materially affected by recent events and the market for repurchase agreements secured by high-quality, agency-issued mortgage- backed securities experienced instability,’ Stomber told investors.”
“State Street Corp. has exposure to $22 billion of asset-backed commercial paper conduits, the types of assets that have caused problems at European banks, according to a report Tuesday in The Times of London newspaper.”
“Separately, the Boston Globe reported Tuesday that an institutional bond fund managed by State Street’s investment arm lost about 37% of its value during the first three weeks of August amid credit market woes. The fund may be facing losses from investments in mortgage-related securities which were heightened by leverage, according to the report.”
From Reuters. “CIT Group Inc on Tuesday said it has closed its mortgage lending operations. CEO Jeffrey Peek on a conference call that day said the mortgage business had a ‘problematic outlook’ and CIT was not willing to spend more to add scale and boost returns.”
The Washington Post. “For months, securities backed by risky mortgage loans have been in trouble. Now, the credit-rating agencies that once blessed those securities as safe investments are in trouble, too.”
“‘This is akin to a slow-moving train wreck,’ said Sean Egan, managing director of a rating firm, who has been a vocal critic of the three rating firms that dominate the field; Moody’s, Standard & Poor’s and Fitch Ratings.”
“Egan noted that the major rating agencies faced similar criticism when they maintained solid, investment-grade ratings until just weeks before WorldCom collapsed in 2002. ‘We’ve seen this movie before,’ he said.”
“‘The rating agencies themselves for a year were putting out warning signs…significant reports highlighting the risks, and yet they weren’t downgrading,’ said Joshua Rosner, managing director of a financial research firm for institutional investors. He said the raters, in effect, were ‘wearing blinders.’”
“Rosner said that part of the problem is that the raters were acutely aware of their power in the capital markets and hesitated to downgrade securities backed by subprime loans. ‘They were afraid their actions themselves could roil already weak markets,’ he said.”
“The other problem, he said, is that the big three credit raters are paid by the very firms they rate.”
“Tom Warrack, managing director in the Standard & Poor’s residential mortgage group, said, ‘We believe we acted at the appropriate time.’”
“Lawrence J. White, professor of economics at the New York University Leonard N. Stern School of Business, is not persuaded: ‘Give me a break,’ he said. ‘What really matters is the rating…and if they’re not willing to change the rating, talk is cheap.’”
“In response to the latest vitriol from investors and Wall Street analysts, the big three raters have moved in recent weeks to restore confidence in their work even as they maintain that they acted appropriately and on time.”
The Associated Press. “Credit rating agency Moody’s Investors Service said Tuesday it is reviewing IndyMac Bancorp Inc. and its thrift subsidiary IndyMac Bank FSB for a possible downgrade because of the company’s exposure to the troubled mortgage market.”
“‘It is unclear if inventory write-downs would be limited to one quarter,’ said Sean Jones, a senior VP at Moody’s Financial Institutions Group. ‘These potential write-downs, and the significant drop in residential mortgage loan origination and sales volumes, is likely to weigh on the thrift’s profitability for a few quarters.’”
“Credit rating agency Moody’s Investors Service said Tuesday it downgraded Fremont General Corp.’s senior debt rating, due to low capital levels and increased uncertainty that Fremont can meet its obligations.”
“‘Fremont…could be subject to a positive inflow of capital, or incremental asset write-downs which would put further pressure on its low capital levels,’ Moody’s Sean Jones said.”
“Lehman Brothers Holdings Inc., Bear Stearns Cos. and Citigroup Inc. were downgraded (by) Merrill Lynch & Co. stock analyst Guy Moszkowski because of looming losses on mortgage bonds and leveraged loans, as well as a slowdown in investment banking.”
“Moszkowski, the top-ranked U.S. brokerage analyst in Institutional Investor magazine’s survey of money managers, said in a note to clients that New York-based Lehman and Bear Stearns will be hurt because of their dependence on debt markets.”
“The worldwide credit crunch triggered by rising defaults on U.S. subprime home loans has undermined some of Wall Street’s biggest moneymakers, including mortgage securitization.”
“‘There has been no good place to hide during the month of August, which must surely go on record as one of the industry’s most hair-raising ever,’ Moszkowski, said in the report written with Patrick Davitt and entitled ‘Differentiation Escalates.’”
“U.S. consumer sentiment took its sharpest plunge in nearly two years during August while home prices swooned in the second quarter, according to reports that show the housing crisis taking its toll.”
“‘My guess is we’re heading for a consumer-led recession beginning in a few quarters,’ said Michael Metz, chief investment strategist at Oppenheimer & Co. ‘The consumption boom is over.’”
“While not all economists are convinced a recession is inevitable, most agree that the housing downturn will put a serious damper on spending as Americans feel poorer.”
From Marketplace. “With 4.5 million unsold homes sitting on the market, could we be looking at a recession? Stacey Vanek-Smith talks to economists and takes a look into the markets. Stacey Vanek-Smith: ‘There are 4.5 million unsold homes sitting on the market, according to The National Association of Realtors.”
“David Lereah: ‘This is starting to look like a typical housing recession.’”
“Housing economist David Lereah says the real problem is that people can’t get the home loans they need. Lereah: ‘Too many homes and not enough buyers is basically what’s happening right now. There may be buyers out there, but they can’t obtain a mortgage.’”
“That doesn’t worry UCLA economist Edward Leamer. He says banks will adjust quickly and the loan market will loosen up. Leamer says what concerns him is that home sellers are holding out for the high prices of a few months ago.”
“Edward Leamer: ‘There’s sort of a stand-off between buyers and sellers.’ Leamer says that stand-off could increase the risk of a recession.”
An audio file:
‘Waiting for the housing market to get healthy again? You may have to wait a few more years. So says Robert Shiller, the Yale professor and chief economist at MacroMarkets LLC. He tells John Wordock the latest 3.2 percent drop in the Case-Shiller Index is the worst in the history of the survey. And Shiller notes the drop happened before the current mortgage crisis.’
‘Following are five facts about SIV-lites, with data sourced from ratings agencies Moody’s Investors Service and Standard & Poor’s.’
Schiller index is probably the most accurate guide to RE pricing. House sellers are still in denial mode. Just wait for the third quarter data, things can only get worse.
Yale should be glad to have Schiller.
Harvard, on the other hand, said something like “We are very sorry
we lost 50% of your money investing in subprime bonds”.
August 2007 a “nuclear bomb” went off in housing market and most sellers have no clue yet. Where did the buyers go? Killed in blast.
“neutron bomb”? Houses are still standing, though unoccupied…
So this is when the occupying army is supposed to march in and take the territory and assets with minimal or no resistance. So:
Where is the occupying army? No sign of them yet.
Who are they, and what do they represent?
Will it be the banks, the street gangs, someone else?
Dirty bomb, effects lingering for long time.
The New Order will be about modern prefab and efficient ways to build houses, not the 19th century techniques applied now.
Since specuvestors made of a house an investment commodity, let’s close the gap and make it a consumer commodity, brought and sold like a car.
“‘There are going to be no happy endings here,’ he added. ‘It’s the last days of the old order.’”
- Everyone to the Fuhrer Bunker!
good point- champion, clayton may be good ,but not yet
Hah! The Clayton’s owned a home behind my parents. IIRC, it sat for a year at ~$600k w/o selling.
No, it was not prefab.
That is my utopia, preach on!
Besides, I absolutely love the new prefabs.
hehe…he said “happy ending”
LOL!
gwynster- count me in as well. I love the prefabs not just because I’m a fan of modern architecture, but also because they are superior in fit and finish. The end result is a much more efficient, longer lasting home. Once economy of scale is realized, I think prefab could be the wave of the future. No more pieces of crap slapped together by untrained immigrants.
Wonder if it will be sort of like having a new laptop for $1000 vs. a new computer in1980 for $3000. New one much better, smaller, more powerful, cheaper. You look at the old ones and they look like dinosaurs.
Hey now, don’t bag on my old trustie Toshiba Satellite.
Now I do think we will see the prefabs become more economical in the future. The ones out now are far superior to the stucco crap being farmed on the markets now. I’m just sad that’ll have to wait 10 to 20 yrs before they become really affordable to the majority of amerika.
And as always when prefabs are mentioned, here is my plug http://www.dwell.com
“The New Order will be about modern prefab and efficient ways to build houses, not the 19th century techniques applied now.”
I also really like the concrete form or foam sandwich approach. Very strong, and, with the premade parts, easier to construct.
Ian, I couldn’t agree with you more! I’ve spent 6 years developing some carpentry programs that improve efficiency and eliminate waste. I’ve advertised and offered my services free to local buiders/remodelers (including my father and landlord). Not one has seen the benefits.
Are we finally seeing the end of the arrogance that has been enabled by this economy. Lord I hope so.
With more and more ‘experts’ finally advising sellers to lower their prices to get sales moving again, I thought this would be a great time for the SNL Spartan Cheerleaders (Arianna…Cheri Oteri & Craig…..Will Ferrel) to come back and do a cheer for all the home sellers of this country. Craig: Arianna…….this market is getting real butt ugly….lets do a cheer. Arianna: Ok……Hey! Who’s that seller gettin’ a wedgie? Craig: It’s all of em ! It’s all of em! …… Both: Push em down….push em down…..push em waaaaaaaaay down…. Uh-huh! Uh-uh! Uh-huh!…….. Uh-huh! Uh-huh! Uh-huh!
Hmm… Spartans…
300 foreclosure victims fighting off the bank and later on riot police, anyone?
“‘There are going to be no happy endings here,’ he added. ‘It’s the last days of the old order.’”
Are you ready for housing bubble carnage? Seriously, it’s coming.
Did everyone enjoy the old order?
For those living within their means, the new order will be much like the old one. Except for the expectation that perhaps their kids will be able to buy houses in their community someday after all, and diminished negative comparisons with the Joneses.
I welcome the new order frankly. I’m really getting tired of being the proverbial stoic and would enjoy a swing back to my eudaemonic self. But I don’t dare do that until the punchpbowl is taken away and we as a society grow up.
Ewww, that gave me goosebumps!
“Are you ready for housing bubble carnage? Seriously, it’s coming.”
Yes, but people who are expecting a running-in-the-streets panic stampede by the J6P sheeple will be sorely disappointed, because this bubble is going to deflate at a glacial pace.
Welcome to the Bernanke-Paulson Expectations Buffoonery Circus. Step on into the big top, ladies and gentlemen; there’s plenty of seats to go around.
Right. Some J6P will lose their houses, and the rest will stay put.
Those who *can* stay put *may* stay put… until they discover that walking away from crushing mortgage debt may actually be the best move. Why should they stay and work and suffer for a $500,000.00 mortgage on a $250,000.00 house?
Good point… walk away gradually over time.
How much do prices have to fall where this really becomes a widespread practice? Where even people who can afford their houses and payments see that walking away is a better idea economically speaking?
I doubt we’ll get to that point — but, if we did — it would be an amazing and terrifying time for the economy.
I hope homeowners don’t abandon homes they can afford to pay for. What kind of society do we want? I don’t want people to speculate on declining values of homes by dumping homes they can afford. This is the same behavior as flipping homes for profit on the way up. Don’t we want to live in a stable communities?
Anyway, the FED and Congress are likely to be protective of housing and homeowers, once the disruptive subprime mortgage business and lax underwriting standards are reformed. The mortgage industry is quickly changing due to market forces, and the FED is already trying to soften the blow.
Listen to the Rush Limbaugh show right now…don’t laugh…it’s worth it today.
The guest host talking about “no bailout” for FBs, sounds like one of us!
Now the guest host is posing the thought:
“Maybe the current high house prices are not necessarily a good thing. Maybe dropping housing prices is a good thing.”
OK, which one of you is on the radio right now?
I’m a true conservative and Limbaugh and Hannity drive me nuts with their mindless drivel about how wonderful the economy is. I’m sick and tired of the establishment cheerleaders on both sides - they issue talking points to their target audience and then do whatever they want and count on the common people being too asleep to notice the wide discrepancy between what they say and do.
Rant off.
“they issue talking points to their target audience and then do whatever they want and count on the common people being too asleep to notice the wide discrepancy between what they say and do.”
You just described J6P’s problem with the conservative clowns. It’s call hypocrisy.
Like Limbaugh spouting that all drug users should be locked up and doing hard time - just kills me >; )
So true, my brother.
“I’m a true conservative and Limbaugh and Hannity drive me nuts with their mindless drivel about how wonderful the economy is.”
As someone who is socially liberal but fiscally conservative (libertarian lite?), I hear you brother!
A true fiscal consverative would swear off supply side economics and the insane plundering of the US Treasury by the priveleged elite and corporations. I have yet hear one these so-called “fiscal conservatives” willing to do so.
My definition of a social lb/fical con is: someone who wants their cake but doesn’t want to pay for it.
Tax and spend democrats or borrow and spend Republicans… some choice!
Where is the guy that will tell the senior citizens, “Sorry, you didn’t pay enough to Social Security, and we have to slice your benefits 30%”?
Where is the guy that will slice the Navy budget 50%, the Air Force 25%, and move the Marien’s and Army’s budgets from big budget boondogles anti-ABM systems to bullets and armored vests? BTW: I spent 8 years active and 5 years reserve Navy. My dad was navy, my great grandpop on dad’s side, gramps on mom’s side, and my nephiew is Navy right now.
Where is the guy that will focus medical care spending cuts on tort reform to get the dam lawyers out of it?
Where is the guy that will tell people to stop wasting their money buying lotto tickets? Tax on people that are bad at math!
Where is the guy that will raise taxes, run true surplusses, pay down the dam national debt, force China to stop pirating our copyrighted goods, force a rework of pension and medical to help our business compete, tax reforn, stop the war on drugs and treat drug abuse as a mental illness,… etc. etc. etc.
I thought that was a lib **winks**
The guy who would do all that is a true conservative. Because a true consevative follows the Constituion and not all these added on “rights” and “entitlements. And once you eliminate all these gov’t programs, a person is truly free to live there life as thet want and reap what they sow (good or bad)
“someone who wants their cake but doesn’t want to pay for it.”
Wrong…socially liberal means I don’t tell you what to do with your life. Fiscally conservative means that I don’t tell you what to do with your money. That translates to “buy and eat my own cake, and don’t tell you what to do with yours”.
Someone who “wants their cake but doesn’t want to pay for it” would be a “big government” person…have the government ensure equal outcome (as opposed to equal opportunity), and get your neighbors to pay for it.
“I thought that was a lib **winks**”
Traditional view on the economic side:
Liberals - take money from my pocket and give it to “less fortunate” individuals.
Conservatives (current iteration) - take money from my pocket and give it to “less fortunate” corperations.
Libertarian ‘light’ - It’s not the government’s to take, so take a hike.
“My definition of a social lb/fical con is: someone who wants their cake but doesn’t want to pay for it.”
Jay had it right the first time.
guest host? sounds like dr. williams. that dude rocks.
A recession? “It’s in the bag.”
Got cash?
Oh, and a reduction in the Federal Funds Rate is also in the bag.
They had better hurry. The market is rolling over. Wall Street is getting the shakes again…they need a fix bad, baby! Gimme the good stuff, half a point. Ooooh yea that’s the ticket.
Waiting for that rush of Trash……here comes Doctor BB with another shot….
If you are really certain, you can make millions if you lever up enough in bonds.
I’m as certain as I can be. But I’ve never leveraged (except to buy a primary residence!) and I don’t intend to start now. Also, I wouldn’t pretend to know how many quarter point drops BB will do.
I disagree, when and if the Federal Reserve lowers the Fed Funds rate US Treasuries will dive! If I knew that the Federal Reserve was going to lower the Fed Funds rate I would be selling CBOT US T bond futures. And I would expect to make about 5K for each one I sold. This is a classic “buy on the rumor, sell on the news”.
ive seen this movie before…they cut rates down to 1% back in 2001 and 2002 and the equity markets still plunged by 25%. Not sure a rate cut is in the bag still because the economy appears to be humming along. Its just in high tech. At the end of the day productivity enhancements and not speculation are what will drive the economy. I think its possible we see good GDP numbers based on productivity that tech is driving and still get no rate cut.
iow - time to go back to work and earn a living instead of speculating in real estate, hedge funds, derivatives and every other exotic ponzi scheme out there.
except that in area with the greatest speculation, there are not a large enough job market for these people to be absorbed into.
bah- should be:
in areas with the greatest speculation, there is typically not a large enough job market for these people to be absorbed into.
Sometimes it’s as if I’m channeling Joyce with a grammatical headcold.
“Let’s get back to work”… No. the Wall St. boys are still having fun. They know when to short the market. They will make millions again and also buy real esate at 10 cents on the dollar, both commercial and choice houses.
Remember the 1980’s when the savings & Loans went bankrupt? Who do you think got the choice real estate, apts. buildings, etc.? Any guess? No the Wall St Players know this game and who comes out/wins in the end. That’s what matters. Who suffers not in the cards. Money, cash, greed are the goals. Build a better country, build plants for production, manufacturing for jobs, nope.
Not this time. Perhaps in another 10 years or more America will get a second chance but the World will be much differant.
“Who do you think got the choice real estate, apts. buildings, etc.? Any guess? No the Wall St Players know this game and who comes out/wins in the end.”
If D_dd gets his way, Da Boyz will have the chance to collect free insurance claims while the rest of America suffers a nasty recession. This will put them in a great position to load up on real estate at fire sale prices once the market bottoms out, and gear up for the next boom phase. They make money when the rest of America makes it, but also when the rest of America is losing their shirts.
I’d rather re-elect the shrub then vote for Dood. I really wish my party would get with the program, it’s embarassing.
The reported numbers can and will be massaged to support any action the Fed wish to take.
Need inflation expectations, some flat-line growth and stable employment, or perhaps a potential consumer-driven recession scare? No problem, the reporting agencies can gin up whatever Bernanke and Paulson need.
But won’t a FF rate cut drive the yield sky high on the 10 year bond? If so, we too should be cheerleading for a rate cut.
“But won’t a FF rate cut drive the yield sky high on the 10 year bond?”
If the 10-yr T-bond yield were only set by the free market, the answer is yes. But why would you assume this?
ehhh…. I’m not sure Professor Bear. Are you saying that the sale of the bonds are manipulated by the primary dealer? I guess I was thinking that the secondary market yield would trade up due a falling dollar.
“…manipulated by the primary dealer?”
No. I was talking about the Fed’s willingness to stabilize prices as needed by ‘injecting liquidity.’ Not sure of the details, but if I were worried about inflation perceptions, I would sure do what I could to keep the long-bond yields contained.
Prior to the TICS data, I would have been contrarian and said “no cut can be made without scaring away badly-needed foreign capital” Now, since the Treasury is flush with cash, and appears to be the safe haven where buckets of cash are going to be stashed, we might survive a 50 basis-point cut. Bernake’s touted stance as an anti-inflationary “hawk” would be destroyed, and the cut may not work as intended, but I now think a cut is feasible.
It may be where buckets are going to be stashed but not by foreign central banks. The FCBs are net sellers of US Treasuries. And the new buyers are weak hands, Wall Street firms looking for a place to park moneys.
Mr. Bernanke is free to do whatever he wishes. It will not save the Housing market, it will not save the stock market and it will not save the bond market.
It’s in the bag ladies and gentlemen.
Hallelujuah!
“State Street Corp. has exposure to $22 billion of asset-backed commercial paper conduits, the types of assets that have caused problems at European banks, according to a report Tuesday in The Times of London newspaper.”
It’s time to reach for the spam and head back into the bunker. Bye…!
“The depth of the pools of liquidity is so much larger than it used to be that a disruptive event now needs to be much more disruptive than it used to be. At some point, the disruptive event will be so significant that, instead of liquidity filling in, the liquidity will go the other way. I don’t think we’re at that point.”
Mr. Charles Prince
CEO Citigroup
July 10, 2007
What do you think now, Mr. Prince?
In case this didn’t get posted…those in LA, tune radio into KFI AM (640 AM)…talking about “no mortgage bailout”…buyers hoping that prices would always go up, buying more than they could afford, lenders throwing money at people, Freddie and Fannie, etc. Good stuff.
better tell hillary-edwards-shumer and b frank
No need…I’m sure that their constituents are already telling them. Support for a bailout is very low and getting worse (in my opinion).
I took a look at the June, 2007, public financial report filed by Countrywide Bank with the OTS. Countrywide bank is the FDIC-insured S&L component of Countrywide Financial (ticker: CFC). Here are some highlights for this $100 billion depository institution.
Conventional home loans, securitized and portfolio, accounted for 92% of assets. These are conventional MBS, HELOCs, and 1st and 2nd mortgage loans. For this $91.8 billion group of loan assets the loss reserve was $0.4 billion, which represents 4/10 of 1% of balances.
REO totaled only $137 million and there is no loss reserve for this asset category.
On the liability side the S&L had uninsured deposits of $24.8 billion (25% of assets), insured deposits of $35.8 billion, and FHLBank borrowings (secured by home loans and MBS) of $28.8 billion.
I suspect that a good deal of the $11.0 billion borrowed by CFC on its credit lines was used to replace uninsured deposits withdrawn from Countrywide Bank. Countrywide Bank, an S&L, is not eligible for Fed membership and therefore can’t access the discount window.
And we’re expected to believe this company will NOT tank?
FDIC does not insure accounts at financial institutions where fraud has occurred.
That is BS. FDIC is designed to protect depositors, not the perpatrators of fraud. Doesn’t matter why a bank fails, depositors will get paid. Bankers may go to jail, or the unemploymnent line, but depositors get paid.
But only up to 100K, right?? Or did the max amount change??
I think it’s still 100K, yes. That is enough to protect the vast majority of Americans, anyway.
Upto $250k for IRAs.
http://www.fdic.gov/consumers/consumer/news/cnspr03/coverlosses.html
“By law, the FDIC only protects insured deposits if a banking institution fails.”
What is your point, Anonymous? If a banking instituion does not “fail,” it remains by definition solvent. What does not matter is why it fails. If it fails, it fails, and depository get paid, up to limits. See above.
It’s not BS, but it isn’t as bad as it sounds. Mainly the FDIC means that if someone drains your account, even if it is a bank employee, that isn’t their business. If the bank fails, whatever is on record in your account will be covered by FDIC. If there is stuff missing, they don’t cover it. This is different from SIPC, which actually DOES cover missing assets from a brokerage account. Always read the fine print.
Stolen funds may be covered by what’s called a banker’s blanket bond, which is a multi-purpose insurance policy a bank purchases to protect itself from fire, flood, earthquake, robbery, defalcation, embezzlement and other causes of disappearing funds. In any event, an occurrence such as a fire or bank robbery may result in a loss to the bank but should not result in a loss to the bank’s customers.
If a third party somehow gains access to your account and transacts business that you would not approve of, you must contact the bank and your local law enforcement authorities, who have jurisdiction over this type of wrongdoing.
http://www.fdic.gov/consumers/consumer/information/fdiciorn.html
This is getting really silly. The implication of the first post was that if fraud is linked to the failure of a bank, FDIC deposit insurance does not apply. That is BS.
Let’s please stop!
I sat by an ex FDIC employee at a CEU class (UC System in California), who was telling the class the FDIC could no way insure any account $1 to $1. He said it was 6 cents on the dollar when he worked for them. He also said it would take months to get paid back, and the FDIC was a false sense of security. I found a link once to an article confirm this tid-bit of information. He was an MBA, who is now an Asst. City Mgr in So Ca. Anyone else hear or read this too?
Dream on. Enron looked good by many believers 30 days before they crashed. Their books by top rated accountants said so and all federal guildlines were in place so all was fine. I guess a little hope is ok.
My wife made me laugh this morning. When I was talking about the way that CDOs are created, she said “I’ve got a great oxymoron - real estate securities“.
I thought it was hilarious, so I had to share.
“way that CDOs are created”
Financial sausage…that way you can sell even the floor sweepings as gourmet food.
All Shiller needs is an education in Austrian economics. Then he’d be truly lethal. Bubbles would implode if he merely narrowed his eyes at them.
He’s not doing too bad already.
OK that made me laugh in a good way
I ask this again…if Detroit of all places is leading cities right now with an 11 percent yoy decline, how bad will it actually be for the bubble markets???
It depends…isn’t Detroit still hurting job wise?
It most certainly is. For example, when you have 5,000 people applying for 300 jobs at a Wal-Mart, things can’t be going too good. Or 26,000 for 1,000 casino jobs.
I also review foreclosure notices in Wayne County, which is Detroit city and some of the ‘burbs. It sure seems like the numbers are accelerating.
They’re escalating in Grosse Pointe. I have to believe the listing of R/E sales in Sunday’s newspapers for Detroit City proper has to include houses going back to lenders given the prices listed and the addresses involved. Usually two columns worth each week.
Man, this whole state is on a rocket sled to nowhere job-wise. The UP tourism market is getting whacked because of weird weather and high gas prices. Pfizer is reducing ops in Kalamazoo. Detroit is a gigantic donut. I think there are some healthy spots on the west side of the state, but they’re small ones. South Americans are even moving in on the home-grown meth market…
The good news is that we never had much of a bubble. Sort of like when Crazy Eddie’s features “20% off our already low, low prices!”
Pfizer is pulling out of Ann Arbor completely. 2,400 jobs….poof. Ford just announced a closure of a parts plant in Monroe…1,200 jobs…..poof. I grew up on a farm outside of Muskegon. My family and best friend would like me to move back there. No way in hell. IMHO if there’s a place in Michigan where there’s LESS opportunity than the Detroit area, it’s the Muskegon/Oceana County area. If I move, it’s going to be where it’s warm in January.
Used to live in Kazoo.
Michigan is what happens when people (voters) keep doing the same thing and expect a different result. Vote for high-tax, anti growth liberals. Continue the “closed shop” union mentality that keeps any sane business from ever considering locating there. Place the value of teacher’s pensions above the students themselves. Think that the 1950s auto jobs will return any day now - and a single high school graduate will be able to support a family of four, with a boat and a cabin “up north” for vacations.
When MI reelected the Canadian trash, and Motown stuck with “Kwamie”, I knew that it was all over there. If you’re still living in MI, get ready for about 20 years of recession and about 25% population loss. That state will not change until literally every LBJ-era voter is dead and buried, and they’re all about 50 to 60 now.
A 20 year recession would be in addition to the current 30 year one, right? As bad as that is, I might welcome a 25% population loss. I hate people, but land is great.
I wonder what will have to happen to get coastal CA down to Detroit prices.
We have all the crime they have. Just need to chase out half the jobs and we are there.
1) A really bad earthquake.
2) Civil unrest from the peseants (our Latino brothers and sisters).
3) slow down in the movie buisness (ongoing)
4) Gov spending slow down in Aerospace (Soon)
then its total carnage
Latinos are peasants? And we wonder why people hate Americans.
“Latinos are peasants? And we wonder why people hate Americans.”
Yes, because everyone knows that racially insensitive remarks (and racism in general) are only found in the US. Woo-hoo for the rest of the world, they are such good boys and girls.
That rebellion just might happen, they’re getting harder and harder to evict, now they all know their “rights”, it’s gotten to the point where I’m only renting to Americans now, at least then I don’t have 5 extra people moving in before I have to throw them out.
California needs the new law that Arizona is getting to force illegal aliens out. Then much of the crime will diminish.
But Bill….who is gonna super-size my order for me if they all leave? It will destroy the economy….the Decider said so!
Detroit has been beaten into the ground for, oh, forty years or so. There are real bargains there. Beautiful, pre-WWII housing stock, cheap.
Property taxes, on the other hand, run, I think, about 6.7 percent of market value. That is not a typo - property taxes will meet or exceed 30-year, fixed rate mortgage payments at prevailing rates.
Guess it depends on your perspective of “bargain.” I rarely see any these days. Cheap, perhaps, but there are plenty of areas where “cheap” is still too much, especially in large swaths of Detroit itself.
Blano, I haven’t been to Detroit in years, but I am very curious about it. I am seeing 5-7 bedroom, brick mansions with walk-in fire places, apparently reasonably well maintained, in the 250K asking price range. That is probably about 1/3 of replacement cost and why I call it “cheap.” You get a house for 33 cents on the dollar and they throw the land underneath it in for free.
This is what a really, really hurting real estate market looks like, folks.
DC,
Guess it depends on where they’re at. The only place I can think of off the top of my head that sounds like what you describe is within the city of Detroit itself. There are indeed some pockets of very decent old homes in the city. One problem is that one street might look nice, and the next street over, literally, is riddled with crack houses and gang warfare. A real hodgepodge. As big as I am, I won’t step into some of these areas.
If it’s those houses you see, many that are for sale are by city employees who are fleeing for the ‘burbs now that there is no residency requirement. Maybe you can buy for .33 on the dollar, but good luck trying to sell it.
Just my .02, for what it’s worth.
It’s worth a lot - you’re a local. What I’m trying to figure out is, at what point is all the bad news “priced in,” and what is the catalyst for change to bring Detroit back.
It is very, very hard to envision a resurgence of anything that has been so badly beaten into the ground, for so long. But, when absolutely everyone agrees that resurgence is impossible, that is usually when the first spring daisy pops out of the ground, so to speak.
Remember Spring ‘05, when “everyone knew” houses were the place to be, now and forever? Well, it appears now that “everyone” was wrong. (Except for Ben’s Aunt Tillie, who put him up to this blog).
All I’m suggesting suggesting is that the bottom often looks like the top, only upside down. Keep us posted on goings on around Motown.
I don’t know what the “catalyst” might be. Like with other cities you have the elitists who say yep, Detroit is in a major turnaround, look at all the great stuff to do, etc. etc. Personally, I don’t buy it overall. Sure, it’s fun downtown around Comerica Park, the Joe, Fox Theatre, Ford Field, the casinos, and quite safe there I might add. Good luck away from those areas.
Until the 14% unemployment rate within the city, 33-40% living below the poverty line, and the 22% graduation rate of students (according to one report) changes, I don’t see any catalyst that will work.
Blano - food for thought - when I moved to DC in the mid-’90’s, we had a mayor who had waged racially divisive war against the middle class - he was even re-elected after rising to national prominence after the FBI got him on tape in a hotel room with a $5 whore and his lips wrapped around a crack pipe - “the b*tch set me up,” said Mayor Marion Barry, famously, as he was led away in handcuffs.
The point is, the city was horrible in those days. Entire neighborhoods given over to drugs and the associated violence. Snow was never plowed in the winter. Schools, unthinkable. Trash pickup, maybe one in a while. “Everyone” was aghast at the very idea of living in Washington, DC. Real estate was very, very cheap, even in surving, “nice” neighborhoods.
The catalyst for change came when Congress seized control from the mayor and established an appointed, financial control board. OK, we have some advantages over Motown insofar as the federal government is a better anchor than GM and Ford, but it was bad here, believe you me. Still is in pockets.
DC,
There was an auction for a property in Grosse Pointe that had an open house one Sunday prior to sale and I strolled in during my jog. Limestone house, slate roof, beautiful woodwork. House had been half restored - kitchen had been demo’d but prepped. Bathrooms pretty much done. Almost walk-in fireplace in living and dining room. Nice house. Starting bid was around $200K. Don’t know what it went for.
“Detroit has been beaten into the ground for, oh, forty years or so. There are real bargains there. Beautiful, pre-WWII housing stock, cheap.”
Like the house I lived in as a kid in North Rosedale Park, 15875 Rosemont Ave. Nice brick colonial, 4br, a little under 2000 sq ft. I Zillowed just now and got $36k. Last spring I zillowed it and it was $77k. When we lived there it was a very nice area. I think it probably still is. It was all white in the 1960s, and the real estate brokers didn’t even allow Italians! When Rocky Colavito was traded to the Tigers he couldn’t get a house in Rosedale. It broke my heart as a little Tigers fan, and turned me into a screaming liberal on social causes.
Here’s one in my vicinity: listed for $1.265M in September 2006. Still on the market at $819K. Greedy fargin’ bastages. Bet he wished he had asked for his $800K a year ago.
Original listing:
http://realestate.yahoo.com/Pennsylvania/Media/Homes_for_sale/ada000ef23b49bb47f9c7afb01dea99b
Updated with price drop:
http://homes.point2.com/US/Pennsylvania/Delaware-County/Media/584196-Real-Estate.aspx?utm_source=Yahoo%20Classifieds&utm_medium=Web%20Page
The taxes on this place are more than I pay in a year of mortgage payments.
Here is more regarding State Street’s bond fund from the Boston Globe:
The State Street Limited Duration Bond Fund was created in 2002 as a way to generate better results than those of money-market funds with only slightly more risk. The fund was widely considered an “enhanced cash” product, an investment category usually considered very low risk. It was sold only to institutional clients, not individual investors.
The fund invests in relatively short-term securities such as corporate notes and debt obligations backed by home equity lines and other loans. At least two-thirds of the portfolio is supposed to be investment-grade debt.
http://www.boston.com/business/personalfinance/articles/2007/08/28/further_fiasco/
Quote: “‘My guess is we’re heading for a consumer-led recession beginning in a few quarters,’ said Michael Metz, chief investment strategist at Oppenheimer & Co. ‘The consumption boom is over.’” My question is this — will the number of cell phone owners go down? Oh please say yes … I’m tired of hearing the conversational dribble of America.
Sadly, I think many would rather give up wearing underware before they would give up their cell phone.
Ummm, I’d be more worried about the ones that might get trigger happy if it ever got that bad.
Cell phones are yesterdays news when it comes to peeves. I had the pleasure of sitting in an airport hanger with at least 2 dozen dorks tapping on their “Blackberries”(?)…… I couldn’t believe how enamoured these idiots were. It made me want to bust their fingers.
Blackberries are a status symbol in the corporate world. No self respecting road warrior would be seen without one.
I know I must be a pariah at work, because my out of office email message when on personal time off says that I won’t be checking my email nor voice mail.
No self respecting corporate executive has a blackberry or equivalent. That is for the hirelings.
blackberries rock…i used my wife’s work one to keep up with this blog while traveling with her on vacation.
get the google download and you don’t even need a blackberry. Convert your cellphone to receive emails and internet from google.
Take the newly polished version of Gmail for Mobile, for example. It’s a fast, clean little program that you install on your cellphone. When you fire it up, you see an immaculately designed miniature version of Gmail.com, Google’s free e-mail Web site.
“It’s all here: keyboard shortcuts, “threaded” conversations that keep all the back-and-forths on a subject together, a fast Search command, Reply, Forward and so on. Incredibly, you can even open Word, PDF and photo attachments right on your cellphone, although text formatting is lost”
Why get a blackberry? When google is free.
Until they make morons wear badges, I’ll have to rely on blackberry use to tip me off.
“But it’s so convenient! I can work even when I’m not in the office!!”
Uhm . . . what?????
A friend of mine described a cellphone in the same vein as a animal that has been tagged and released into the wild.
With cellphones the question is who is the owner the cellphone or the tagged owner of the cellphone.
Ahmen!!!
Oh I long for the days before I got a cell phone. Remember when you could go out of your home and didn’t have to answer the phone? Just let the “machine” pick it up and because they often times didn’t work right you could always say you did not get the message. Now everyone feels that you should answer the phone and are often offended if you don’t. A modern convenience that has become a royal pain in the a$$. And why don’t they fix the phone service part as far as cell phones are concerned, I have a camera already, buy can’t make a clear call from the inside of my home.
I had my first beeper circa 86 in Fla. The end of quiet uninterrupted dinners. When I sold my startup I had a small party and tossed it into the intracoastal. Apologies to the manatess and such.
Sadly, I think many would rather give up wearing underwear before they would give up their cell phone.
I think land lines will be given up before cell phones.
Sometimes I think I’m the only U.S. citizen over 10 that does not own a cell phone. Certainly the only 40 y.o. without one.
Darrell_in_PHX,
Finally bought one for emergencies while traveling and Quest just “gave it to me” just to get my business….was 50 until I got my first cellular telephone and 40 before my first computer (The Commodore 64 does not count).
Please don’t abuse the C64 and my fond memories of Congo Bongo and Below the Root and pretending to program in BASIC…
I actually still have my C64. Don’t know what happened to the VIC-20 though. Bummer…
I still have my Osborne1, complete with a blazing 300 baud modem.
Still have the C=64, the most fun you can have with 1 megahertz and can even do word processing and still type a letter with it!!
Backup machine if the internet goes away.
“The Commodore 64 does not count”
Truly embarrassing confession: I used to be able to do 6510 assembly language programming. How useful.
No too useful now AKron, but if you can make sprites dance and the SID chip sing, there may be a future for you in retro gaming.
“I (still) Adore My 64!” (and still have the 1200 baud modem but no place to dial into a unix account anymore)
“Housing economist David Lereah says the real problem is that people can’t get the home loans they need. Lereah: ‘Too many homes and not enough buyers is basically what’s happening right now. There may be buyers out there, but they can’t obtain a mortgage.’”
“That doesn’t worry UCLA economist Edward Leamer. He says banks will adjust quickly and the loan market will loosen up. Leamer says what concerns him is that home sellers are holding out for the high prices of a few months ago.”
I cannot believe this kind of rampant douchebaggery is still out there! The problem is buyers can’t get loans for the purchase price. Don’t worry, the banks will soon ‘adjust’ and give them loans!
Um, the banks WERE handing out those loans just a few months ago. The problem is that the prices have gotten so high compared to household income, it guarentees a large percentage of defaults. In order to even come CLOSE to pretending to qualify people for mortgages, every last vestige of veracity got tossed out of the mortgage process.
The banks and investors are now seeing the foreclosures that loaning people with X income greater than 3X money, especially with 0% down, inevitably brings. Those houses are lost. The loans are bad. You cannot give people those types of loans and expect to collect.
Bankers and investors will slap their heads and say “Duh! Of course! We should UNDERWRITE the loans we make/buy!”
That means either housing prices MUST collapse or wages MUST increase. There is no way to avoid one of those outcomes. Even if Freddie and Fannie buy every damn mortgage out there, and the taxpayers pay off every penny of every defaulted mortgage, if you try and sell that same average house to the same average buyer for the same damn price as it got defaulted on before, IT WILL GET DEFAULTED ON AGAIN!
NOTHING WILL STOP THE DEFAULTS. NOTHING!
Wage inflation is the only way to come close to stopping it, and doing that will be far to slow to save the houses. You’d have to have a government mandated 50% raise to all employees in the USA across the board, funded by REAL printing presses and not credit-based printing presses to make housing suddenly affordable.
Not. Going. To. Happen.
Forgive my ignorance, but if you can’t pay all cash, AND you can’t get a mortgage, you’re not really a buyer, right?? You’re just a wannabe.
sfbubblebuyer, you have hit it on the head.
Been saying that in one form or another for years and was scoffed at. Ten dollar an hour service jobs will not buy that 400K pad and 40K SUV’s.
Affordability is the key and the bondholding idiots that have invested cannot get that through their heads…until recently….I have seen rockribbed investors all of a sudden want a bailout….their house are worth what they say they are and not that they are affordable to anyone.
The consumption economy is dead. I can see it for the last six months when I go into Kmart, Walmart or Target…..the places are empty on a shopping day and 50% off sales already on Halloween and Xmas crap.
After Christmas, the economy dies.
“After Christmas, the economy dies.”
I really wouldn’t mind a Christmas that was focused on family, thankfulness, and togetherness more than the sales results from “Black Friday” and whether or not Walmart has any of the latest toxic-waste infested talking Elmo dolls from China on their shelves.
A nice consumer pullback starting in a month or two would really wake this country up to what’s important. Maybe instead of buying $500 worth of plastic Chinese garbage on the credit card, parents could buy their children one or two high quality American made toys, or even books! Scr*w the Walmart economy - make those cargo ships sit empty in Asia.
I got a coffee cup with my daughters hand prints from “color me mine”.
I got some other stuff too… forget what it was.
Been saying that in one form or another for years and was scoffed at. Ten dollar an hour service jobs will not buy that 400K pad and 40K SUV’s.
Heck, $10/hr won’t even pay for the 40K SUV, gas and insurance, unless you ive with your mom and dad.
Wage inflation will bring with it higher interest rates. I think that may support your COLLAPSE option.
Wage inflation will bring with it higher interest rates. I think that may support your COLLAPSE scenario.
“Leamer says what concerns him is that home sellers are holding out for the high prices of a few months ago.”
I read Leamer’s remark to indicate his acknowledgment that sellers are not in tune with new lending market realities. Banks would gladly make traditional home loans (20% downpayment, fixed rate financing etc.) to qualified buyers AT 50% OFF 2005 PRICES. But try convincing a seller his home is worth only 1/2 what it would have sold for in 2005 — good luck!
If you mean FDIC insured banks, actually, they required some skin in the game and retained only about 25% of those loans iniated.
“‘There has been no good place to hide during the month of August, which must surely go on record as one of the industry’s most hair-raising ever,’ Moszkowski, said in the report written with Patrick Davitt and entitled ‘Differentiation Escalates.’”
Oh hell, I’m no quant or hedge fund genius, but index puts were a dandy place to “hide” during August! How about some kind of ratio between those and your funny money holdings?
That is not very patriotic Tx, The funds are always long that is the quant model bias.
ha, are you still holding JAVA? That is the lonely green symbol on my screen just now, and I thought of you.
I haven’t gotten any responses on this yet so I’m reposting. I’m looking for good financial sites where I can look up specific groupings of corporations all at once (i.e. if I want to look at banks there would be a pull down/button/watever that will pop up everything in the industry). I know there’s pay sites out there, but are there and free ones with a good search engine? I don’t want to just look up one company at a time and be restricted to the major corps that I know about. I’m wanting something that’ll give me the whole industry so I can compare and contrast.
Devildog, open an E*trade account, there’s no minimum. They have a great search engine. Go to the “Research” tab and click on “Trading ideas” then select an industry. DP
I like finance.google.com
It’s pretty bare-bones, but it does everything you’re talking about. Since it’s simple you don’t get bogged down in ads, and everything updates constantly in real-time.
Thanks, guys. There’s some tools in my TDAmeritrade account, but not quite what I want. I’ll check out the google site and see if I can get a look at the e-trade tools.
What the heck is a 6% fixed rate mortage going to do. Everybody wants this interest rate cut so that is the magic bullet, pay no attention to the fact more then ever loans are going to be tough to get. How is it the experts think that a rate cut is going to get Joe blow off the couch to buy a 750k home and a 40k car especially since Joe makes 50k a year. What this is another scam, so that stock investors get their 3 day rally sell short make a lot of money then tell us that the rate cut wasn’t the answer or they didn’t cut enough so Oct is the next target date for them to prop up the market?
so Oct is the next target date for them to prop up the market?
It is nearly every year when you don’t have artificial activity going on like last year. You could look it up (what baseball guy said that?)
Breakfast TV in the UK this morning interviewed a property speculator who owns 700 properties, which he rents out.
The speculator said that he closed on the purchase of another five properties on the way to the TV station !
Around the corner from where I live is a 35 year old property magnate who owns 100 properties, which he also rents out !
He also owns an employment agency, which supplies labour to care homes and the British National Health Service (NHS).
He also has an Aston Martin sports car parked in his garage.
Does anybody on this blog see a future for these two budding property magnates ?
Best Wishes,
UKBottomFisher, Cambridgeshire, England.
Really depends on the cash flow, doesn’t it?
>Does anybody on this blog see a future for these two budding property magnates ?
1st it’s highly dubious they closed on 5 properties on the way over to the studio unless you guys have drive through closing windows. 2nd, you’d have to have a large and well staffed company to manage more than 10 properties yourself. Third, does anyone check the Bullsh*t these guys are spewing as far as their after tax margins or if they actually own that amount of properties ? I smell con artists.
O/T: From the WSJ: It isn’t obvious how the Paw family is able to afford such political largess. Records show they own a gift shop and live in a 1,280-square-foot house that they recently refinanced for $270,000. William Paw, the 64-year-old head of the household, is a mail carrier with the U.S. Postal Service who earns about $49,000 a year, according to a union representative. Alice Paw, also 64, is a homemaker. The couple’s grown children have jobs ranging from account manager at a software company to “attendance liaison” at a local public high school. One is listed on campaign records as an executive at a mutual fund.
Check out the pic of this house posted on Drudge report. It is unbelievable that they could get $270000 for it!
> It is unbelievable that they could get $270000 for it!
In Daly City, that wonderful piece of property definitely would go for $500K+. Sad but true.
“‘This is akin to a slow-moving train wreck,’ said Sean Egan, managing director of a rating firm, who has been a vocal critic of the three rating firms that dominate the field; Moody’s, Standard & Poor’s and Fitch Ratings.”
Hey, “slow motion train wreck” is a line from the patron saint of this blog, Jeremy Grantham.
I met Jeremy earlier this month, BTW. Fascinating guy.
Ha! I thought the patron saint of the blog was Eric Janszen.
I vote for Minsky or Kindleberger.
Minsky
‘Confidence falls, stocks drop’
http://tinyurl.com/259ctl
‘Prices fell in 15 of the 20 cities covered by the index. Hardest hit was Detroit, where home prices fell 11% year over year. Seattle, however, seemed relatively unscathed by the housing-market woes: Prices there rose 7.9%. ‘
Dammit! Seattle actually rose. Of course, we just recently had the utter evaporation of most financing tricks. I expect that’ll help.
Seattle rose year over year, but it is topping out month-to-month. In the first half of the year appreciation was well into the double digits, so you have to wait a while for the year over year figures to turn. (Think San Diego in late 2005, early 2006.)
Let’s hope the global credit crunch accelerates the fall for the last to leave the party.
haha, “Who will rate the ratings agencies?” to mangle the old latin phrase…
I would LOVE to see the headline “Moody’s cuts rating on Fitch, S&P to junk status”. Holy crap I think I would laugh for a month!
“S&P responds by cutting Moody’s to ‘CCC- infinity’ citing ‘I know you are but what am I…’ “
Didn’t something similar happen today with Merrill Lynch downgrading Citigroup, Bear Sterns and Lehman???
A humble pardon if this was already mention: Warren Buffett Bought 10 Million More Shares of Burlington Northern Santa Fe Corp.
Article said rails can compete with trucking for moving goods. ??
In a recession, aren’t there less goods to move?
In a recession, cheaper hauling = not going out of business. Interstate trucking is an inefficient and dangerous subsidy of the companies that build trucks.
ty…makes more sense. Curtsey.
peak Oil play?
Moving freight by rail is only about 1/4 the cost of moving it by truck. But railroad stocks seem already overpriced.
And I don’t think displaced FB’s will be paying them for tickets as they hobo around the country.
No offense but isn’t this true only if you’re moving the goods from rail yard to rail yard? If you’re transferring goods to something not served by a railroad (i.e. 99.99% of all retail stores and probably 80% of the warehouses in the U.S.), then you need to transfer the goods from rail to truck, and thus transport by *both* rail and truck, in addition to incurring the cost of moving things from one to the other transport means.
That being said - since rail is more fuel-efficient, it is hit less by oil/gas price increases than are trucks, and thus are doing better lately. Still though there will always be a balance between the two - rail is only “better” for some segment of the transportation market - e.g. long distance, pretty much wholesale only, and mostly non-perishable.
A fair amount of perishable goods, ie, fruit, vegetables, candy, etc get moved on refridgerated containers
Rail got a huge boost in recent years from switching almost entirely to intermodal freight, for almost everything except bulk materials. It cut the cost of transferring between shipping modes (ship to rail to truck) almost to zero — you just lift the container off one mode onto the other. Plus the railroads got a huge return on investment by increasing the overhead clearance on their lines to accommodate “double-stack” container cars, which basically doubled their carrying capacity at little additional cost.
For anything longer than a trip across town, rail is mindblowingly more efficient than trucks. Plus there’s still room for growth, as a lot of the major lines are still single-tracked, and double-tracking and investing in advanced signaling allows for a lot more traffic. Even with a major (expected) decline in consumption, this will probably only lead to a greater share of traffic being taken away from trucks.
RE: Peak oil play…
AI…You got it…
From J. Knustler’s, “Clusterf*ck Nation Archives”
Brown’s math suggests that world oil exports will drop by 50 percent within the next five years, certainly enough to trigger a systemic breakdown in market allocation, meaning serious supply shortages among the importing nations. That’s us. We import two-thirds of all the oil we use.
The implication in all this is that the activities that have become “normal” for us during the post World War Two era will very shortly become untenable. An economy based on suburban expansion and incessant motoring is on the top of the list of supposedly “normal” activities that will not be able to continue. I would maintain that even if we had 20 years, no combination of bio-fuels and other alternatives would enable us to keep suburbia running. But this latest work indicates that we have much less time to adjust.
This new information is consistent with my view that we had better prepare to make other arrangements for living in this country, by which I mean specifically re-localizing, de-globalizing, with an emphasis on local agriculture wherever possible, the emergency restoration of passenger railroad service and related modes of public transit, the rebuilding of local commercial infrastructures, and a radical rethinking of how we inhabit the landscape under New Urbanist lines
Somebody has to carry the ores and grains to the ships heading to China.
Buffett has been buying physical assets or stocks of companies with physical assets for years.
Railway is the foundation of a manufacturing / mining / farming economy. I susspect Buffett sees a return to these industries which are currently “undervalued” in the US.
Railroads are the perfect Buffett investment. What, you think they’re going away in five years? You think the Chinese are just going to drop all their cheap junk to us from helicopters when Ben will be using them all to drop dollar bills?
5 yrs. solid earnings, solid management, not flashy, understandable, lack of competition because of high barriers to entry, cheaper than trucking, esp. if gas increases, worsening highway infrastructure, etc. That’s what WB is usually about, no?
I haven’t looked at BNI, but couldn’t it also be a potential asset play?
I don’t think that he’s worried about the passengers buying tix. Corn supply in rural areas + ethanol needs in the needs in the city = earnings.
“Burlington Northern Santa Fe Corp.”
BNSF does a lot of the business of moving stuff from the Long Beach / Los Angeles harbor complex, and on to the rest of the country…and that’s a LOT of ’stuff’. If the economy tanks, and we (the US consumer) cut down on our purchases of goods from China, I would expect BNSF to take a big hit.
I believe old Warren’s just staying ahead of the petrol lines…. One day soon it will be advantageous to live near a rail line.
Housing layoffs
Struggling companies in housing sector have cut nearly 60,000 jobs this year.
http://www.marketwatch.com/news/breaking.asp?id=news/story/2007/08/layoffs_page.htm
And this doesn’t include all the now-starving realtwhores, “self-employed” mortgage piranhas, and illegal aliens who used to build homes in CA-AZ-FL-etc.
TOTALLY CONTAINED, I SAY!!!!!!!!!!!!!!!!!!!!!!!
15% appreciation PER MONTH FOREVER is in the bag!
This is BIG news if it’s carried in the mainstream media. We’ve all known that there must’ve been layoffs, but they haven’t been showing up in the Dept of Labor statistics, since independent contractors, undocumented workers, etc., are invisible to them.
say it again
“and a warning that the current round of credit-market problems are worse than the problems that brought about the demise of Long-Term Capital Management nine years ago.”
“San Diego, Washington D.C., and Tampa, Fla., were the next biggest duds, with housing prices falling about 7% in each market.”
7% of the value of a San Diego starter home (at last year’s typical price of $500,000) would translate into a net worth loss of $35,000 — about 1/2 year’s worth of pretax income for the median SD household.
Just think Sept 1st in a few days and again banks are not going to get a mortage or credit card payment from a whole lot of people. Tues after the holiday they will cry we have no money coming in we thought all was well, the people will get a rate cut most likely and Toll Brothers says all is well, i guess we have to ask the gov’t “us” for a few billion more we are sure by Oct 1st we will get some money in???
think of the arson rate this Holloween
dude ? we can help
‘It is unclear if inventory write-downs would be limited to one quarter,’ said Sean Jones, a senior VP at Moody’s Financial Institutions Group.
LOL!!!
They haven’t learned a thing. Just tweak the computers again, all will be well:
http://dallas.craigslist.org/acc/408163068.html
“Buying the stock of a bankrupt company is not exactly taking a safe position,” said analyst Danielle Seitz of Dahlman Rose & Co in New York.
Understatement of the year.
but buying the bonds or the bank debt . . . . now that’s investing!
anyone read the fed minutes from the August 7th meeting? stock market took a dive after it came out.
they pretty much gave a middle finger to the market and what Poole said was essentialy true
“…Readings on core inflation had improved modestly in recent months. However, a sustained moderation in inflation pressures had yet to be convincingly demonstrated. Moreover, the high level of resource utilization had the potential to sustain those pressures. The Committee’s predominant policy concern remained the risk that inflation would fail to moderate as expected. Future policy adjustments would depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information….”
Fed Minutes
No Fed Fund Rate cut with inflation rearing its ugly head.
The T-bond yield curve out 30-years is not inverted at the moment, which suggests the bond market is already pricing in the risk for liquidity injections to stimulate future inflation.
http://www.bloomberg.com/markets/rates/index.html
Cramer and his ilk have forced the Fed’s hand. Now either the Fed shows that it can lean against the wind (especially of the hot air variety) or else BB becomes Helicopter Ben and Cramer’s lap dog forever.
Stand against the wind… stand against the wind!!!!
Ride em down, ride em up, ride em down again. Not so inclined to cover this time.
If BB does lower rates, how will that affect the foreign purchase of our debt at lower rates in light of this global CDO debacle?
More meaningless fodder for Sheeple consumption. What the Fed thought or believed on Aug 7 is completely irrelevant. Watch what the subject does not what it says:
Some behaviorists argue simply that the observation of behavior is the best, or most convenient way of investigating psychological, and mental processes. Others believe that it is in fact the only way of investigating such processes, while still others argue that behavior itself is the only appropriate subject of psychology, and that common psychological terms (belief, objectives, etc.) have no referents and/or only refer to behavior.
http://en.wikipedia.org/wiki/Behaviorism
Now watch the re-writing:
WASHINGTON — Days before cutting the discount rate on Aug. 17, U.S. Federal Reserve officials were worried enough about eroding financial conditions to consider that they may need to take policy action, according to the minutes of the Federal Open Market Committee’s Aug. 7 meeting released Tuesday….
http://online.wsj.com/article/SB118832349767011156.html?mod=hps_us_whats_news
“Edward Leamer: ‘There’s sort of a stand-off between buyers and sellers.’ Leamer says that stand-off could increase the risk of a recession.”
The only ’stand-off’ is between Sellers and REALITY.
As a potential buyer myself, I simply REFUSE to bid on homes that have been driven to EXORBITANT price levels by penniless dead beats, just as I would refuse to stake my REAL money in a poker game against douchebags that are playing with FAKE Monopoly money.
It’s that simple.
Now I -along with hundreds of thousands of other potential buyers- am quite content to stand on the sidelines and watch this whole freakin’ mess unravel. After all, I don’t HAVE to buy a home.
And I absolutely WILL NOT make an offer on a $570K POS home that originally was worth $170K just 5 years ago.
Damn, Dan! Well said!!! That is a perfect analogy to how I’m receiving this market (re: poker.)
I’m with you - the condo I rent here in SD was purchased for 400K only 3 years ago, and the owners would like 700K!!!???. . .I rent it for $1900K. . .duh. . .when it drops back to 400K (faster than I might think) I will write them a check.
You miss his point. The “$400k” condo you rent is only “worth” $150-200k.
Why buy at 400K?? 3 years ago the price was already inflated!
120x rent would imply a reasonable price of $228K.
Dan,
I agree! Great post! We can easily see the sale price history of houses through various sources. We can sit out for several years and be happily renting instead.
I really like that line:
The only ’stand-off’ is between Sellers and REALITY.
Right on. The only way to beat speculators in is to have lots of cash when the margin calls go out.
“John Stomber, CEO of the fund and Merrill Lynch’s former treasurer, said conditions are worse than in October 1998, when the Federal Reserve intervened to compel banks to bail out Long-Term Capital Management.”
Agreed. For one thing, there are sure a lot more ‘too-big-to-fail’ entities out there today, thanks to unintended lessons taught by the ad hoc bailout of ‘too-big-to-fail’ LTCM.
I shall think about this Prof, I am not sure that there are any “to big to fails” left. Certainly the Countrywide et al have been granted TBTF status, but there are no moneys to bail them out. 3 billion to 50 billion - no problem, but the CLO/CDO market is swinging by $100B/day with little liquidity. One wrong move and toast.
The Federal Reserve will try valiantly to instill confidence. I just do not believe it will work.
The headline on CNNMoney of “Don’t Panic” is still going to instill confidence.
I wish!
But I think the Federal Reserve act as the French did in Casablanca
Captain Renault: “Realizing the importance of the case, my men are rounding up twice the usual number of suspects.”
I said “TBTF entities” in reference to a relatively larger number of firms playing with fire these days than in 1998 in ways that could spark another LTCM-size crisis. I did not mean to suggest that myriad TBTF bailouts would be financially practicable.
Cracks (small ones) are starting to appear in the Austin, TX market. My apartment complex is getting leafletted semi-regulary by builders. Latest was DH Horton offering 10-20k incentives and a free cookout.
Seeing some price cuts in Tarry Town and Hyde Park too …
And the condos - vast thundering herds of luxury condos … not sure that there will be end users for all these (Texas property taxes would be brutal on an 800k condo)
http://www.statesman.com/search/content/business/stories/realestate/08/26/0826condos.html
A very sad day as General Mills is closing its frozen waffle plant, now I will have to find another snack to munch on. Alas for the 600 workers laid off.
Try these. The maple cinnamon and Mesa Sunrise are great. I eat these by the boxful:
http://www.naturespath.com/products/lifestream_r#null
Hoz,
Was it a move out of the U.S., or was it a consolidation of their plants?
Yum, Yum, but they aren’t good on a lady’s figure.
closing consolidation and fewer sales of prepacks to a financially strained consumer, the price of ingredients is up 100% from last year.
“Due to declining financial results, we have decided to exit the frozen waffle business (retail and foodservice) and to close our frozen waffle plant in Allentown, Pennsylvania”
Last thirty minutes and the bottom just fell out of the market…off over 200 points…
Will the PPT gang come to the rescue and buy in the last 5 minutes?? Push the market up 300 points just like the Perils of Pauline?
Dow down 280.28 - Can’t wait to see the spin.
Okay, very sorry and very OT and even apologies if this was posted yesterday BUT this has to be one of the most amusing articles on the Vegas high rise market I’ve ever read…
http://tinyurl.com/yt9q67
I’m trying to decide if it’s the 29 year old real estate genius surveying his domain of homeless crazies in the neighborhood, the cop asking the guy he’s arresting if he’s tasered him before, or the 24 YO master-of-the-universe with the pet shark that sends me into the greatest spasms of giggling.
This is from the Las Vegas Sun but reads like an article from The Onion.
Not to dismiss the guy whose business plan is to build a high rise with a “really, really fancy Starbucks on the first floor”. Absolutely brilliant.
“The worst-performing market was Detroit, where prices fell 11% in one year. San Diego, Washington D.C., and Tampa, Fla., were the next biggest duds, with housing prices falling about 7% in each market.”
But the NAR says it’s a good time to buy and the Florida RE associations say it is a good time to buy, but the data shows otherwise. Hmmm, I wonder who is telling the truth?
The DC numbers are telling….and bad news for NVR homebuilders, who for so long were touted for their invincibility–”they’re in the high-end market, unaffected by subprime;” “they don’t have a lot of property to take writedowns on,” etc. etc.
“Housing economist David Lereah says the real problem is that people can’t get the home loans they need. Lereah: ‘Too many homes and not enough buyers is basically what’s happening right now. There may be buyers out there, but they can’t obtain a mortgage.’”
His credibility is gone due to a poor track record of getting it right. I would not waste my time listening to him!!!
They’re doing comedy on LA talk radio in between segments, and it goes like this: first they put on a commercial for some kind of toxic loan from a mortgage company (yes, those ads are still on the air here — especially the “and we’re nice people too” company), and that is immediately followed by an ad regarding how debt can bring on depression, anxiety etc. and our credit counsellors are standing by to help. LOL.
By the way, as an update from LA: the market in the SF Valley (Sherman Oaks, Valley Village, Valley Glen, etc.) is DEAD. Heard it from a realtor. Saw numerous open houses, no lookers whatsoever. Everyone’s talking about it now.
That would be nice if housing deflated like computers, no?
Lereah is a blowhard, BTW.