Bits Bucket And Craigslist Finds For September 1, 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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Happy Labor Day weekend, campers. I don’t know about you, but Bush’s bailout doesn’t seem like much of a much to me. As for Bernanke, he keeps hinting he’ll do what’s necessary. Whatever that might be.
What else can he do but print money and lower rates? Won’t help the man on the street though, that’s already deep in the red. I’m really looking forward to the next move, they’ll drop rates I think and the RE folks will get all lathered up but it ain’t gonna help. Crash flags are flying at full staff!
Let the RE scumbags get all excited. It makes the depression on the other side all the severe…lmao. I’ll find out today where the RE bulls heads are at when I visit my brother who insists that the millionares are coming.
.25 point cut is meaningless, he will have to do 1 point to have any effect.
What effect are you talking about? Causing the dollar to crash out of fear of hyperinflation?
Other than a psychological effect reflected in the stock indexes for 2 or 3 days, it will have no effect regardless of the amount.
The problem is the Dollar is under a lot of pressure. Lower rates too much, or print too many more dollars and the Dollar plummets. We are a debtor nation and need other Countries to continually buy dollars. When they don’t, we are then Argentina in the 90s.
Yup, bye bye Yen Carry Trade. Those 1% rates on the Yen don’t seem so good now.
The Fed can’t possibly print enough money (currency) to make a difference without us spotting it. They would have to increase currency in circulation by 400% just to make up the AB commercial paper collapse. The 250 million new $1,000 bills might be a bit obvious.
What the Fed usually does is facilitate credit. But that is proving to be nearly useless now. They can’t force people to borrow or lend. Nobody wants to go deeper into debt now, nor lend when their hidden losses are already so huge. The Fed is about to demonstrate its impotence to sustain inflation and asset prices.
“They can’t force people to borrow or lend.”
They are pushing on a string now, and BB knows it.
“hump or die, hump or die”. (Mel Brooks, history of the world)
RE: Hump or die..
For all the Pro-Immigrationistas…goin’ Third World…
http://www.knbc.com/news/14029243/detail.html?dl=headlineclick
The Bernanke-Paulson-Bush Comedy Sheeple Expectations Management Circus is only trying to do just that, manage expectations to keep the markets from tanking. They won’t ever do anything take any substantive action (e.g., a true bailout), because they can’t afford to and it would incense the non-FB voters.
That said, there will no dount be some excellent rally opportunities every time one of these buffoons opens his mouth to yak about the housing market.
The lead editorial in today’s Beantown Globe here in Mazzholeland
lauds Bush’s and Barney Frank’s (talk about a 2-headed monster) mortgage bail-out plans which essentially advocates the dumping of the entire mess on FHA.
People can poo-poo the idea but never underestimate the ability of an incompetant governmental agency, who suddenly see’s itself in the position to empire build and further entrench itself into the pig’s trough of bureaucratic quagmire and inept governmental functioning all funded by an overtaxed populace the majority of which had nothing to do with the problem.
HUD/FHA couldn’t manage a bag lunch picnic.
“HUD/FHA couldn’t manage a bag lunch picnic.”
LOL, hd, got a new govmint agency for ya: FHUD
And the director’s name will be Elmer?
P~Man…
LOL…Hire me as your agent, will ya?
Barney Frank doesn’t get nearly the criticism he deserves. Those same people that think Bu$h is the devil fail to see the evil in Mr. Frank. And it has nothing to do with his “lifestyle”.
“Lifestyle” = Rump Ranger.
“…dumping of the entire mess on FHA.”
They may have to invent an acronym for this new class of government entity. I suggest TISL = taxpayer-insured subprime lender.
Based on the “discount window” action of a couple weeks ago, I think his “whatever necessary” is to protect against a rapid unwind of the Cary Trade that would take down the global economy.
The Fed’s “Let them eat cake” statement on the Aug 7th caused panic that started to unravel the Cary Trade. Lack of that .5% money would have taken down the world financial economy that is based on an arbitrage play (borrow at .5%, loan out at 5%). Japan, the world’s second largest economy, would screech to a halt as their exports became too expensive to compete.
So, the Fed is saying they won’t allow the Cary Trade to unwind too rapidly. I think that as long as we see relatively stable internation monitary exchange rates, the Fed will do very little. Exchange rates go nuts, and they’ll make another move…. IMO.
“I think that as long as we see relatively stable internation monitary exchange rates, the Fed will do very little.”
Except, I would assume, see to it that exchange rates remain sufficiently stable to support the carry trade that keeps the global credit bubble aloft.
Even is what’s necessary is leaving the rates where they are.
Gary North…FED/Money… A little off topic but interesting, IMHO.
http://www.lewrockwell.com/north/north564.html
wmbz, that was an awesome article. Made my day. Thanks for the link.
wmbz,
Gary North is a really good writer although he sometimes wonders off into the scriptures…
I’m in Columbia too.
What’s up with Tommy Ravenel (former SC State Treas) getting off with his POUND OF COKE charge with no bail paid, no time served, and likely probation?
Sorry to all board members for OT.
Ben, YOU ROCK!
commercial RE action in your hood- any observations ?
Running at full speed here in Columbia, S.C. Lots of State,FED and local tax bucks feeding the system. Not to mention all the money coming in from the Yankees and Half Backs.
I have noticed more signs advertising “50,000 sq feet for lease” and such in the Northern Virginia area (Fairfax, Mclean, Arlington).
On the residential side, there are more and more newly built homes on the market, including these overprice POS houses in Manassass….there is no way anyone should have to pay more than $200K for a townhouse in Manassass.
http://www.centexhomes.com/Northern-Virginia/N46026.asp
http://www.centexhomes.com/Northern-Virginia/N46025.asp
http://www.khov.com/Home/VA/KG147/_Properties_AUTH.htm
“Centex Homes does not offer investment opportunities in this community;”
How right they are but for reasons other than they think. I love that line. It reminds me of ‘98 when all the people that voted for Jesse Ventura said they wanted to “send a message”. They were right, of course, but obviously not for the reasons they thought.
I’m trying to rent 2 stories of an office in burke va and suddenly there’s tone of competition
Gee, them places are sure UGLY. Why buy (basically an apartment) when you could rent for 1/2 the price?
Lots of new sold signs. That was after seeing a small wave of price reductions and some sellers getting it and coming on w/competitive pricing.
I’ve actually seen signs that have weathered to almost unreadable being replaced with new signs from the same company. That’s a long time on the market.
I get so frustrated in the City. Rents for commercial space must be absolutely ridiculous. Businesses come and go as often as I change underwear. The Village is being ruined because it is turning into only high-end clothing boutiques. Everything else is getting pushed out. In my neighborhood, the financial district, we have businesses that have been closed for two years. It would be nice to have something in there but the fools that own these “jewels” aren’t going to “give away” their little treasures. So, it’s Subway restaurants and abandoned buildings.
NYCB, on the lower part of Broadway near TWTC, is there a “STAR” shop for infant and toddler clothing and accessories?
Also, are there abandoned buildings or closed shops next to the subway? May not be good for the rodent population.
Oops, I meant Subway shops, not the subway.
I don’t have kids so I don’t really look for such things. You must mean where Broadway and Liberty cross. Do you remember where the ghetto-like TGIFriday’s was? They have pretty much ripped that entire part of the block down on the east side of Broadway. I would guess a larger building will go up there. That area of Broadway is pretty trashy. I walk quickly through that section. There are just too many tourists that are always getting in the way.
RE: I get so frustrated in the City…
I suggest a move to Montreal.
It has the most beautiful women in the world.
Then you can be MontrealMan
“Hey, honey, we are moving to Montreal. I hear the women are really hot there.” Something tells me that this might not work. I really like New York, even if I dislike most of the people. I don’t know what I will do when I leave this city. Where do you go from here? I will miss the rats.
She’s really love the strip joints on St. Catherine street.
RE: I really like New York,
I’ll bet your lungs don’t.
They will register their displeasure in about another 20 years.
RE: the strip joints on St. Catherine street.
I heartily recommend the Cleopatra Club.
Sorry, it might be double posted..
NYCBoy, I walked down Broadway the other day - it’s ridiculous amount of newly open banks everywhere in downtown, same here in Village - banks on every other corner.
Midtown is awful. Banks are everywhere. We need more bars, not more banks. It just makes you realize how dependent this city is on the finance industry. But nobody here wants to see what a downturn in the financial industry would mean to housing and the city’s economy.
There were a lot of banks in 1929 I’m told….
A glut of banks is Ponzi Finance at its finest. The financial tail has been wagging the economic dog since 2002. The real economy has managed to get itself into pretty good trouble without Wall Street really going down. With finance as the only sector still booming until recently, the consenquences when it DOES go down will be truly ugly.
Same here in Queens. More and more chains, less mom and pops. My wife and I constantly talk about which city we should move too, if the sellers here don’t ever realize their $250k house is not worth $700K.
Philly, Boston and Montreal are all in consideration.
RE: Philly, Boston and Montreal are all in consideration.
Geez, don’t pick Boston.
Portions of the city are sinking because all the pillons driven into the ground back in the 1700’s so the denizens could build on backfilled swamp land are all rotting because of exposure to air due to falling water tables.
Many exclusive rowhouses are starting to crack and split apart.
The cost to correct the problem is huge.
Out of town movers beware!
I talk to a lot of business owners in PHX and generally speaking, the prices to lease or buy properties is still considered high, suggesting that inventory is low at this point. Also, commercial contractors are showing steady work for the near future.
Strip mall here has 11 stores on one side of the strip. Five are now vacant. 100% turnover in the last two years with most occurring in the last 4 months. Gone are mortgage co, RE co, health food store, dress shop (can’t remember the rest); new are two hair salons, nail shop, mailer, insurance co, and check cashing service.
new are two hair salons, nail shop, mailer, insurance co, and check cashing service.
Ah, the check cashing service. Many FB’s are going to be using these frequently.
I was trolling around and came across this. Listen to the sound clip. You guys especially will appreciate it.
http://seattlebubble.com/blog/2007/08/22/suzanne-researched-this-part-2/
More evidence that a skyrocketing divorce rate will be one of the side effects of this bubble. Families under financial stress almost always point the first fingers of blame at eachother.
“Families under financial stress almost always point the first fingers of blame at eachother.”
Most of the time it is justified.
More evidence that a skyrocketing divorce rate will be one of the side effects of this bubble. Families under financial stress almost always point the first fingers of blame at eachother.
That “bratty” “selfish” wife ought consider herself lucky. She’s still married and can be thrown into the employment pool to plug the leak in the financial dike.
I prefer to think of the legions of “who needs men” women, who have actually divorced their husbands during this real estate jobs boom and marched right out and bought a CONDO.
My sister was one.
Bought into a 3 unit converted colonial deal with the other 2 occupied by another pair of the “liberated and divorced” .
$350k per (gag) for the upper units.
Both are now up for re-sale.
The financial noose tightens again.
Wow. I bet the woman hung up and DID NOT call her husband to apologize and say she was wrong. From what I have seen women have a much harder time admitting they are wrong than men do.
Momma bird wanted a fancier nest to keep up with the Joneses but she didn’t want to have to get a job either. At no point during that call did I have any sympathy for the caller. She still doesn’t realize that this mess is completely and totally her fault. She will look to blame others. Put money on it.
“From what I have seen women have a much harder time admitting they are wrong than men do.”
Nah. I don’t think any one sex has a lock on that, although it might be that way in your experience. Let’s face it, men have been blaming women for their woes ever since Eve supposedly got Adam to take a bite of the apple. Give the poor gals a break.
Don’t forget Pandora opening her “box”. Harra, goddess of war. Delila cutting off Sampson’s hair. Helen causing the Torjan War.
I’m sure I could think of dozens more given a few more minuts.
Agree that men like to blame women (and their box, fruit, flower, etc) for much of man’s grief.
Let’s face it, men have been blaming women for their woes ever since Eve supposedly got Adam to take a bite of the apple. Give the poor gals a break.
Kind of like the loan officer who MADE you sign those docs. Everyone wants to blame someone.
What about uhm, Bill and Monica ?
Hmmm. I think I may be in love.
“completely and totally her fault.”
So the husband’s John Hancock on that dotted line means nothing? If he really felt it was the wrong decision, there would have been no purchase. If someone doesn’t have a backbone to make a decent argument for their convictions, that weakness is just as much part of the problem as the keep up w/the Jones mentality blamed on the Mrs.
(Shudder!) Gawd, why would anyone want to be married to anyone so bleeping weak? Talk about NOT sexy.
You are correct. He should have never married into it in the first place. He’s probably not much of a jewel either. I am awake now and the brain is finally humming. Screw both of ‘em. Too bad they created another generation of drones.
She probably didn’t tell the hole story. She wanting to make sure the payments still get made while she is on the sly bringing her boyfreind over while he is at work.
Wow, I thought I was bitter.
CarrieAnn-
That’s a crock and you know it
“That’s a crock and you know it” for the crowd you hang with dear.
In my house its not. When I say no my husband doesn’t even bother. When he says no I joke there’d be divorce if I even tried. Maybe its the stubborn Irish in us. Or perhaps it’s the stubborn version of mutual self respect. Probably why we haven’t spent ourselves into oblivion.
RE: If he really felt it was the wrong decision, there would have been no purchase.
LMAO…
If hubby hadn’t signed there’d have been no nookie for him until momma got her way.
Probably wasn’t gettin’ much anyway.
That’s why he broke his cellphone.
Sexual frustration.
“From what I have seen women have a much harder time admitting they are wrong than men do.”
I’m female, work in a female-dominated profession, but used to work in a male-dominated line of work. I maintain a great many women equate any and all criticism of their ideas or positions as personal criticism of themselves. And thus take criticism very, very — well, _personally_. This type of female is sheer hell to work under, since any time you criticize her proposal or processes she turns very hostile.
I think men in general better learn to separate criticism of their performance or ideas from criticism about themselves, and I think it’s from participating in team sports while growing up. When the coach tells you you f*cked up and can do better, you learn to understand he’s criticizing your actions, not you the person. That’s a valuable thing to learn before entering the workplace. I think women more usually hear criticism as “You think I’m bad” versus “You think my idea needs work” and tend to react (overreact) accordingly.
Great post txchick57. The first sound clip is the first minute, but the second sound clip is the entire 3 mins, worth taking the time to listen to.
Already posted previously, but great to see it posted again for those who missed it.
Dr. Laura was spot on with her advice, but how many people will gravitate towards those “mental health pros” who will side with the nincompoops?
Last summer my tennis singles partner was a shrink and he had lots and lots of stressed out patients who simply bought more SUVs and houses than they could afford. Most of his practice was telling people how to unwind from all of this spendthrift stupidity and debt.
Got 10% down?
“Last summer my tennis singles partner was a shrink and he had lots and lots of stressed out patients who simply bought more SUVs and houses than they could afford. Most of his practice was telling people how to unwind from all of this spendthrift stupidity and debt.”
The first place to cut is spending money on expensive shrinks, then sell the SUV and it you can sell the house. That should cut their expenses and reduce their stress. Maybe I should become a stress councilor
My landlord is a f.b. shrink.
Thanks txchick, the “Pink Pony” link in the comments was pretty funny too.
Nice find Chick. This is a good snapshot on how it will hurt society.
This was in my email this a.m. Ha ha. She needs to update this one
When calculating what you can afford in a house, don’t just look at the list price. The amount you pay for a house is important when you consider your ability to re-sell the house. Today’s mortgage options are increasing the possibilities for home buyers, so you should also take a close look at what it will cost you to live in the house.
Your monthly housing cost is the second figure to consider, and that cost is largely determined by current interest rates. Today’s real estate market is very price-driven. Homes which are in the best condition and have the most attractive price tags are the ones that sell.
Diverse financing options and competition among lenders are giving many buyers the opportunity to buy a more expensive house or condo than they thought they could afford–and sooner. There are many creative ways to get into a home with a relatively small amount of money. Ask your real estate agent to help you look at today’s numbers–you may be pleasantly surprised.
Donna Lasater
Coldwell Banker Residential Brokerage
Phone: 469-567-1421
Email: donna.lasater@cbdfw.com
Website: http://www.dlasater.com
PROPERTY HOTLINE 469-567-1497
You know what? Forward this on to your Senators and Congressional reps. Make an example of this b!tch. This is becoming a political hot button: “predatory lending”. Clearly she is encouraging it. She may be small fry, but the government just loves to go after small fry.
Comment by palmetto…
She may be small fry, but the government just loves to go after small fry.
No doubt about it! I do hope to see the lot of these shills dropped into the deep fat fryer!
wmbz, you’re right. I complain a lot about shrub and CONgress and the FED, etc. But the truth is, changes in the society ultimately take place at ground level, neighbor to neighbor. Much easier for us to point our fingers on high and say “Look what they are doing to us”. And yet, no one wants to have a word with the neighbor who rents to illegals or the family member who wants to bury their savings in a flopped flip or nail the local mortgage broker who is shilling to members of the community. That takes real courage. And I admit, I don’t always have that courage myself. But I’m trying.
Leadership is the act of doing what you know is right, even though you know it’s going to suck doing it. And that is in short supply. I see it at work all the time. I have fellow managers that come to me and ask me to come up with some technological way to confront their subordinates instead of them just going up to the offender and saying, “quit that $hit”. I find it disgusting but it makes me realize why we have such a shortage of leaders in public life. We have the same shortage in private life.
Awesome post, NYCityBoy. This is the best:
“it makes me realize why we have such a shortage of leaders in public life. We have the same shortage in private life.”
Yep, it’s been a bit hard for ole palmetto to start speaking up after years of “live and let live”. But I had to realize that going along to get along was doing me more harm than good. Actually, this blog and the bubble rubble has really shoved that point home.
Somehow I doubt you ever had a hard time speaking up, palmy.
Maybe my favorite bloggers on this site behave opposite in their actual lives. Palmetto is a quiet guy, NYCityboy is a shrinking violet, Neil is a mean pessimist, Jen Bones has no sense of humor, CarrieAnn is a stripper, imploder is a nun, etc.
“There are many creative ways to get into a home with a relatively small amount of money.”
And they all involve large quantities of KY warming gel.
Just for the record: LOL.
Yikes! Check that mug out. I wonder if she is a “classy” realt-ho and not a bum? She needs to do an upgrade on the diamonds and of course run by the pawn shop and pick up a rolex.
Good god. I hadn’t looked at the picture. If her real estate career doesn’t work out she can always hire herself out for children’s birthday parties.
Oh my word!!!! It’s Alice The Goon!!!!!
“Top local real estate expert.”
if her bowl haircut and triple chins did not do her in, her condescending attitude does:
‘When a home owner tries to sell “By Owner”, they commonly use two basic marketing techniques to advertise the property. They place a “For Sale” sign in the front yard and a classified ad in the local newspaper. When a seller lists their home with a professional real estate agent, however, a very sophisticated process is set in motion in order to facilitate the home sales transaction.’
sophisticated! just like her bad dye job!!!
“There are many creative ways to get into a home with a relatively small amount of money.”
Ooops typo. Let me fix this for her:
There are many creative ways to get into a
homeforeclosure proceeding with a relatively small amount of money up front.A bit OT, A question for any of you financial sharpie out there. Will da boyz be able to get their First Data & other deals done?
Debt markets put to the test
September could be a critical month as bankers attempt to bring risky bond and loan offerings back to the market.
The credit markets will face a critical test next month as bankers attempt to ramp up issuance of risky debt offerings.
The market for high-yield debt and loans has been locked up this summer as investors have balked at risk. But as droves of Wall Streeters head back to work after Labor Day, they’re expected to roll up their sleeves and start to try getting deals done.
The offering related to the buyout of First Data, which agreed to be taken private by KKR in April for $28 billion, is a prime example of a deal that could go awry. First Data is planning to raise about $8 billion in bonds and $14 billion in loans.
“It’s got to be one of the ugliest of the LBOs that hasn’t yet been financed,” said Justin Monteith, an analyst at high-yield research firm KDP Investment Advisors.
link
http://money.cnn.com/2007/08/30/markets/credit_preview/index.htm?postversion=2007083011
Looks like very little chance the big deals will get done anytime soon. The banks are already under huge stress with the off-balance sheet vehicles being forced back onto the BS. Many banks may not be legally able to make the loans as they are right up against the limits on the reserve requirements. If you look at the merger arb spreads, they are flashing big danger signals for these deals.
Even the fool gets it. Okay, which one of you HBBers was the ghost writer on this one?
http://www.fool.com/investing/general/2007/08/31/bushs-housing-bailout-bad-idea.aspx
Could someone please remind me whether the Fed is part of the executive or the legislative branch of govt?
19 hours ago
What’s Next For Big Three? (Fed, Congress, Bush)
Posted By:Bob Pisani
Topics:Mutual Funds | White House | Congress | Interest Rates | Ben Bernanke | Federal Reserve | Investment Strategy | Stock Market
OK, we now know that the President, the Congress, and the Fed are acting, and if things get worse, will act in an even more aggressive manner. What’s next?
http://www.cnbc.com/id/20533777
According to Pisani:
Shorts are bitterly complaining: “they’re changing the rules to save the system!” There is some truth in that. But why is anyone surprised? We are going into a presidential election, and you think everyone is going to sit around and spout laissez-faire economic theories? What it means is a lot of hand wringing from my friends on the short side–and, for the moment, a lot of short covering.
I disagree. What it means is fundamentals are in the toilet and bulls are relying on divine intervention to keep the market from plunging. When the smoke clears, look out below.
“…you think everyone is going to sit around and spout laissez-faire economic theories?”
Absolutely! In fact, I expect the Fed to continuously spout such theories, as a smoke screen for their market-distorting, planned-economy social engineering behind the scenes.
PPT stock market interventions flummox MSM financial journalists.
Upshot of wild market swings unclear
Turmoil could be tied to investor confusion
By Floyd Norris
NEW YORK TIMES NEWS SERVICE
September 1, 2007
Does it make sense for stock prices to plunge one day and soar the next, with little in the way of new information to explain either move?
Maybe not, but it happened this week, just as it did earlier in August. It was the first time in more than four years that the U.S. stock market suffered such wild swings, and it could be a harbinger of a reversal of direction in either the stock market or the economy, or both.
http://www.signonsandiego.com/uniontrib/20070901/news_1b1swings.html
Fed Chief, Bush Give Hope to Wall Street
By Neil Irwin and Michael Fletcher
Washington Post Staff Writers
Saturday, September 1, 2007; Page A01
http://tinyurl.com/26pbld
JACKSON, Wyo., Aug. 31 — Federal Reserve Chairman Ben S. Bernanke said Friday that the central bank was willing to take action to ease damage to the economy from troubled financial markets, and President Bush introduced a plan to help people who are at risk of losing their homes to foreclosure.
The separate actions by the chief central banker and the president gave Wall Street faith that policymakers were confronting the problems in the home-mortgage market. Their actions drove the stock market up for the day and helped soften fears of a disastrous fallout from the wave of foreclosures expected in the next two years. All three major market indicators rose about 1 percent.
Bernanke said the Fed must consider the effects of financial markets beyond the markets themselves. (Ted S. Warren - AP)
“Essentially, you have the executive branch saying they’re going to do something. You have the Fed saying if the economy is in trouble, they’re going to do something,” said Mark A. Coffelt, chief investment officer of Empiric Funds. “The market’s really saying, ‘Someone’s going to do something.’ ”
Investors had been hotly anticipating Bernanke’s speech, his first since the meltdown in mortgage and other credit markets in August, hoping for clues to whether the Fed might be inclined to cut a key interest rate to stimulate the economy. The speech, delivered at the Federal Reserve Bank of Kansas City’s annual economic symposium here, seemed to imply that the Fed was more open to cutting rates than it was when it made its last statement about the economy, two weeks ago.
“Developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy,” Bernanke said. Moreover, he said, the Fed’s policymaking committee “continues to monitor the situation and will act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets.”
The Federal Open Market Committee is scheduled to meet Sept. 18, and investors increasingly expect it to cut the benchmark federal funds rate after having left it at 5.25 percent for more than a year. Bernanke did not explicitly say what action he had in mind for that meeting, but in the subtle language of monetary policy, he didn’t have to.
“It was a way to reassure the market,” said Martin H. Barnes, who studies the Fed for investment analysis firm BCA Research and who attended the speech. “He did not do anything to dissuade the market from expecting a rate cut at next month’s meeting.”
LEND is joining millions of homeowners who cannot find a buyer because they are unwilling to lower their list price to current market value.
Shotgun marriages are seldom happy ones.
Accredited shuns new buyout bid as no deal
Subprime lender pursues suit to get original offer
By Mike Freeman
STAFF WRITER
September 1, 2007
Accredited Home Lenders yesterday rejected a Texas private equity fund’s revised, lower offer to purchase the ailing San Diego subprime mortgage company, opting instead to continue with a lawsuit aimed at forcing the deal at the original $400 million price.
http://www.signonsandiego.com/uniontrib/20070901/news_1b1accredit.html
This is pretty funny. LEND was apparently up FORTY THREE percent Friday. All the way up to a market cap of 227 million.
(”LEND Closed above its 13 day moving average. This is generally considered to a bullish trend.” (sic) From a Scottrade ad. Darn, I’m glad Scottrade presents complex research in plain English.)
Market whisperer in chief, and his sidekick Tonto:
Comments reassure investors
By Tim Paradis
ASSOCIATED PRESS
September 1, 2007
NEW YORK – Wall Street closed another erratic week with a big gain yesterday after investors took comments from President Bush and Federal Reserve Chairman Ben Bernanke as reassuring signs that Wall Street won’t be left to deal with problems in the mortgage and credit markets on its own.
http://www.signonsandiego.com/uniontrib/20070901/news_1b1market.html
Can someone please tell me why a f-ing market needs f-ing reassurance? Has the whole world gone crazy?! Am I the only one around here who give a sh-t about the rules?!! [pulls out handgun] Mark it zero!!
August 31, 2007, 8:18 pm
Should the Fed Target Housing?
The Federal Reserve is required by law to aim for stable prices and maximum employment. Ed Leamer, an economist at the University of California at Los Angeles, thinks we’d be better off if instead it aimed at stabilizing the housing market.
Mr. Leamer, in a paper presented to the Federal Reserve Bank of Kansas City’s symposium in Jackson Hole, Wyo. Friday, argues the Fed’s focus on things other than housing gave us the overheated housing market this decade whose unraveling now threatens to plunge the U.S. into recession.
Mr. Leamer says housing construction contributes 25% of the weakness in gross domestic product growth on average in the year preceding recessions since 1949. As the Fed raises interest rates to cool inflation, consumers delay purchases of homes. Once interest rates fall, pent up demand for homes is released. If the Fed targeted housing along with unemployment and inflation, it could alleviate a lot of suffering, he says. “It’s not just pink slips that are handed out in recessions. It’s also notices of delinquencies and foreclosures. Both the pink slips and the foreclosure notices are given disproportionately to the poor and the young, often to the very same families…. Beyond limiting the damage unemployment does to working Americans, attenuation of the housing financial cycle is likely to reduce the financial damage done to the lifetime budgeting of many lower-middle class Americans.”
The last recession is unusual in that housing did not decline to any great extent. In Mr. Leamer’s views, this means the Fed’s interest rate cuts were misplaced. Instead of releasing pent up demand from prior years, it pulled forward demand from future years. “The historical record strongly suggests that in 2003 and 2004, we poured the foundation for a recession in 2007 or 2008 led by a collapse in housing we are currently experiencing.” (Though he quickly adds that’s not actually his forecast.
)
Mr. Leamer’s study is likely to resonate among those now coping with the hangover of the housing boom. But it’s unlikely to find a sympathetic audience at the Fed. The central bank’s responsibility is to the entire economy. To focus only on housing might end up leaving the economy as a whole in worse shape. The Fed cut interest rates in 2001 because business investment was collapsing. Had the Fed held steady because housing was fine, the recession that year would probably have been deeper.
http://blogs.wsj.com/economics/2007/08/31/should-the-fed-target-housing/
There’s a 5 minute video interview with Professor Leamer on Bloomberg.com where he talks about how housing prices in the super bubble areas will see a 30% to 40% decline….but he also seems to think that the FED should take a more activist role in trying to stabilize the housing market rather than let it crash since it’s such a huge part of the economy.
Anyone notice how the forecast price corrections get deeper and wider? First correction would only occur in Florida and Vegas and only 3%. Now it’s “super bubble areas” 30-40%. I stand by my forecast that all areas will see a minimum 40% real loss.
Leamer’s research program’s funding depends on a money flow from the REIC, so you can see why he backs more Fed intervention to prop up the housing market…
The Fed used to take the punchbowl away 3 years into an expansion. They used to understand the importance of not letting speculation get out of hand. This guy is basically asking them to go back to their own pre-Greenspend policies.
“The Federal Reserve is required by law to aim for stable prices and maximum employment.”
required by law? say what?
We can thank Liberal Dems for this harebrained social engineering blueprint…
In response to rising unemployment levels in the 1970s, Representative Augustus Hawkins and Senator Hubert Humphrey created the Full Employment and Balanced Growth Act. It was signed into law by President Jimmy Carter on October 27, 1978, and codified as 15 USC § 3101.
The Act explicitly instructs the nation to strive toward four ultimate goals: full employment, growth in production, price stability, and balance of trade and budget. By explicitly setting requirements and goals for the federal government to attain, the Act is markedly stronger than its predecessor. {An alternate view is that the 1946 Act concentrated on employment, and Humphrey-Hawkins, by specifying four competing and possibly inconsistent goals, de-emphasized full employment as the sole primary national economic goal]. In brief, the Act:
* Explicitly states that the federal government will rely primarily on private enterprise to achieve the four goals.
* Instructs the government to take reasonable means to balance the budget.
* Instructs the government to establish a balance of trade, avoiding harmful trade deficits.
* Mandates the Board of Governors of the Federal Reserve to establish a monetary policy that maintains long-run growth, minimizes inflation, and promotes price stability.
* Instructs the Board of Governors of the Federal Reserve to transmit an Monetary Policy Report to the Congress twice a year outlining its monetary policy.
* Requires the President to set numerical goals for the economy of the next fiscal year in the Economic Report of the President and to suggest policies that will achieve these goals.
* Requires the Chairman of the Federal Reserve to connect the monetary policy with the Presidential economic policy.
http://en.wikipedia.org/wiki/Full_Employment_and_Balanced_Growth_Act
“Mandates the Board of Governors of the Federal Reserve to establish a monetary policy that maintains long-run growth”
In the long run we’re all dead.
“The central bank’s responsibility is to the entire economy”
No, the central bank is an entity made up of its members, which are all the commercial & retail & investment banks. The central bank’s responsibility is to the banking community, as a consequence. Just watch the behavior.
The rest is just playing for the cheap seats, or else some governor really believing he is some sort of juggling maestro, instead of another fool.
Cry me a river…
Wall Street Bonus Picture: Rich Instead of Very Rich
By Josée Rose
Word Count: 513 | Companies Featured in This Article: Goldman Sachs Group, Bear Stearns, Lehman Brothers Holdings, Merrill Lynch, Morgan Stanley
Hold that Porsche? The Wall Street bonus picture is bleaker, by Street standards at least.
While the summer may have started with the long-term bonus outlook for Wall Street seemingly strong, it’s ending with bankers and traders expecting lower bonuses, or even layoffs.
It’s still early to be getting a firm read, but given the subprime crisis, credit crunch and market unrest, the early talk is of lower payouts for the first time in five years, especially in fields related to fixed income, hedge funds and alternative investments.
http://online.wsj.com/article/SB118860116486715105.html?mod=hpp_us_whats_news
“But, but, but, it is those bonuses that keep Manhattan real estate prices so high. They will go on forever. It’s different here. We are special.” What a joke! The layoffs are coming and I will be able to feel the floor shake in my apartment when they hit. We are about to get a big slap of reality in my neighborhood. It’s about g-ddamn time.
“…it is those bonuses that keep Manhattan real estate prices so high.”
I pull in resolution, and begin
To doubt the equivocation of the fiend
That lies like truth: ‘Fear not, till Birnam wood
Do come to Dunsinane:’ and now a wood
Comes toward Dunsinane.
Hah hah! It’s already there.
My friend’s firm already got the “you’ll get nothing, and you’ll like it. just be happy you’re employed” speech.
Another quant friend isn’t answering phone calls. Nor is his wife. I hope they paid cash for their “second home” in Vermont.
The word on the street is that all the structured product desks at LEH, GS, and BSC are getting laid off next week (which means Tuesday since it’s after the end of Q3 for many financials.)
[Translation: no more "funny" derivative products available.]
Manhattan! your date with destiny is coming up real soon.
“Financial innovation” seems to be one of these phrases that should go the way of dodo like “contained” and
“Financial innovation” is what gives rise to New Eras…
And nattering of “tax cuts” should be ignored until details of the beneficiaries of said tax cut is explained.
TxChick — Good things come to those who wait…
Art Loans Get Hung Up Credit Crunch Raises
Concern of Defaults In a Lucrative Market
By LAUREN A.E. SCHUKER
September 1, 2007; Page B1
The credit crunch shaking up Wall Street is now hitting the big-money world of art-backed loans.
For years, art loans — ones with a borrower’s Raphael or Rothko as collateral — were the purview of large banks serving wealthy clients. But as the art market boomed in recent years, other firms have pushed into this lucrative business.
Today, hedge funds, auction houses and specialty lenders all offer rival services. Often they cater to less wealthy borrowers dabbling in the big leagues.
Some loans are like reverse mortgages, letting borrowers receive monthly payments against the value of their art, rather than selling it outright and taking a capital-gains tax hit.
Other lenders essentially act as high-end pawnbrokers, taking possession of the artwork itself during the loan period — a practice that banks with more high-end clients sniff at. (They’re inclined to let you keep the art on your wall.)
As these newer kinds of loans proliferate, concerns are rising in the art world that some borrowers could default or find themselves in over their heads. Art is notoriously tough to value, so if prices fall sharply, lenders could find that they’re holding collateral worth less than the loan it is backing.
That hasn’t happened yet, but experts say there’s a precedent for worries like these. Hope Tate, a banker at Fine Art Capital, a subsidiary of Emigrant Savings Bank, points out that there was a spate of defaults on art-backed loans in the early 1990s triggered by “a very serious correction in both the real-estate and art markets.”
Back then, “the people who defaulted on their art loans for the most part had real estate as their primary business,” says Ms. Tate, who worked on a handful of defaults like these at Citibank at the time.
“When people have calls on other loans, such as real-estate loans, it increases the risk that they will default on their art loans,” she says.
http://online.wsj.com/article/SB118859963931815079.html?mod=home_we_banner_left
the art bubble could be bursting. is the hedge fund bubble closing in?
the Raphael bubble.
The hedge fund bubble has burst.
The institutional investors (who are all that matter at the end of the day) have shut off the spigot completely.
The mood is grim in Greenwich, CT.
Lovin’ it!!!
muffy will have to give back the aston martin
‘don’t frown muffy, we can’t afford your botox anymore and you know how daddykins hates wrinkles on your face.’
Maybe HFA will have time to post here again now?
It’s just another freakin’ asset-backed debt bubble. It doesn’t matter if the asset is art, land, stocks or commodities. When the asset doesn’t throw off enough income to service a fully-amortizing loans, it’s not investment - it is speculation. The speculators gambled and lost. The related debt markets are shutting down - ensuring that potential greater fools cannot get financing to bail out the current specs.
As the various asset markets deflate, those with cash will be in a stronger and stronger position. Relative to houses and vehicles, my t-bills are appreciating about 10% per year right now and that looks set to accelerate. If the Fed really had the powers that some attribute to them, this sort of thing could never happen.
Bernanke to superinflated speculative markets: “Must–not–deflate!”
There is a whole lot of sputtering in the world of high finance these days. I hope all these big banks gag on their toxic subprime investments.
Barclays Copes With a Stall In Cash Engine
By Carrick Mollenkamp
Word Count: 1,067 | Companies Featured in This Article: Barclays, ABN Amro Holding, Bear Stearns, Royal Bank of Scotland Group
LONDON — The engine behind Barclays PLC’s growth and a major reason the British bank has the fuel to bid for Dutch bank ABN Amro Holding NV is its capital-markets business.
When Barclays needed extra cash last month to fend off a European consortium also bidding for ABN, Barclays Capital helped bring in investors from China and Singapore. The unit reported a 33% increase in six-month pretax profit compared with the same period a year earlier.
But over the past two weeks, the Barclays Capital machine has sputtered. On Friday, the unit said it is providing $1.6 billion in financing …
http://online.wsj.com/article/SB118855274528614531.html?mod=hpp_us_whats_news
Major shocker: Investment homes default at higher rates!
Investment Homes Make Up A Major Part of Mortgage Defaults
By Ruth Mantell
From MarketWatch
Mortgages for investment properties constitute a major chunk of defaults in four states with the fastest-rising rates of seriously delinquent loans, according to data released Thursday by the Mortgage Bankers Association.
Mortgages on non-owner occupied properties in Nevada accounted for 32% of prime mortgage defaults as of June 30 as well as for 24% of subprime loan defaults, the MBA said.
In the rest of the country, non-owner occupied homes accounted for 13% of prime defaults and 11% of subprime defaults.
http://www.realestatejournal.com/buysell/mortgages/20070831-mantell.html?mod=RSS_Real_Estate_Journal&rejrss=frontpage&rejpartner=wsj_hpp
Professor B~
In the appraisal biz there are 3 approaches to value. Cost; Direct Sales Comparison; and Income.
For residential properties you establish what is called a Gross Rent Multiplier which is figure derived from dividing the final sales price of a home by what it was renting for at the time of sale. You also can make various adjustment to the rent to compensate for amenity differentials. However, the adjustments must be supported in the marketplace.
Not an easy data figure to come up, but it can be done.
With the steady inflation of residential housing after the recession of ‘82, the Income Approach was deemed less and less applicable because rents were not keeping up with what was being paid for private use acquisition.
So, I have to laugh when I hear the term “investors” pertaining to
single family housing because their ain’t no way in hell any set of numbers were going to work relevant to producing anywhere near a positive net income instream.
Far as I’m concerned these stupid fooks never bought from a rational financial plan , but rather simply from the sell to a greater fool/sucker theory, all with the acquiescence of a dipshit L/O.
And now the morons want a bail-out.
They can all go kiss my azz.
Who is sufficiently wealthy yet dumb enough to buy in California right now?
THE WEEK AHEAD
Housing
Credit’s Crunch Harder on Some
By JAMES R. HAGERTY
September 1, 2007; Page A2
There’s plenty of pain in the home-loan market, but it isn’t spread evenly.
A new Index of Mortgage Pain, devised by independent housing economist Thomas Lawler, shows that the recent drastic tightening of credit will hurt worst in California, Nevada, Florida, Hawaii, Arizona, Rhode Island and New York state. Those states have a higher dependence on the types of mortgages that lenders are now refusing to make or offering only to select buyers and at higher rates.
In parts of those states, the autumn home-shopping season — which kicks off after Labor Day for buyers eager to install themselves in fancier quarters before the holidays — is likely to be a “disaster,” says Mr. Lawler, who is based in Vienna, Va.
Mortgage lenders, finding they can no longer sell off many types of loans now deemed too risky by nervous investors, have grown far more cautious over the past few weeks. They’re still happy to make “conforming loans,” ones for $417,000 or less to people with good credit records and enough savings for a down payment. That’s because such loans fit the criteria for sale to government-sponsored investors Freddie Mac and Fannie Mae.
But lenders are making very few subprime loans, those to people with weak credit records, and have cut way back on Alt-A mortgages, a category between prime and subprime that often involves credit for people who can’t, or don’t want to, fully document their incomes and assets.
Lenders have jacked up rates on prime “jumbo” loans — those above $417,000, which exceed regulatory limits on mortgages that can be sold to Fannie and Freddie.
Jumbo 30-year fixed-rate loans last week were being offered for an average of around 7.4%, or about 0.9 percentage point above those on conforming loans, according to HSH Associates, a financial publisher that surveys lenders daily. Usually, jumbo rates are only around a quarter point above conforming.
http://online.wsj.com/article/SB118860896772315363.html?mod=googlenews_wsj
“…for an average of around 7.4%, or about 0.9 percentage point above those on conforming loans,…”
The implicit subsidy created by the 800 lb FNM/FRE gorillas’ mortgage securitization activities accounts for this 0.9 percentage point gap in interest rates between conforming and Jumbo loans. Think of that as the market’s assessment of the taxpayer-provided implicit too-big-to-fail protection the GSEs enjoy.
The practical impact is to create a notch effect in the bid distribution at $417K, as homebuyers who would otherwise prefer to borrow more and purchase bigger, more expensive McMansions are constrained to package their financing to conform to the $417K cap, in order to enjoy the taxpayer-funded below-market interest rate on conforming loans. This situation bodes rather ominously for the next several months’ market action in areas like our zip code (92127 Rancho Bernardo W in San Diego), where last time I checked (just now), the median SFR list price on the MLS was $1,346,055, while the median sale price for July was a mere $850,000 — in other words, there was already a $446,055 gap between the median bid and median asked price before the credit crunch. It is high time to issue the avalanche alert!
Added right, but typed wrong…
$446,055$496,055Maybe it’s just me, but that sounds like an Ass-pounding!!!
Michael Bolton and Samir are probably worried about that market.
No, no, no. We’re going to federal POUND ME IN THE ASS prison.
The ultimate reason why bailouts (individual and corporate) are a bad idea:
To make capitalism work, every once in a while the foolish need to be bitch-slapped by the invisible hand.
Hear hear!
August 29, 2007
Central banks should not rescue fools
http://blogs.ft.com/wolfforum/2007/08/central-banks-s.html
Bush’s save the house program. Wonder if this will not acutally accelerate the bursting bubble.
It’s easy to be in denial drinking koolaid and laughing at the tin foil hatters on Ben’s Blog. But when the president goes on TV with a save (some) of the FBs hard to argue that all is well - no bubble. I am seeing lots of new listings the past few days. Here in Wash, DC and NY.
“Wonder if this will not acutally accelerate the bursting bubble.”
I am hoping the tax forgiveness for short sales might have exactly this effect. If I was a desperate houseowner who could not afford his ARM reset and could not afford to sell thanks to the nasty tax hit of an extra $100,000 or so in income (in the form of debt forgiveness), the tax forgiveness that W is proposing might be exactly the incentive I needed to get me off the fence and dump my property on the lender.
This could quickly restore liquidity to the housing market, in a similar fashion to the spring thaw of the Alaska ice fields (I hope everyone has seen the footage of crashing chunks of ice falling off the edge of melting glaciers which I am visualizing!). The comps could get screwed up very quickly, resulting in a rapid marking of housing market valuations to fundamental reality.
Your image of huge chunks of ice falling from a great height into the water leads me to the image of the object sinking far below the waterline before eventually rising again to a “fundamental” level.
As someone has pointed out… companies will buy houses for use by executives, and hold the mortgage for their executives. In so doing, the companies will consider this a business expense.
Then the companies will forgive the mortgages: voila, tax free house for the CEO, and a complete write-off for the company.
If this passes I will be talking to an accountant tout de suite.
Would this plan work for a home business? Because I am thinking this might be a good time to start one…
Bush did all of us here, a favor. If any idiot out there didn’t know about the housing crisis, they do now. Sellers will be listing like crazy and buyers will be running for the hills. You know every newspaper, radio station, news mag, & TV station in the country will run that speech. Thanks pres.
I apologize if someone already posted, and I missed this, but this is a true gem. I saw a segment on the news last night about mortgage crisis, foreclosure, blah blah bah… nothing new. Predictably the term “Predatory Lending” came up, again nothing new. But along side these terms a Realtard was using the term “PREDATORY BUYERS” that had the gall to call around making offers as low as $30,000 - $40,000 below asking. Then nerve!
A realtor is obligated to present every and all written offers, no matter the amount or terms. If you run into one that doesn’t, you can go after them legally. Tell them you want the seller to sign the rejection, so you can be sure they even presented it.
Oooh, Oooh, maybe someday I will be a “Predatory Buyer.” I like it. My wife and mother-in-law (both of whom bargain for sport) will be impressed.
Do I get a certificate? Please? I will bid really low if its a cool certificate. Something that says Predatory Buyer in big gold letters would be nice.
A sign of the times, this is one of the Bankrate Top Stories today: “Fighting Aggressive Collectors.”
I have my bubblebucks in VMMXX. Is this safe?