Bits Bucket And Craigslist Finds For September 8, 2007
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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I was watching the local PBS Friday night political punditry show (Tampa Bay area) and just to give you an idea of how desperate Florida is getting, our gov wants to sell the lottery and toll roads in the state to private business. The lottery I couldn’t care less about. Sell MY/OUR toll roads? Not only no, but HELL NO! As one panelist said, it would be a good thing…for one year. The gov gets a lump sum, it helps the budget for one year and we’re right back in the same predicament, except now we’ve got a private corp monkey on our backs.
P-Man~
RE: Desperate…
Lewiston ME, which has had an influx of around 3000 Somalians who came in from Atlanta due to a better welfare system which has resulted in a busted muni budget, has implemented what they locally call a “rain” tax.
The “rain” tax is a surcharge by the sewer and water department based on a homeowner’s roof size secured from the assessor’s department. They then apply a formula to the estimated water run-off from the roof during a rainstorm which feeds into the street drainage system.
The revenues are then funneled back into the regular budget.
Rain tax…coming to a town near you.
That is fricken amazing…What will the bastards think of next ??….Maybe a methane tax based on the number of flushes in each household….
I was thinking about all the toilets that will turn into portolets that get flushed once a day.
EWWWWWWWW
I foresee an increase in the number of homes that look just like the transamerica building.
Wow! Who elects these people?
Would it be any different if they had elected the other choice they were given?
“Somalians”? What? Came from Atlanta? Welfare? My coffee must be a little weak today.
There are a lot of Somalis in Mass. too. They really wore out their welcome.
It’s funny because we have Haitians and so on, and their country is poor and war-torn too, but in Boston they are respectable business people and responsible home-owners. Hell, I worked with Salvadorans, one of which saw his girlfriend murdered in the street in San Salvador, among other things, and they are hard, sober workers in Boston. Who knows, maybe there are Salvadoran crime syndicates in NYC, I really wouldn’t know, but I never heard of any such thing in Boston. (Nigerian crime syndicates, yes, at least on a minor scale … apparently Nigerian immigrants are very superstitious, let’s leave it at that.)
Is it that Islamic whiney-baby stuff that makes Somali males unemployable and bent towards criminality? I dunno.
That is absurd.So what is to say that the rainwater from your roof is not absorbed by the soil around your house.A significant amount of the drainage from your house can be absorbed by your yard.I hardly ever get runoff into the streets down here in az.Theoretically all the lots are supposed to drain to the street but that does not always happen.Your soil has a lot to do with infiltration rates too.If you have a lot of clay then it tends not to absorb water as quickly thus more runoff in an intense downpour. I would be pissed if they started this program out here.
The insane taxing of J6P is going to get worse. That speculation tends to support my contention that in the end, when all said and done, housing will become a cheap commodity like cars, cell phones and PC’s. It won’t be entry costs that will prohibit ownership, rather the insane carrying costs.
“It won’t be entry costs that will prohibit ownership, rather the insane carrying costs.”
Certainly a point well worth further discussion, exeter. One doesn’t need to connect many dots to conclude that taxation is about to be put in hyperdrive - all the evidence is staring us right in the face. We should all be preparing for this eventuality - if we aren’t already.
Have your house declared a federally proteced wildlife wetland. Problem solved. Now, are they also applying this to local businesses? Im betting some of those warehouse sized home depots and wallmarts might have more clout about maiking this go away.
RE: That is absurd
Around the urban Northeast the density of development and the amount of paving is so intense that when it rains, under certain conditions, the waste water treatment plant can’t function properly. So they purge into streams. Nasty stuff.
So…
Be that as it may…somebody’s got to pay for the all this
wear and tear on the sewer systems.
However, the word from the street is the “rain tax” revenue really goes to the education department for all the translators, special education types; and resettlement costs attendant to having a large influx of people who don’t, won’t, or can’t speak English and therefore cannot contribute to the monetary economic base.
Illegal immigration shouldn’t be a crime, either, Giuliani said:
http://apnews.excite.com/article/20070908/D8RH02K00.html
RE: Illegal immigration shouldn’t be a crime, either, Giuliani said:
He’s toast…Nothin’ more than a loud mouth hack makin’ a run on Twin Tower blood.
Fortunately, AZ has its act together.
It would be better if it denied education to children of illegal aliens and denied health care to illegals. Call me heartless (I will be proud), but I’m a taxpayer and tired of illegals packing emergency rooms raising health care costs.
My town charges each household a $3 fee for stormwater drainage. This started after heavy rainfalls in 2003 caused widespread flooding of basements & disclosed problems with stormwater getting into sewers and generally inadequate provisions for stormwater drainage. $ is supposed to go to improving the drainage situation.
How about a one time deportation tax?
Good one Matt…(:
People used to come here to work. Now we let them come to get on the gravy train. Whatever happened to self-respect?
Lewiston Maine is completely screwed and has been for years since the Somalis arrived, courtesy of the Fed refugee resettlement plan. This crowd should have been directed to Kennebunkport, where the big money summer owners could have shouldered the costs. Lewiston was once a nice, middle-class town–but who would want to buy there now with the killer prop. tax burden?
Great idea Spike. That way, the criminals would be quarantined to a central location.
“This crowd should have been directed to Kennebunkport, where the big money summer owners could have shouldered the costs.”
NIMBY. Screw the Kennedys, Bushes and all of these other “elites”.
RE: This crowd should have been directed to Kennebunkport, where the big money summer owners could have shouldered the costs.
LMAO…Man, S66, you are so, so right!
There’s a special place in hell for the do-gooder “evangelical christian” congregations in Minneapolis-St. Paul, especially the Lutherans, who were instrumental in sponsoring the huge influx of Somalis into the Twin Cities. The churches brought in whole families, who then turned around and brought in entire extended clans, who have proven highly resourceful in milking and defrauding every possible dime out of Minnesota’s generous social services networks. Of course the churches, much like Pontius Pilate, have washed their hands of this blight they’ve inflicted on a once-great metropolis.
Sammy,
couldn’t agree more. I’m an ex-Catholic who’s fed up with churches pulling this kind of stunt and then walking away from any criminal or financial responsibility. The Feds are in on this too, often using quiet, middle-class communities as dumping grounds for their refugee projects, then leaving the social and economic costs on the shoulders of who else–the working stiffs. Of course, with close to 20 million illegals, you’d think we would try to get a grip on that situation, but the folks in DC are beating the drums to start bringing in Iraqis displaced by the war…keep watching the MSM for all the sob stories. Egypt and Jordan are trying to kick them out, and the admin is finding this embarassing…but they will not be coming to Kennebunkport or Crawford Texas, you can bet on that.
Drainage fees have been in the works for some time now. Not only does drainage cost money, but it has serious implications for the environment and civil safety. Runoff from roofs contributes to flash floods and sewer overflows on a regular and ongoing basis. Rather simple and cheap changes to construction can make big changes to runoff, and green roofs can eliminate it almost entirely. Charging people for the nuisance they contribute to is the first step toward letting the market work its magic.
So, Mole Man, do you support “drainage fees” being diverted to the general budget?
Most stuff administered at the municipal level works more like utility fees. The amounts are based on some sort of usage measurement and go directly to the involved departments. Garbage service, for example, usually is handled by fees that support contracts with agencies to do the collection. Drainage fees are most likely to be handled by whatever agencies handle sewers and any storm systems like emergency pumps.
If the way your civic institutions allocate and handle funds is not ironclad then you as a citizen have work to do.
Given the huge nature of the problem, should the money not be given back to the homeowner in the form of rebates to help them upgrade their roof? Obviously, this is yet another scam by local government to shore up the city administrators retirement fund.
lol, in Gainesville the city employees are on a city pension plan but the COMMISSIONERS and MAYOR are on the STATE pension plan with HAZARD pay (as if they were staties or something).
Oh yeah, that’s fair.
(Btw, a bus driver was beaten about the head by a crazy person three years ago. Another was stabbed by a crazy person ten years ago. Drivers do not get hazard pay. Haven’t heard of any commissioners in G’ville being in any danger except Ed Braddy when he was drunk and driving and left the scene of an accident. Oh wait, that’s right, the person didn’t press charges.)
We haven’t got a rain tax, but the intent is the same: make people pay for runoff from their properties into the sewer system. Ours is called an environmental assessment fee (fee not tax, so it isn’t deductible), and it is currently assessed against business owners based on the square footage of paved area of their property. Homeowners are currently charged a flat rate, but if a homeowner puts in a rain garden (a sunken garden near the curb planted with weedy-looking native plants, designed to trap runoff in the yard) they get a 15% discount on the fee.
Our city had no choice. Our un-elected Metropolitan Council (Twin Cities, MN) told us we’re dumping more water into the sewer system than a city our size ought to be, and if we don’t reduce it, we’ll see a steep rise in everyone’s sewer bills. The idea is to find the folks who’re dumping the most water into the system and make them pay for doing it - or encourage them to stop doing it.
Some folks had their house gutters tied into their sewer drains. Is that a standard practice in your area, and is that why the ‘rain tax’ is based on roof size? It’s now illegal here to tie gutters into sewers, and you’re required to decouple them and let the water drain across your property instead.
Dear HD74:
Can you give us an official link to the info on this tax?
Thanks,
Big V
Why not? Everyone else is doing it.
Troubled toll road’s sale is best of a bad situation
http://www.denverpost.com/opinion/ci_6751790
Pennsylvania Toll Road Sale Details Kept Top Secret
http://www.thenewspaper.com/news/16/1660.asp
The selling of toll roads to foreign companies in the USA is quite common. Indiana turnpike, Chicago Skyway, Denver Toll Road, Pennsylvania Turnpikes, New Jersey etc. I guess it’s part of globalization.
Doing jobs Americans won’t do. Pretty soon, americans won’t do any job.
Buying up the old U.S. one snippet at a time. Many of these piratizing deals - roads, water systems - have gone bad, with no to poor infrastructure maintainance and excessive charges.
North American versions of Cochabamba coming right up?
“Big Houses Are Not Green: America’s McMansion Problem”
Excerpt:
“The recent mansion boom produced millions of energy-wasting homes with thousands of square feet that Americans don’t need — not the behavior of a society that’s thinking about a sustainable future.”
“The just-popped housing bubble has left behind a couple of million families in danger of losing their homes to foreclosure. It has also spawned a new generation of big, deluxe, under-occupied houses bulked up on low-interest steroids.”
“The long-term impact of titanic houses parallels that of gas-gulping SUVs and pickup trucks. Sales of the big vehicles may be ebbing, but the buying binge of the past decade means they’ll still be out there by the millions, belching pollutants, for years to come. In the same way, even if the mania for big houses fades, Americans will be stuck with heating, cooling and powering the millions of them already littering the landscape – not for years like SUVs, but for decades.”
http://www.alternet.org/environment/61523/
Amen, Key Lime. I wanna get me a big old bulldozer and plow ‘em under. McMansions suck, anyway.
They just plowed down 2 more 40s homes on my block here in Studio City to build mcmansions….the builders are still razing my neighborhood. AND the big, overpriced piles of sh!t keep selling.Bleh.
today’s Mcmansions are tomorrows duplexes.
RE: today’s Mcmansions are tomorrows duplexes.
You can bet there will be a surcharge for the zoning change.
My family and I live in 1/2 of one of yesterday’s McMansions (early 1980s vintage)
There are a couple things I’ve noticed about the housing market in the last few years but still can’t comprehend….
Why would any home buyer pay for more home than they need?
1- With a fixed mortgage I know at least how much I owe for the next 15/or 30 years. But with rising property taxes (bc gov’ts don’t know how to budget and spend responsibly), why would any buyer want to put themself into a home that has that growing liability. I can always refinance my mortgage, not my yearly property taxes. What a hassle that would be!!
2- Another liability is ever-increasing costs to heat/cool/maintain the bigger home.
When I ever retire (which is still a long way off), I never want to have to worry about these rising costs eating away at my fixed income.
I’ve learned not to rely on my government for handouts or bailouts in times of crises. The majority of our leaders would take care of themselves and friends before you. Take care all! We are approaching scary times.
The mantra was to buy the biggest house “you could afford” since appreciation will ensure the “investment” gives you the greatest profit.
Well, people bought homes they couldn’t afford and they don’t seem to be appreciating. No one told them about HOA’s and taxes as well as insurance. Makes you wonder who started spreading this “rumor”.
“Why would any home buyer pay for more home than they need?”
Because like the stock market, real estate always goes up in the long run.
Try not to examine the logic while you are at it of what use J6P would possibly have for an ownership share (effectively nonvoting) of a major corporation.
Why would you think economic considerations entered into the decisions to buy these monstrosities? Far as I can tell, it’s all about a weird concept of image, stirred liberally with magical thinking.
I don’t think those McMansions built the past few years will last decades. Many of them are falling apart already.
Isn’t it funny how so many people are freaked out about “global warming” yet most of them want 4000sf houses? Even Al gore lives in a giant mansion. Leonardo DiCrappio has a mansions of his own. It’s ok because they are “green”. I don’t believe man is responsible for global warming, but I still drive a small car and would never buy anything larger than 2500sf. Who wants a big empty house? I just need a nice kitchen for cooking and a backyard for my dogs.
With many people it’s Do as I say, not as I do.
Part of the sickness in America seems to be that obsesion with bigger better things. We are out of touch with our core values.
I own a hybrid and have been realy concerned about the enviroment for a long time. Did a bit of reading on global warming and prety convinced we have zero clue what is going on.
I’d really like to see some of the alleged models for the global climate. Everybody publishes summary results but they don’t give you any details on assumptions, modeling parameters, equasions… nothing.
We are obsessed with huge things humanly made…
But have problems seeing the bigger picture, for some reason?
Let me help you out - its about more taxes and controlling people’s behavior - only.
“Part of the sickness in America seems to be that obsesion with bigger better things. We are out of touch with our core values.”
That’s what happens when our “leadership” uses language that reinforces selfishness, condemnation, self-righteousness, greed and fear. Basically tacit support of the worst things human.
Have you noticed how quiet they and their barking minions have been over the last 18 months?
is it a pious or a hindsite ?
in DC 90% are used to avoid hov lane use restrictions
I heard they emit a lot of smug.
Ed Bagley Jr still lives in a small 50s house…unrennovated except for the green renos. The man lives his quest.(He lives about 10 blocks from me and I have been to his house)
And he drives a car powered by his own sense of self-satisfaction.
The real details are available. If you _really_ want to see full details on the models, go to a University library and start reading the technical literature. Not the summary in Scientific American, but the next few levels up.
My own Dad is guilty on this count. He and his wife are “green” to the gills and built a retirement home with rammed earth walls, compact flourescent bulbs, radiant heat, triple-glazed windows, etc…
But the thing is 6000 sq ft for two retired people! So the heating bills are still huge. And to top it off, they built in a desert outside of Santa Fe, NM and even keeping “xeriscape” vegetation alive requires a huge amount of water in the summer.
I’m with Palmetto on this. A lot of these McMansions will be future tear-downs because of the the lousy construction…and a lot of the rest will become low-income multi-family neighborhoods out in the boonies.
I’d like to buy eventually, a 1000 sq ft or so with a 1/2 acre for the dogs…but where depends on how taxes and local budgets shake out…as exeter points out, if the carrying costs are killers, I’d rather rent. Having sat out the bubble, I’m not going to volunteer to pay the costs.
single person = 700-1000sf
couple = 1000-1500sf
family of 4 or 5 = 2000-2500sf
There are many factors involved. For example: in southern EU countries like Spain and Italy most people in the cities have small apartments and are happy with it, because they ‘live on the street’; they spend most of their free time outside. In northern Europe people spend most of their free time in their own home and so they have larger homes (despite the fact that the climate makes heating these larger homes relatively expensive).
I live in FL with my GF in 540sqft … and loving it.
I would like a larger kitchen, but I am glad to wash my dishes in the sink to be away from Paradigm Properties LLC.
I had an apt nearly 1000sqft before, but I actually like the smaller bed. and living room better than the bigger ones. It really doesn’t make any difference with guests because the 980 was still cramped with people over. I got rid of some furniture and arranged space differently and I think I could get a decent crowd in the 540.
Jesus, I’ll bet that cost a fortune. I’ve looked at those.
Actually it didn’t cost much at all. He built in 1998-99, and every builder quoted him $125/sq foot then for rammed earth adobe construction. He decided it was too much, so acted as general contractor himself and built the whole thing for $60/sq ft (not including his time of course). Lot was just $100k back then (a few acres). Now, of course, the house is appraised at $1 million+. But dad could never afford a million dollar house (retired professor, never made all that much money), and in fact has thought of selling just because he thinks the cost of owning is too much (his wife thinks otherwise, however).
GHD — sounds like maybe he wants to travel and she doesn’t.
Visa Versa. She wants to spend 3 months out of the year traveling around the world and he thinks they can’t afford it.
While the size of the house is way too big for a retired couple, at least they are “trying” to do right WRT building “green”.
Sounds fascinating. Are they in that “recycled tire house” community in NM?
I think green building will become the next “big” thing when the market hits bottom. Look at how many on this blog want to build their own green houses. The homes built by the traditional homebuilders are NOT what the average person wants, IMHO.
“I don’t believe man is responsible for global warming, but I still drive a small car and would never buy anything larger than 2500sf.”
You can’t blame me. My last apartment was so small that I had to step into the hallway to change my mind. I haven’t driven a car in years. It’s a nice feeling.
NYC’boy,
In Phoenix, I met one person (so far) who says he will use the new light rail system when it starts in his area. He lives a stone’s throw from one station. I’m excited about it myself. I am a mass transportation enthusiast. Alas, I drive an economy car and would love to drive it less.
I love simple living. Gotta stay away from Scottsdale and Paradise Valley though. LOL
You must be illiterate in science if you do not believe that man is responsible for global warming.
“illiterate in science”
Yes, that must be it.
This country has devolved to a state where public discourse consists of telling each other “you’re an idiot”.
A quick literacy test:
1) The planet has a history of warming and cooling periods (think ice ages coming and going) but it’s different this time. True or False
2) The planet is currently coming out of an ice age.
True or False.
3) Man is omnipotent and has a complete understanding of the planet’s weather patterns and can manipulate them at will.
True or False
4) Carbon Dioxide is the number one green house gas.
True or False
If people want to have a cause to fight for, so be it, but please don’t expect me to turn my back on basic science fundamentals in order to support the latest cause du jour.
2
Thank you for your reasoning Suzanne’s ex.
I saw one post on AOL saying that yes, Global warming/cooling has occured in nature many thousands of times before the human species. But he said that this is the fastest that we are headed to global warming. I laughed at that. He gave no documentation of course. No URL.
“You must be illiterate in science if you do not believe that man is responsible for global warming.”
The idea of global warming is a highly political issue, used by many politicians to draw votes and espoused in politically correct media. There are many competent scientists who do not believe in “global warming” meaning this terrible thing caused by man. We know that there used to be glaciers in many parts of the world where there are none now. Presumably there was global warming that happened before the industrial revolution. If you want to be literate in science you should read up on both sides of the argument, which from your statement I gather you have not, or you would be open to the idea that a person can be literate in science and not believe than man is responsible for global warming, such as it is.
“There are many competent scientists who do not believe in ‘global warming’ meaning this terrible thing caused by man.”
Oh, really? Please name a few. Contrary to your unsupported statement, there seems to be little debate among climate scientists as to whether global warming is a) happening, and b) caused by human activity. That is why earlier this year several thousand of the world’s top climate scientists (including both authors and reviewers associated with the Intergovernmental Panel on Climate Change, hailing from over 100 different countries) agreed that there is a greater than 90% chance that the earth is warming, and that warming pattern has been the result of human activity over the past half century. Most of the debate about global warming seems to be taking place not among scientists, but among lobbyists and politicos who have an obvious interest in downplaying the threat of climate change. It has been an amazing public relations coup that certain lobbyists have been able to convince people that they know more about climate science than the people who have dedicated their lives to studying it. Even more absurdly, these scientists have been accused of having a political agenda. The people making the accusations? Lobbyists and politicians, most of whom have no scientific background whatsoever. Absolutely amazing. The number of “competent scientists” who dismiss global warming as nonsense is quickly approaching the number of medical researchers who believe that smoking is harmless to the health.
“Presumably there was global warming that happened before the industrial revolution.”
I don’t see that this presumption is warranted at all. Please provide your reasoning.
You are quite correct that one could be literate in science in not believe that humans are responsible for global warming, but to take that position these days would likely require some willful ignorance on the part of the person in question.
many competent scientists, but not in climate science
get a clue, science is competitive. you use the fruits of science every day so clearly the system works. so you tell me why the experimental and peer review system isn’t working here.
btw, the tv weather teleprompter reader is not a climate scientist … nor is the five day forecast likely to get any better. read up on chaos theory for the straight dope here. this does not, however, imply that climate modeling is impossible.
Actually, I think you’re illiterate if you think man IS responsible for global warming. People act like it’s never happened before. All I see is the environmental crazies using psychology against people by repeating something so much that eventually large numbers actually believe it.
Environmental activists are the new Communists.
read Ayn Rand - the coming anti industrial revolution 1968 ?
New communists - new facists - it doesn’t matter, Blano. Its just another way for some people to tell others how to live - and that’s just plain bad coming from any political direction.
Thirty years ago it was the coming Global Ice Age caused by man and anyone who didn’t agree was illiterate in science. I guess I’m still illiterate in science.
The media pushed that, not climate scientists.
I am a physicist by training, and I am sick of this “debate”. Would non-physicists so casually debate the finer points of transistors or quarks?
Face it, you don’t know what you’re talking about. Unless you have at LEAST an MS in Physics, I don’t want to hear it.
Btw, Envi Sci or, worse, “Ecology” is often a bs major and I don’t take those people seriously. It’s ideology dressed up as science. Much like the tobacco companies claiming that smoking doesn’t cause lung cancer or heart disease. Of course, we all “know” that cigs cause lung cancer because we all know people who died from it … just like we all “know” that the 1970’s was the next Ice Age and weather forecasting is crap because we watch the TV news.
Well, guess what, the TV news are incompetent hacks … I should know, my brother is in television. He was the kid most likely to become a used car salesman (or mortgage broker, heheh) back in high school because he would tell any lie for a dollar.
Not wishing to come across as a know-all but:
“illiterate in science”= ‘innumerate’
Just so’s ya know, like.
What bothers me is when people refuse to believe things are changing. Go to Glacier NP and watch the glaciers melt, down to about 50 from 150. You can stand with your binoculars and actually watch them melting (they all do this in the summer, then are replenished in the winter, but now the winters aren’t as replenishing). But some of them have been melting since the 1920s. I don’t know when global warming was supposed to have started. To me, global warming is becoming a phrase with too much baggage, I prefer the term climate change. It definitely is happening, but I can’t state why, scientists vary in their opinions. But in any case, why waste the world’s resources? McMansion owners are doing exatly that, from construction to heating/cooling.
PS, for the record, I consider myself an environmentalist, but I don’t belong to the Sahara Club or any other, I prefer to make my own judgements.
PPS I must say I don’t consider most Sahara Clubbers to be real environmentalists, either…getting OT, sorry.
I can’t quite understand the loons who deny global warming. I suspect they are merely part of the shrinking minority of nattering moonbats who have ZERO skin in the game. It has long been established that the polar ice caps are melting. The debate is, or should be about the cause.
As a scientist who works in the global change area, I certainly don’t see human activity as the only driver of global change or even the dominant driver. We know: (1) CO2 (and other greenhouse gasses like CH4 and N2O) concentrations in the atmosphere have risen dramatically due to human activities, primarily burning fossil fuels; (2) the earth is warming, glaciers are melting, sea temperatures are rising, etc…; (3) CO2, N2O and CH4 are greenhouse gasses.
However, connecting what we know and concluding with certainty that anthropogenic greenhouse gas emissions are the dominant cause of global warming isn’t easy to do. Most scientists would agree that anthropogenic greenhouse gasses are contributing to global climate change, but it is hard to say exactly how much.
But Guys:
How can you say that humans aren’t contributing to global warming? We already know that we’ve been releasing CO2 into the atmosphere over the last 100 years at an unnaturally high rate. We also know that global temperatures have been rising in high correlation with the increase in CO2 emmissions. We also understand the mechanism by which atmospheric CO2 causes global warming. We have high correlation and an understood causal mechanism.
When it is said that a true “scientist” would remain open to the possibility that we are NOT causing global warming, I always cringe. Scientists are taught to calculate their level of certainty based on observable facts. They are NOT taught to withhold judgement ad infinitum just because there are still some people in the world who disagree with them.
Nothing can be known with 100% certainty. We can’t even say with 100% certaintly that housing will continue to crash. I’d say that 85% certainty is good enough to take action.
And the fact is that for the last thirty or so years, scientists in this field have been bitterly fighting over models and data, each trying to get that Nobel Peace Prize or prove that dick who humiliated them during their doctoral defense fifteen years ago wrong.
And instead of the field getting more fragmented and the studies never getting any better, a la chiropractic or NICAM, a lot of the controversies of the early 1980’s have been settled. A growing consensus is appearing in the field. It’s quite remarkable … but the public only hears these partisan jabs, either self-serving propaganda of Exxon and ilk, or self-serving propaganda by fear-mongers.
I live a pretty low-impact life because I care about the environment I live in (ie, not poisoned by ore-extraction, or littered, or uglified by McMansions). I don’t even own a car (I bike). But I think Al Gore and his followers are full of crap. Not that global climate change isn’t occurring–it certainly is. Try 2degF, ocean temps. Scary stuff. But buying a new hybrid does more damage to the environment than limping along your old ‘91 commuter car.
Priuses are pretty, but calling them good for the environment is a joke. Ride a bike, you useless pricks. (They do reduce smog in city traffic, which we have a lot of in gainesville. Heck, traffic is probably worse beCAUSE of the Prius, as they can afford to buy more gas. Pricks.)
Especially the fight to park the Priuses downtown for Farmer’s Market … gag me with a spoon. OMG TAKE THE BUS!!!
Do you get your science from Wikipedia? That appears to be the case. Please learn to use the library.
If you knew anything about the global warming issue, you would know that there have been periods in the earth’s history when temperatures and carbon dioxide levels were significantly HIGHER than they are presently. Where did that carbon dioxide come from? Hint: it was not from prehistoric man buring fossil fuels.
Also, all of these ‘predictions’ come from building computer ‘models’. Ha! Do you know how easy it is to bias your model to get the ‘answer’ that you want? Its relatively easy and don’t think that people don’t do it to further their agenda.
If you go back ~30 years, there was a huge fear of planetary COOLING - it was even on the cover of Time. Can you explain why carbon dioxide emissions by man weren’t causing warming throughout the first 3/4 of the 20th century?
I believe that carbon dioxide emissions from fossil-fuel burning does not cause global warming - until I see it PROVEN [not through the use of models]. There is certainly much that we do not understand about the earth. Personally, I think that a potential source of global warming is the deforestation that we perform in the name of ‘progress’. Of course, this is compounded by the paving of huge swaths of land for roads & parking lots in cities which traps heat and shows up in higher thermometer readings.
One of the most eye-opening experiences that I have had was learning where the thermometers are that we use to record the temps for ‘official’ recording. When first set up, these thermometers were often in outlying areas, typically at airports. Today, they are generally in the exact same place that they were then, but the surrounding areas have been cleared and much of it paved. This results in slightly higher temps due to the additional heat trapped by pavement and/or buildings.
I may not know as much science as some people, but I do have a Ph.D. in chemistry and I am a stickler for following the Scientific Method.
Dear Brian:
I don’t mean to be rude, but a degree in chemistry does not make you an expert on ecology or physical geography. Temperatures and atmoshperic CO2 levels have been rising measurably over the last 100 years, not just the last 25. I learned that in ecology class when I was a junior in college.
I know there was a global cooling scare. Perhaps we would be experiencing cooling if it weren’t for the fact that we are now releasing so much CO2 into the atmoshpere.
While it’s true that the Earth cools and warms as time goes on, it’s also true that changes in climate are not random. They’re caused by something. In this case, it’s us. Now here’s the thing: global warming will be very hard for mankind to adjust to because we have built static societies. It will not be easy for us to convert cool northern and coastal areas to farmland because most of those areas are already paved over and poisoned with mercury, lead, pesticides, herbicides, etc. It will also be more difficult for other species to adapt to the change because their migratory channels, in many cases, have been blocked by highways and cities.
Deforestation also contributes to global warming because it decreases CO2 sequestration, although I think pavement has been shown NOT to contribute to global warming, since the heat is reflected and is able to escape from the atmosphere (although all that excess CO2 is still doing its part to trap that heat).
Inywayz, the scientific method has been applied extensively to the study of this phenomenon. About two years ago, I read an article where they did a survey and it turned out that something like 95% of all people who hold degrees in some sort of science AGREE that mankind is contributing to global warming. I wish I could remember the source so I could give you a link. I could google it if I weren’t so lazy.
Of course, you’re entitled to disagree, but it looks like the onus of proof is going to have to fall on your shoulders if you wish to debunk the bolus of sceintific inquiry that has led us to this point.
“Guess” we’re beginning to “see” how many asked for “their” money back…
Singing that old ‘60’s tune: “Try to remember… the kind of September
…When life was slow and oh, so mellow”
Outflows from hedge funds
http://biz.yahoo.com/ft/070907/fto090720071010442131.html?.v=1
Note:
“But the secrecy that surrounds hedge funds means these estimates should be treated with caution. They are extrapolated from a database that covers one-third of the hedge fund industry.”
They finally figured out that hegde funds are mostly a scam as they are currently structured. The contracts encourage HF managers to take huge risks with your money and discourages any risk management.
“…to take huge risks with your money…” only after you have paid a ginormous fee up front…
I watch many “hedge fund” managers on CNBC make predictions. They are then wrong most of the time. In fact, many are worse than Jim Cramer. I guess anyone could be a hedge fund manager and then take 2% of the deposits and 20% of the profits. Where do I sign up?
And that may be the next shoe to drop in the financial markets…Those hedge funds do not have the reserves to cover significant redemptions…
Many of them are levered to the hilt. Every $1 of redemption will require that that the fund sells off $10 or so of assets. This is where it is very important to be invested in the right sectors and assets.
two words:
tick
tock
I am waiting for the private equity implosion. Just like many bought houses hoping to flip in a few years for a nice profit, many private equity companies like KKR and Blackstone bought companies to flip back onto the stock market in a few years for a nice profit. The company of course would have already been loaded up with debt and the Private Equity companies have already given themselves a nice payment much like a Vampire sucks the life out of their victims.
However, this is going to blow up in their faces if the economy slows, which it will.
People keep saying, too big to fail. Well, this problem is too big to fix. The Gov’t can’t fix it this time. It will only be worse. Restore confidence to free market economics and stay out of it!
You may not have to wait long. Bloomberg yesterrday posted that KKR is trying to complete it’s First Data buy-out and the ibanks on the hook are having trouble offloading the debt involved to investors. If the ibanks can’t see it, they’re stuck with it, and KKR is taking a hard line and refusing to let the ibanks off the hook.
Should do wonders for the ibanks financials. Blacksone’s share price hit its lowest level ever yesterday.
From the FT…Euro banks on the hook too…
“Two UK high-street banks are saddled with some of the largest pools of leveraged loans for pending European private equity deals, according to industry estimates.
Barclays Capital and Royal Bank of Scotland have between them more than $20bn (£9.9bn) of loans still to syndicate, coming second only to Citigroup, which has almost $12bn.”
If these loans are such great investments, why don’t the banks just keep them??? I am being a bit sarcastic here, but isn’t that a fair question??
Blano,
These loans represent a large percentage of a Bank’s net worth (as a single loan). Banks are highly leveraged by nature. The transactions were underwritten with the intention of taking a big fee on the whole transaction then selling down, passing on a portion of the fee as an upfront to the acquiring institution. The credit risk perspective has changed dramatically since these deals were first cooked - purchasers would want a much bigger up front fee, unless the deal can be re-worked to lessen the credit risk (more equity, better financial covenants). Just as Tom said, the underwriters were flippers that caught holding the asset. Now these deals are eating into capital allocation.
Because they built their business model on passing them along to investors. If they’re forced to keep them, then they are basically done lending since all their capital will be tied up.
http://tinyurl.com/27yyx3
http://tinyurl.com/28bqal
It’s waaaaay over my head, but this guy opines that China stuck it to us over a little backroom deal gone south on them. Kind of makes you wonder, coupled with the item yesterday re: China bailing on T-notes too.
Reading Hwy50’s link, it looks like same-old-same old — the insiders tiptoed out the door before any of the other investors even smelled smoke. Insider money: safe in the Caymans. Everyone else’s: evaporating by the day. Another pigmen Gotcha!
Twelve remaining lots in Amity Township’s upscale but unfinished Pond View development were bought at sheriff’s sale Friday by Bancorp Bank, Berks County officials said.
The bank, based in Exton, Chester County, has a $2 million judgment against owner Pond View Associates LLC. The bank paid the $3,100 cost of the sale for the lots along Pine Lane near Route 662.
Bank officials were unavailable for comment.
A separate sheriff’s sale of 32 remaining lots in another upscale but unfinished Amity development, Glenwood Estates, between Morlatton Road and Russell Avenue, was postponed for undisclosed reasons.
Harleysville Bank and Trust Co. has a $4.5 million judgment against the owner of that development, Commonwealth at Glenwood LLC.
Both developments were marketed by Commonwealth New Homes, Lederach, Montgomery County.
Me thinks you surely “jest”:
“We don’t know exactly where all the exposure to this class of securities rests,” Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, told the Atlanta Press Club on Thursday. “The opaque nature of our current financial world is the result of a long trend of replacing direct bank lending with less transparent investment vehicles in securities markets.
& don’t you just “love “their” attitude:
A Citigroup spokeswoman said the company would make those filings “when we deem appropriate.”
“…and then it went dark”
Investors urge more sunlight on securitization
http://www.reuters.com/article/ousiv/idUSN0723487820070908?sp=true
I though SOX was supposed to have made everything more transparent? LOL
Now we have more major accounting scandals and and firms hiding debt bombs off their balance sheets. How about we stop passing more new laws and start using the ones currently on the books to prosecute and send these people to jail? I want to see some executives and board members in orange jumpsuits.
I agree.
Hey, its not my idea, but part of my summary to my boss this week.
I think Leamer has nailed it.
BTW - How many people actually remember a real recession? Actually, 2001 wasn’t a recession, but surely felt like one in California. Otherwise, you have to go back 17 years for a recession. I doubt anyone under the age of 40 really remembers too much about a real recession. Of course, I’m over 40 and lived through a very nasty one 10 years ago in Hong Kong. Let me tell you, people in their 20’s and 30’s have NO IDEA of how painful it can be to themselves and their families and friends. Get cashed up!
It is housing that has led recessions in the US for the past 60 Years
The most important and insightful economics paper on the US economy that I have read in a very long time was released this past weekend at the Federal Reserve’s weekend in Jackson Hole, Wyoming. The title of the paper is “Housing and the Business Cycle” by Professor Edward Leamer of UCLA. While it is well written and even humorous in parts, you also need to be comfortable with r-squared’s and the like. It really shakes the rust off of my statistics classes! It is well worth the read and can be found here:
http://www.kansascityfed.org/publicat/sympos/2007/PDF/2007.08.03.Leamer.pdf
The key points of this paper include the following observations:
Weakness in residential spending precedes recessions; weakness in equipment and software coincides with recessions.
It is residential investment that contributes most to weakness before recessions. In six of the ten recessions, residential investment was the greatest contributor to weakness prior to the recession.
After residential investment as a contributor to prior weakness come consumer durables, consumer services and then consumer nondurables. Those are all consumer spending items – it’s weakness in consumer spending that is a symptom of an oncoming recession.
The timing is: homes, durables, nondurables and services. Housing is the biggest problem in the year before recession, durables is the biggest problem during the recession. Business spending has no weak components prior to a recession.
False Positives: There have been two false positives in the last 60 years. 1951-2 and 1966-67. In both cases housing was weakening substantially but there was no recession. Why is that? It was the Korean War and the Vietnam War. Those two false positives occurred coincidentally with a big ramp-up in defense spending.
False Negatives: There have been two false negatives in the last 60 years: 1953 and 2001. 1953 was due to a huge shift in defense spending which dropped dramatically almost the day after the Korean War ended and the false negative in 2001 was due to the tech wreck from the internet bubble.
The reason housing is so important in recessions is that homes have a volume cycle, not a price cycle. Home prices are very sticky downward, and faced with a decline in demand, it is the volume of sales that adjusts, not the prices. With the decline in sales volume comes a like decline in jobs in construction, finance and real estate brokerage. The sluggishness of price adjustments is what makes the volume cycle so extreme, and what makes housing so important in recessions.
Conclusion: It’s a Consumer Cycle, not a Business Cycle. Prevention of a consumer cycle requires special focus on the volatile components; residences and durables. Target sustainable building of homes and cars, and sustainable rates of appreciation of homes.
HK,
If housing prices do not decline in a recession, does that mean by his definition we are already in a depression?
How many people actually remember a real recession? Actually ??
I remember the last three…Four if you want to count the little blip in 2001…
I remember 90-94 recession. Jobs were scarce and RE tanked bad. Of course that is when I bought my first house.
Same here.
1982 still scares the shit out of me. You can quote me on that.
“1982 still scares the shit out of me. You can quote me on that”
Little OuroVerde tried her luck with a 1bedroom condo in W. Hollywood. Mommy bailed her out and we gave it back to the bank. Oh and then there was the other 1bd. condo off Sunset we sold to a film editor.
“1982 still scares the shit out of me. You can quote me on that.”
That was the year I decided to stay in school. Until 1986.
I remember 90-94 recession.
Can’t hold a candle to the ‘74/’75, ‘81/’82 debacles.
Oil shocks, (you couldn’t take your car on a 200 mile trip without calling ahead to find out if gaz stations would be open for the return trip!), Vietnam war inspired inflation, Jimi Carter, stagflation, junk cars, prime @ 21% prime rate; 16% 30-year mortgage instruments.
…the stuff of real nightmares.
The one we are already in, will make those pale in comparison.
I remember the advance planning I had to do to move a few hundred miles to another job back in the 70’s, not knowing if there would be enough gasoline for sale on the way, and getting a 11.5% 30-year VA mortgage in 1980. I was a child during the 1957 recession & remember my mother breaking up furniture & burning it in the fireplace to keep warm. My mother told me about eating lard sandwiches and making “tomato soup” at lunch counters using free cups of hot water & ketchup during the “Big One” of the 1930’s.
“Oil shocks, (you couldn’t take your car on a 200 mile trip without calling ahead to find out if gaz stations would be open for the return trip!), Vietnam war inspired inflation, Jimi Carter, stagflation, junk cars, prime @ 21% prime rate; 16% 30-year mortgage instruments.”
And 1984’s liability crisis wiped out the contactor class workers, father n son business, etc., especially in “lawyer thick” California.
I got out of college in late 89 - what a cr*py time to try and find a job! Young’ns got lots to learn, and while we’ve been trying to warn them… they all seem to be a bit deaf in this regard.
Good Times. DY NO MITE!
Excellent post. By using that logic, one can say that if sellers weren’t so glued to their fantasy price, the depth and breadth of a recession wouldn’t be so wide and deep. You’d think that the evil group that our elected officials report to would lean heavily on business interests to pressure sellers to reprice downward, ie NAR, Banks, private lenders etc.
I don’t know much of anything, but from what I have heard/read from others is that often a housing slump is caused by a recession, not the other way around. That is why builders and the like are so puzzled right now.
Are you telling me those tied with RE don’t speak RE gospel?
“False Positives: There have been two false positives in the last 60 years. 1951-2 and 1966-67. In both cases housing was weakening substantially but there was no recession. Why is that? It was the Korean War and the Vietnam War. Those two false positives occurred coincidentally with a big ramp-up in defense spending.
False Negatives: There have been two false negatives in the last 60 years: 1953 and 2001. 1953 was due to a huge shift in defense spending which dropped dramatically almost the day after the Korean War ended and the false negative in 2001 was due to the tech wreck from the internet bubble.”
“Positives” / “Negatives” are subjective measures of housing market weakness, subject to the analyst’s (Leamer’s) discretion. Try using “25% decline in residential construction investment” for your “Negative”. I get a 7 out of 7 prediction success rate for recessions going back to 1955 (and we are currently in the eighth 25%+ residential construction recession…).
Hi Prof:
I think in this context that a false positive is a “false alarm”, i.e., this model would have predicted a recession, but there wasn’t one. A false negative is a “failure to alarm”, i.e., this model would NOT have predicted a recession, but there was one.
Your decline in residential construction, since it’s predictive accuracy has been 100%, would have been neither a false positivie nor a false negative.
US Business cycles:
National Bureau of Economic Research
http://www.nber.org/cycles.html
I remember mid 70s. It was grim. This will be worse - most of society expects a much higher level of lifestyle than 30 years ago. In those days, credit wasn’t easy and most folks had to live within their means.
Recessions I remember: Most of the 1970s, 1980-1982, 1990-1994 - I remember when the stock market was “sideways,” meaning the Dow charts went up x points, down x points, up y pointd, down y points, you get the drift, for the year. 2001-2002 recession, and then the current 2007 deal, which seems to be morphing to recession.
On the other hand, I had a job interview at 10:00 to 11:30 a.m. on Friday and the job offer at 5:00 pm same day. Very good pay with bennies in my metro area. I’m also assured an east coast position with higher pay but no bennies. Personally, I don’t see a bad economy for people who are in embedded software. I hear the same good news of jobs galore is in the health care industry.
The “wrong direction”?
Bugs: “eh, I don’t think so Mo” “…eh, hey Moz, you’d better go see Daffy…I think he has some SP450 shoe polish to prevent any more of Martin the Martian’s gamma-ray-gun skin tone damage…
“During the past two years the growth in home price appreciation has stopped dead in its tracks and in many areas of the country it has turned in the wrong direction,” Mozilo said in the letter
Countrywide may cut up to 12,000 jobs
http://biz.yahoo.com/bizj/070907/1518117.html?.v=3
So how does Bank America fair with all of this news? Is their 2.1 billion investment at risk?
BOA got stucco with a chunk of CFC.
BOA Blew chunks?
BofA is not the new kid on the block, in case you were wondering. They existed before the 1980s (customer since 1977). They have been through several economic crises intact.
I don’t think BofA just plunked $2B down for nothing.
I read somewhere that BofA probably also shorted a huge chunk of CFC at the same time. BofA wouldn’t give this kind of cash up without hedging it someway. They get preferred stock for their $2B. I’m not sure exactly of the pecking order at CFC bankruptcy time, but I think BofA would get the mortgage servicing division, which is one of CFC’s most lucrative businesses. The post I read said “BofA will get to cherry pick the best parts of the CFC carcass”, kind of a gross analogy…
Don’t know if it’s true, but sounds plausible.
I’ll guarantee you that they hedged. It’s standard procedure to hedge when lending money to a firm that is in distress. either you hedge or you’re guaranteed to a piece of their best assets in case of BK
Yeah, I saw that CountryWide cut this morning also….Its a 20% cut on top of their previous cut…First American Title just had a huge cut in California also…And, IMO, there is more to come….
“First American Title”
Is Cagan still saying it’s all contained?
Its accross the board….WAMU is doing it also…
Not sure if it’s worthy of being a whole ‘nother topic, but when a title insurance company goes under, what happens to the surety of the policies they issued?
I think insurance companies have to pool their resources so that if one company can’t pony up, the $$ comes out of the pool. What happens if the pool dries up? Then policy-holders just get nothing on their legitimate claims.
To me, that makes the old-fashioned abstract-of-title a lot better idea. Probably impossible to get done, anymore.
Hi Chip:
Just out of curiosity, if you’re still there, can you tell me what an abstract of title is? I’ve never heard of it.
My wife and I took an Earth destroying 20 mile trip to replenish liquor stocks and buy Baklava today. It seemed like every commercial office building we passed was sporting a big “Lease Me” sign.
See what happens when you “throttle” the wages of the many:
“…Once the brakes came off, health care costs started running at two to three times inflation. It’s not a sustainable thing when wages aren’t going up.”
Insurance, Not Assurance
http://finance.yahoo.com/expert/article/moneyhappy/44043
The article states:
“The United States spends $2 billion a year on health care, more than any other country.”
And the reporter, editor and proof-reader didn’t catch this? It’s obvious that they know nothing about the economy.
Ignoranuses!
I laughed at that too. Maybe the reporter and editor are British/European refugees, like seemingly so many financial reporters I see these days.
The Brits and Europeans would have caught that mistake.
(Some of them use Billion as 1E12 to our 1E9)
I’d like to see what the real number of uninsured is after you take out the following:
1. illegal immigrants (est 12-20 mil)
2. business owners
3. those who qualify for medicare but do not sign up (est 6 mil)
4. those who can afford health insurance but decide to buy something else (plasma tv, boat, vacations)
5. those who have a healthcare plan at work but don’t sign up
After that, perhaps the states can start up an insurance program for the poor, where they can pay lower premiums and deductibles based on their income.
FYI - How many people know that health care costs are so high due to insurance and medicare? Doctors and dentists give a big discount (up to 30%) to people who don’t have insurance.
Hey Jerry,
Not necessarily. A lot of hospital/doctor pricing is based on negotiations by insurance companies…and those who would rather pay cash do not get any discount, instead they get hit with full freight. Ex. Mt Sinai Hospital here in NYC..try paying in cash for an MRI or blood work…they ain’t negotiating.Though individual doctors and dentists might be willing to negotiate, it hasn’t been my experience, and I would rather pay cash as needed then fork out for insurance. YMMV.
Hospitals operate quite differently from doctor’s offices. Hospitals will not even tell patients in advance what a fee is for any service at all. Instead, during the process of giving permission for testing or treatment, the non-insured patient must sign a promise to pay whatever the hospital charges even though the hospital will not tell them what the charge will be. This is Standard Operating Procedure for hospitals when dealing with non-insured patients. Patients with health insurance only sign agreements to abide by the terms between their insurers and the hospital, which is quite a different matter.
There are companies who market blood work a la carte to the noninsured. There usually is no need for a doctor’s order for any blood test, so this is legal most places. The prices are a small fraction of what hospitals will soak the noninsured for. Strange thing, these lab companies also have contracts with hospitals to get the blood drawn. Once obtained, blood & body fluid samples are then shipped to the companies for testing, results sent directly to the patients, or doctors if they wish.
Once an MD who owned a sleep laboratory agreed (by email) to give me a 50% discount for testing if I paid cash. The lab was not part of a hospital, though.
I’m just talking about local offices, not the large hospitals. I know some doctors, dentists and medical office managers. They all tell me that the uninsured get much lower prices than what insurance and medicare is charged. hospitals can charge people full freight, but they will always have to end up negotiating the bill because people can’t afford to pay it.
someone made an interesting comment on this blog awhile back about how the hospitals beg for blood donations, how you’re a hero for doing so, then turn around and charge a fortune for it when people get transfusions.
“And the reporter, editor and proof-reader didn’t catch this? It’s obvious that they know nothing about the economy.
Ignoranuses!”
In England, traditionally, a billion is 1,000,000,000,000, called a trillion in the U.S. though they are now tending to move to the U.S. standard.
A Short Course in Brain Surgery
http://onthefencefilms.com/movies.html
Gold is back over $700 this week. Will we see Gold finally break out or is this just a temporary reaction to current financial events?
Some foreign banks are cutting back on agency debt, the dollars have to go somewhere. The question is: how high will gold go?
Nobody really knows how many Dollars Americano are out there, but it’s thought there are plenty…
When the race to the Dollar exits gets going, it might look something like scenes from one the finest comedies of the 1960’s, “It’s a Mad, Mad World”, albeit in reverse.
It was actually, “It’s a Mad Mad Mad Mad World”. You aren’t mad enough.
I get that a lot.
As for actual physical currency in circulation, there is approximately $850 billlion. I don’t remember which agency has the data (I used it in a paper I wrote about 6 months ago), but it is either the US Bureau of Engraving and Printing, the Treasury, or the Fed.
As to the amount of credit money in the system, that is an entirely different story. That part of the story is also the part that is making people very nervous, as that will vanish just like it was created–out of thin air.
“Will we see Gold finally break out or is this just a temporary reaction to current financial events? ”
Finally break out? It keeps breaking out, over and over. I remember when it “broke out” above $400, and then it “broke out” above $500 and $600. On the monthly chart, Gold had its highest monthly close price ever in August.
Just ask yourself which you trust more: little slips of paper with the US treasury seal, or actual money. The traditional role of Fedral Reserve Notes is something you exchange for money or a money substitute; it’s not money itself. The scam has worked well until now. The govt has only one solution to our current problems - print more money.
50 to 1
There are 50 fiat Dollars, Yen, Euros, Francs, Pounds, etc…
For every available Dollar of physical Gold Bullion out there, most of which is in strong hands, going nowhere, so call it 100 to 1.
All of that paper money and computer blips chasing the phantom of $leepy Hollow…
Clarification : Gold climbed substantially in the first half of the decade along with property prices. It has floated between $650 and $700 now for a year, while the dollar continues to weaken. Will the dollar stabilize now and gold prices along with it? Will the dollar collapse as some are saying and cause gold to skyrocket in multiples? Is gold overvalued like poperty and basically a suckers game? Will it become the next asset bubble? So by break out will it basically bob around where it is, decline or double again? I own some gold, on the basis that it is unlikely to half in value but could double. I won’t sell at $700 even though in doing so I would realize a healthy 2 year gain.
Buying a house, anytime from 2001 to 2006:
0% down, balloon interest rates down the road, a-ok, let the good times roll…
Buying a Troy Ounce of Gold, anytime
Payment in full with good funds, for physical delivery.
Don’t be comparing lemons to oranges…
30 year (up to 2006) gold price charts. http://www.blanchardonline.com/beru/gold_silver_75_06.php
$700 gold is equivalent to $300 gold in 1980 dollars. It’s one item to consider. On the other hand, I read Chris Laird’s and Peter Grandich’s columns on kitco.com. Mr. Laird is bearish on gold and bullish on cash.
So which will it be?
Today, just put 7 more ounces into my safe deposit box during a nice half day trip. Clink Clink! Added 5 $1000 Series I bonds to the safe deposit box too. No clink on them
O.K., I’m off to Legoland with my 5 year old today, helping to keep the economy going by… spending my deflating USD…I‘m not able to use “their” private reserve parking …since I don’t own a Volvo.
PS,
I’m returning a POS megaphone toy that “lasted” all of 2 hours…guess…yep, “made in China”
Post Script to Neil:
I’m eating walnut & black berry with sunflower seeds trail mix today…the recent “events” both in quantity & quality have caused me to eat too much of: “Neil’s *Natural* Hot Buttered Derivative Popcorn”
Munch, munch, munch…
Some sleazy realtors get their just desserts
http://tinyurl.com/yrkb6d
This kind of stuff is just starting Jerry…..It will take years to play out….
$1 million in punitive damages. Very nice.
It take a lot of 6% commissions to pay that bill off.
I apologize if this topic was discussed yesterday already but i just heard about it this morning on the net. The dollar dropped below the support level of 80. I don’t know a whole lot about the financial world, but I do from my readings over the last few years that this is a bad sign. According to the site below this drop has serious ramifications.
http://www.oftwominds.com/blog.html
It means more inflation and a possible dumping of the dollar. It means that long bond yields will go up and the Fed cannot cut rates unless other central banks cooperate and cut theirs. Hopfully, the USD will unwind slowly so we don’t all end up living in cardboard boxes with the FB’s
Depends, if you are exporting products it is a great help.
What do we export anymore except for toxic CDO’s and jobs?
We export plenty.
plenty of food, which I might add is getting a little pricey.
Yes, and don’t forget some of the finest military hardware known to man. Too bad arms manufacturing is now done with a fraction of the workforce it used to take.
Scientific instruments. Equipment for manufacturing semiconductors.
Lots o’ jobs in the USA available for embedded software engineers - tcp/ip, VxWorks, C, Rational Suite, Etherpeak, and the like. Pop a cork.
I hate the concept of support levels and all that crud. There isn’t a support.
Otherwise oftwominds is really good stuff
There is significant potential for a depression and you could argue that we are already entering one. Could be price destruction that Japan xperienced. Be interesting to see if real work becomes a value again vs selling/braning/marketing snake oil salesmen that have domminated for almost three decades.
Conventional wisdom automatically assumes support levels are driven by collective decisions of private individual market participants. But if you were the man behind the curtain, wouldn’t you feel tempted to lend a bit of extra support to the private market when it suited your policy goals?
Is it too late for gold? From Asia Times, In gold we trust:
United States currency notes carry the motto “In God We Trust”. Well, not anymore, we don’t. Put a letter “l” into the second word and you just may have a winner.
With the global financial system basically dysfunctional, the issue for hard-working Asians is where to put their money….
http://www.atimes.com/atimes/Global_Economy/II08Dj02.html
wow, we’re already down to this many comments and no gold bashing! what a difference a few years makes on this blog. I remember when gold was a bubble here.
I regularly buy gold. But don’t forget to buy platinum and silver okay? Those are beautiful metals. I’m accused by my buddies as being a gold bug. I told one that gold will go above $1000 per ounce. Well when it went down to $580 last Fall I never got the end of his teasing. So lately I’ve been saying gold will never go above $700 per ounce (LOL). Well when it happened Friday, he did not hassle me. I sent him an e-mail and reminded him he’s not doing his job. BTW: He is a Bob Brinker cultist. Bob Brinker is against precious metals.
RE: “The sub-prime crisis is contained…”-BB
From this AM’s edition of Beantown Globe…
Headline-August drop of 4000 jobs WALLOPS stocks, raises FEAR about ECONOMY…next stop RECESSION!
“I can’t find any mitigating sugarcoating to this said James Swanson chief investment strategist at MFS Investment Management in Boston.
“The housing problem is catching up to the economy.”
Nearly everything expected by the favorites and regular’s discussed and regaled upon here on this blog for the last 2 years is coming to fruition.
Only intense behind the scenes machinations and Joseph Gobbels inspired propanda of the whoremaster Pig-Men and their Congressional minions have delayed the inevitable.
There will be no return from this disaster.
The ATM home piggy-bank is empty.
Many references to the
Thanks for the uplifting words, hd74man.
RE: Thanks for the uplifting words, hd74man.
Don’t kill the messenger.
“Don’t kill the messenger.”
That’s my line, too
I’m in Surprise Az, to see my grandson. Amazed to see the signs of all the builders mentioned here. Fields and fields of uniform houses where a few years ago only desert floor to the mountains.
My youngest daughter told her husband (who wanted to buy a house here this summer) “Let’s buy when everyone we know says that houses are the worst investment, I wish I never bought one.”
Thanks everyone here!
SoCal: Was driving north from I-5 on 14 towards Palmdale (Lancaster, Victorville area) at sunset. The HORROR! Some of you have seen that area. Those ‘developments’ are just criminal, on an economic, human, environmental, aesthetic and societal scale. Absolutely no soul, how can there be? America, what are you doing to yourself.
The lady at the reception desk in the hotel said that she knows many people who are now losing their houses, so the reality is hitting.
“America, what are you doing to yourself.”
Wall Street, what have you done to America?
–
Just what bankrupters and fraudsters, aka bankers and financiers, are supposed to. Reality check time. And realty check out time.
Jas
“Absolutely no soul, how can there be? America, what are you doing to yourself.”
Exactly, multiple by thousands, and that’s what the typical new home development consists of nationwide.
Notice how the DJIA is “falling in place” just above 13,000? This is how I believe the Fed uses the Greenspan-Bernanke put to create inflation: Whenever blood appears to be flowing on Wall Street, the man behind the curtain pumps in liquidity to reflate the DJIA back up to the strike price. This sets the stage for the next bull run after the panic has lifted.
EQUITY PREMIUM PUZZLE SOLVED!
Markets plunge on fears of US slowdown
By Eoin Callan in Washington
Published: September 7 2007 14:02 | Last updated: September 8 2007 01:11
Global stock markets tumbled on Friday on fears that the US economy was facing a sharp slowdown as the first monthly fall in employment in four years made an interest rate cut this month all but certain.
The evidence of weakness in the jobs market shocked investors and raised expectations that the US Federal Reserve would be forced to cut interest rates by as much as half a percentage point this month to stave off recession.
The anxieties about the US economy were exacerbated after the close of trading when Countrywide, the leading US home lender, announced plans to cut up to 12,000 jobs and predicted further weakness in the mortgage market.
Stocks in the US and Europe had suffered heavy losses on the back of the US job figures and the dollar fell sharply as investors sought the safety of government bonds.
In New York, the Dow Jones Industrial Average fell 1.9 per cent to 13,113.4, while the S&P 500 lost 1.7 per cent to 1,453.55.
http://www.ft.com/cms/s/0/1597066c-5d41-11dc-8d22-0000779fd2ac.html
“The evidence of weakness in the jobs market shocked investors”
Exactly who are these “investors” and why are they shocked? 130+
subprime shops have imploded, builders have been cutting for months, projects have been halted and abandoned, and those are just 1099 workers. As Hoz has posted, layoffs have been announced in all sectors for months. And with the housing bubble the major support for the consumer economy, what did these “investors” think was going to happen?
Real investors watch the world with a cold eye…this sounds like the media toeing the official line…troubles with the “containment” could not have been predicted by any rational person. BS, big time.
–
Exactly who are these “investors” and why are they shocked?
Actually they meant invesuckers. Scam market is a perfect place to get sucked in. And stay! (For the fabled long-term, of course).
Jas
Watched the candles on that last 30 minutes saying to myself Where are these guys getting this money? At the very least it’s pump and dump. They’ve gotta do what they can prior to the financials due in the next 2 weeks on what they’ve really lost. Don’t see how they can dodge the bullet, but they’ve got nothing to lose trying now.
stucco, you are definitely on to something. Keep digging, I really do enjoy your comments.
vozworth,
Thanks for the voice of support. But I have to confess that I am a bit disappointed that nobody has jumped in here to say what a tinfoil-hat-wearing conspiracy theorist I must be, for daring to suggest there is something a bit odd about a stock market that can never correct below DJIA 13K no matter how shockingly-gloomy and worse-than-expected the news releases turn out.
Well, If you want to see the DJIA below 13k, I think you will be getting your wish pretty soon. I vote that we will see under 12k by November 1. Anyone else want to throw in a prediction?
The news releases are not the cause of stock market moves, except that sometimes they have a temporary effect for a short time that doesn’t affect the long term results. For instance, after 9/11 everyone said that it had caused the stock market to fall, but if you look at an undated chart you would have trouble figuring out when it happened because it had already been falling for so long. I really wonder how many investors were “shocked” by the drop in jobs? Not many, probably none. And generally an expectation that the Fed will cut rates is credited with causing the stock market to rise, not fall. Those news releases are a bunch of baloney, in my opinion.
I think that there is a PPT prop-up, but also that they will pull the rug out when there is something believable-to-the-masses on which to blame a fall. Can’t imagine they will drop the funds rate, despite all the wailing, but they must be working late tonight trying to figure out some other salve or pap as a stall.
They’re probably reading this blog right now.
Hey, Fed! If you’re out there, here’s my advice: Don’t cut rates. Let the market correct and save the US dollar.
That’s the 64,000 question. What is with all the plundits screaming about how shocked they are and no one could have predicted this. Either they are stupid or lying or both.
Something strange happened in my area last evening. I live in Idyllwild, CA, a small village in the San Jacinto mountains above Hemet (about 24 mi.). I am a loyal, daily viewer of the Lehrer News Report on PBS (channel 28). Last evening, for the first time ever, the regular 6 pm (PT) program was blocked-no picture, no sound- for the first forty-five minutes of the pgm. Later I learned of the PBS news piece concerning the cratering of the RE mkt. in Hemet on HBB. Thanks be to HBB and the bloggers therein (NYCityBoy, Az_lender, Tom) the truth will be disseminated. I am consumed with curiosity wondering if some local RE entity could be powerful enough to have locally blocked a national news cast of a locally damaging report? Could this actually happen, or was it mere coincidence? I am riveted by the unfolding of this real estate/credit/financial saga. I sense I am a front-row-seat spectator at history in the making. Thank you, HBB.
wow, that is truly scary….this is the usa, not ussr…
…and not China.
Powerful have the power for a reason — to control events in their favor as much as they can get away with. Just look at what Wall Streeters have been able to get away with.
Jas
It was quite damning of Hemet and the Inland Empire in general…
When a new car dealer (Chrysler) said flat out, “we are concentrating on selling used cars, nobody has any atm money left to buy new cars”
You get an idea of how bad things are in the i.e.
I was wondering what the reaction would be by homeowners that lived in the area that the Lehrer News Report was reporting a huge decrease in prices .As far as I’m concerned ,anything is possible I guess .I was also wondering why the news show picked Hemet of all places . Isn’t Hemet a low priced retirement town that doesn’t really have alot of jobs ?
Used to be, it grew up way too fast.
Hemet is an arm pit…no I take that back. An arm pit smells better.
Low priced no longer. Nothing has changed on the employment situation there beyond everyone having been in constuction of some sort. Hemet has been overrun with builders and flippers in the past few years. Think of it as an extension of Temecula/Murietta disaster but just up the 79 a little further.
The News Hour segment on Subprime Mortgages may be downloaded here: http://www.pbs.org/newshour/rss/redir/http://www-tc.pbs.org/newshour/rss/media/2007/09/07/20070907_market28.mp3
Thanks for the link.
Having the program blacked out in Hemet is amazing. Don’t know if anyone’s posted this, you can download the News Hour Subprime Mortgage segment here.
W. Lee Jones:
I presume that your receive your ch 28 signal via cable?
I am wondering out loud if your local cable operator
intentionally blocked that segment? Is that legal?
Of course, the local cable operator would have to have
advance knowledge of content in order to pre-arrange
the block. Comments from anyone involved in the
distribution of cable TV who might understand the
mechanics of how that could happen?
Another comment
I spent last weekend (labor day w/e) in Idlywild at a friends
cabin. Have been there many times over the years. I was
startled at the the number of “for sale” signs that I have
never seen before. There was at least 2 on my friends
street alone. (Appleton). Since you a full time resident, what
has been the outlook from your point of view?
Lived in Idy from 2003 - 2006 so daughter could go to art school. Few houses for sale when we moved there. Paid $195K for a small old house on 1/2 acre - everything had to be updated from weekend home status to full time home. Few houses for sale until 2006. Put house on market 7/06 for $25K less than 4/06 appraisal. There were no buyers - it wasn’t the price - realtor is old friend and no several others - they all said buyers just disappeared. Finally sold 5/07 for nearly $100K less than that appraisal. Used to commute to Riverside for work - they built tons of mcmansions and mini mcmansions in Hemet (some next to dairies so the new homeowners could complain about the smell) and even high end homes on golf courses. There are no jobs anywhere near Hemet that can support the prices of houses and commuting is a total grind.
That usually happens up here (rural CV, CA.,) when PBS is interviewing someone from the Bush sadministration who has either resigned or is about to release a book about their time in service of our Dear Leader. It’s happened at least a half a dozen times over the last year. If Mr. Lehrer announces an interview segment with someone I’m interested in hearing from, I can almost count on the cable going out. When it happened to Colin Powell, I knew the jig was up, (his kid, Michael, being the head of the FCC and all….) Very sad times for the USA.
Hi W:
It’s probably too late for you to get this, but maybe you should call the station and ask them what happened. See if they come up with anything good. I do not put it past anyone to try to prevent damaging information from being released. Even our own President does it all the time!
LA sales down 50% in August. Wow.
http://latimesblogs.latimes.com/laland/
“Ruh roh” says Scooby Do. The LA Times writer asks if anyone has ever heard of a 50% drop in sale during other housing corrections?? They are trying to determine if the downturn is differents this time. Interesting question.
Do LA residents still expect their homes to appreciate by 20%+ a year forever (as they did back in 2003)?
I have seen the “vulture” mentality on a personal transaction. I have a ‘01 Volvo station wagon that’s been sitting in my garage for a year basically undriven. It only has 65K miles on it as well and is very nice. So I put it up for sale, discounted, “quick sale” price and I still get these idiots coming over who think everyone is desperate and will give things away. I just laugh at them. I don’t have to sell the car. I’ll donate it to charity before I’ll let someone steal it from me.
I see that kind of crap too Chic….Did they ask you if you would take less even before they saw the car ???
Yeah. I had one guy say he couldn’t possibly be interested unless it was “much lower” in price. It’s already priced below book value. I told him to take his miserable $$$ and stick it up his ass.
You better be careful with kind of comment - I hear that many people in Texas carry guns!
Perhaps Txchick packs some heat herself.
A few years ago when I bought my son a new vehicle the dealer offered me $4,000 on the trade. I had it detailed took it to Carmax and they offered $4,500. I sold it the next week for $7,200 out of my driveway.
My Volvo is a 1995 with 270K miles on it. The turning radius on my Vovlo is incredible. No desire to replace it yet. ‘Vixen’ has been a great car.
Txchick57, I knew you were my kind of gal.
Its all supply and demand. Market sets the price just like in housing. Maybe your Volvo isn’t worth as much as you think.
Yeah, but at least vehicles have a Kelly Blue Book price.
Which is more than can be said for property.
Doesn’t matter - as many know, and especially those who don’t *have* to sell - often donating is better as it’s a direct reduction in the taxes…
Ask the Clinton’s about those used boxers…
We had a 93 Jeep sitting outside (120k miles) which was not for sale. It has been sitting there gathering dust for 4 years since my father-in-law passed away. Last month two people different knocked on the door asking if we wanted to sell it. We did. This is South Orange County, CA.
Op-Ed piece from today’s Austin American Statesman:
http://tinyurl.com/2zno29
American dream - with a catch
EDITORIAL BOARD
Click-2-Listen
Monday, September 10, 2007
Texas lawmakers missed an opportunity this year to help stem the swelling tide of people losing their homes because they can’t afford to pay the mortgage.
Nationally, foreclosures are at a record high. More than 5 percent of all home loans are delinquent, and nearly 15 percent of subprime borrowers are behind in their payments.
Though the collapse is complicated, it stems from a simple premise. As mortgages became commodities traded on the open market — not deeds held in a banker’s safe — the standards for home loans fell to ridiculous levels.
Bankers made questionable loans knowing they could sell the mortgage to investors in a matter of days. Investors, thinking real estate would spiral upward in value forever, didn’t worry whether the borrower could repay the loan.
Home buyers were enticed with junk mortgages, no down payments and teaser rates that ballooned in a few years. When borrowers couldn’t pay, foreclosure notices began to arrive. Congress is considering banning the worst of those practices.
Texas lawmakers could have stepped in and brought a bit of sanity to the risky subprime mortgage market, which was 20 percent of all mortgage loans nationally in 2006. State Sen. Eddie Lucio, D-Brownsville, sponsored a bill to require mortgage counseling for borrowers with shaky credit histories seeking risky home loans.
The collapse of the subprime mortgage industry continues to have worldwide repercussions as borrowers forfeit on their loans and investors are stuck with a declining asset. Central Texas is not immune: Foreclosures in the region and state are the highest they’ve been in more than a decade.
Trust me, Austin is toast just like Dallas, Houston and San Antonio. The newbie “investors” just don’t know yet how bad it’s gonna get.
spent two weeks in San Antonio and Austin, overbuilt is and understatement.
San Antonio, rule of thumb…you cant avoid the drunk drivers. Austin, rule of thumb…you cant avoid drivers.
From yesterday’s thread:
“Movoto founder and broker Henry Shao said listings in San Jose are driving the county’s overall inventory trajectory. Listings in San Jose are about double their level from three years ago, he said.”
This is a flat out lie. The SFH listings in Santa Clara County are more than triple and in San Jose they are more likely to be four times that of Aug/Sep 2004. I am sure those condos are not much different than SFH.
SFH sales for the county are 30-40% of the 2004 level (a sharp fall in the past four weeks). In San Jose, they are closer to 25-30%.
The supply-demand is off by a factor of ten! Based on the escrows closed in August the inventory for the county was 6 months and based on sales pending and increased listing presently it is 8-9 months. In San Jose, it is close to 10-12 months.
Jas
New Sport for Realtors in Sacramento: Find the next FB and go lowball home builders!
http://sacramento.craigslist.org/rfs/413451128.html
“…..homebuilders who are begging buyers to come in and make an offer….”
The “R” word reared its ugly head on the front page of today’s SD Union Tribune (courtesy of NY Times News Service). Is a FFR cut suddenly in the bag now, rosy beige book outlook notwithstanding?
Job losses seen as sign of rising risk of recession
Labor data put health of economy in question
By David Leonhardt and Jeremy W. Peters
NEW YORK TIMES NEWS SERVICE
September 8, 2007
The nation’s job market took a serious and unexpected turn for the worse last month, raising the risk of a recession and putting added pressure on the Federal Reserve to keep the ailing housing industry from infecting the rest of the economy.
The Labor Department reported yesterday that 4,000 jobs were lost from July to August, with the deepest cuts coming in industries connected to housing, such as construction and manufacturing.
It was the first employment decline since 2003, when the job market was still struggling to emerge from the slump after the 2001 recession.
The jobs report all but guarantees that the Fed will cut its benchmark short-term interest rate when its policy-making committee meets Sept. 18. A quarter-point reduction, to 5 percent, remains the most likely move, though economists said a half-point cut should not ruled out.
http://www.signonsandiego.com/uniontrib/20070908/news_1n8economy.html
Don’t the pols know you can’t squeeze blood out of Iraq?
Economy gets political attention
Pressure grows from both parties on Fed
By Edmund L. Andrews
NEW YORK TIMES NEWS SERVICE
September 8, 2007
WASHINGTON – For the first time in four years, economic concerns are rivaling the war in Iraq as a top issue on the political agenda.
Sensing new political momentum, Democrats in Congress and on the presidential campaign trail are stepping up their criticism of President Bush’s handling of the economy and offering their own proposals.
And now that the malaise in housing and credit markets appears to be infecting the wider economy, the Federal Reserve could feel more political pressure from Democrats and Republicans alike than it has since Alan Greenspan, then the Fed chairman, incurred the wrath of the first President George Bush for not cutting rates faster in the early 1990s.
The Fed is all but certain to reduce interest rates at its next policy meeting Sept. 18, but the big debate among economists is how much further and faster it cuts rates after that.
The Bush administration, on the defensive, rushed out with a message of calm reassurance, as top officials insisted that the economy remains poised for growth, despite a government report that seemed to show that the broader economy is suffering from the mortgage meltdown.
“We’re still confident that we’re going to see high growth for next year,” said Edward Lazear, chairman of President Bush’s Council of Economic Advisers.
CLICK!
http://www.signonsandiego.com/uniontrib/20070908/news_1b8fed.html
To little to late ???
News analysis: top story
American jobs
Recession alert
Sep 7th 2007 | WASHINGTON, DC
From Economist.com
Weak jobs figures darken the outlook for America’s economy
WHATEVER your opinion of the health of America’s economy was a couple of days ago, it should now be a lot gloomier. The monthly jobs figures for August, released on Friday September 7th, were worse, far worse, than anyone expected. The economy lost 4000 jobs last month, the first monthly loss of jobs since August 2003. Already jittery financial markets headed down. The Dow Jones Industrial Average fell almost 250 points or 1.87%. The dollar sank at the prospect of weaker economy and lower interest rates.
The monthly employment figures tend to have an outsize impact on financial markets. But this time Wall Street’s reaction seemed justified. Not only were the overall figures far worse than expected—Wall Street’s seers had forecast some 100,000 new jobs
—but revisions to prior months suggested that the job market has been weakening for a while. The new figures suggest that over the past three months the economy, on average, created 44,000 jobs a month, far fewer than are necessary to keep the jobless rate stable, and well below the monthly job growth of 147,000 between January and May. The unemployment rate, which comes from a different set of figures to the jobs numbers, remained at 4.6%—but only because the number of people who described themselves as being in the labour force fell sharply.
http://economist.com/daily/news/displaystory.cfm?story_id=9783297&top_story=1
I thought of a mindlessly simple solution to the subprime foreclosure crisis last night. In cases where no fraud was involved, too bad. In cases of documented fraud on the lender side (e.g., where “worthy borrowers” were duped into buying houses they cannot afford), make the bagholder funds take the hit for whatever drop in value of the paper results from forbearance measures.
WHATEVER SOLUTION IS ADOPTED SHOULD AVOID THE MORAL HAZARD WHICH RESULTS WHEN YOU EXTERNALIZE THE COSTS OF WALL STREET EXCESSES TO MAIN STREET TAXPAYERS.
Task Force Will Seek More Loan Revisions
By Ruth Simon
Word Count: 889
Attorneys general and banking regulators from 10 states have formed a task force hoping to persuade mortgage-servicing companies and investors in mortgage-backed securities to increase the number of troubled subprime loans they restructure, to stem the tide of foreclosures.
The task force, headed by Iowa Attorney General Thomas Miller, has invited a dozen of the nation’s largest subprime-mortgage-servicing companies to meet later this month in Chicago. The group will ask servicers to find ways to modify more subprime loans instead of moving borrowers into foreclosure. The group also wants servicers to create more longer-term solutions for distressed borrowers, such as …
http://online.wsj.com/article/SB118921051749421243.html
Texans take note. Going Green has it’s price.
http://online.wsj.com/article/SB118917973520420698.html?mod=us_business_whats_news
Even with mild temperatures and moderate fuel prices, wholesale electricity prices have hit $600 a megawatt hour or 60 cents a kilowatt hour several times this summer. And the state is in the process of lifting price caps on wholesale prices as supplies are thinning, another factor in what could be price shocks in coming years.
It’s time for the big thinkers at the Fed to reconsider their pro-bubble policy bias, and stop unleashing Frankenstein bubbles of their own creation on the U.S. economy.
Economics focus
Tangled reins
Sep 6th 2007
From The Economist print edition
America’s central bank attempts to tame a beast it once let loose
… The asymmetry in the Fed’s thinking is obvious. If Mr Mishkin believes the Fed should anticipate the economic consequences of a deflating bubble, why should it not anticipate the consequences of an inflating one? If it is possible to spot excessive lending as the market climbs, how can it be so impossible to identify bubbles? Until this asymmetry is corrected, frequent bubbles seem a sure thing. And the Fed’s efforts to exude a cowboy confidence will be undermined by the suspicion that it is dealing with the consequences of its own errors.
http://economist.com/finance/displaystory.cfm?story_id=9767718
“undermined by the suspicion”
Jeez, that’s an understatement.
And respiking the punch bowl a la Mr. Mishkin could be a disaster.
Mr. Bernanke and team are now walking a very high tightrope, in a high winds, attached to two buildings with Mr. Greenspan’s handiwork all over them.
******
As for Mr. Greenspan, he should have been paying attention to Mr. Taylor (an excerpt):
“Shooting at the sheriff
This is by now an old debate. A minority of central bankers (mainly in Europe) and many observers (including The Economist) have long argued that the Fed should try harder to prevent bubbles. The new twist at this year’s gathering was that the critics’ ranks seemed to be deepening. John Taylor, a Stanford University professor and author of the “Taylor Rule” for setting interest rates, argued that the Fed had erred by keeping rates too low for too long. Had the central bank followed his rule, he argued, it would have raised the Federal funds rate from 1.75% in 2001 to 5.25% by mid-2005, rather than pushing it down to 1% and then raising it only slowly. Professor Taylor’s calculations showed that a more orthodox path for interest rates would have dramatically reduced the pace of home building. Earlier tightening, he argued, would have ‘avoided much of the housing boom’. Central bankers from Israel to Brazil spoke up in favour of discouraging bubbles and questioned the Fed’s approach.”
“…argued that the Fed had erred by keeping rates too low for too long.”
Easy for Professor Taylor to kvetch over this. He was not the man staring into the maw of deflation in the months following 9/11/01.
“maw of deflation”
You’re kidding, right?
Consumer spending on the ropes?
“Barbara Nell, manager of The Daisy Shop on Oak in Chicago, a designer resale shop where a Chanel suit can cost $1,200, said her customers have been merely browsing since the beginning of August. High-end Oak Street, around the corner from Chicago’s Magnificent Mile “is very quiet” with lots of empty stores, she said.”
Up until April I rode my bike to work past this very store - and Oak St. was quite flush with trophy wives toting boutique bags. If this high end retail area is sputtering its bad news for Chicago.
Recession in the house, y’all!
http://tinyurl.com/yuzo5w
Gap down!
G
a
p
d
o
w
n
!
Friend reports an acquaintance 30ish public servant couple residing in a wealthy East Bay (Alt-A Bay Area) enclave are trying to sell their townhouse…. having tapped the Bank of Mom & Dad two years ago for a downpayment.
As 2007 dawned, they decided to try to keep up with the Joneses by selling said townhouse and moving to a nearby bigger ‘burb with larger houses. Townhouse was listed for sale.
No lookers for 8 months. Reduced a measly amount to ~$580K.
Bad news Thursday - neighbor on one side just listed for $20K below already reduced listing price.
Worse news yesterday - neighbor on other side, single mom HELOC partier type (~$200K spent) just SOLD her place for $100K under their list (at $479K) to avoid foreclosure.
Yes, that equity flushing sound and fist pounding you heard last night was emanating from the Alt-A Bay Area!
[Note to MSM: Save everyone the bleeding heart single mom "thrown out on the street" angle on this one; instead, educate by focusing on the fact that renting is a very good option for the single mom (this will be especially true as outer Bay Area rents moderate or drop) and who may have learned the best lesson of her life which she could pass on to little Timmy and Janie.]
sf jack, thanks for sharing. Keep ‘em coming. I rent in East Bay (Fremont-Newark) and can’t wait for more such news to come.
I know people who live in Dublin/San Ramon, and am worried for them though.
“Save everyone the bleeding heart single mom “thrown out on the street” angle on this one”
why? a story is a story. that is part of the story. haven’t you read all those stories about mortgage brokers and their fraud.
Worse news yesterday - neighbor on other side, single mom HELOC partier type (~$200K spent) just SOLD her place for $100K under their list (at $479K) to avoid foreclosure.
Some starvin’ appraiser will be paid off to ignore the comparable.
Another trashy Centex townhouse in Manassass, VA for sale at $290K:
http://washingtondc.craigslist.org/nva/rfs/417065226.html
That’s a condo complex? Looks just like a motel.
Something about this just doesn’t pass the sniff test.
I believe this belongs to one of my favorite flopping flippers. He’s wishing for $2.2 million. Neighborhood comps are way below what he’s asking, even without the $200,000 kickback he’s trying to arrange on this so-so La Jolla place w/o an ocean view. Purchased 4/05 for $1.3 million.
Craigslist SD listing-
http://sandiego.craigslist.org/rfs/416589071.html
http://www.zillow.com/HomeDetails.htm?zprop=16839815
Things that make you go hmmm.
The ocean looks to be about a mile away… an awful lot of yards and fences to have to cross and go over to get to the beach! Ocean view?? Maybe… if one built a ten story deck on the roof like the Behrani guy did in the movie “House of Sand and Fog.”
The house is worth no more than $300k… at best.
Anything high enough up and within 15 miles of the coast qualifies as “ocean view” in San Diego…
My favorite was a recent ad claiming “cool ocean breezes”….. In Ramona!
“If you are serious about being successful even in this down market, then this deal is for you!”
If you are a serious moron, that is.
Dead horse beating time…I’m convinced we are hitting a patch of stagflation (look it up, whippersnappers)…
1. Global competition and “insourcing” through illegal immigration are already keeping wages low.
2. Recession in 2008/2009 due to loss of consumer spending (no housing ‘ATM’) leads to job cuts, keeping wages down, or send them even lower.
3. “Liquidity injections” designed to “fire up the engines” and lift us out of economic malaise overly increase the money supply, tanking the US dollar even further, and increase the price of, well, everything, *except* wages (see above).
In other words, wages and economic output stagnate or go lower, while inflation (and the cost of everyday goods) rises. Stagflation.
Oh joy.
Insourcing via illegal immigration is not occuring in AZ since the upcoming new anti-illegal alien law took effect. One of our two janitors is moving to Kansas. Yesterday was her last day. The other one is going to Mexico in November and taking her “Ninos” with her.
Expectations are that wages will increase in Az. The politically correct don’t mention that the school test scores will edge up from near the bottom of the nation. I heard AZ has 500,000 illegals.
How can stagflation happen? If no one has any money (negative savings rate), then who’s buying?
I believe the Fed will inadvertently create stagflation (if they are able to), as it would be preferable to the alternative of outright deflation according to BB’s social welfare function.
With all due respect to the recently-departed Governor Gramlich, I hope the Fed can soon get past the notion (repeatedly stated at their recent Kansas City Fed Bank Jackson Hole symposium) that the subprime market was a force for good, “a valid innovation” that enabled “12 million households to become homeowners, a large majority of these who would have been denied mortgage credit in the early nineties.”
Subprime lending had the unfortunate unintended consequence of creating a vast gulf between home purchase budgets and the incomes needed to pay off a loan over the long run. Where is the upside to tempting myriad households into buying homes they cannot afford, leading naturally into the foreclosure crisis we currently face?
I am eager to hear from anyone who can offer substantial evidence that subprime was for the greater good. Until I see the supporting evidence, I will maintain the hypothesis that such statements are CYA propaganda for the biggest economic policy blunder of the 21st century thus far.
Edward Gramlich 1939 - 2007
Former Fed Governor Foresaw Subprime Storm,
Served in Numerous Influential Policy Posts
By GREG IP and STEPHEN MILLER
September 8, 2007; Page A6
Former Federal Reserve Board governor Edward Gramlich himself noted the grim irony of his last months: He couldn’t have picked a timelier moment than June to publish his book “Subprime Mortgages: America’s Latest Boom and Bust.” But as the subprime crisis dominated headlines and whipsawed markets, Mr. Gramlich was fighting for his life.
“The hottest thing I ever did was this subprime book, and it’s going to get a lot of traction and I’m not in a position to push it,” he said weeks before his death in an interview that looked back at his long career in and out of Washington. But, “All’s well that ends well.”
Mr. Gramlich… managed to have a paper on the subprime crisis delivered in his name at the Federal Reserve Bank of Kansas City’s annual symposium in Jackson Hole, Wyo., though he was too ill to travel there.
The paper demonstrated Mr. Gramlich’s embrace of the free market combined with a desire to regulate its rougher edges. He said that despite its problems, the subprime market had been a force for good, “a valid innovation” that enabled “12 million households to become homeowners, a large majority of these who would have been denied mortgage credit in the early nineties.”
http://online.wsj.com/article/SB118921994251021470.html?mod=googlenews_wsj
Agreed. Arguing it was for the greater good is just more subprime spin-o-vation. Encouraging strawberry pickers to buy 1/2 million dollar homes is not innovation. It’s simply bad policy. The Fed failed to supervise where supervision was needed the most. As a result, it is about to get bitched slapped by Adam Smith’s invisible hand. Link to Gramlich’s paper:
http://www.kc.frb.org/publicat/sympos/2007/pdf/2007.09.04.gramlich.pdf
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I watched him, just a few weeks ago, on a panel to discuss his subprime book, on BOOK TV. He claimed, “We didn’t know,” that the taking the FFR to 1% that he voted for would lead to the subprime problem. They were not paying any attention to what was going on during 2003-05? It is sad.
Jas
Because of the 12 million more homeowners that got into housing 6 million extra houses were created that were not needed and 3 to 4 million will go into foreclosure . The sub-prime easy underwriting mess created mass fraud that will be costly .
Millions of people will be damaged by their credit and finances being ruined ,and millions of loan investors will loss money .
Many town and cities have big ugly homes built in absurd locations along with condo projects where the demand was false . Vacant houses with weeds are already destroying neighborhoods . People will lose their retirement savings on these faulty home investments.Thousands of people will lose their jobs .
To bad the low interest rates were not used for a more productive end than people flipping houses to each other trying to make a quick buck .
I’m not so sure that the Feds were aware of how much fraud was going on in the final years of the boom ,but it should of been clear that a mania was going on that was not supported by local wages .Why didn’t anyone question that approving someone on a loan based on teaser rates would create problems once the loan ajusted up to the real rate ?
The REIC was just selling a investment scheme using easy leverage ,so it was never about putting people into homes .
LOL….
“DROWNING **DELERIUS** WILL SELL CHEAP - pics”
http://sarasota.craigslist.org/rfs/417092221.html
PLEASE - Take Advantage of Me in my Weakened State. OUTRAGEOUS HOMES AT OVER THE TOP SAVINGS. Drowning In Real Estate Quagmire - HELP!! CALL NOW: Rob Feder (941) 545-3677 (investor - - Sarasota / Bradenton / Surrounding Areas)
Kind of reminds me of that bird that fakes a broken wing as a lure, or maybe Br’er Rabbit.
All of those houses look ugly to me. I’m sure that if I were to call the guy, he’d get me to overpay for them by 10-120% though. Think I’ll pass.
That one seems to be popping up here a lot more than any other listing I remember.