Bits Bucket And Craigslist Finds For September 12, 2007
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The Housing Bubble
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Save that plastic!… I know I’d much rather live on the street and keep my card. I hear those steam grates are toasty warm in the winter.
http://biz.yahoo.com/ap/070912/homeowners_credit_cards.html?.v=2
You mean my credit card is my lifeline / savings account? No way, what ever happened to putting 6 months+ of $ away? Credit cards are a luxury here. If dire straits happened here (very unlikely though) charging it would be the 1st thing to be cut off, mortgage would be the highest priority. From the article, some are facing foreclosure but still current on their cards, I hate to imagine what interest rate is 30% ?
I saw Dire Straits a number of times, in our country…
“I saw Dire Straits a number of times, in our country… ”
A lovestruck Romeo sung a streetside serenade, laying everybody low, with a lovesong that he made…
I love that song!
The best band ever. BROTHERS IN ARMS is still one of my favorite albums. Mark Knopfer’s single stuff is good, too.
Lot’s of FBs “Twisting by the Pool.” No, on closer examination, they’re writhing by the pool.
But see, people know they can, in an emergency, take their cards to the limit as a last-ditch effort for survival, then stop paying. The final gasp for air. It gives them a false sense of security.
FB’s can rent cheap while keeping the important things. There’s the plasma TV, PS/3, plus the payments on the Chrysler 300 with the phat rims.
FB’s can rent cheap while keeping the important things. There’s the plasma TV, PS/3, plus the payments on the Chrysler 300 with the phat rims.
LOL!!
Word.
“Any unexpected pickup in past-due cards could “affect the asset-backed securities” stuffed with credit-card receivables the way the unexpected surge in overdue mortgages has hurt investors in mortgage-backed bonds, said Bill Knapp, the investment strategist for MainStay Investments in New York. It could be “just like the subprime area,” he said, referring to home loans made to people with tarnished payment histories.” and “Credit-card companies, it says, wrote off 4.58 percent of payments as uncollectable between January and May, up nearly 30 percent from the same period last year.” “And some analysts don’t see an immediate danger to investors holding bonds backed by credit-card receivables. Cynthia Ullrich, a senior director in Fitch Ratings’ asset-backed securities group, said the outstanding deals have “sufficient” cushions to accommodate an expected increase in card delinquencies in the coming months.”
Ah yes, another group with tunnel vision. The tide is rapidly going out and they are running out to pick up the fish without sensing the tsunami headed their way.
Oh man, these kids have a BABY for christ’s sakes. Let’s call the White House and see if we can’t get them bailed out.
LOL! My boss just got a card that offered him a $350.00 credit line.
Initial fees of $179.00 leaving an available balance of $171.00 with monthly payments of $25.00 at 19.90% apr.
I $hit you not! This is for real - don’t even use the card and you are upside down. Bring back usury laws!!!
Paul
So has there been any statement on what the new posting guidelines are?
What do you mean, new posting guidelines?
There are filters in place. If you use certain words, your post doesn’t go through.
I suggest baleout or ba!lout…
posting - here?
Are some of your posts blocked? I think wordpress automatically holds some pending approval based on something.
For example if you put 2 or more URL’s in your post, it will not post it right away until the blog owner gives the ok.
The comments server crashed this AM and some posts were lost.
still can’t post a damn thing
Dollar tanking again; 20 basis points a day. This dead cat just won’t bounce.
http://quotes.ino.com/chart/?s=NYBOT_DX&t=f
Just for the picture in this flemish article about the dollar fall against the
euro…
http://www.tijd.be/nieuws/economie_financien/artikel.asp?Id=3200409
I don’t think it’s Washington that is crying right now. I think it is Jefferson that would be really pi$$ed if he saw what was going on. Alexander Hamilton would be laughing with glee.
The WSJ editors are interpreting BB’s remarks yesterday as pro-rate cut. But wouldn’t that tend to exacerbate the greenback’s slide? How low can it go?
And I confess to being flummoxed by his argument that rising long-term interest rates (and risk aversion) favor a FFR cut. Is there any logical basis for this argument, or is it pure propaganda designed to mystify the sheeple? And wouldn’t a bit of risk aversion going forward help avoid another disastrous incursion into stoopid high-risk, low-reward investments like the ones that got us into the current mess?
Bernanke Cites a Rise in Risk Aversion
By GREG IP and JOELLEN PERRY
September 12, 2007; Page A2
Federal Reserve Chairman Ben Bernanke said long-term interest rates have started to rise in part because global investment is picking up and partly because lenders have become more risk averse.
That aversion could be a factor favoring a cut in the Fed’s target for short-term interest rates when its policy makers meet Tuesday. Fed officials are likely to cut their rate target from the current 5.25%, but the size of any cut remains uncertain.
http://online.wsj.com/article/SB118951887530023797.html?mod=hpp_us_whats_news
P.S. Now that BB has tipped his hand in favor of rate cuts, I am guessing the game plan may be to administer electroshock therapy to the sagging credit markets in the form of a “surprise” 1/2 point cut.
IMO, it’s a 50/50 chance he’ll lower 50 bps. Wouldn’t it be an even better surprise if he left rates alone?
We can hope, can’t we?
So far Bernanke has been all talk. I guess we will see what happens.
Got Gold?
The gold bull is snorting, kicking up dirt and about to charge.
Oil, Silver, Grain too…
Things are about to get very interesting.
Dollar index now down 30 bps. Oil up $1. Not a word in the media.
Oh, they’re busy reporting news…or something.
Stop trying to distract us from what’s going on with Britney, Paris, and Lindsey.
CNBC just mentioned energy and food are pushing inflation, so they actually used the fed from the 70’s analogy - indications of inflation balancing off rate cut… Maybe the fininacial dudes need a reminder of the 70’s to wake up…
drag.
Natural gas up 8% today. Booya!
I just can’t figure out why they are all pushing inflate – don’t they remember what that did to the market in the 70’s? Somehow they seem to think as long as the markets are going up they’re set – not only are the markets gonna crash anyway, but they have to do a tad bit better then just go up to offset the hyperinflation underneath it all… We already know if it’s inflate is really stagflate – income sure ain’t going anywhere, and with all the carpenters, plumbers, electricians, concrete works and everyone else connected to building dropping employees it’s more like wages are going to dive.
Let me get this straight. If I do not drive a vehicle,eat or put a roof over my head we have little INFLALATION. WOW!!! I finally understand economics.
This is why the FED just cannot cut rates.
Dollar at all-time low (a new new all time low!) against the Euro. Oil at all-time high (a new new all time high!).
Got rate cut? Think again!
I’m taking my shopping cart full of Newbucks to the store for a loaf of bread. Be back soon.
Does anyone know the btu content of a dollar?
Time to break out the lab coat…
Or the nutrition content?
Fahrenheit 451
Kills paper products instantly…
Much higher than gold, I expect…
Be careful out there.
If you get robbed…. whatever you do… don’t give up the shopping cart!!
I walked by a beggar on 42nd Street today and he would only accept loonies or euros. He threw any dollars in the gutter.
Funny you should mention bread.
Bloomberg: Wheat Price Rises to Record $9 a Bushel as Stockpiles Approach 26-Year Low
Well really, in a hyperinflation control mode, we’d end up with something like a “rentendollar”
http://en.wikipedia.org/wiki/Rentenmark rather than newbucks IMHO.
Or the Amero.
I wonder if the intentional trashing of the Dollar is being done to accelerate the advent of the NAU?
I wonder if the intentional trashing of the Dollar is being done to accelerate the advent of the NAU?
———————-
That’s my bet. :*(
While the PPT is maybe 75% tinfoil hat, 25% reality, to the best of my knowledge NAU/Amero is 100% tinfoil hat. Other than academic treatises on it, I’ve never seen any serious discussion regarding it nor could I see the USA nor Canada adopting it. Each would have way too much to lose nor would they want the benefits necessarily.
Many South American countries have renamed their currency to rid themselves of the stain of just another fiat currency gone wrong song, and it’s never helped.
Currency is a report card, financially.
to the best of my knowledge NAU/Amero is 100% tinfoil hat
Then why all the secretive, closed doors, SPP meetings. The latest one was in Canada, and it received virtually no MSM coverage. J6P has probably never heard of the Security & Propsperity Partnership. I wonder why?
“Security & Prosperity Partnership?” Sounds Orwellian to me.
spp.gov…..
But according to our wonderful elected officials, the economy is “roaring” and everything is wonderful. Will it take complete and utter destruction of J6P for the nattering loons to see the light? In the mean time, real, everyday problems like retirement security, healthcare and erosion of privacy goes on while the idealogues yap on about “terrists” and “socialism”.
Hey, exeter, didja catch any of the Petraeus testimony yesterday? What a farce.
I started to until the propaganda got me ill. The old “communist behind every tree” paranoia is rapidly losing it’s effect.
Why wont anyone talk to ME?
I even posted my reume on CL, and offered to work a week for free, with one stipulation, that the job or your company has a direct relance to my resume, NO TAKERS…..
But i did get 3 responses from Pre Paid legal, 2 from Bankers Life, 2 from Primerica, Or i can be a mortgage Broker, sell insurance, and the usual money lauding scams from the UK. Work at home “jobs”, ………and assorted others in just 3 DAYS!
aren’t bk lawyers hiring ?
You’re way way too picky. Get some experience in a different field, and prove that you can work even when the terms don’t match your exact expectations.
CL is not the place to find a job. I am job searching as well and am experiencing the exact opposite of what you describe. So far best offer I have is $70 an hour but I think I can hold out for $80.
Sorry, no doom and gloom on the economy where I sit.
“But according to our wonderful elected officials, the economy is “roaring” and everything is wonderful. Will it take complete and utter destruction of J6P for the nattering loons to see the light? In the mean time, real, everyday problems like retirement security, healthcare and erosion of privacy goes on while the idealogues yap on about “terrists” and “socialism”. ”
[Funny smirk] “But Exeter, high interest rates would harm my fr… I mean, the economy. We don’t need further government intervention, except for spying on people and spending all their money on endless oil wars… fool me once…… the point is, I’m the decider”.
I am going to cool my heels overseas for a couple of years. If you guys figure out a way to pay for all this, let me know.
“If you guys figure out a way to pay for all this, let me know.”
Munitions, that’s where it’s at, my friend. They keep trotting out OBL, Weekend at Bernie’s style, just to keep the sheeple in line. Overdid it a bit on the Just for Men gel, though.
It was the Grecian Formula they used on his beard that threw me. So, he’s trying to appeal to a younger demographic? Or lure chicks to his cave?
LOL, spike, I about lost it when he started pontificating about mortgages.
I think OBL is just pissed he didn’t think of unleashing a 100K clueless realtors and mortgage bankers on our economy to wreak havoc first! It was far more efficient than 9/11 and it shows him up.
They keep saying they dont want to print coins because the metal is worth more than the value the coin represents. There is fear that people will be lemtling down pennies and selling the copper.
Forget that, when will the paper be worth more than the $?
print coins
And I thought the big chain-based beasts we used in mainframe ops. back in the 1980’s were impact printers . . .
Oops.. you got me.. too early lol… PRINT coins.. drop them out of helicopters.. kill guilty homeowners as the coins pierce their bodies.
“As got is my witness, I thought turkeys could fly.”
WKRP never gets old. Still funny stuff.
One of my favorite shows to watch when it was on. Ahead of its time.
http://www.youtube.com/watch?v=ZByndN_ffyw
Ah yes, remember the old Ginger vs. MaryAnn debate?? Well, for me anyways Loni Anderson couldn’t hold a candle to the other gal in that show (Jan Smithers?? I forgot).
A $100.00 Bill costs around 25 Cents to print…
The other $99.75 of value?
Strictly faith based
“melting down pennies and selling the copper.”
After 1982, most pennies were copper plated zinc. But I guess zinc prices are high enough that this is a moot point.
In our world Nouveau Bizarro…
Every last Nickel in commerce, is worth 9 Cents, @ meltdown value, let alone minting cost, call it 11 Cents to make em’ now.
When the lowly Nickel has more bang than the paper buck~
Something is very wrong in the state of Denmark…
But don’t you see? This is what the AuBUGs want: a fully convertible currency.
Hoarders of the 5 cents piece would be called CuNiBugs
A Nickel’s composition is 75% Copper and 25% Nickel
You can’t call US coinage fiat money any more.
oil at an all time high. My mantra “peak oil” - coming soon, to a neighborhood near you.
To warn those who hate me, as well as others who do not, my name will be changing to Bill in Maryland for awhile. Just temporarily leaving for a kind of “sabbatical.” Wrong time to leave Phx and wrong time to go to the a cold area. But I always think of our soldiers in Iraq before I start complaining about my location. MD is paradise compared to being in harm’s way from a crazed fundamentalist.
Hope you have a nice relocation to MD, Bill. I suggest you not change your name, though, as most of us know you as BIP.
Keeping the apartment in AZ?
buried alive in his house:
Sydney Lasry, a systems engineer, took a second job three years ago so he could afford to buy a $400,000 home in Severn, Md. His mortgage payment hasn’t risen, but his property taxes have jumped by $1,000 since then, to $3,200 a year, and his home insurance has soared by $500, to $1,100.
Now, housing costs are devouring 70% of his gross income. And Lasry, 45, who’s working as much overtime as he can, fears he won’t be able to keep up. “People see me living in this nice house” but when Lasry eats out, “I eat at McDonald’s,” he says.
http://tinyurl.com/2mzprw
“His mortgage payment hasn’t risen, but his property taxes have jumped by $1,000 since then, to $3,200 a year, and his home insurance has soared by $500, to $1,100.”
I remember a couple of years ago, there was a lot in the news about how local taxes would increase as the federal government spent more on defense and less on everything else. Here in NYC, Bloomberg used 9/11 as an excuse to jack up the property taxes, and we’re still paying.
I eat at McDonald’s, too. Yesterday I had their angus burger for lunch. It was very good. Does that make me a victim, too?
I remember the days as a kid,when eating at McDonald’s, or better yet getting White Castle, was a huge treat for the entire family. Now these idiots are entitled to Capital Grille for breakfast. Screw this guy and all like him.
They redid the McD’s here. It has free wifi, better coffees, and salads and such.
You can still get the greasy nasty cheeseburger that will lubricate your bowells if still you want it.
There was a newspaper article where they did a blind taste test and found that most people prefer McDonalds Coffee over Starbucks coffee!
Whodathunkit?
Don’t laugh! I accidentally ordered from the drive up window a Big and Nasty by mistake and had the whole crew laughing their A$$es off. I though my wife would die laughing….
“I eat at McDonald’s,”
as if eating at mcdonalds is a bargain. This guy don’t know the first thing about conserving money.
Even hamburger is up 50% from last year, its $2.99 a pound, last year $1.99
No kidding. I had absolute sticker shock buying ground beef at the local Sam’s Club yesterday. It’s up around $0.050/lb since the beginning of the year.
last year $1.99? it’s been $2.99 a pound or more down in Florida for a while. my favorite, though, is the $4.00+ gallon of milk.
I’ve been finding ground chuck lately for $1.99. Maybe I should check it.
Good idea. You wouldn’t want to be eating ground ‘roo.
“Even hamburger is up 50% from last year, its $2.99 a pound, last year $1.99″
These facts are seditionary; we don’t have inflation here anymore. Recall, we did away with the pesky M3 figure. Now remember to bow when the chariot passes by!
I think the point is that WHEN HE EATS OUT, all he can afford is McDonalds.
“..And Lasry, 45, who’s working as much overtime as he can, fears he won’t be able to keep up..”
He has fears .. he’s worried.. I have compassion.
..he cannot afford McDonalds.
his property taxes have jumped by $1,000
that $1000 a year is the 2 meals a week at McDonalds.
If he keeps eating at McDonalds and dumping fat on his arteries, he won’t need to worry too much about house payments. His main expenses will be health care and cremation insurance. That’s another subject. Health care. The obesity factor in the western world borders on horrific. Keep those house payments up if you’re obese. You’re going to need the equity for those by-pass operations and joint replacements.
Don’t forget smokers, drinkers, motocyclists, speeders, people who sleep around, etc…
Truth is, everyone has a vice. Just wait until your vice is the one the govt & PTB decide to “ban” for your own good.
So in 3 years his yearly housing cost has increased about $1600? I have to think that he’s gotten raises over the last 3 years that would more than cover that increase. Of course, the problem is 70% of his gross income is tied to housing costs. The $1600 isn’t the issue, the idiot bought more house than he could afford even working 2 jobs.
I’ld like to think that he got raises as well. But in the “new” economy, its entirely possible that he got bupkus (sp?).
In the “new” economy we don’t get raises, but instead get “variable” pay, which means that we get tiny year end bonuses if the company exceeds the wildest (but secret) expectations of management.
Since Bush has been in office, US worker productivity has risen 20% but incomes for the lower andf middle class have averaged 3%. Incomes for CEO’s, especially in the big corporations which have shifted US jobs abroad and the oil and drug companies which the Bush administration have favored, have risen several hundred percent.
I can’t remember who said this, but I’m stealing this quote from Minyanville:
“The high productivity numbers can be interpreted to mean that the US worker is not doing a good enough job of sticking it to the man.”
From the article:
“”Affordable housing has a stigma,” says Marissa Trevino of the Phoenix Industrial Development Authority. “But young professionals need affordable housing, teachers need affordable housing, police officers need affordable housing. It goes back to the wage issue.”
No. It goes back to a price issue, and in most of the country is still artifically high. There are two or three communities locally in VT that have attracted (especially) out of staters and the top 10% income bracket in VT. They have affordable housing issues because the local service workers cannot afford to live there.
However, these communities do not lack land. They lack the willingness to have high denesity housing come into their community and have artifically high prices due to a perceived premimum. And then wring their hands when “normal” folk can’t afford it.
The other real issue is we have the Lasry’s of the world that seem to be all too willing to throw away large chunks of their life away for a frinkin house. Prices will come down if everyone says (like the banks used to consider safe) - no more than 30% of my income. That’s it - if 30% of my income is a hut, then I’ll move to someplace where I can get an air conditioned hut. But no more, it’s not worth it.
The last time I checked, Bill Gates was paying his bills…so I guess his house is “affordable”.
Let’s get real and call it what it is: LOW INCOME HOUSING
It’s all Orwellian Newspeak.
They refuse to make a distinction between “illegal immigrant” and “legal” immigrant, nowadays just conflating the two, calling them all “immigrants”. This muddies the issue, benefiting the pro-illegal immigration supporters.
Now, conflating “Affordable housing” and “Low income housing” advances the cause of those who advocate for low income housing. Low income housing is housing for the poor - projects, crime, drug dealing, Lord of the Flies in your back yard. Affordable housing is housing that is within the reach of teachers, firefighters, cops, nurses, based on their income. Conflating the two serves the purpose of those who advocate for low income housing.
AZ Republic simply calls then “undocumented workers”. They NEVER, EVER, EVER mention any laws being broken.
I don’t get anger here… Like there’s some line that separates “low-income” from “affordable”.
Either way, if those asshats want to enjoy the services provided by low-income workers without making available places for them to live, and it’s because they want some price-premium on their neighboorhood?…
Well, they’re going to get a really nice, tight, bitter, sweaty reaming from behind in the next couple years. Hopefully physically from the low-income workers, heheheh.
“Affordable housing is housing that is within the reach of teachers, firefighters, cops, nurses, based on their income.”
Affordable housing does not cost $500,000+. The proposed increase in the GSE/FHA conforming loan limit has nothing to do with affordable housing and everything to do with baling out fools.
Bill Would Raise Fannie, Freddie Loan Limit
By James Tyson
Bloomberg News
Wednesday, September 12, 2007; Page D03
Fannie Mae and Freddie Mac would be allowed to buy mortgages of as much as $500,000 under an amendment to legislation that will likely be voted on next week, Rep. Barney Frank (D-Mass.) said yesterday.
Frank, chairman of the House Financial Services Committee, told reporters that he plans to add the amendment to a measure giving the Federal Housing Administration more flexibility to insure home loans. The amendment would also give the Department of Housing and Urban Development authority to further raise the limit.
The provision, which would raise the companies’ loan cap from $417,000, is intended to moderate the worst housing slump in 16 years. Declining home sales and prices combined with rising loan delinquencies and foreclosures have crippled mortgage markets, leaving consumers with fewer options to get a loan or refinance.
The Bush administration opposes allowing Fannie Mae and Freddie Mac to buy larger home loans, Treasury spokeswoman Jennifer Zuccarelli said. Treasury Secretary Henry M. Paulson Jr. and Treasury Undersecretary Robert K. Steel “have both said that the subprime market is the area where policymakers should focus to really make a difference,” she said.
http://www.washingtonpost.com/wp-dyn/content/article/2007/09/11/AR2007091102209.html
Wait a minute; that’s just $1,500- a year; Mr. Lasry is living WAY too close to the edge if $125- per month has him paying 70% of his gross.
I had similar thoughts. Big deal.
Guess he wouldn’t be caught dead making his own meals.
What a joke.
I made the same point above. The story says that when he eats out, he eats at McDonalds. It doesn’t say that he doesn’t make most of his meals at home. It doesn’t say that he eatas at McDonald’s 7 day/week. It could be that he treats his family once every month to McDonalds, because that’s all that he can afford.
Selective reading and interpretation I guess
I see what you’re saying now….thank you. Time for more coffee I guess.
It’s actually cheaper to eat of the Dollar Menu than to prepare your own meals (other than maybe mac and cheese), but who’s counting dollars.
Yes, it is. Actually a lot of fast food is cheaper than cooking a decent meal. My family (of 3) can eat a good meal for $6-10. Chinese take out (some variation of chicken, veggies and rice) and a maybe a couple tacos for our son.
Making a good meal at home with any kind of non-processed meat is hard for less than $8. Hamburger around here is $4 a lb or more. Fresh chicken breast is often $6 a lb or more. Sure you can get hot dogs for $2 a lb but I’d wager that McDonalds burgers are healthier than a cheapo hot dog.
I’d wager different.
That’s only if you go with the most expensive option at the supermarket. I never buy fresh chicken breasts as that’s the most expensive way to buy chicken. I buy the whole bird and ask them to cut it up.
And even in the most expensive supermarkets, I’ve never seen 30% fat hamburger at $4 a lb - you don’t need to buy the absolute leanest beef there is.
Totally off topic, but when did people become willing to spend $6/lb for someone else to cut the breast off the chicken?
The Chinese food restaurant isn’t buying 6/pound chicken breast, I can tell you that. If you buy thighs and drumsticks (1.19/lb at my supermarket) cook up some rice and throw on a few veggies you can get a meal for your family for much less than $10, and it will be healthier too.
go vegetarian and it’s pretty cheap and healthy and easy to prepare. if you have to eat meat, cut back to one or two times a week.
I’ll risk being politically incorrect here: not every human on the planet can go vegetarian nor is it healthy for them.
I did exactly as you described (meat twice a week) and within two years was over 200lbs and had nearly lost my mind. (That isn’t a euphamsim…)
My mind and health returned when protien and/or meat was the main portion of every meal, including breakfast. I knower longer eat any grain based products (unless you count cows and chickens).
Some people do very well on vegatarinism. Others get sick - food is one of those places where other things may have to go.
“Yes, it is. Actually a lot of fast food is cheaper than cooking a decent meal.”
Rice, lentils, beans, potato- dirt cheap and healthy. And pretty tasty, if you cook them up as Indian or middle eastern dishes… you can feed the whole family for less than $5.00.
Starvin’ Marvin’ ten years ago could feed himself for a week on $5. Lentils, brown rice, spices. Boring as hell, but it’s a complete protein and better than a $.99 McFarction.
$3200 is taxation childplay. Sydney, you couldn’t afford this house in the first place.
What a winer Sydney is. Here in South Florida I pay $1,100 per year windstorm insurance on my mailbox.
This guy must of lied on his loan application ,so I have no pity for the dude .This guy isn’t even enjoying his house if he has to work all those hours ,but maybe he did it for his family .I guess his family doesn’t see him very much .
It only jumps about $125 / month or so. He must’ve already been buried anyway.
http://biz.yahoo.com/ap/070912/economic_forecast.html?.v=2
“Still, strong global demand for U.S.-produced goods and reduced domestic demand for imports should fuel economic growth of about 1.8 percent for 2008, according to the report.”
You mean there are US produced goods? Oh, right, all those munitions and armaments.
LMAO! Nobody makes a bomb like the US, especially a credit bomb.
Don’t bet on it.
Russia tests superstrength bomb: military
Russia has tested the world’s most powerful vacuum bomb, which unleashes a destructive shockwave with the power of a nuclear blast, the military said on Tuesday, dubbing it the “father of all bombs”.
http://www.reuters.com/article/worldNews/idUSL1155952320070912?feedType=RSS&feedName=worldNews&rpc=22&sp=true
Yeah, but we got that awesome pain ray!! You could call it the super-Taser.
I hear the RNC is going to use that puppy on the Ron Paul crowd during their convention…
My wife and I were just talking about this this morning. The slow bleed and change of the US by loss of manufacturing and illegal immigrants. We figured the heyday passed sometime in 1997-98.
how is the new 532 million dollar embassy in Iraq accounted for ?
an export ? roflow
good point, flat. The whole Iraq situation is sickening, especially when you hear reports about the Iraq gov officials sitting in the green zone, hoovering up as much money as they can, while young American men and women get their asses shot off.
“Imagine a broken down Tijuana, where nothing works and people want to kill you”
A description of Baghdad, by a 51 year old National Guardsman we met…
He spent his 48th and 49th years of life, there.
and the foriegn policy intellectuals thought it would turn out differently, how?
“Imagine a broken down Tijuana, where nothing works and people want to kill you”
Sounds like Phoenix to me.
Oh, I don’t know, seems there’s this little company up in Seattle that make some kind of flying thing that foreigners just can’t seem to get enough of. And oh yeah, China seems to be buying a lot of stuff made by that litte equipment manufacture…what’s it’s name, Caterpillar..or something like that!
Granted, the US does still produce some things, but I doubt if flying thingies and Caterpillar alone can keep the US afloat. Energy innovation would be a great area for us to get into. But of course, as soon as you suggest that, the military industrial complex starts salivating over “Nukular” energy. As if man were advanced enough for that on a widespread basis.
We are still the largest manufacturer in the world (we aren’t the largest exporter). I believe we produce more autos, jets, equipment than any other nation. It’s tricky is a GM car made from Canadian and Mexican subsystems an American car? How about a Toyota car assembled in Alabama? Who benefits most from the manufacture of an iPod–the country with the largest trade in iPods is China, but they only assemble them for a value add of about $2 per unit. Is it better to design the iPod or manufacture it?
Energy innovation is tricky, there is really only one source (the sun) and the rest of our sources are batteries of one kind or another (even under the theory that oil comes from the core the initial energy to heat the core was provided by the sun). There aren’t many batteries we don’t know of (air, water–potential, chemical, and nuclear). We’ve tapped most of the easy water, wind doesn’t occur where we consume it and doesn’t fit with demand cycles, we’re tapping the easiest chemical sources already (oil, gas), nuclear and solar are the only two left. Nuclear is reliable and much better understood than it has been–google pebble bed reactors if you don’t know about them (and is the last remaining untapped battery).
Solar is great, but works best as a simple heat source rather than electric generation (which uses boiling as a handy way to transfer heat into mechanical motion) this requires either focusing or direct generation–which still isn’t all that efficent even though we’ve more than doubled the efficiency of plants. Like wind solar also doesn’t fit too well with our usage patterns both time and locationally.
Energy innovation is tricky, there is really only one source (the sun) and the rest of our sources are batteries of one kind or another (even under the theory that oil comes from the core the initial energy to heat the core was provided by the sun).
One of the biggest arenas in energy innovation right now is increased efficiency — of appliances, of houses, of buildings, of systems, of power grids.
My brother-in-law used to work in solar but is now focused on increasing efficiency and supplementing with solar or wind. Granted, increased efficiency won’t take us all the way to energy independence or green energy (or whatever the eventual goal is), but there are inefficiencies built into our current consumption patterns that can be solved much more easily than developing an entirely new energy source.
And the ROI of flourescent lights is much better than PV arrays.
They are buying planes and caterpillars… they go there.. Chinese engineers tear them apart, and then try and build competing units.
nice…
I don’t know about the rest of you…
But if the Chinese can’t do pet food “right”
Everything else is highly suspect~
And U.S. companies don’t do that - right!
Reverse engineering is practiced by everyone. Nothing wrong with that at all.
51 Panamanians are resting in their graves, due to shoddy Chinese toothpaste…
If a like amount of Americans were to perish, crunching the numbers, 2.3 Million Panamanians vs 300 Million Americans
6,630 of us would be laying dead all over the country, victims of anti freeze laced toothpaste…
http://english.pravda.ru/news/hotspots/12-05-2007/91340-deadly_toothpaste-0
“And U.S. companies don’t do that - right!”
Don’t even go there. Speaking from personal experience - the Chinese are *way* ahead of us in that department.
Maybe it’s mostly because of opportunity (how many Chinese-designed products are actually manufactured in the U.S.?), but I think mostly not. The Chinese business model is copy-copy-copy, not innovate. When the company I work for tried to sell product (telecom) in China - we did - just a few units, enough for the Chinese to reverse-engineer it, and then our sales to China amazingly vanished, beaten out by “competition” of amazingly similar products. We attempted a lawsuit but of course it came to nothing.
I gave it some thought, the yin and yang of acceptance of Asian imports…
In the 1950’s, Japanese products were thought of as junk, and their reputation only went ever upwards, from that low point, to today, where i’d much rather have a product made in Nippon, than anywhere else.
They set a standard for quality and the Koreans and Taiwanese, et al, followed along.
Remember the 1st Hyundai Cars?
Not the best made A to B transport, but cheap.
They improved dramatically on quality over the years…
Perhaps based upon past performance, we think the Chinese will certainly follow in the steps of other tigers, but are they really just a vast Potemkin Village Take-Away, when you get right down to it?
The sting of products made to shoddy standards negates the low bar of entry, pricewise.
Maybe it’s mostly because of opportunity (how many Chinese-designed products are actually manufactured in the U.S.?), but I think mostly not. The Chinese business model is copy-copy-copy, not innovate. When the company I work for tried to sell product (telecom) in China - we did - just a few units, enough for the Chinese to reverse-engineer it, and then our sales to China amazingly vanished, beaten out by “competition” of amazingly similar products. We attempted a lawsuit but of course it came to nothing.
Sorry. No sympathy here. Reverse-engineering benefits the consumer which is paramount in my mind. If you can’t compensate for that, your business model needs to be scrapped.
I should qualify that the hardware was reverse engineered - the software was just stolen.
And no - theft of intellectual property, including reverse engineering, does not benefit the consumer. In the short run it may cause lower prices on that one particular product - but in the long removes all incentive for innovation - why spend the $$ to invent something when someone will just steal it and sell it for less? It’s the reason why patents exist.
FWIW, the 787 willis the most outsourced/offshored airliner in Boeing’s history. For instance, I know that the fuselage is not made in the US.
I wonder how long until the entire process is offshored and the the only Boeing contribution will be market research and the Boeing logo on the plane (the way your “American brand” laptop PC is made).
It is stupid to think that Boeing and Caterpillar will save the day for the US. The Boeing manufactured today is not the same Boeing that was manufactured a decade ago, in fact it is not even recognizable. First, a lot of the parts of the Boeing are outsourced. The fuselage, the engines, the design the research, the engineering is all gone from what I recall reading a few years ago. What was left is a deal with the Boeing union that forbade Boeing from assembling the plane outside. And that is what it is, big parts such as functional wings, tails, engines being snapped together inside the hangar.
Hell, nothing in the 10GB iPod is manufactured here, the drive costs $18 and it comes from Japan, the controller chip is made in Malaysia/Taiwan for $3, the case costs like $2 or $4 and the various 100 parts together cost $50. On a $299 iPod, other countries make $80, retailers something like $60-$80 and the rest goes to Apple. From what I hear they only make the specification and hand it off to manufacturers like Foxconn to put it together.
The U.S. still manufactures a significant portion of the world’s semiconductors. Companies like Intel, Freescale, and TI (as well as many smaller companies) still have modern fabs here in the U.S. Intel recently built a multi-billion dollar ultra-modern fab here in Chandler. It’s not as dire as you paint it to be.
Tell that to the millions who have lost their jobs in high tech manufacturing. The median household wage in Fort Collins has dropped about 7K since 2000, and it is almost completely attributable to the mass layoffs and offshoring done by the local tech employers. And as the article admitted: those jobs are NOT coming back.
The assertion was that the U.S. doesn’t produce anything. That’s false. The U.S. does manufacture a substantial amount of the world’s semiconductors. I didn’t say there haven’t been layoffs. There have been, but companies have discovered there are repercussions to outsourcing these jobs. It’s not as simple as moving a fab around the world and producing the same quality product. Nice theory. Reality is completely different.
As Jay mentioned below. Productivity has increased significantly in the past decade which means fewer employees are needed to produce the same number of parts. That has as much to do with labor reductions as anything including outsourcing.
Ok, I concede that “we don’t make anything” is false. But there is no denying that there is a major hollowing out going on, and that it is accelerating.
We manufacture a substantial portion of the world’s everything (we mine/manufacture/generate about twice as much as Japan–the next largest manufacturer). Also our output has grown about 20% from 2000 to 2004. Just becuase we have fewer employees (and more machines making the stuff doesn’t mean that we’ve stopped making things).
http://evop.blogspot.com/2006/02/global-manufacturing-data-by-country_22.html
The US produces more steel in the 2000’s than in the 1960’s. Not much more, around 90 milllion short tons then and about 100 million short tons now.
Employment in steel mills has plunged as the mills get more efficient.
Yep, they did…
They also have major fabs all over the world too, their production here is a fraction of their total.
A pretty big fraction in the case of intel it’s about 2/3.
You mean hundreds of billions of dollars of loans defaulting might have an effect on the overall economy? SAY IT AIN’T SO!
What happened to the “Housing is such small part of the economy it won’t have an affect.” crowd?
Hey BucksBag:
I used to be part of that crowd. This blog convinced me otherwise, but it was a painful revelation. Oh well, I’d rather be right than faithful.
Guys,
Need some input. I visited a new community of SFH by one of the big box builders in Riverview (Tampa vicinity), FL. The model that I looked at was a 3600 sq ft home which is being offered at $293K (about $80/sq ft) plus some perks thrown in.
The same house was being offered in mid August for about $325K, so they have cut the price by about $32K in the last 3 weeks.
I know, I shouldnt be even thinking about loooking at a house right now, but my wife has been after me to get her a nest (We have waited for 4 yrs and watched as we were priced out).
On a per sq.ft basis what were the prices in the Tampa area pre-bubble? The offer of $80/ sq. ft for a brand new house doesnt sound as outrageous to me as the ridiculous 2005/06 prices.
“..they have cut the price by about $32K in the last 3 weeks..”
Price setting is out of the hands of sellers, buyers and builders. Lenders are now setting market prices.
You wanna buy an asset that’s losing market value at about a thousand bucks a day? Jump in.
Empire, just my two cents: before you even contemplate price, check out the builder and the quality of the house itself. I’d be really careful of anything built new and especially the HOAs in Florida right now. If you can, try to convince the wife to wait until after January. Also, check the traffic patterns in the area. From reading local articles, Riverview seems to be having a real problem with traffic. I’ve heard horror stories of people having to wait forever just to turn onto 301.
LOWBALL! I would offer them $150k.
i might .. in April of next year.. depending..
Tell her that if she can be patient, price will be even cheaper next year. Tell her that mortgages are tight and they need to work throug the system. The bottom is 2 years off minimum. Ask her how she will feel if next year she could have gotten the house for 240k? or 230k? You won’t be happy if you owe $300k. And does it make it a good deal if HOA’s, taxes, and insurance are high?
EmpireFL,
Since no one else is answering right now, I will.
1) Understand that most likely this is just the “beginning” of the slump in housing. Many ARMs and IO mortgages are just beginning to reset and many more foreclosures are going to be happening in 2008, 2009, etc.
2) Costs will continue to plummet as sellers (J6Pk or Banks) try to find buyers with the capacity to purchase. There are just way too many sellers in comparison to buyers who have the ability to purchase.
3) If you buy right now, you’ll be pricing yourself into that home for a long time, maybe 10 yrs, maybe longer. Many on this blog have estimated 70-80% reductions in the prices of homes. I’m thinking a 50% reduction off 2005 prices (peak), but maybe I’m wrong.
What to Do: Try to talk the wife into waiting a little longer, maybe one more year. Track the costs of homes in the area to verify the costs (maybe per sq ft). Then if she still doesn’t get it, tell her that this could be “THE LAST HOUSE WE WILL EVER BUY” because the cost will be so much higher than the future costs of the same homes.
Good luck and always remember, “A happy wife is a happy life”,
Lip
at $80/sf, you are probably pretty close to price levels for this size house in 2002/2004. FYG, we bought a condo in Punta Gorda in 1998, 1200 sf, and paid about $125/sf. New single family homes, about 2400 sf, were selling for around $200K, or slighly under $100/sf. This was in Burnt Store Marina, a gated community with a smallish golf course and a 450 slip marina. So slightly upscale.
Are they throwing in a pool, nice upgrades in the kitchen, etc. ??
Price-wise, this sounds OK. Market-wise - I think you will do better renting, or finding a rent-with-option-to-buy. Have you sat down with your better half and ran some numbers ?? $300K will cost you about $2000/month mortgage (30 year fixed, 6.5%), most of that will be interest expense in the beginning. Plus insurance, property taxes, maintenance and any kind of homeowner’s or property owner’s association dues. I’m going to add on another $500 for taxes/insurance, plus $200 for maintenance. Add more if you’re going to hire a pool guy or lawn service instead of doing it yourself. So this could end up costing you $2500 to $3000/month. Can you rent equivalent space for less ?? In Tampa, I think you can. Probably be able to get it for $1500. If you buy the house, you are probably not going to be able to sell it for the next 3-4 years, so if you anticipate moving, I wouldn’t do it.
Finally, what is the status of the community you are buying into?? Are the roads and infrastructure built out already, how many houses have been erected?? How many sold ?? How many occupied ?? If everything isn’t done and in on the infrastructure side, you could have some nasty surprises.
All in all, at this point you are probably better off renting and sitting on whatever cash you have. Having said that, and without knowing more about where the house is located, $80/sf seems pretty good, and if you can sit in it for 5 years minimum, you probably at least won’t get hurt.
M78
I would guess that $80/sq is a pretty good price.
The long way to do it is to find some streets in the area with similar size houses and neighborhood that are older than 2002. Then check these streets on the Hillsborough county property appraisers site (here in Broward county you can just type in a street name and it lists all the houses on the block) and start to look at all the sales in the tax records and the corresponding sq feet.
If you can put at least 70% down AND you and your wife do not think of it as a financial investment, then go ahead. If you think of it as a financial investment in any way, then wait.
Empire, check out hcpafl.org. You can see for yourself what the going rates were over time. Here is S. Tampa, asking prices are still north of $200/sq ft, but you can get downtown, to I4/I275, St. Pete, and pretty much everywhere else in a matter of minutes. But prices were about half that in S. Tampa in 2001.
Heed the advice of whoever above mentioned checking into the building quality. I had a friend who was renting a house in Riverview, and the construction quality was horrendous. I was in her bathroom, and I noticed black spots on the ceiling. At first I thought they were bugs, but then upon closer inspection I realized that they were rusty screw heads. It’s like they didn’t even bother to mud/tape the drywall. I started looking around the house, and it was like that everywhere, and everything was cheap, cheap, cheap, from the carpet and tile to the cabinets. On top of that, every house in the subdivision was identical, no one had a fenced yard, the lots were postage-stamp sized, and you could see everything the neighbors were doing. I left there totally freaked out. There are nicer subdivisions in Riverview, but even then there’s actually a decent amount of crime out there, and I was suprised to learn, a Latino gang presence.
I would suggest renting there first, to gauge traffic flow and whether or not you’d be comfortable living there. It’s not like prices are going to go up any time soon. And if prices overshoot the bottom, as some here suggest they may, places on the outskirts like Riverview will most likely be hit hardest, assuming that people would prefer to live closer to where they work, and if they can now afford to buy closer in, they will.
weren’t these guys big BULLS or bullshters ?
The quarterly Anderson Forecast by the University of California at Los Angeles predicts growth in the gross domestic product of just over 1 percent for the fourth quarter of 2007 and first quarter of 2008.
They lost Thornburg. Now they’re bulls–ters. He was their one that would speak the truth.
Neil
Has anyone else been hearing this ad on the radio for cheap housing? Something like “Yes you too can buy a house for $199 a month!!!”. Wonder how that scam works.
A sales lead is the identity of a person or entity potentially interested in purchasing a product or service, and represents the first stage of a sales……..
Sept. 12 (Bloomberg) — The three-month rate banks charge each other for pounds held at its highest in nine years after Bank of England Governor Mervyn King said policy makers are unwilling to supply extra cash to money markets.
The London interbank offered rate, or Libor, stayed at 6.9 percent….
http://www.bloomberg.com/apps/news?pid=20601087&sid=aUGwOxM86nbA&refer=home
More cake?
The central bank won’t amend its system for financing commercial banks by changing collateral rules or making longer- dated loans for fear of encouraging risky behavior in future, King said today in written testimony to the U.K. Treasury Committee.
“The provision of such liquidity support undermines the efficient pricing of risk by providing ex-post insurance for risky behavior,” he said. “That encourages excessive risk- taking, and sows the seeds of a future financial crisis.”
I posted those exact two paragraphs over at Calculated Risk. Love those words. King talks about moral hazard and backs it up with action (actually, by leaving things alone).
So, Mr. Bernanke, do you have the same kind of integrity? Well? … I sense a big, wet sloppy kiss from the Fed to Wall Street next Tuesday.
– Judge Smales
“You’ll get nothing and like it”
He said that although injecting extra cheap money into the financial system, as the European Central Bank and the Federal Reserve have done, would help calm markets down in the short term, “the provision of such liquidity support undermines the efficient pricing of risk by providing ex post insurance for risky behaviour. That encourages excessive risk-taking, and sows the seeds of a future financial crisis.
How does dumping more liquidity into the system restore trust? It seems to me like it may serve to respike the punch bowl, but the only way to restore trust is to end the conundrum, not worsen it.
That’s what I’m wondering, Professor. Aren’t banks by and large hoarding all the cash they can get now ’cause they’re too freaked to lend it out, not knowing where all the losses are?? Doesn’t that take it back to a trust issue??
Liquidity does not restore trust. It prolongs the malaise.
More behavioral analysis from King:
If a central bank provided implicit insurance to lenders “the next period of turmoil will be on an even bigger scale,” Mr King said.
“The provision of large liquidity facilities penalises those financial institutions that sat out the dance, encourages herd behaviour and increases the intensity of future crises.”
http://www.ft.com/cms/s/0/d0035456-6110-11dc-bf25-0000779fd2ac.html
“The provision of large liquidity facilities penalises those financial institutions that sat out the dance, encourages herd behaviour and increases the intensity of future crises.”
Sounds as though financial institutions that sat out the dance are in the same boat as priced out renters.
Why can’t we get this kind of level headed, straight-shooting, analysis? Instead, we get ‘it’s contained’ and smoke and mirrors:
He said the behaviour of markets in withholding short-term funding from vehicles which invest in asset-backed commercial paper was “a process not unlike a bank run.”
He added: “Liquidity in asset-backed markets has dried up and a process of re-intermediation has begun, in which banks move some way back towards their traditional role taking deposits and lending them. That process is likely to be temporary but it may not be smooth.”
The wider economy is likely to be affected by the crunch, he added, “through the interest rates for borrowing and lending faced by households and companies. It is too soon, however, to quantify the impact on the economy as a whole.”
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/12/bcnmervyn112.xml
King’s letter to the Committee (pdf). It provides a measured description of the unfolding credit crisis:
http://www.bankofengland.co.uk/publications/other/monetary/treasurycommittee/paper070912.pdf
According to the letter:
Securitisation of loans has separated the information held by loan originators from those exposed to the risk of default – investors in asset-backed securities or commercial paper. The unexpected losses sustained on assets backed by US sub-prime mortgages have highlighted the potential costs to investors of uncertainty about the types of loans underlying the assets they purchase. So for the time being the markets in these instruments have either closed or become very illiquid. Vehicles financed by short-term commercial paper are holding assets which can no longer be traded in liquid markets. They now find that they have borrowed short to lend long – normally thought of as a function of banks.
As a result of this maturity mismatch, vehicles set up by banks and others are now finding it extremely difficult to obtain funding through asset-backed commercial paper. The markets are now withdrawing short-term funding from such vehicles, a process not unlike a bank run. Many investment vehicles have been forced to shorten the maturity of their commercial paper, making their borrowing even more short-term and their maturity mismatch even greater. Other vehicles have been unable to issue at all. For example, since the beginning of August the value of asset backed commercial paper outstanding in the US has fallen by almost 20%.
Some investment vehicles will need to be wound up. In many cases, however, the sponsoring bank will have written a backup line to the vehicle, guaranteeing its funding. Many of the securitised loans may now be re-priced, restructured or taken back by the banks. A process is starting that will expand the balance sheet of the banking system. But how far that process will go is hard to tell.
The vehicles can be taken back onto banks’ balance sheets. Banks as a whole are well capitalised and should be able to do this. Moreover, the funds that were directed to assetbacked
securities and commercial paper will now be available elsewhere. In the end, that funding will come back to the banking system, although between banks the distribution
will differ. So the adjustment period may be awkward and, during it, banks are placing a premium on holding assets which can quickly be turned into cash.
The increase in demand for liquid assets during the adjustment period is one reason why, in all the major economies, yields on liquid assets like government securities have fallen. It also helps to explain why the compensation needed for banks to lend to other banks over periods longer than overnight has risen and why the volume of inter-bank lending has been increasingly concentrated at shorter maturities. Since the beginning of August, the spread between interest rates for 3-month inter-bank lending and central bank interest rates expected over that period has risen in all the major economies. At present, the average spread is 110 basis points in sterling and 90 basis points in dollars. This is the natural economic result of a change in the preferences of banks over the composition of the assets they wish to hold on their balance sheets.
Can someone explain the Libor?
http://en.wikipedia.org/wiki/Libor
“LIBOR is … a filtered average of inter-bank deposit rates offered by designated contributor banks, for maturities ranging from overnight to one year. The shorter rates, i.e. up to 6 months, are usually quite reliable and tend to precisely reflect market conditions at measurement time. The actual rate at which banks will lend to one another will, however, continue to vary throughout the day.
Apart from the US dollar and, of course Pound Sterling, currencies for which LIBOR is a significant reference rate currently include the Swiss Franc, the Yen, the Canadian dollar and the Danish Krone.”
Two key features of the LIBOR that distinguish it from the Fed Funds Rate (FFR) are:
1) It is not currency specific;
2) It is not controlled by a Central Bank, but rather by the interactions of a number of independent market conditions.
Hence I conjecture that the LIBOR is a better gauge of global lending market conditions than currency-specific interest rates that might be (or are) subject to manipulation from the issuing country’s central bank (e.g., FFR and T-bond yields).
conditionsparticipantshttp://housing-watch.com:80/home.aspx
Kind of handy guide for tracking home prices. If you click on a city you can break housing into percentiles.
Kewl…i can buy 8 homes in Detroit for the same price as 1 in Santa Barbara… I see the light of opportunity!
And the Detroit average price must include the burbs, cuz you can buy 8 house in the Detroit city limits for about $100K
Careful…….just ’cause they’re cheap doesn’t mean it’s a deal.
That “rally” yesterday merely filled the gap down from the Friday employment shock dump. It’s a very low risk short entry becuase you’d know quickly if you were wrong. Volume stunk too.
Tangenelo Countryslide
http://www.stockmania.com/2007_09_12_archive.html
Nice work, kahuna.
Thanks. This may be my master work. Ha!
I thought BB had a giant printing press? I never knew there was actually a money tree (thunk that was a figment of GetStucco’s imagination!).
Retirement Woes..
I have been hearing about this for awhile from people in other agencies… The house sale was going to fund their retirement.
From the Washingtonpost.com
Census: More Delay Retirement
Squeezed by health-care costs, dwindling pensions, more Americans are working past 65, data show.
From Bloomberg
Retirement Funds Vanish as Bankruptcies Hit Tax-Deferred Scheme
By Erik Larson
Sept. 11 (Bloomberg) — Marsha Slotten’s bad news came in April by e-mail, from a tipster warning that the company holding her retirement nest egg had collapsed.
After racing in a panic to the office of Southwest Exchange Inc. outside Las Vegas, she found a locked door and a sign saying the staff was “in training.” It never reopened.
“I was devastated,” said Slotten, 58, who said she was forced to cancel early retirement after the disappearance of $2.74 million she made selling a strip mall. “I thought I knew what I was doing, but now my nest egg, my retirement plan, is gone.”
My take? Marsha got divorced and got the strip mall as part of the settlement. Then instead of investing it safely she went for the big return. Greed as usual. My guess is she is living in a 4,000 sq ft house that is overpriced and on it’s way to being upside down also.
Call me crazy, but one would think that with $2.74 million this person’s portfolio would have been a little bit more diversified. Not even a few token FDIC insured CD’s? Oopsie…
“The European Central Bank on Wednesday loaned commercial banks €75bn ($104bn) for three months, a sign that institutions in the money market remain wary of lending to each other for periods of more than a week,” according to FT.
http://www.ft.com/cms/s/0/c9599ea4-611e-11dc-bf25-0000779fd2ac.html
It seems the protracted loose lending spree has served to largely destroy the globalized banking industry’s most valuable form of capital: trust. Heckuva job, Central Bankers!
As ye sow, so shall ye reap.
It is all over the news: insurance premiums are up 6.1% in one year.
http://tinyurl.com/39vby7
A few thoughts about this. Is this going to “miss” having an effect on the inflation numbers, just as the run up in RE did not seem to have any effect?
(Also, is the downfall of renting and owning domiciles going to depress inflation numbers?)
Does this mean that medical is now imploding from its own weight? I think so. Medical is now in a downward spiral of less and less people insured, so those remaining with insurance have to pay more. Many factors contributing to this, including the off-shoring of jobs that have reduced our jobs base.
What this means is my own health insurance (that I purchase on my own and is not a group plan) is going to have larger and larger deductibles every year with more and more medical exceptions, until (after so many years) my health insurance coverage will become meaningless.
Eventually, the only people left with meaningful insurance coverage are going to be the CEOs and members of Congress. (Already, small businesses are all but shut out of medical insurance coverage for their employees.)
What will happen next? Perhaps a new medical Phoenix will rise from this smoldering heap of deep doo doo, a system where people who have legitimate “on-the books” employment will pay-as-they-go, (and the marketplace will respond with facilities for this growing pay-as-you-go clientele) and everybody else gets a free pass.
As more and more insurance and tax burdens are placed on conventional jobs, you either will get less of them, or honest hard working people will refuse them. At some point, people will realize that employer provided insurance group plans are so watered down that there will be no “insurance credible” reason for working in a large multinational. I believe the underground economy is only going to get proportionally bigger from here on.
What do y’alls think?
Got 10% down?
Yes, a latte in every hand and a Hummer in every driveway.
Um, did you mean to post in some otter thread?
Once we socialize here, the quality doctors will simply move to Mexico, hire Mexican nurses, and work in top-rate (new) hospitals - without vulture lawyers lurking over them. The cash cost to Americans going down there will be about the same as our present co-pays, if not less.
We’ll simply outsource our top-rate medical system, while the little people here can stand in line at wait at the US clinics.
http://www.onthefencefilms.com/video/deadmeat/
A Short Course in Brain Surgery highlights the plight of an Ontario man with a cancerous brain tumor who crossed the border to the U.S. to get the medical care that is rationed in his home country. Run Time: 5:36
That’s extreme. If we have socialized medicine (all citizens have access to basic medical coverage), it does NOT mean people can’t pay for more/better treatment.
Scare tactics…
You got that right. That’s exactly what happened with Germany.
Once we socialize here, the quality doctors will simply move to Mexico, hire Mexican nurses, and work in top-rate (new) hospitals - without vulture lawyers lurking over them.
Quality doctors don’t worry about vulture lawyers lurking over them
Our own family primary care physician shuttered his doors in July. 3 other local doctors did the same since.
Gotta love the money making “free market” healthcare system we got.
I know of doctors who have never been sued once, but their malpractice is now $100k per year. But there is a doctor in Louisville who has racked up 20 something malpractice lawsuits, and is still practicing medicine.
This is insane!
Malpractice insurance allows for quacks to practice while quality doctors are leaving the system.
All you have to do is “go bare” (i.e., don’t carry any malpractice insurance). You put everything in your spouse’s name and you don’t “own” anything so you have nothing to lose. Most vulture lawyers won’t take even a meritorious case because they can’t be sure of getting paid so the malpractice claim never even gets off the ground. Nothing to lose, nothing to take, move to Florida and buy your home with cash ala O.J. style. You can be as irresponsible as you want or the biggest quack on the planet and there is nothing to stop you since malpractice rarely rises to the level of being prosecuted criminally.
Responsible doctors usually have something to lose and usually a moral code where they want to see their patients get well. At some point though they make enough (and many make a LOT) that they ask themselves why they should continue to put up with their complaining patients for what they government (if Medicare) or the insurance company (if not) pays. It is easier to just schedule a tee time.
I suspect this has already been going on for some time, although there are some complications with this approach. What happens in a divorce and one spouse has everything under their name?
My ambulance chasing brother in law makes a joke out of this. He suggests looking at percentages. Chance of getting sued for malpractice (5% or less) v. chance of getting a divorce (50%). Actually, most state laws require division of marital assets on something approaching parity without regard to whom hold legal title.
Umm, yes they do. I work in a hospital, and even the very best doctors are petrified that they are going to get sued over a bad outcome.
Right, whatever. So having to wait 11 months to have a mole removed from someone’s face here under the existing system is ok, then, as long as the system isn’t !!!horrors!!! socialized !!!gasp, shriek!!!
The fact is, every other industrialized country thinks enough of its citizens to create a system of health care for all. Health care is a basic right that all people should have access to.
If we got the insurance companies’ greedy hands out of the till, current health care costs could cover everyone.
Blasphemy Dani blasphemy!!!!!!
” Health care is a basic right that all people should have access to.”
Along with social security, education, housing, autos, etc.. It’s in the constitution or bill of rights somewhere. oh yea the 14th amendment “equal protection”.
Careful… Education is a priority established by our founding fathers. We assume you don’t need education either.
Maybe, but they didn’t suggest that we needed government schools any more than government hospitals. That idea started, appropriately enough, in Germany.
http://tinyurl.com/3a84y4
Yes Comrade, if we only got the greedy capitalists out of the system, a greater good could be accomplished with a centrally controlled system. The inherent inefficiencies of capitalist competition and ineffective rationing systems based upon supply and demand are worthless compared to the central buro and our latest 5 year plan.
Ignore the failures of other public systems, such as the 2003 France heat wave that killed nearly 15,000 due to the lack of AC in hospitals and that most of the hospital staff all go on vacation at the same time (labor laws you know): http://en.wikipedia.org/wiki/2003_European_heat_wave
Ignore the fact that there are more MRI machines in philadelphia than in the entirety of Canada.
Our 5 year plan will is better and will offer the best care for everyone, regardless of their income, ability to pay or contributions to society.
The communists are coming!!!! BOO! lmao…
Nice strawman argument but you didn’t speak a word of the utter failure our healthcare system is.
We’ll give you another chance.
The system is already half socialized as it is. All anyone has to do is look at the projected government expenditures for Medicare over its history to see what the long term of effect will be. There is uniform underestimation of its costs. It works now because the non-governmental piece is subsidizing the governmental (Medicare/Medicade) piece. Once it is all governmental, that opportunity goes away. Taxpayers here will have to get used to taxation rates like they have in countries that have these systems which are all uniformly higher and even then, when government pays the bills, government gets to make the decisions.
It is hard to argue that government ever does anything better for less or even the same money. I can’t think of a single instance but solicit suggestions.
I have a suggestion in the interim. If Mom will refrain from from running her little yuppie larvae off to the doctor whenever he/she/it has a runny nose and expecting someone (anyone) else to pay for it, and if drug companies would stop spending hundreds of millions of dollars trying to convince all of us that we have to have an overpriced pill for the “mal du jour,” (yes, we need to drive Tums out of business with a prescription drug) we might be able to pay for it ourselves and we don’t have to get into this discussion.
And since this is the housing bubble blog, all these highly paid doctors in our system do perform an additional useful public service. They are often bad at making investment decisions. I know at least 3 that have bailed out fb by buying overpriced real estate in the last 12 months.
Yay, Big Pharma!
Yay, HMOs!
Y’all know how to treat us right!
It is hard to argue that government ever does anything better for less or even the same money. I can’t think of a single instance but solicit suggestions.
There are things we want government to do for us because it’s in the common interest. Highway funding, national defense, the postal service, mass transit … just to name a few.
Would these things be better privatized? Doubtful.
In some cases, clearly not … can you say “Halliburton”?
“utter failure”?
So most people who seek out medical treatment in this country are denied, or are killed by incompetent doctors? Drugs are in short supply, and are usually poison conterfeits when they are found? Medical equiptment is stolen from clinics and resold on the black market by thugs and criminals? You can’t just walk into any emergency room across the country and recieve treatment for whatever is aling you - heart attack, broken neck, etc?
I’m not sure you’ve fully thought out your position. If you really think that the US health care system is functionally equivalent to Zimbabwe’s, then nothing can be done to change your mind. Yes, let’s be like Canada, where people die wating for MRI scans of tumors, and serious cancer patients must sneak away to the US for treatment, since in Canada any private treatments outside of the socialist system are illegal - for “fairness”.
If we’re going socialist here, why not start with food? I’m sick of paying $200 a week for groceries, and I’d love to be able to walk into a nice restaraunt and get a “free” meal with my government-provided “eater” card. Surely you agree that food is a more basic right than healthcare? Heck, I could even stop working and live off the system - what a “utopia” that would be!
I thought this forum was populated by economic libertarians, but maybe there are execptions like yourself exeter.
If all these “horrors” socialized systems are so bad, why are we behind every one of these countries in overall health and lifespan - the amount of machines doesn’t matter if no one can afford to go to the doctor. Take the profit out of healthcare or make the insurance companies at least provide some preventive care, which is much cheaper than having to try to fix people once they are in crisis.
You really want to compare the efficiency of the post office with Fed Ex?
As far as national defense, the government buys all its technology from the private sector, who also has to teach the government how to use it. Most of the military is technically illeterate, although they more than make up for it with persistence.
illiterate. Jeez that’s a good one to misspell!
Highway funding, national defense, the postal service, mass transit … just to name a few.
Chicago Skyway Privatized. UPS privatized. Southwest Airlines. Amtrak woops.
The middle two you suggested were in the Constitution, although an argument can already be made that the postal service has been privatized since it now is funded off budget and is forced to compete with FedEx, etc.). Those relating to getting around (highway funding and mass transit) are/can be privately funded. Impact fees in developing areas, toll roads, etc. Some state governments are actually selling these things off. We’ll all get to see how that turns out.
Since you mention Halliburton, it is an example of the problem with access to government monopolies (i.e., the military, as good as the service men and women are), not an argument that government should do it. You’d just get health Halliburtons (to the extent that you don’t have them now in HMO’s)
If anyone here would like to expound on the magnanimous successes of our broken healthcare system that even the dimmest of bulbs would agree is broken, please proceed.
FedEx is fast but a tad more costly than a first class stamp.
My wife works in a cath lab. Nothing like taking care of a patient that has cellulitis and has roaches come running out of the flab as they are hoisted on to the gurney. The medical profession is no cake walk. She and many of her colleagues are starting to burn out.
Chicago Skyway Privatized. UPS privatized. Southwest Airlines. Amtrak woops.
Small potatoes (Southwest) or niche players at a different price point (FedEx, UPS) that, granted, do their job well. Implicit in my argument was a problem of economies of scale … should’ve made that more clear.
Since you mention Halliburton, it is an example of the problem with access to government monopolies (i.e., the military, as good as the service men and women are), not an argument that government should do it.
I agree, it is that. But it’s also an example of private enterprise f*cking up a privatized “service” at 10x the cost.
Just like our healthcare system.
I had a longer, blah-blah-blah filled post disappear (I think).
So, shorter, I’ll just quote are they crazy:
Take the profit out of healthcare or make the insurance companies at least provide some preventive care, which is much cheaper than having to try to fix people once they are in crisis.
Absolutely.
Recent stats in Boston: a one-month wait to have a mole removed, a one-week wait for Botox.
looks like there are less people waiting in the botox line. what does that mean?
If we’re so much better than the socialized countries, why are wealthy Americans seeking treatment in Germany? They are years ahead of us WRT stem cells, for instance.
As exeter already mentioned, the US is running painfully behind socialist countries when taking into account general health, longevity, infant mortality rates, etc.
Agree that if we removed “for-profit” insurance companies & the pharmaceutical monopolies, we’d have far better outcomes in our healthcare system.
BTW, even though I believe we need to have “socialized” medicine, in my world, doctors and nurses would be some of the highest- paid people — we’d just eliminate the junk in the middle of the system (insurance, bureaucrats, top-heavy administration, etc.).
Finally, a hint at the truth.
“Much of the nation is now in a housing slump, and an Associated Press analysis of new census data provides insight into the reason why: Since 1990, homeowners have faced a growing gap between their incomes and the price of their homes.
The widening gap in all but a few of the nation’s 500 largest cities helped make the recent boom in housing prices unsustainable, analysts say. The rising prices were fueled largely by low interest rates and risky borrowing rather than increasing incomes.”
http://www.msnbc.msn.com/id/20728149/
“Since 1990, homeowners have faced a growing gap between their incomes and the price of their homes.”
Blog vindication is sweet!
This is a good first step in the rehabilitation of the MSM, but they are not there yet.
They still have to make that giant leap in faith, when they report what most J6Ps would already know, that the reason for this gap is because prices have risen too high. (Giant leap in faith meaning that the REIC will not be vengefel with their advertising dollars, since it will be common knowledge by then.)
Got 10% down?
My post may need some further explanation.
What I am saying is that in my local area in South Central Kentucky the local MSM is still a megaphone for the local REIC. “Hosuing has slowed so it is a great time to buy.” Although all J6Ps in my area know that housing is not doing well right now, most are still clueless as to what has been going on for the past few years, and why it has slowed down. But SCK does not exist in a vacuum. The REIC can do nothing about the national news programs and the internet. Once enough of the local J6Ps in my area get a better understanding then the local MSM will have no choice but to capitulate and start reporting the truth. At that point, I can say the MSM has been “rehabbed” in totality.
Sorry for any ambiguity…
Got 10% down?
My husband really likes this house. I think the house is nice but I don’t like the location (it looks like it’s off a major road and not walking distance to anything.) How much would you offer?
http://tinyurl.com/yrz9dq
$125,000. That house is old and will be a money sinkhole. Those wood shake shingles look ready to go…..
I love old houses. I think it’s charming. I’d say $275k….but I’m just guessing. If it is off a busy street maybe less.The land might be worth something.
Listen to Devildog. If you want to mess with old buildings that need more frequent repairs then just wait until the price is 1/4 or less. Nothing wrong with being patient and saving over $400k. (But be sure youy save for a 25% down payment. It will be required at that time.)
Of course, by that time you will be able to buy comparable new buildings for a somewhat higher price, sans the maintenance headaches of an older building. But you will still need a 25% down payment no matter what you buy, so keep renting and saving the difference in a Fed money market. (Now is not the time to do do CDs or FDIC accounts with the freakin’ banks.)
Got 10% down?
Ummm, I’ve been a blog member since 2005 and whole-heartedly believe we can see some serious price adjustments (in several towns similar to princeton of 40% in some cases) but that house will not, under normal circumstances, be 125K. That would suggest it is the proper home for a family with an income of about 35K… in princeton NJ? Whereas home prices ARE out of whack with incomes, that price is out of whack in the reverse direction. BTW, nice house
Just map it or visit and see how the traffic is. Had a similar issue with a beautiful house in Navesink by me…. I guess being that close to the road wasn’t so bad when the house was built…. as cars werent around for another 100 years or so.
I didn’t say it would go for that price. That’s just all I would pay for it.
I believe we will be witnessing (in the next few years) the mother of all housing collapses. (This may have happened only one or twice in the 400 year history of the Holy Roman Empire.) The foreclosures in 2008 are going to be of biblical proportions. This is why I fully expect the pendulum to “overswing” in the opposite direction. So in areas where 3.5x income would be the “norm” look for 2.5x income to become reality. So 1/4 of $600k would be $150k, and divided by 2.5 that would suggest an annual income of about $48k after a down payment, or about 37% higher than your estimate. However, all bets are off if we have high inflation, or near hyper inflation.
But only time will tell for sure what will happen. It is going to be very interesting…
Got 10% down?
If you’re planning to buy today, go with your gut instincts. This home will need a lot of work and is in need of a good interior decorator. You will, no doubt, want to put in a garden/green house because the price of food is getting so expensive and is poor quality. With the rising gas prices, food from California will evaporate. I’d say try $400K but know that you won’t be able to sell it for at least 10 years. Will you be happy with that? Will you be happy with all the noise of traffic nearby? If you really like this home, buy it as a home, not as an investment.
Its a great location in that you have easy access to some major connecting roads - especially if you’re heading for Philly.
Pretty pretty area just south of the University too.
And the park is cool.
The 206 is a major road so if you’re directly on it, there will be traffic to contend with.
Lucky you to be heading to that area.
Check out Thomas Sweets first thing.
That house is really cute. In FL, you’d have to offer you firstborn for that sized lot. I miss the North. I wouldn’t jump on it though unless that price is substantially under “comps” for the last couple of years. And I’d find out exactly what has been updated. Electrical and plumbing, foundation issues, roof, etc. could be incredibly expensive to fix.
“Incredibly expensive” to update these old buildings. Exactly what I am saying.
Most people do not have a clue as to the true cost of owning these aging buildings. So what happens is that these old POS buildings keep getting passed on from one owner to another with a price increase. At least this is what has been happening until now.
The point is, a POS is a POS. Don’t pay more than a POS price. Period, paragraph.
Got 10% down?
Figure out the 2001 price. Adjust it 3 - 3.5% for each year since for inflation. I.e. if it was $100,000 in 2001 now, 6.8 years later, it is worth $126,355.
We’re not there yet - not even close. You might want to hold off buying AND dreaming for awhile (heavy sigh, I am) as this will be a slow correction. Want it too much and any reduction looks good.
more fallout from this great credit experiment–this time boats, RV’s, snowmobiles, etc:
“Companies that repossess recreational watercraft say their business is up between 20% and 50% from a year ago. They’re hauling away boats that cost tens of thousands of dollars, or more, after the owners fall several months behind on their payments.”
http://www.jsonline.com/story/index.aspx?id=660784
There is a tremendous potential benefit to stopping Congress from its evil plan to increase the GSE conforming limit from its current (already-bloated) level of $417,000: More affordable housing construction may result, inadvertently helping Fannie and Freddie achieve their affordable housing mission! As for all the white elephant McMansions, the lenders and speculators should get what they deserve, which is to take a bath in their own Koolaide.
THE GSE CONFORMING LIMIT SHOULD BE CONTAINED (OR BETTER YET, SHRUNK).
Size of New Homes Starts Shrinking
As Builders Battle Housing Slump
By KELLY EVANS
September 12, 2007; Page A1
The McMansion may be shrinking.
With the nation’s housing market in a slump and the mortgage market in disarray, many home builders are putting up fewer supersize homes and offering smaller floor plans. That seems to be what buyers suddenly want in an era of high prices and tougher financing.
“Financing has tightened down so much that many people aren’t able to qualify for the larger houses,” said Kathryn Boyce, an account executive in Northern California for Boston-based real-estate research firm Hanley Wood Market Intelligence. “Throughout the U.S. people can’t afford what they previously did. Floor plans are going to get smaller.”
Home sales have plunged over the past year, leaving builders saddled with excess inventory, especially of larger, more expensive homes. In July, new-home sales were running at a seasonally adjusted annual rate of 870,000 units, down sharply from 1.3 million in 2005.
[Small Home]
More recently, turmoil in the mortgage market has made it harder for buyers to qualify for bigger loans. As lending standards get stiffer, lenders have cut back on mortgages exceeding $417,000. That’s the maximum size loan that lenders can sell to Fannie Mae and Freddie Mac, the government-sponsored financiers that buy mortgages from lenders and repackage them into mortgage bonds for sale to investors.
All this is causing builders to redraw their blueprints. After reducing prices on their current inventories of unsold homes, the next step is to “start building to a new market. That new market is a lower price point at a smaller size. To the extent they can do it, they will,” said Kermit Baker, chief economist at the American Institute of Architects.
http://online.wsj.com/article/SB118955679788724507.html?mod=todays_us_nonsub_page_one
P.S. I agree with the school of thinking (embodied in Robert Reich’s Marketwatch interview with Kai Ryssdal yesterday evening) that it is not the builders’ fault that they have overbuilt in the unaffordable oversized home category, but rather the fault of bad policy, like that represented in Senator Schumer’s proposed increase in GSE limits.
Tuesday, September 11, 2007
Listen to the show
Too much of a good thing?
Supercapitalism
For many Americans, capitalism equals democracy. But in his new book former Labor Secretary Robert Reich questions the appropriateness of that equation. He talked with Kai Ryssdal.
http://marketplace.publicradio.org/display/web/2007/09/11/supercapitalism/
Odd that the money cartel and government policy are the key problems in a “capitalist” economy. The problem isn’t so much the free market as the lack of one. We’re living under something more equivalent to financial fascism.
Reposted, but a perfect comic strip sequel to your comment:
http://www.workingassetsblog.com/2007/09/this_modern_world_the_invisibl.html
I can’t believe they’re still building at all.
Oh yea they do - that just tells you how inflated the price of housing was and still is, compared to its cost.
Why not? They were making money back in 2001 and they can still sell the houses for a lot more than they did then. And the “I’m not going to give it away” crowd will still probably hold out for another year or two and leave the market to them.
Yeah - Maybe we’ll see nice developments of 1200-1800 sq ft homes WITHOUT GRANITE OR STAINLESS STEEL, constructed well and planned well. Perhaps laid out so that there’s a bit of privacy, some outdoor space and a 2 car garage - horrors - I don’t want a 4 car garage - what’s wrong with me.
I saw this earleir today. Now everyone can jump in and be a lender to those in need of refinancing. I thought I saw it all till today.
http://www.prosper.com
Recession Time! The Housing Bubble Bursts the Economy
By Dean Baker
http://www.truthout.org/docs_2006/091107R.shtml
“The housing bubble created more than $7 trillion in housing wealth.”
I am so tired of hearing this one. They seem to think that if the “value” of a home goes from 100K to 200K that “wealth” has been created, when the only thing the owner has that he didn’t have before the “value” went up is an excuse to go out and take on more debt.
‘Tis only wealth when you sell it (and maybe not then with fiat currency.
Barn door open…
horses have fled…
BARN IS ON FIRE!!!
QUICK: POUR ON SOME MORE KEROSENE!
COMMENTARY
Liquidity Now!
By MARTIN FELDSTEIN
September 12, 2007; Page A19
The time has come for the Federal Reserve to cut the federal funds interest rate substantially, starting on a path from the current 5.25% to 4.25% and possibly even less. Without such a policy shift, the U.S. economy faces the risk of a significant economic downturn.
…
In addition to these general credit market problems, the decline of house prices and home building will be a growing drag on the economy. Home building has collapsed, down 20% from a year ago to the lowest level in a decade. House prices are beginning to decline, falling 3.4% from 12 months ago and at an estimated 9% annual rate in the most recent month for which data are available. Since house prices adjusted for inflation had surged an unprecedented 70% relative to rents and construction costs between 2000 and 2006, house prices could now fall substantially further.
Falling house prices would not only cause further declines in home building but would also shrink household wealth and thus consumer spending. A 20% cumulative fall in house prices would cut wealth by some $4 trillion, implying a decline in annual consumer spending by about $200 billion or about 1.5% of GDP — enough to push the economy into recession.
A 20% national decline in house prices would involve smaller declines in some places and larger declines in others. Some homeowners could find themselves with loans that substantially exceed the value of their homes. Since mortgages are non-recourse loans, borrowers can walk away with no burden on future incomes. Although experience shows that most homeowners continued to service their mortgages even when their loan balances slightly exceeded the value of their homes, they are more likely to default when the difference is substantially greater.
If defaults become widespread, the process could snowball, putting more homes on the market and driving prices down further. Banks and other holders of mortgages might see their highly leveraged portfolios greatly impaired. Problems of illiquidity of financial institutions could become problems of insolvency.
The negative impact of falling household wealth on consumer spending would be magnified by a decline in mortgage refinancing and the associated withdrawals of spendable cash. Such mortgage equity withdrawals totaled more than $9 trillion in the decade through 2006, a cumulative amount equal to nearly 90% of disposable personal income in 2006. While there is uncertainty about just how much of this was used to finance additional consumer spending, my own belief is that mortgage refinancing was responsible for a substantial part of the recent sharp decline in household saving and the corresponding increase in consumer outlays. The decline in house prices and rise in interest rates will shrink the future volume of mortgage equity withdrawals, causing consumer spending to decline. While the resulting rise in the saving rate would clearly be good in the long term, permitting increased investment in plant and equipment and reduced dependence on capital from abroad, a rapid rise in the saving rate could push the economy into recession.
Fed action to lower interest rates cannot solve the credit market problems, but it would help the economy: by stimulating the demand for housing, autos and other consumer durables; by encouraging a more competitive dollar to stimulate increased net exports; by raising share prices to increase both business investment and consumer spending; and by freeing up spendable cash for homeowners with adjustable-rate mortgages.
A reduction of the federal funds rate would not be a bailout for individual borrowers and lenders who are suffering from their past mistakes. Any such targeted bailout would be wrong, encouraging more reckless behavior in the future. But it would also be a mistake to resist an interest rate cut and risk a serious economic downturn merely to avoid the indirect effect of helping those market participants.
The Federal Reserve faces a difficult decision because inflation remains a problem. Slowing productivity growth and rising money wages raised unit labor costs by 4.9% over the past year. That plus the falling dollar and rising food prices caused market-based consumer prices to rise by 4.6% in the most recent quarter.
Although the extent of the possible decline in economic activity is uncertain, the economy could suffer a very serious downturn if the triple threat from the credit market, housing construction, and consumer spending materializes with full force. A sharp reduction in the interest rate would attenuate that very bad outcome. Today’s 5.25% federal funds rate is relatively tight in comparison to the historic average of a 2% real rate.
Setting the federal funds rate requires a balancing of risks. If the economy would have continued to expand in the absence of a large rate cut, Fed easing now would produce an unwanted rise in inflation, an unwelcome outcome but the lesser of two evils. If that happens, the Fed would have to engineer a longer period of slow growth to achieve price stability. The economic cost of reducing that inflation would depend on the Fed’s ability to persuade the market that easing under current conditions is an appropriate risk-based strategy and not an abrogation of its fundamental duty to pursue price stability.
Mr. Feldstein, chairman of the Council of Economic Advisers under President Reagan, is a professor at Harvard and a member of The Wall Street Journal’s board of contributors.
It just goes to show how stupid an educated person can be. This guy is begging for hyper-inflation.
Yes, but he explains exactly what all of us on this blog have been talking about for the past 3 years……….this “bubble financial scheme” would lead to a BUST.
I have long awaited the Bust, as I consider it long overdue and necessary.
He, on the other hand wants to keep prices HIGH. His solution to a ponzi-financial mania it to find more players.
He thinks the juggler can keep playing, even though he’s tossing too many pins, already.
What he fails to see is that higher, so-called support prices for everything need to have higher support WAGES, and that’s not going to happen. We need price CRASHES. period.
“We must, we must, we must increase our bust.”
Thank goodness for Judy Blume. And boys, dont’ worry if you don’t get that.
LOL!! I got that, SDRE Bear!
I guess Mr. Feldstein is not concerned about rampaging commodities price inflation (e.g. wheat, gold, oil). I thought the Fed’s primary objective was containing inflation, not making sure the stock market always goes up? (I guess I should not be surprised that Feldstein supports respiking the liquidity punchbowl, given that he is on the WSJ board of contributors.)
UPDATE 2-COMMODITIES-Gold, oil and wheat all target new highs
Tue Sep 11, 2007 4:28PM BST
By Veronica Brown
LONDON, Sept 11 (Reuters) - Oil and gold eyed lofty ground on Tuesday as crude came within a whisker of record highs and bullion hovered near 16-month peaks, while wheat prices stayed on the boil due to tight supply.
http://uk.reuters.com/article/oilRpt/idUKSP18400820070911
Although experience shows that most homeowners continued to service their mortgages even when their loan balances slightly exceeded the value of their homes
That was back in the pre-bubble days when the mortgage payments were comparable to renting. Just who is going to pay 2x rent to stay in an underwater house?
Baby boomers looking for second and vacation homes, rich oil sheiks, foreign buyers from Europe and South America, etc, etc.
Ask the NAR. They have a whole list of buyers who are the fundamental reason prices should continue to go higher indefinitely. Why should price matter?
“Although experience shows that most homeowners continued to service their mortgages even when their loan balances slightly exceeded the value of their homes
That was back in the pre-bubble days when the mortgage payments were comparable to renting. Just who is going to pay 2x rent to stay in an underwater house? ”
Yeah, rent now and stop throwing your money away on your mortgage!! Ha ha tables turned! Burn FB’s, BURN…..
“Let the bodies hit the floor”- Drowning Pool
Link to Martin Feldstein WSJ Op Ed piece on why it is high time for the Fed to respike the punchbowl:
http://online.wsj.com/article/SB118955944544924579.html?mod=googlenews_wsj
P.S. I thought the Fed only responded to bubbles after they saw them through the rear view mirror. But my reading of a number of comments from the Jackson Hole pow-wow is that many Fed insiders are not even sure whether housing was in a bubble, or if it was merely an overvalued asset class…
Question: Feldstein says (if I read it right) that reduced spending from equity withdrawals will help increase the savings rate. I thought the equity ATM was for people by and large who couldn’t afford to buy the “stuff” with their incomes.
If the savings rate is zero during a period of equity withdrawals, how does the elimination of the equity ATM suddenly help the savings rate???
Lower MEW = less “negative savings”
I’d guess most people on this board have a significantly positive personal savings rate. That means that for every one of us there must be several people spending every penny they make and some more on top. To do that they need access to credit and MEW was a huge source of such credit. Cut it off and there are fewer negative savers to drag the national numbers down.
Sadly, I am not one of them on here, yet.
many Fed insiders are not even sure whether housing was in a bubble, or if it was merely an overvalued asset class…
Um, an overvalued asset class is a bubble, by definition.
Not according to Fedspeak.
The idea that you can blow bigger and bigger bubbles without pain is simply insane. How does this guy think we got in this mess? If you hadn’t over-inflated the price of housing in the first place you wouldn’t have to fear the correction taking down the economy. Hmmm, the house of cards looks shaky…let’s keep building it higher. Absurd.
The Old Lady argues:
There shall be no bailout. Would you like some tea with that Joshua Tree? IOWs, I hate effing spikeys. Who is proper effed now?
Snatch ~
Great movie.
“Tommy, ‘The Tit’…
… is praying.
And if he isn’t…
… he f**king should be.”
Crude is bubbling skyward. The commodities markets have concluded that BB has decided to respike the punchbowl rather than contain inflationary pressures.
September 12, 2007 11:41 A.M.ET
BULLETIN
Oil futures scale a new peak
Crude oil trades at an all-time high of $79.20 after inventories data.
http://www.marketwatch.com/?avatar=seen&dist=ctmw
Expert on Housing Has Her Own Nest
Zelman, Who Warned About Troubled Sector, Starts Research Firm
By MICHAEL CORKERY
September 12, 2007; Page C2
Ivy Zelman, the former housing analyst at Credit Suisse who warned about trouble in the housing market months before the downturn, has started her own housing-related research firm geared toward institutional investors such as hedge funds, mutual funds and banks.
http://online.wsj.com/article/SB118954743875724257.html?mod=googlenews_wsj
So I’m on the CNN site today, and I see an article titled “Hottest Housing Markets.” “This oughta be good,” I thought, and proceeded to open the article and the first thing I noticed was a list with an Arizona city listed as #1. Arizona? Then I read the article’s subtitle: “… housing market figures “through July 2006!” Who makes these decisions to place these articles, the NAR?
We’ve had something like 30 days over 110 degrees this year. What market is hotter than that?
LOL. It had occurred to me that they might have been talking about angry FBs burning down their houses
Death Valley CA not making any more land over there you know.
A couple of Philly ‘burb stories:
A new house in my area, that sold to a single young woman in early 2006 for $655K, has been on the market for less than a year and was just marked down to $549K. $18K in taxes. Sheeesh, I remember when that property sold, thinking, “$655K? Are they nuts?” But I can’t help feeling bad for the stupid person (now a “motivated seller!”) who bought it.
Similarly, a former neighbor of mine just spent $800k on a place that’s been on the market for over a year, having started at a price of $1.44M. Most recently it was listed at $819K, and I was thinking that maybe, MAYBE, it should go for $600K (4500 sf on a reservoir: “water views!”). My neighbor said he was afraid he’d lose it if he bid lower. Lose it? Yeah, he’s lost it alright….
We knew the market was *NUTS* when our neighbors bought for 425… then some fool around the corner bought one for 600. Now we’ve got about on the block, have to see what they go for and how long it takes… Not worried, we paid 160k 9 years ago, so let it come back half - we’re still way ahead!
Cagey B
My new moniker for Bernanke, as he’s a little hard to read…
Feel free to borrow words, comrades
Graffiti is hard to read, but I wouldn’t call it clever.
Jumbo fixed rate loan rates headed back down?
http://tinyurl.com/2zwoec
Conforming rates are headed back down as well. Are investors coming back for at least the fixed rate mortgage pools?
Also, are investors assuming that a limit on what is considered a conforming loan (currently $417K) will go up in places like California?
As expected, the credit crunch for normal loans based on normal criteria was temporary, if it ever existed at all.
The problem is getting housing prices down to match those normal critiera given actual incomes.
Anticipating rate cut by Fed.
Wouldn’t a rate cut be inflationary, which would (if markets were given free reign) increase the risk premium on the long end of the yield spectrum? I don’t see how lower s-t rates (FFR) could make l-t yields fall, unless there is an unannounced policy of inflation risk premium containment to make it happen.
Banker’s greed makes LT yeilds fall in line with short term yields. Most bank assets earn interest based on long term yields, but their liabilities pay interest based on short term yields. Because bankers compete with each other for business, they tether the one to the other.
I was struck the other day by the similarities between the subprime loans and our current health care system.
During the height of subprime the buyer was an obstacle between the loan originators and the MBS securities investors and loan officers had to come up with innovative ways to qualify borrowers for loans in order to create more securities to sell to wall street.
Today patients are an obstacle between big pharma companies and government funded insurance money and doctors are having to come up with new disease labels (i.e. acid reflux disease, restless leg syndrome) to allow the pharma companies to bill the government for X dollars a month for the rest of the patient’s life to treat the syndrome du jour.
I think there is something to your theory. The tort system discourages cures and treatments for serious illnesses. If the patient has a life-threatening condition and dies while taking your medication, you can be sued for huge money. So the pharma industry has been given perverse incentives to avoid treating anything too serious - frankly I’m amazed that we have as much research on heart conditions and cancer as we do under the current legal system.
But instead, the industry has shifted more and more resources to “lifestyle” drugs. The aforementioned acid reflux, prostate enlargement, insomnia, toenail fungus and of course the killer ap - erectile dysfunction. All chronic conditions but none remotely life-threatening.
Another graph…this is what easy money *used to* look like:
http://tinyurl.com/3chlav
7/1 Interest Only ARM and 3/1 Interest Only ARM, national rates, graphed over the last 3 years.
Interesting that rates on the 3/1 I/O ARMs (ever so popular with people trying to “stretch their dollars” to buy more home) have gone up from 4% in 2004, up to 6% in 2007…just in time for the rate reset. That’s a 50% increase in interest payments at the reset (assuming that the buyer didn’t start off at an even lower ‘teaser’ rate). WOW.
Mortgage companies warned on ad claims:
http://tinyurl.com/2j67hb
“The Federal Trade Commission has warned more than 200 companies about ‘potentially deceptive’ mortgage advertisements that could give borrowers a false impression of the cost of home loans.”
“The FTC said Tuesday that ads that ran in newspapers and magazines, online and in the mail “may violate federal law” by giving a deceptive picture of mortgage terms. It sent the warning letters to mortgage brokers, lenders and media outlets.”
This is way late and not even a hand slap. Put down the FTC as among those complicit in the fraud of the past few years. It’s really absurd that the FTC is just now noticing that there might be some deception in mortgage lender ads. If they’re lending, they’re lying.
Cruising the ‘tube, I found this one i’d never heard before, from Woody Guthrie…
Enjoy~
http://www.youtube.com/watch?v=_k83WArW5XU
OT, but important. The US war in Iran started today, months ahead of schedule. I thought they would at least wait until the Brits left….
http://news.independent.co.uk/world/middle_east/article2953462.ece
Attacks against Iranians are long overdue. This is nothing.
Are you saying you support attacks against Iran?
Please tell me I’m misinterpreting you.
escalation of the war is a component of the GDP prop-up carnival show, the show goes on and on and….
No toast, you heard me right. 25 years overdue.
test
Some asshat at Chicago’s local shrill website thinks that a quintupling of the average home price in Wicker Park over the last 10 years is a sign of a healthy market. No bubble here folks, move on.
At the end he asks whether home prices will continue their meteoric ascent…..duh!
http://yochicago.com/today/market-conditions/appreciate-this-in-wicker-park-and-bucktown-house-prices-more-than-double-in-5-years_5913/
Appreciate this: in Wicker Park and Bucktown, house prices more than double in 5 years
Posted 9/11/2007 by Kate Hawley
If you bought your house in Bucktown or Wicker Park 10 years ago, you’re probably sitting pretty. Our pals at the Multiple Listing Service of Northern Illinois recently shared some figures on home prices in those neighborhoods (bounded roughly by Division, Western, Fullerton and the Kennedy Expressway). Appreciation has been dramatic: the average price of a detached home nearly quintupled during the last decade:
In 1997, 308 houses sold. Average price: $210,523
In 2002, 393 houses sold. Average price: $443,986
In 2005, 172 houses sold. Average price: $784,610
In 2007, 98 homes sold (through August). Average price : $1,001,199
The average price of attached homes - condos and townhouses - has risen too, though not as dramatically.
In 1997, 496 units sold. Average price: $176,242
In 2002, 1,608 units sold. Average price: $305,933
In 2005, 860 units sold. Average price: $393,690
In 2007, 579 units sold (through August). Average price: $418,208
That must be gratifying for the pioneers who endured these neighborhoods’ rougher days, but it remains to be seen whether prices will continue their meteoric ascent.
Wicker Park is my de facto example of A.) Chicago bubble behavior at its worst, and B.) urban development gone awry. I posted a long-ish entry in the last week or so about all the damage the bubble did to the character of Wicker Park and Ukranian Village.
I know some people who bought there in the early ’90s and did very, very well. And they were smart enough to get out.
I saw the Wicker Park posting. Who could buy there now at those prices? It’s $700,000 or up for the two bedroom cottage houses.
Things are changing in the Chicago market. A $4.6 million foreclosure of a new McMansion in Lincoln Park was canceled yesterday. Auction price of $1.3 million so I’m assuming someone came to the rescue there. (It was a developer in trouble.)
Another auction today in DuPage County for a McMansion in Hinsdale. Auction price of $1.3 million. Listing price of $1.799. It’s been on the market for three years. Original asking price of $3.1 million.
That’s a 50% cut!
Two of my best friends bought condos in WP - one in Spring 2005, one in Fall 2006 - both against my advice. They both rented there for 3-4 years first. Both are now underwater, because they used 80/20 loans. Wicker Park is cool because it’s an “emerging” neighborhood, and there are lots of young professionals moving in, good restaurants, etc. But the last place my friends rented together was a new townhouse, and there was a literal crack den next door, hookers on the corner a half a block away, only one parking spot for a 4-bedroom unit, and they were constantly calling the police about homeless people squatting in between their building and the crack den. I just don’t understand why anyone would be willing to stretch themselves to pay top dollar to live there. I understand the “pioneers” - it was a relative bargain to buy in before the bubble started, and it’s proximity to downtown via the el is great. I just can’t see prices holding at current levels, even with Chicago’s relatively high wages.
who posted this?
http://chicago.craigslist.org/chc/rfs/418727246.html
“The real estate postings keep getting more desperate and sales pitches sound like carnival barkers. I keep waiting for another 20% price drop. When will people realize they just simply overpaid for real estate?
Keep waiting buyers, real estate is going to come down a lot more.
900 W Adams”
More Crisp & Cole- straw buyers, fradud, ducking camera’s, Donald Trump commericals, etc…
http://www.bakersfield.com/hourly_news/story/234343.html
http://www.kget.com/news/local/story.aspx?content_id=1862bff7-6776-4f3a-bc77-c9fe625f6259
http://www.kget.com/news/local/story.aspx?content_id=105f5c59-71d5-4019-bb6a-ddee49430b2f
“…David Crisp is the Donald Trump of Bakersfield. Those were Crisp’s words. He called the commercial “The Apprentice.”
Crispy will be the “Apprentice” alright…in an orange jump suit at the state prison in Tehachapi. The “interior” will have a somewhat different “feel” the that of his $560,000 Mecedes…
Bakersfried…what a place to invest your $$$$$$$$$$$ in “real estate” houses…
Crisp and Cole were not the only realtors turning real estate and double escrowing real estate at a higher price with the new sales price being accepted by the appraiser/lender .
The appraisers/lenders should of questioned these high monthly and yearly increases in real estate prices as well as the rapid turnover of property .It’s just absurd that a house in some of these locations would double in 2 years .The old model that people don’t buy houses they can’t afford (because lenders would not let them do it )went out the window .
How the loan -paper risk-raters thought they could use traditional models of foreclosure risk when the new age lending was such a departure from the old models of lending risk is beyond me .In other words ,lenders never gave low down/low doc loans that had such payment increase potentials on these toxic adjustables before . The index spreads were higher ,the teaser rate verses final adjusted interest rate spreads were higher ,payment increase potentials were higher etc., regarding the new age lending of the housing boom .
Did the appraisers/lenders even question what possible improvements could of been done to a property to make the propety appreciate 100% or more in 2 years when inflation was around 3 to 5 % . What possible local wage conditions were present that would cause a home to increase that much in value or cause such a increase in demand for dwellings ?
“Certainly, there is evidence that sales are decreasing from last year, but not enough to warrant hysteria,” said Martha Durnett, president of the Richmond Association of Realtors and an agent with Keller-Williams Realty.
“It’s not all bad for the buyer,” Durnett said. “They have a lot to choose from.”
—Martha, please turn in your spin/lying credentials, you seem to have failed to convince even yourself.
hey ben,
how about a topic on who may come out of this crash smelling like a rose.
i think internet based real estate companies will be very popular and Zillow will become a household name.
Is not Zillow already a household name?
not in northern va.
No “zestimates” available for Alexandria (they just provide assessment, as well as sales data). I don’t know about other NoVa jurisdictions. If they provided zestimates, I’d probably check my own house occasionally, just for kicks.
Crap, buried at the bottom of the bits bucket.
Anecdote: I recently met a person that just told me the following, and I quote: “So I did what any intelligent/resourceful person would do. . . home equity line.” He has used this to buy cars, and lots of them. I said, “I hope you are being sarcastic”. He came back with “Why would you say something like that?” He and I are going to have a long discussion.
More crap, buried at the bottom of the Bits Bucket:
Yesterday, as she was standing on a street corner, I overheard a realtor yapping on her cellphone here in SF: “We’ve had 150 come by in three weeks but no offer.”
Also just this morning I heard on KGO (all news, all talk radio) an advertisement for an auction in Oakland at the downtown Marriot on Saturday for 400 houses, claiming “all cash flow properties starting at $150,000; some with $80,000 in tax credits.”
What a difference a year (or two) makes!
Don’t feel bad about being down here. Welcome and glad to have you.
Roidy
I’ve noticed in my neighborhood there are quite a few homes that have trustee sales pending, but then the sale gets postponed. This happens over and over, each time being postponed between 2 weeks and 1 month. The auction price is higher than current market value. When I look up these properties or visit them in person, they aren’t for sale, they just look like ordinary houses with people living there. Does anyone care to speculate what is going with these?
My first guess is that the owner of the paper has some benefit from picking the time that they take ownership of the property. Even if they are receiving no payments, they seem to feel it is better to keep someone in the house but preserve their right to have the sale and take ownership. Perhaps it looks better to have delinquent loans than have REOs or worse yet losses on sales of bank owned houses.
Keeping these houses off the market is extending the correction period.
Dear Austrie:
OMG! There is a house in my ‘hood that’s asking 2.6 mil. It was for sale for a long time, then the for-sale sign came down, but the little notice about how to use the lock from Coldwell Banker was still on the front window. That lasted about 4-6 weeks. Now the for-sale sign is back up. There has been (apparently) someone living there the entire time. I went to the house’s website, which is 1294hanchettave.com, and there was no mention of what was going on. I thought it was very strange. I also happen to know that this house was a flip.
You may be on to something here.
OMFG! I just went to their website again, and now it just says “This house is off the market”.
OK, I just went to foreclosures.com. I don’t subscribe to their “service”, so I can’t see a pic of the house or the exact address, but there is a house with the same zip code, 5 bedrooms, 3 bathrooms, 5712 sq. ft. It has to be the same house!
I’m pretty sure that the house down the street from me is in the same boat, but that house isn’t so easy to spot on the list without seeing addresses. There are plenty of 2 bed, 1 bath POSs around here.
cnnfn is starting a new happy talk campaign after being mostly negative (and almost realistic) for the past couple of weeks:
http://money.cnn.com/2007/09/11/real_estate/toxic_rate_reset_shock/index.htm
http://money.cnn.com/2007/09/12/real_estate/refi_rescue_status_check/index.htm
FBI RAIDS CRISP AND COLE OFFICES RIGHT NOW:
http://bakersfieldbubble.blogspot.com
Anybody else notice that a good percentage of radio commercials have a “are you in financial trouble tone” to them?
I am starting to see more signs of fear. Dont look at the numbers the MSM is reporting. Take a walk down your streets. The number of houses for sale is really starting to grow. Prices will be dropping in short order.
Timing is everything. Many people on this blog knew there was a housing bubble. The question ultimately is when will it make sense to buy a home. I dont think we will see wholesale reductions just yet, but that day is definitely getting closer.
I know nothing, Nothing.
FINALLY, a little sign that seller’s are giving in.. arlington heights, IL.. swanky Scarsdale hood.. house started around $700K .. tried to rent $2,500.. came up on MLS today at $579… it’s about stinkin time!
hey what is your take on the NW suburbs…How much do you see the prices dropping?
My husband and I are always complaining about prices not coming down.. especially here in Arl. Hts.. it’s crazy. They just can’t get it thru their thick skulls that prices DO FALL!! Houses are sitting, although there are still definitely some suckers out there buying tiny little 3 bedroom ranches on the industrial side of Evergreen for $390K!
http://www.vicapplebaum.com/ranchph/
In todays legal record there were twelve Notices of Intent to Perform actions filed along with numerous mechanics liens. The list of buliders having these actions filed against them is growing every week.
TIMBER!!!
More Business news
Countywide median house price drops $20,000 in a year
By Roger Showley
UNION-TRIBUNE STAFF WRITER
September 12, 2007
SAN DIEGO – The price of a home in San Diego County tumbled to a median $475,000 last month, down $20,000 from a year ago and $14,000 from July, as the number of sales continued falling, DataQuick Information Systems reported Wednesday.
There were 19.4 percent fewer sales than there were a year ago.
However, neither decline was as severe as those recorded elsewhere in Southern California.
http://www.signonsandiego.com/news/business/20070912-9999-bn12housing.html
Great! Only 16 more months of $14,000 drops and I’ll be ready to buy! And y’all thought this was gonna take years.
I was thinking along exactly the same lines!
Check out the graphic, which suggests a red alert for affordability in CA and NV. Meanwhile, back on K Street, D-rats in Congress are working hard to price out Californians forever by pushing the conforming loan limit north of $500,000. If they succeed, two things will happen: (1) California prices will become less affordable; (2) in the near term, more people will buy homes they cannot afford.
Survey: Housing eats up more income
Higher percentage of pay spent on rent, mortgages
NEW YORK TIMES NEWS SERVICE and ASSOCIATED PRESS
September 12, 2007
Housing costs ate up more of the monthly paycheck for millions of Americans in 2006 than the year before, despite signs of a slowdown in the housing market, according to figures made public yesterday by the U.S. Census Bureau.
The bureau also reported that more people older than 65 were continuing to work last year, whether by choice or out of economic necessity.
Graphic:
Housing eats up more income
The housing data describe the buildup of economic pressures before the recent wave of foreclosures, as lenders allowed buyers to borrow more money relative to their earnings and consumers borrowed or refinanced as if the market would never fall. At the same time, incomes did not keep up with housing prices.
http://www.signonsandiego.com/uniontrib/20070912/news_1n12census.html
MARK HULBERT
When bad news is bad news
Commentary: Market’s reaction to jobs report suggests U.S. is in a recession
By Mark Hulbert, MarketWatch
Last Update: 12:01 AM ET Sep 12, 2007
ANNANDALE, Va. (MarketWatch) — Making sense of the stock market’s reactions is never easy. But it appears to be especially inscrutable in the face of unexpectedly weak news on the employment front.
Sometimes it will rally in the face of such news. Yet, at other times, such as Friday, it will plunge.
Believe it or not, the market’s behavior may not be so mysterious after all.
Let me start by reviewing what happened Friday. The Labor Department reported before the market open that nonfarm payrolls had dropped by about 4,000, far worse than the 115,000 increase that was the consensus expectation of a group of economists that MarketWatch had polled.
The stock market plunged on the news. The Dow Jones Industrial Average dropped some 160 points at the open, on its way to losing 250 points for the session.
To make sense of the market’s varied reactions to seemingly bad news, I turned to an academic study from several years ago that examined the reaction to unemployment news., “The Stock Market’s Reaction to Unemployment News: Why Bad News is Usually Good News for Stocks,” was conducted by finance professor John Boyd of the University of Minnesota, Jian Hu of Moody’s Investors Service, and finance professor Ravi Jagannathan of Northwestern University. (See study)
The researchers found that when the economy was in recession - as later determined by the National Bureau of Economic Research, the unofficial arbiter of when recessions begin and end - the stock market typically fell when the unemployment news was unexpectedly bad. But when the economy was in an NBER-declared expansion, more often than not the market rallied.
http://www.marketwatch.com/news/story/reaction-jobs-report-suggests-were/story.aspx?guid=%7BE02825E0%2D81ED%2D4592%2DBC91%2D35CD8EB02D15%7D
Dewd,
That was a completely interesting article. I Llllove it. PB, you are getting really good at picking out all these great articles. You must be some major speed reader.
http://put2.elpasoco.com/foreclosure/detail.aspx?pkg=2325
Bank loans FBs $427K on 8/25/2006. By the time the house is sold at foreclosure on 9/12/2007, lender is owed $455K (9.25% interest rate). Lender gets $212K at auction. BWAHAHAHAHAHAHA! Oh, the Humanity!
Call me Nostradamus, but I predict that that lender, burned for better than 50% of the loan, is giving today’s borrowers far more scrutiny. I just love watching all the villains of the piece getting exactly what they had coming.
For those who don’t like doing the math, the lender in this case was left holding the bag for -$243,415.34.
Cool! That’s a 50%+ haircut that should leave at least one lender with a lasting impression about the consequences of abandoning traditional lending standards.
Sept. 12 (Bloomberg) — Target Corp., the second-largest U.S. discounter, said it may sell its credit-card receivables.
http://www.bloomberg.com/apps/news?pid=20601087&sid=am4mw4EdluKo&refer=home
Looks like a well timed exit. From Minyanville:
Finally, no one is talking about it yet, but I think the market will soon begin to realize that the credit card lenders have in essence become the consumer lenders of last resort. As consumers have been shut out of the mortgage and home equity world, the last available credit is plastic….
To put this all together, take Target’s (TGT) latest financial results and you can see the numbers for real. First, credit card balance growth was up 14% year-on-year - almost 1.5 times Target sales growth of 9.5%. Second, thanks to this balance growth, reported year-on-year delinquency ratios are up only a little bit (60+ days delinquencies of 3.5% versus 3.4% a year ago), but the dollars of delinquent accounts are up almost 18% - to $242 mln from $205 mln – and, as an aside, “late fees and other revenue” are up more than 36% year-on-year….
http://www.minyanville.com/articles/TGT-SEC-Fed-credit-debt/index/a/13898
Who stepped up to buy a record number of GSE mortgage bonds just when the liquidity python was sucking credit away from private sector MBS issuers?
US GSE mortgage bond sales soared to record in Aug
Wed Sep 12, 2007 1:00PM EDT
By Al Yoon
NEW YORK, Sept 12 (Reuters) - Issuance of mortgage bonds from Fannie Mae, Freddie Mac and Ginnie Mae hit record levels last month as U.S. residential lenders found they had no where else to go, according to data from UBS Securities.
Net sales of mortgage-backed securities from Fannie Mae and Freddie Mac hit a record $40 billion last month, a pace that would also make 2007 the biggest year for issuance, UBS said in a research note published late on Tuesday. Gross sales at Ginnie Mae were $9.3 billion, the most since August 2004.
Sales for the three companies are expected to grow with many mortgage lenders — including Countrywide Financial Corp., the largest in the U.S. — increasingly restricting business to loans eligible for the companies’ guarantees. The shift toward the government-chartered companies and Ginnie Mae marks a shift from years past when lenders found it cheaper to package loans themselves, or with the help of Wall Street.
“This is a migration” from the private mortgage market to the so-called agencies, said Satish Mansukhani, head of the U.S. mortgage strategy team at Credit Suisse in New York.
http://www.reuters.com/article/newIssuesNews/idUSN1231342320070912?pageNumber=1
Finance & Economics
Buttonwood
Credit and blame
Sep 6th 2007
From The Economist print edition
The rating agencies operate on shaky foundations
AS OSCAR WILDE might have said, it is the unspeakable in pursuit of the unrateable. America’s Congress is holding hearings on the subprime-mortgage shambles and the losses that have resulted. The firms that must be feeling most nervous about the outcome are Standard & Poor’s (S&P), Moody’s and Fitch.
Those rating agencies have earned huge sums in the past ten years offering opinions on the creditworthiness of an alphabet soup of mortgage-related securities created by over-eager banks. As the market blossomed, so did the agencies’ profits. Moody’s net income rose from $289m in 2002 to $754m last year. But did the fat fees lead to a drop in standards?
http://economist.com/finance/displaystory.cfm?story_id=9769471
Looks like you nailed that one on the head, Prof. G. Stucco-Bear. I had no idea that the bee watcher watcher was being paid by the bee watcher.
Sept. 13 (Bloomberg) — Goldman Sachs Group Inc.’s Global Alpha hedge fund fell 22.5 percent in August, its biggest monthly decline, on losses from currency and stock trades, according to an update sent to investors.
The fund, managed by Mark Carhart and Raymond Iwanowski, dropped by a third in 2007 and 44 percent from its March 2006 peak. Investors notified New York-based Goldman last month that they plan to withdraw $1.6 billion from the fund, or almost a fifth of its assets as of July 31.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVGq2Ll9Lntw&refer=home