Bits Bucket And Craigslist Finds For September 18, 2007
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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U.S. foreclosure filings rose 36% in August from July and 115% from a year ago, hit by declines in once-hot housing markets such as California, Nevada and Florida, according to a report released Tuesday
Nevada again posted the highest state foreclosure rate, with one filing for every 165 households. The state reported 6,197 foreclosure filings in August, a 21% rise from July and more than triple the number reported in August 2006.
California’s foreclosure rate jumped to the second highest among states, with a 48% month-on-month spike in foreclosures. The state reported 57,875 foreclosure filings in August, or one for every 224 households, more than twice the national average.
Florida’s foreclosure activity jumped 77% from the previous month, with the foreclosure rate jumping from seventh highest to third highest. Florida reported 33,932 foreclosure filings, one for every 243 households.
Rounding out the top 10 for foreclosure rates were Georgia, Ohio, Michigan, Arizona, Colorado, Texas and Indiana.
And there is not thing the FED’s rate cuts can do to stem the next wave of re-sets. As someone once said “they are pushing on a string”.
At some point you got to just cut the addict off and let them go through painful withdrawl. The road to recovery is never easy or pain-free. Hopefully Mr B understands the meaning of this analogy. A rate cut today gives the immediate effect of relief, but the long-term effect of increased pain. I guess by 11:15 we’ll know whether mr B and the Fed have the true interests of the economy foremost in their minds.
I guess we know now.
The state [California] reported the most foreclosure filings of any single state with 57,875, up 48 percent from July and an increase of more than 300 percent from August 2006.
Thankfully, we’re number one (California, that is) at least in this category. Soon to be #1 in # per household, I’m willing to bet… [And maybe even # per population.]
Woo-hoo! We’re number 7!
Actual repossessions grew 60% from July and 113% from a year ago. Houses now going back to the banks at a rate of over 500,000 per year. This would represent almost 10% of the existing home sales rate and nearly 15% of the current inventory.
“The number of bank repossessions jumped to 42,789 in August, compared with 20,116 a year earlier, the RealtyTrac said. In July, there were 26,842 bank repossessions.”
http://www.foxnews.com/story/0,2933,297157,00.html
spain; it’s different here!
Sept. 18 (Bloomberg) — A residential real estate slump in Spain, where prices have almost tripled since 1997, is “unthinkable,” the top economic adviser of Prime Minister Jose Luis Rodriguez Zapatero said.
“To talk about severe adjustments or a meltdown in prices is ridiculous,” Taguas said in response to reports pointing to an end of the Spanish real estate boom. “That sort of crisis is unthinkable.”
http://tinyurl.com/3xdryz
Translation: Taguas invested his life savings in real estate and a decline would mean he’s screwed.
Alright you data hounds, go find out what Mr Taguas owns.
I do not think that word means what you think it means… mr economic advisor.
“The next person to rhyme is going to get it. I mean it!”
“Anybody want a peanut?”
Exactly what I was thinking. “unthinkable. You keep using that word. I do not think it means what you think it means.” LOL
I just watched Princess Bride again this weekend. LOL.
Zapatero is trying to avoid a panic in the Spanish economy. Northern Rock Bank said last week that 3 Spanish banks also asked for ECB financing and no Spanish newspaper reported that fact. Only after Bloomberg published it, the Bank of Spain (subsidiary of ECB) reported that the Spanish financial system was solvent and all right (yeap!). Spain has700k new houses built in 2007 (down from 800k last year) and there are “only” 40 million in the country…what the heck!!?? The article said there is demand for 500k new houses for this year…it cannot be actual population growth. I know for a fact that speculation is rampant and there the flippers follow the Miami style: they buy pre-construction and they flip the condo before they have to sign the sales contract. Ay Dios mio!
There have been a lot of English buying down in Spain because of the cheaper prices. I would compare it to Californians coming to Texas to buy properties because they are soo much cheaper.
not only English, the Irish and the Dutch also own over 1 million properties in Spain. And most of those homes have been financed with equity gains from their native housing bubbles. If Spain collapses, the rest of Europe will follow soon. But Spanish prices are stil climbing, just not as fast as in previous years (and maybe there are problems in some areas, but certainly not yet for the whole country).
I think maybe Florida would be a better comparison than Texas. Many buyers are from northern Europe so they are buying vaction properties due to better weather. I like living in Texas but the weather isn’t our strongest selling point…
Yes, I know.
But they are not buying anymore, they have enough “problems” in their own local markets.
Taguas = Lereah’s cousin? Working for the Spainish Association of Realtors?
Traveled from Barcelona to Valencia this summer. Nothing but rows of condos in bad areas for miles. The high rise condos made good landmarks for where you were. The condos looked liked cement dog houses. Big culture difference between Spain and France, as soon as you cross the border you can feel and see the difference.
Big culture difference? How? Could you provide some details, Simi?
Took a train from Barcelona to Marcellea (sp?), South France. As soon as you cross over into France the roads are marked (paint), signs are posted. Also, less trash on the roadsides. Dress code standards are better for the officials. The trees and roadside shrubs are trimmed. The hotels do not have trash in the lobbies. Small differences you notice if you look for them.
The folks at the French train stations are better informed. In Spain, the train schedule could be out of date and was. The people of South France seemed to be more helpful than in Spain.
Oh god, isn’t that the truth. Recently stayed in Montpellier and then drove to Barcelona. The people in Montpellier were surprisingly kind, and even a girl who teased me about Americans being too good to import french cheese supposedly because of “fruit flies” was nice about it. As soon as I entered Spain it took on a more lazy, rural atmosphere. Barcelona was a dump. When I tried to engage people on the street to help me find a mapstore, 9 out of 10 treated me like I had the bubonic plague. Relief only came when some street vendors offered to help. PS - I think when you said Marcella (sp?) maybe you mean Marseilles? Anyway point is that I’ve lost any desire to go there again. Buying bubble-inflated real estate is out of the question
why worry about cement dog houses, nobody lives there anyway …
it’s also different in the Netherlands, we have heard very similar statements recently from Dutch politicians. Netherlands doesn’t have subprime, so we only have responsible lending and honest appraisals here and something like the US housing crisis can never happen in the Netherlands. The Dutch statistics office even published an investigation a week or two ago stating that also the price gains in Netherlands are far bigger than in the US, it’s all based on fundamentals like the low number of new homes that is built and the restrictions that politicians have made for land sales/values. Too bad they don’t mention the huge government subsidies and the mountains of private debt that are the real fundamentals of Dutch home prices.
NHZ, what do you think it’ll take for the Dutch real estate bubble to deflate?
From what you’ve said in the past, it seems the Dutch government has taken an even more hands-on role that the US / UK governments in priming the national real estate bubble. If prices drop or crash, how aggressive will the Dutch government be in protecting that asset bubble? What actions do you think the government will take?
I think the major dangers for the Dutch housing bubble are a crash in other EU countries like Spain, Balkan area, Turkey etc. where the Dutch are heavily invested; because of all the leverage this could prick the Dutch bubble. I don’t think there is much that the government could do in that case.
The other danger is increasing interest rates (most of all the longterm rates). If interest rates rise significantly (like 7-8% instead of the current 4-5%) the 50% home mortgage deduction will turn into a huge problem for the state budget and they will have to make changes (also because no other EU country has such a favourable HMD system).
Without such external factors maybe the bubble can keep growing for another few years, because the government together with the big builders/developers controls almost the complete RE market and everybody in these circles benefits from rising prices. They can keep raising starter subsidies, state mortgage insurance limits etc. indefinitely but I think those only work as long as average prices are rising. The national mortgage insurance etc. will probably make the crash worse when prices finally start moving down.
From Australia.
Economist warns of debt-fuelled recession.
http://www.abc.net.au/worldtoday/content/2007/s2036407.htm
Greenspam on Bubbles and Gardening
http://www.stockmania.com/2007_09_18_archive.html
Sweeet!
Yeah, he’s a regular Chance the Gardener.
I guess he would have to “Be (ing) There”
From his continued interest and statements, I would bet he likes to watch.
Shall I go get Warren now?
Was Greenspan doing the macarena?
He was supposed to be blowing bubbles, but it does look a bit like the macarena. Ha.
UK gets the shakes:
There is a one-in-ten chance of a crash in the housing market over the next year, according to the Royal Institution of Chartered Surveyors.
Simon Rubinsohn, chief economist for the RICS, also said there was a 20-per-cent chance of a 10-per-cent drop in London house prices over the next 12 months.
http://tinyurl.com/3drmch
RE: UK gets the shakes.
It’s being contained.
http://www.guardian.co.uk/frontpage/story/0,,2171546,00.html
“guaranteed” said chancellor Alistair Darling.
Is that like a lifetime warranty?
“The doctor said there’s a fifty percent chance that he’ll survive. But there’s only a ten percent chance of that.” -Col. Frank Drebin.
Oops! I meant Frank Drebin is a lieutenant at Police Squad.
I was checking out the sales listings for my hometown last night. They are still highly overpriced but I noticed two things. 1) Listings are increasing when they should be decreasing. 2) It was the first time that I saw widespread price cuts that were actually substantial price cuts. In the past I saw a few $2,000 - $3,000 cuts. Last night I noticed a lot of cuts in the $5,000 - $10,000 range. Most houses in my hometown are listed in the upper $100,000 to low $200,000 range. I still believe that there would need to be 40% across-the-board cuts to get back to reality.
have you seen new york magazine’s nyc’s nabe-by-nabe vulnerability index?
http://nymag.com/realestate/features/37656/
It’s a pretty rosy prognosis, don’t you think?
it’s hard to tell. and it will certainly vary greatly nabe by nabe.
as the dollar tanks, the most exclusive manhattan nabes may that much more attractive to many europeans.
the outer boros will certainly tank, although according to the tulip.com model, the most cosmopolitan centers will be the last to fall.
i still would not be surprised to see a 25% drop over the next 5 years, even in the best of nabes — and that includes mine.
It seemed pretty bullish on Manhattan real estate overall, and only became pessimistic for some parts of the outer boroughs.
That follows roughly your scenario, too, it just seemed like the magazine report was softpedalling any major downturn for the city as a whole.
Don’t get me wrong, it was an interesting read. But it seems like the writer (and the readership?) is still in the denial stage.
actually, there are several areas of manhattan mentioned — harlem and a few others — that are listed as equally vulnerable (6.0 on their scale) to the outer boros.
Well - this is just great, the British gov’t guarantees deposits at Norhtern Rock. Woohoo! there’s no risk anymore! Just let the money ride - after the banks grab all the profits, the downside falls on the taxpayers. Way to go guys, privatize the profits, and socialize the risk. Sad thing is, it will happen (again) here in the U.S. too.
P.S. OT - Does anyone know that has happened to the Wall Stree Bear Forums? They have been down for the past day.
So long as corporations stay solvent and the campaign to keep J6P pandering to the wealthy, all is good.
LMAO after reading “any solvent bank in similar circumstances.” Does this make King and his bitter diatribe completely irrelevant?
Sept. 18 (Bloomberg) — Northern Rock Plc, the U.K. mortgage lender that sought an emergency bailout last week, rose in London trading after the government stepped in to stop a run on the bank.
…
Chancellor of the Exchequer Alistair Darling said late yesterday the government will guarantee all accounts. The pledge will be extended to any solvent bank in similar circumstances, a Treasury spokesman said….
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_uN4IWVVBZY&refer=home
I wonder if that “pledge” has the force of law or if it is just promises. I would still take my money and run.
There is no deposit insurance in the UK. That turns out to be a problem. Instead of just shutting the thing down and paying off those with under $100K, you get this.
There is deposit insurance in the UK, up to 33,000 pounds, but at a certain level coinsurance kicks in. The first 3,000 pounds (abount $6,000) is insured 100% but the remainder (about $60,000) is insured only 90%. That is why there is a run on Northern Rock. To stop the run, and probably prevent runs at other building societies, the Bank of England said it would guarantee the uninsured 10%.
Many other countries have deposit insurance but the amounts are much lower than in the U.S. and like the U.K. there is sometimes coinsurance.
This is what I’ve been wondering about. What’s the point of only covering 90% up to $60k? If there’s a widely-publicized bank run that leads to a bank failure, you get the extra 10% covered because of the government trying to calm things down, but if it “sneaks up” on you and surprises you out of the blue, you lose the 10%? What kind of policy is that?
In Netherlands up to 20K euro is fully insured (that was only 10K euro some time ago). Under certain conditions you can also get 90% of the next 20K euro back, but above 40K euro you will get nothing if the bank goes bust. I think most of the mainland EU countries have similar deposit insurance rules.
a run on banks is worth avoiding and it’s not for the sake of the banks or profits..
If banks have no cash and can’t operate, employers can’t borrow to buy inventory, equipment, business supplies, etc.. business skids to a halt and everyone is out of a job.
What good does it do to pull fiat currency out of the bank and stuff it under your mattress if the govt can always print more where that came from?
The value of money is based on faith, of which we have an unlimited supply.. If someone has a better idea, i’d like to hear it.
The value of money is based on faith, of which we have an unlimited supply.. If someone has a better idea, i’d like to hear it.’
Wrong. Fiat currency is based on faith. Hard currency is backed by gold and silver. That is a better idea, which is why it is in the Constitution.
That’ll work fine, unless and until something expensive comes along, like a real war. At that time, either gold / silver suffers massive inflation or a fiat money system is instituted..
We already been there / done that. It may have worked with the tiny society of the Founders, but it can’t work in modern times.
That’ll work fine, unless and until something expensive comes along, like a real war. At that time, either gold / silver suffers massive inflation or a fiat money system is instituted.. ”
We fought every war up to and including Vietnam on a gold standard. It didn’t slow us down much; if anything is highly inflationary it is the ridiculously printing of money to burn in Iraq.
“We already been there / done that. It may have worked with the tiny society of the Founders, but it can’t work in modern times.”
Tiny society of the Founders? I repeat, the gold window was not closed until Nixon, and I don’t consider him a founder.
“which is why it is in the Constitution”
…which is itself “just a piece of paper.”
maybe it is called a “gold standard” in some text book, but practically speaking you gotta go back to 1933.. The Emergency Banking act..
The Fed got all the gold and replaced it with paper.. which was then devalued.
Well, except for those with savings - imagine that.
.. but where would we spend that savings?
The grocery store has gone out of business, because it can’t restock the shelves, because the trucking company that delivers groceries can’t pay it’s drivers, who’ve quit because the bank can’t cash their paychecks.. because of a run on the bank.
I guess you never heard of “barter system” or the black market?
i think i’ve heard of them.. That’s the step just above hunter-gatherers who live in caves and trees, right?
Do you imagine the country’s infrastructure will remain in place without an operable banking system? Roads, electricity, food production.. police and military?
You’ve just stated the reason to have a system backed by something real. Such a collapse is inevitable in any paper money system. Gold or silver backed notes were the money of choice during our days of strength. The same was true of the British Empire.
They went off the gold standard during WWI and never fully re-implemented it. Their empire began to collapse 40 years later. We have a larger landmass, population and economy so we will still be a world power after this occurs. We won’t be the dominant superpower we are today. If we follow a similar timeline to Britain, that should occur sometime in decade starting in 2010.
JoeyinCa,
How is the infrastructure in a fiat-collapsed country like Argetina or Zimbabwae? Top notch, eh?
They went off the gold standard during WWI and never fully re-implemented it.
You fail to say why that is true: The fact that they didn’t own enough gold to fund the war and faced annihilation and weren’t dumb enough to risk putting themselves in that position again..
Actually, they exhausted their financial resources in the war and weren’t willing to accept the reduction in power and status flowing from that. Their failure to return to the gold standard and the Fed’s attempt to prop up the Pound set the stage for the financial mania of the Roaring ’20s and the Depression which inevitably followed.
Gold and silver as money, or backing money, is not necessarily needed.
Bartering breaks down for two major reasons:
1) Something you want to barter for cannot be divided into the amount you want without destroying it, or what you have to give in return cannot be divided into the amount the other side wants without destroying it.
2) The other side may not want, need, or have the capability to use what you have to offer.
Gold and silver solved the problem. It can be divided into the most minuscule amounts without destroying any part of it, it is durable, fairly rare, and perhaps most of all, it was mandated as money by many empires and regimes for centuries. It didn’t matter if you had no need or want for a piece of gold, you could easily exchange it for something you did want or need.
We live in a world with an incredible communications infrastructure. We don’t necessarily need to go back to gold or silver as the intermediary in our system of acquiring that which we want or need. In fact, our world has become so used to the conveniences of electronic payment that if the USD were to collapse, I’m fairly certain that a trusted entity would provide an electronic method for incremental bartering. Honestly, that’s all the dollar is anyway. We’re exchanging some fraction of our labor or our assets for some fraction of the fruits of someone else’s labor or assets.
Yeah, hackers are a threat. But so are coin shavers.
joeyinCalif,
Everything you’re describing is happening currently in a country called Zimbabwe off a fiat system. And it’s because the bank is printing as much money as it can making it more and more worthless. I saw an estimate yesterday there of 7500% inflation.
joeyinCalif,
Everything you’re describing is happening currently in a country called Zimbabwe off a fiat system. And it’s because the bank is printing as much money as it can making it more and more worthless. I saw an estimate yesterday there of 7500% inflation.
The black market and trading has taken place.
Zimbabwe is not an outpost either. It used to be one of the best countries in Africa until it was ran into the ground.
rj … yeah.. well, no banking system, fiat or otherwise, can withstand the efforts of a Mugabe ..
Black markets and barter systems are a last resort for basic survival of a people, not an improvement to strive towards.. as an antidote for imperfections in ‘fiat’ money systems.
I heard a story about another African dictator who played the same currency devaluation tricks as are now used in Zimbabwe, mostly so he could live a lavish lifestyle. He finally went bankrupt when he could no longer pay the bills from the printer
it seems that Bernanke at least understands that tiny flaw in the system.
RE: until it was ran into the ground.
…by throwing all the whites off their farms.
But that’s all right. The American Relief Agency will resettle a few thousand in Lewiston Maine to join their brethern from Somalia.
Life gud in Amerika.
I can’t get the analogy someone here made out of my head:
A comparison between bank runs and “musical chairs”. Except it’s more like 30 players and only 1 chair
Keep in mind that the guarantee only kicks in if the bank fails …
and banks cant fail cuz all the in eye duba Gee A’s running the press full throttle, my brotha.
these policy clowns are walking a thin line, and its pegging my BS meter at ten. (but these go to Eleven.)
Marc Faber was on Bloomberg this AM. He suggested buying gold because of fed policy the dollar is toast. He had no kind words for AG. He questioned why the fed would use the same medicine that has made us sick. He said if you buy gold you should store it off shore in Hong Kong or places Singapore. Does he see another in our future?
Jim Rogers was on Bloomberg too, and he was great. CNBC would never put those guys on the air because they don’t spin lies. Rogers ripped Greenspan, the Fed, politicians…it was beautiful. He likes Asia and agriculture, hates financials.
Marc Faber was on Bloomberg this AM. He suggested buying gold because of fed policy the dollar is toast. He had no kind words for AG. He questioned why the fed would use the same medicine that has made us sick. He said if you buy gold you should store it off shore in Hong Kong or places Singapore. Does he see another in our future?
Jim Rogers was on Bloomberg too, and he was great. CNBC would never put those guys on the air because they don’t spin lies. Rogers ripped Greenspan, the Fed, politicians…it was beautiful. He likes Asia and agriculture, hates financials.
Over the last few days or so, I have been re-allocating our stock positions to agricultural commodities, currencies and PM. I told my mom about Faber’s interview this morning, and she said they all have a vested interest- like Cramer. I became livid and started yelling at her and told her she has lost 30% of her life savings and won’t even admit it. People just don’t get it, they don’t understand inflation and would prefer to ignore it.
Well, I don’t entirely disagree with your mom, isn’t Rogers the guy who has a fund and is selling his NY property and moving everything to Asia? He seemed awfully self-satisfied in that one interview I read a couple of months back, although I agreed with him. He’s definitely correct about what’s going on, but he does have a bit of an interest in the outcome, if he has a fund. I dunno about moving to Asia. I suppose it depends where in Asia, but I’m not sure my money would be any safer there than here.
and she said they all have a vested interest
She is right. They ALL have a vested interest. And sometimes their interest matches yours.
I like Jim Rogers; his commentary, his candor, and his books.
But even Jim Rogers says that Gold will underperform most other metals and commodities.
Does he see another FDR in our future?
As the Fed’s debasing of the currency accelerates, some form of capital controls seem likely. Americans will be prevented from moving their money outside of the country or into foreign currencies.
We don’t exactly how it will play out, but we have a pretty good idea. It’s the same for all fiat currencies. There’s nothing about the “dollar” that makes it immune from the fate that writers such as Von Mises, Rothbard, and others have so eloquently described. Wiemar Germany in the ’20s and ’30s and Argentina in the 90s are just two examples.
One of the best ways to keep a frog from jumping out of a pot of boiling water is to clamp down the lid on the pressure cooker.
As the Fed’s debasing of the currency accelerates, some form of capital controls seem likely. Americans will be prevented from moving their money outside of the country or into foreign currencies.
Then we had best learn to be self sufficient. No more cheapo Asian imports!
Unfortunately its HRC in our future.
One item I have not heard stated about Greenspan is the following. Since the Fed controls margin on the NYSE why didn’t they raise margin rates to temper speculation when Greenspan warned of high prices in 1996? He uses the excuse that he could not raise interest rates for it would hurt the economy. Margin rates would not have had that affect.
Second, the Fed controls the amount that must be put down of the buyer’s money in a real estate deal. Why didn’t the Fed insist on a large deposity 15-20%? Again, Greenspan hides under the argument that low rates were necessary for the economy at the time. He could have reduced speculation in stocks and real estate by raising the skin a buyer put in the game. Instead he just sang that bubbles were impossible to identify and helped his friends.
He will go down in history as the worst Fed Chairman.
Some of the CNBC hacks have argued that the companies that played this mania have suffered or are paying their price for what they have done to this country. Kudlow points out that the home builders are way off their highs and 100 mortgage companies are under. What they do not mention is that the insiders of those companies were dumping their shares prior to the debacle. The insiders were the ones with the power and encouraged this mess yet they have sold out. The homneonwers, consumer and stock holders have been screwed.
What we have witnessed is the ruling class (top 2%) of our population have grossly abregated their responsibility to our people all for more wealth.
Mr. Patriotic Bear,
You are so right! My father and I have spent a lot of jaw time over the years wondering why the loser never raised margin rates or the amount of money down that must be paid preferring instead to tinker with the interest rate. The only thing we could come up with is that AG’s a first class licker. Sometime today we’ll see if BB’s a first class licker too.
Keep your gold in Hong Kong or Singapore?
If you don’t have the gold in your hands you’ve got nothing but a promise to pay, and we’ve seen how well that works.
Amen, krazy bill.
Yeah but the man said “guaranteed”…
“He said if you buy gold you should store it off shore in Hong Kong or places Singapore.”
Well that doesn’t make any sense. If you buy gold you should keep it at a place handy enough to get at. Hong Kong and Singapore are on the other side of the earth.
gubmint can’t confiscate off-shore gold.
Yeah, but gold is mighty easy to hide.
And this is what I can’t understand about the 30s confiscation of gold. Just how many people willingly turned in their gold versus just buried it?
The problem would be when it comes time to sell it - i.e. to obtain cash or to buy goods, would it not? If gold were confiscated, then presumably all transactions in gold would be made illegal, would they not?
That being said - I’m sure there will end up being a tremendous black market economy then. That’s the day I become a criminal.
I think people were more trusting in the government in the Thirties than they are today. I suspect that’s because then the country was largely agrarain; farm folks generally base their business dealings on trust. That’s not so true of city folks.
“And this is what I can’t understand about the 30s confiscation of gold. Just how many people willingly turned in their gold versus just buried it?”
My understanding is the gubmint locked down safe deposit boxes w/o warning, and also made it illegal to own or sell gold. This would not have kept you from burying a stash of bullion in the backyard, but would have put you at risk of arrest if you tried to sell it or even if you refused to hand your gold over to the Fed.
http://www.fgmr.com/confiscation.htm
“And this is what I can’t understand about the 30s confiscation of gold. Just how many people willingly turned in their gold versus just buried it?”
And they were rewarded for it too. FDR bought the gold for $20.67 per oz. And then after confiscation ended, said that gold was worth $35 per oz.
The problem would be when it comes time to sell it - i.e. to obtain cash or to buy goods, would it not?
Convert it into jewelry? AFAIK, FDR didn’t confiscate jewelry.
That whole Prohibition thingy pretty much stopped everyone from drinking didn’t it?
Gold, silver, or barter can work just fine. What are they gonna do lock up the whole country? Probably just make “examples” of a few while the country keeps right on trading.
People forget–or never heard of–Germany’s Weimer Republic. No fiat currency can survive.
I now understand why my Grandparents did not trust banks. Never kept any of their money in the banks.
Put it in a bank right across the border in Windsor or Hamilton or Vancouver. No history of gold confiscation in Canada.
>\
I think the job market who can make tire rims out of gold will be soaring in a few years. Probably will be the easiest way to get it over the border……
I’ve got you beat already. My catalytic converter has platinum in it.
Hong Kong.
Uh, have you ever heard of the communist Chinese government? I’m sure they would respect your “ownership” of gold held in their country.
China encourages its citizens to invest in gold, so yes, private ownership is allowed. Also, if you watched the Rogers interview, he was doing it from Shanghai. China today is unrecognizable from the Maoist days.
The Commie Chinese might be “unrecognizable” from Mao’s day, but that’s just economically. Politically/militarily, nothing’s changed. They’re still our enemy.
Rest assured, the day they decide to take the gold, you can kiss it goodbye. Doesn’t matter what Rogers or anyone in Hong Kong thinks. They’re still Communists, you know. I’d never willingly trust them with a penny.
I recall seeing a documentary about factory workers in China (all young women). Rather than deposit their paycheck into a bank, on payday a gold jewelry vendor would show up and sell them gold jewelry. This would be their “savings account”.
Blano,
I don’t know if ‘commie’ China would confiscate gold, but America under FDR sure did. Think about it.
Very true, watcher. And I’ll never say it can’t happen again. I just think I’d have a better chance of keeping it if I’m in the same general area as the yahoo trying to confiscate it.
Who’s government?
Sept. 18 (Bloomberg) — Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage-backed bonds, said profit fell less than expected as fees from equities trading and investment banking offset some losses from subprime home loans.
Net income fell 3 percent to $887 million, or $1.54 a share, in the third quarter from $916 million, or $1.57, a year earlier, the New York-based company said today in a statement. The average estimate of 16 analysts surveyed by Bloomberg was $1.48 a share.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ae.oA..RuXWs&refer=home
Even in these rough times these financial companies make almost one billion dollars in PROFIT per quarter. They don’t do anything except take bribes for “counterfieting” money. Total leaches on our society.
I frankly do not care how much they made, I wish to see how they accounted for their profits.
Last quarter out of 270B in assets 22B was Marked to Fantasy and 152B was marked to model. WSJ.
Changes in the ratios especially in marked to model increases will reflect the loss that Lehmann truly has. Unfortunately these numbers will not be out for a while.
WSJ
Fri Sep 14
http://tinyurl.com/3ap7d4
Hoz
Listened to the conf call. $27 billion in level 3 assets - expect that to grow in coming quarters. Didn’t catch the level 2 number and not sure they gave them out. Huge influences on the quarter:
- Tax rate fell from 32.5-33.0% over the last 4 quarters to 26.4%.
- Leverage ratio rose to 30.2x from 28.7x last Q and 25.8x a year ago.
- Share count down 1.5% YoY, buybacks and options pushed out of the money by falling stock price.
More from the FT:
Fixed income capital markets revenues plunged 47 per cent to $1.1bn in large part due to mark downs on leveraged loan commitments and residential mortgage-related positions.
However, Lehman said these losses were partially offset by large gains on economic hedges. The result was a net reduction in revenues in fixed income of about $700m.
http://www.ft.com/cms/s/0/63bda490-6534-11dc-bf89-0000779fd2ac.html
From the Q&A, it sounded like one of those “economic hedges” was the declining market price of the bonds issued by LEH. I was so incredulous that maybe I mis-heard but it sounds as if this is what happened:
Rising interest rates and spreads allowed them to write down the book value of their liabilities. They then recorded that decline as a “gain” when calculating the “fair value” and “profit” of the company. Of course since they’ve marked down their liabilities to market, future interest charges will also have to be recorded on a fully amortized basis.
Basically, they wrote down their obligations and booked it as a profit this quarter. The tradeoff is higher interest costs every quarter for the future. But as we know, the objective is to hide the losses just a little longer.
Hovnanian CLAIMS discounts snagged buyers. Yeah, right. Now lets see how many of them actually close!
http://www.nj.com/newsflash/jersey/index.ssf?/base/business-4/119005794424410.xml&storylist=jersey
the number of sales keeps changing- maybe the close ratio is why
http://www.ibdeditorials.com/Cartoons.aspx
Jim Rogers on the Fed - a must watch
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vjUSJ.lwS8e0.asf
Beautiful!
I watched it but some of it went over my head. I make my living by CD interest but he said to sell my dollars. Does anyone know how I can do that?
I posted on another thread last week. Try Rydex currency ETFs.
http://www.currencyshares.com/Home/CurrencyShares.rails
You can buy foreign currencies through brokerage accounts; there are various indexes and baskets of currencies. You can also buy precious metals.
Google “Everbank” (I think it’s everbank.com)
They’re a St. Louis bank from which you can buy CD’s denominated in Euros, Yen, Australian $, NZ$ and more. You get the interest paid by the underlying banks of the country the note is denominated in… a couple of years ago I was getting 7% on Australian CD, plus currency appreciation versus the USD. Rates, etc. vary. When the CD expires you can roll it over, or move to another currency, or withdraw.
Thanks to everyone who responded to my question. I appreciate the help.
Everbank.com has foreign currency CDs.
Marc Faber is up on Bloomberg too.
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vCoNtU.D0pcE.asf
My local A.M. news said “the FED will lower rates to aviod a recssion”. This is the first time I have heard any local MSM say why a rate cut is needed. All they ever say is “everything is good even if it costs more”. Maybe at least 1 other person here in PA will wonder why out of the blue the “R” word comes out.
Now this is rich: Ara Hovnanian put his home in Rumson NJ for sale, pricing it at $7.2 million. He paid $6.75 for it in 05.
http://njrereport.com/index.php/2007/09/17/no-fire-sale-in-rumson/
Gold also seems “bubblicious”…?
Not if we get real inflation or hyperinflation. I’m guessing that some people expect high/super-high inflation, which is why gold and other commodities are up (I include oil in the bunch, too). The free floating money that once went into dotbomb moved to real estate and now into commodities/futures and stocks, it seems.
The conundrum is, regardless of what the Fed does today, what will the U.S. economy do? Japan lowered their rates down to zero and they still got deflation. In Japan after the burst, things like 100 yen [= about one US dollar] shops bloomed, along with thrift or used goods store [pre-bursting, people threw away perfectly good TV's and furniture] and started importing lots of cheap[er] Chinese goods as well as swelling of temp/contract jobs (less hiring of permanent full time employees).
“Not if we get real inflation or hyperinflation. ”
If what we have is not “real inflation,” then I don’t want to see what is real inflation. Come on! Inflation (definition: an increase in the supply of money) is running at approximately 10-14% per year. How much higher does it have to get? The rise in prices is the symptom of inflation, and that’s coming. It’s already baked into the cake. The inflation itself has already occurred.
You’re right: I meant “high/hyper inflation” not “real inflation”.
Minyanville says the increase is 2%/yr … hmmm….
Inflation (definition: an increase in the supply of money)
That is not a complete definition of inflation.
It is more properly: “Expansion in the money supply beyond the increase in available goods and services”
Economys expand.
If a new industry is created, lots of new jobs (paychecks), support industries and various new assets are created or are enlarged. An commesurate amount of new money has to be created to account for the increase.. this is not inflationary.
Economys expand.
If a new industry is created, lots of new jobs (paychecks), support industries and various new assets are created or are enlarged. An commesurate amount of new money has to be created to account for the increase.. this is not inflationary.
Wrong. If new money is not created, then prices will fall. If it is created, to whom is it given? Those people get something for nothing, and everyone else pays.
When we had real money in the 18th century, price deflation was a regular feature of life. The economy grew so rapidly, that the money supply (tied to gold) could not keep up. That led to benign deflation as the price of goods (especially manufactures) fell in nominal terms and even faster in affordability terms as rising incomes combined with falling prices. Usually, this type of deflation is good for everyone except banks.
The Fed’s inflationary policies prevented us from enjoying a similar period over the last 15-20 years. Instead of rising living standards, productivity gains were siphoned off in the form of government spending and financial profits. Americans who wished to improve their material circumstances were forced into debt.
How much of the “money” that has been created is in unrealisable gains? House prices went up. No big deal, if everyone can’t actually sell at that price. It means the money is locked up in the house and would go away if attempted to be accessed.
It isn’t only the amount of “wealth” that exists. It is the amount of wealth that can be accessed and used to buy stuff. Locked up, unrealizable capital gains do not cause prices to rise.
technovelist
Lets say everything is balanced and there’s 100 units of assets and 100 dollars in money in the whole economy. One dollar trades for one asset unit.
Next, a new industry is created, consisting of 100 units of brand new assets. We now have 200 units of assets but still have 100 dollars.
That 100 dollars must now cover the total 200 units of assets, so the ratio is now 1/2 dollars per asset unit.
One dollar will now buy two asset units.
Your daily pay of one dollar must then be cut in half.
However, this half-dollar pay will still be worth what 1 dollar used to be worth before (one unit of assets).
Nothing changed except the math.. kinda like a “stock-split”.. Costs and prices are the same as before. There was no inflation or deflation, just a different set of numbers.
It’s just easier to create 100 new dollars to cover the 100 newly created asset units.. same difference.. this keeps things simple.
But, if 200 new dollars were created, that would be inflationary and costs would rise .. The ratio would be 300:200 and a dollar would then trade for only 2/3rds of an asset unit.
18th century should read 1800s or 19th century.
Sorry for the brainfart.
Well, what we have is credit inflation, which can reverse rapidly as the credit markets implode. Currency inflation is growth of actual paper bills outstanding and is nearly impossible to reverse.
I’m curious about the folks that say gold is in a bubble. True, there may be some hot money from hedge funds flowing in. But, in inflation adjusted terms, it’s well off the highs it hit in the 80’s. Also, the number of individual investors holding bullion right now is exceedingly low. By what criteria is gold experiencing a bubble?
If I really knew I would just settle in and wait to be rich. My impression though is that some suspect much of the “demand” for gold is leveraged, debt backed bets that the price will go up, not actual purchases for cash. If these speculators loose their nerve, or their credit lines, they will take their bets off the table. If the leveraged speculative portion of the market is significant, then price corrections could be significant.
If you adjust for inflation, gold is absolutely nowhere near it’s highs — it could double a couple times. When it passes $3000/oz. we should become concerned about a “gold bubble”.
Gold, and oil, other precious metals, commodities, are not bubblicious, the dollar is. The feds are dropping money out of helicopters, it’s called inflation.
There is no bubble without the public, and the public doesn’t own any gold or believe in it. Even the people here, a bright bunch overall, still don’t understand the role of gold in a monetary system. They will, too late.
Yep.
“There is no bubble without the public, and the public doesn’t own any gold or believe in it.”
We’ve had bubbles in commercial real estate and commodities before without widespread public participation - sometimes without any significant participation at all. Bubbles often reach their fullest extent with mass participation but such buying is not necessary for the creation of bubbles.
Watcher,
Can you give a brief explanation, or can you suggest where to find an explanation about the role of gold in a monetary system?
There are many good articles at this site:
http://www.mises.org/story/1829
Thank you Watcher.
Sept. 18 (Bloomberg) — Prices paid to U.S. producers fell more than forecast in August, diminishing concern over inflation as the Federal Reserve considers lowering interest rates.
…
Less inflation gives policy makers more reason to lower the target rate later today in an effort to sustain the expansion as housing tumbles….
http://www.bloomberg.com/apps/news?pid=20601087&sid=afcfXTyucu2g&refer=home
What a rigged game. I’m finding it more and more difficult to maintain interest because of the frigging rigging.
If I could eat my computer, everything would be just fine.
Sadly, I now give more weight to economic numbers from China than from America.
The guest on CNBC said that number was bad. With the price of commodities the decrease in PPI is not possible and the Fed will know that.
AP has the same story: http://tinyurl.com/2ql6fo
“The Labor Department said Tuesday that wholesale prices fell by 1.4 percent last month, the best showing since a 1.5 percent fall last October. It was a much bigger decline than the 0.3 percent drop that had been expected and was led by a 6.6 percent plunge in energy costs, the biggest drop in more than four years.”
Just when I thought BB would keep rates the same, they come out with this at just the right time. Now I think the dude will cut.
I thought inflation excluded food and energy?
Also in the article:
“Core inflation, which excludes food and energy, was also well under control, rising by just 0.2 percent. The good price performance should further ease concerns about inflation and give the Federal Reserve the leeway to cut interest rates to guard against the possibility of a recession.”
Never mind $700+/oz AU or $81+/bl oil… inflation is contained!
all is well….remain calm! go back to sleep, America. your government has everything under control.
or at least, they wish they did..
You’re speaking of ‘core’ inflation , which the little devils also pull out medical and housing. What’s left after you subtract out housing, medical, food, and energy? The tee shirt or Halloween stuff at Wal-Mart.
Where do you get the idea that medical prices are not in the core inflation measure?
Housing prices are not in the CPI. Hedonic pricing methods are used for rents in the CPI.
Those who control the past control the future.
–
September 18, 2007
Inflationists On The Record: Greenspan and Jim Rogers
Greenspan predicts the 10-Year US Treasury rate to go to 8% and for inflation rate (I think that he means core-CPI rate) to be at 5%. He specifically concluded that the disinflationary forces have ended and global reflationary forces are already in place and will play out going forward. In essence, Greenspan is predicting that Bernanke will fail in his commitment to keep the core-CPI rate close to his stated goal of 1-2% range.
Jim Rogers is convinced that the long-term US treasury bonds and the US dollar will fall a lot. He advises to buy Asian currencies and agricultural commodities and sell the USD.
Both are forecasting a rapidly rising inflation rate in the US because they believe that Bernanke will abandon inflation fight. I disagree and I believe that Bernanke will fail on the lower side of the core-CPI rate, i.e., the rate will go below 1% and then to negative when “no mo mo(-nee)” is available to the 1/3rd of the most irresponsible borrow-and-spend US households.
Neither gentlemen gave a date for their forecasts to materialize but three years should be more than plenty. The rate on 10-Year UST (currently at 4.5%) will go below 3% before it goes above 6% and below 2% before above 7%.
Jas
Jas , link please?
–
Sorry, both are from the bubble-vision. Greenspan’s interview from yesterday with Maria and Jim Rogers was on the tube early this morning. I am sure that these should appear in print if they already are not.
Jas
Before any of you jump on me, I am renting now.
8% for the 10 year would mean about a 9% 30 year fixed mortgage.
A $300K mortgage at today’s 6% would be $1800 a month.
Say prices drop 30% from today’s price. That mortgage is now $210K. At 9% the payment is $1700.
What have you really gained? $200 a month doesn’t seem all that fantastic a bargain.
I would always prefer a lower price and higher interest rate than the other way around. The price is forever. Rates are fluid - you can refi, pay off early, etc. A lower price also helps those who wish to pay cash. Also, property taxes are based on the home value, too.
You can always refi? That was the mantra of the ARM salesman. You can always refi later.
Hi, J J it’s JJ.
I think this is different. The ARM salesman were essentially saying you don’t have to worry about a bad decision because you can refinance with your equity gains.
In this case, you are buying at a low price. Assuming the house isn’t still overpriced, the house presumably wouldn’t lose more value and refinancing would be an option if rates go down. Furthermore, if you buy at a lower price the risk to the lenders is much less. They will have sufficient collateral since the value of the home is not expected to fall significantly.
I would always buy at a lower price and higher rate than vice versa. It’s not all about the monthly payment. Too many people pay way too much attention to the monthly payment and that is why we have credit card debt, negative savings, etc.
$200 a month. How about $90,000 after tax
If you have a mortgage at 9%, you have a way to invest money that guarantees a return of 9%. No fees, no risk, no finance industry con-men with their latest “investment vehicle”.
Which is no doubt why the wall street con men want interest rates kept low…it forces people to do business with them.
“What have you really gained?”
Very simply, I figure it is easier to pay off 210K than it is to pay off 300K.
Also, if I were thinking of selling this house in the future, I think I would have an easier time selling it at a profit if I had paid 210K than if I paid 300K.
It is great to get good terms on a loan, but it is a good principle to be more concerned about principal.
… and if the rates should stay high or even jump up to 15% after, it means you pay the suckers back with inflated dollars.
“Greenspan predicts the 10-Year US Treasury rate to go to 8% and for inflation rate (I think that he means core-CPI rate) to be at 5%.”
The inflation risk premium in L-T T-bond yields is contained.
“Every time the Fed turns around to save its friends on Wall Street, it makes the situation worse,” Rogers said in an interview from Shanghai. “If Bernanke starts running those printing presses even faster than he’s doing already, yes we are going to have a serious recession. The dollar’s going to collapse, the bond market’s going to collapse. There’s going to be a lot of problems in the U.S.”
Bloomberg
Sep 18, 2007
Contrary to popular belief the “printing press” has not been working well at all. I am sure that Mr. Bernanke would like to loan moneys, but it does not appear that there are many takers.
Not to worry! After a 1/4-1/2 point FFR cut today, Wall Street can enjoy a choreographed (inflation-producing) rally, and it will all be good once again.
And I’ll have a great chance to finish selling off the last of my stuff! Yay!
I still think EVERYTHING hinges on wage inflation. The only way to get wage inflation is to create demand for products and therefore labor. With people loosing jobs everyday there will be a surplus of labor. I am convinced that there is NOTHING the FED can do to cause enough wage inflation to get us out of this mess.
Where the hyper inflation will come from is not an increase in the supply of dollars, but a decrease in the DEMAND for dollars as the US crashes under our debt load and foreign countries abandon the dollar.
Higher interest rates would result as an attempt to create more DEMAND and out of necity to make up for FALLING demand.
So, if you have a 167K mortgage the purchasing power of your dollars will fall AND your sallary will fall in both real and nominal terms. We end up with a very ugly combination of inflation of prices and deflation of incomes / housing. How am I wrong?
“With people loosing jobs everyday there will be a surplus of labor. I am convinced that there is NOTHING the FED can do to cause enough wage inflation to get us out of this mess”
People lose jobs every day. That is very true. People get new jobs every day as well. And every day more jobs are created than destroyed. I am always amused by this supposed surplus of labor I hear about.
I am an independent consultant and I turn down work all the time. If I wanted to I could probably work 90 hrs a week, there is that much demand out there. But, officially I have no job. I’m not employed by anyone. I haven’t had a “real job” in over 6 years. I discovered long ago that working for someone else is foolish when I can make twice as much money doing the same thing without the middleman of an employer. I know very few people who actually work for someone else. Most of my friends and family are either self employed or own their own businesses and as far as I can tell are doing quite well.
You’ll never read about someone like that in the newspaper landing a $300K deal or signing on 5 new clients or opening a second store. What you read is that GM is laying off 1500 and assume nothing but doom and gloom for the 99% of people who don’t work at GM as well. Doesn’t work like that.
Which is also why I pay no attention to the “jobs” created numbers or the weekly unemplyment numbers. They are statistics that were useful 20 years ago. Today, irrelevant.
“With people loosing jobs everyday there will be a surplus of labor. I am convinced that there is NOTHING the FED can do to cause enough wage inflation to get us out of this mess”
People lose jobs every day. That is very true. People get new jobs every day as well. And every day more jobs are created than destroyed. I am always amused by this supposed surplus of labor I hear about.
I am an independent consultant and I turn down work all the time. If I wanted to I could probably work 90 hrs a week, there is that much demand out there. But, officially I have no job. I’m not employed by anyone. I haven’t had a “real job” in over 6 years. I discovered long ago that working for someone else is foolish when I can make twice as much money doing the same thing without the middleman of an employer. I know very few people who actually work for someone else. Most of my friends and family are either self employed or own their own businesses and as far as I can tell are doing quite well.
You’ll never read about someone like that in the newspaper landing a $300K deal or signing on 5 new clients or opening a second store. What you read is that GM is laying off 1500 and assume nothing but doom and gloom for the 99% of people who don’t work at GM as well. Doesn’t work like that.
Which is also why I pay no attention to the “jobs” created numbers or the weekly unemplyment numbers. They are statistics that were useful 20 years ago. Today, irrelevant.
When temp agency results, raw employer and employee survey data and payroll company financials all point in the same direction - I pay attention to that.
I would say 1/2 to 3/4 of the people out of work in the last few months also worked for themselves. Most of those jobs were contract, commission jobs. That’s why the number showing people collecting unemployment is totally bogus.
Ghostwriter
The data support your position. Household survey captures self-employed and contractors - it showed a loss of over 300k jobs last month. The employer survey measured only 124k job losses.
124K job losses? 300K job losses?
According to…
“Greenspan predicts… ” why the media might believe this phrase has any remaining credence is beyond me, so I choose to believe it is instead featured under the same nameless morbid fascination as recent Britney pictures or OJ protestations.
Soon we will see “Greenspan Predicts…” splashed across tabloid headlines at the supermarket checkout, where once we saw “Jeanne Dixon says,” or “Nostradamus:
In fact, I foresee the start of a new Profession for Sir, as he takes over the mantle of another worth Predictor:
http://www.criswellpredicts.com/
I can’t wait until someone starts to channel AG
A video of a university of Florida student being tasered for merely asking questions of John Kerry. So this is what’s come to, huh? Ask the wrong question and get tasered. Sheesh!
Student Tasered for Asking John Kerry Questions
He deserved it because he was an annoying spazmo who called a cop “bro.”
He forgot to bow as the chariot passed.
He was tasered for resisting arrest.
He was granted a certain amount of time to ask his question, but he went into a long diatribe instead. When his time was up, they cut his mic, but he kept talking. He was asked to return to his seat as he was being disruptive to the proceedings. The police then tried to gently remove him from the hall, but he resisted, causing further disruptions.
If you are asked to leave by proper authority, and you don’t, it is called trespass, and it is illegal. So, they tried to arrest him, and he resisted. Also illegal.
He was tazered, not for asking the wrong question, but for breaking the law.
One person from the audience does not get to control a campaign meeting.
Also at least he was permitted to be at the meeting, as opposed to the (ahem) “free speech zones” blocks away from the Pres.’ public events.
Screwed up government, screwed up economy…revolution, anyone?
Dennis Miller blamed the tasering on the 6 “minicops”. Use one big cop and pick him up by the scruff of the neck instead
By how much is BB going to drop the nizzle on the shizzle?
I’m a bankgsta, but y’all knew that…
I cut so much you thought I was a DJ…
Drop it like it’s hot
Drop it like it’s hot…
http://www.youtube.com/watch?v=2GYSei66Rh4
—
“By how much is BB going to drop the nizzle on the shizzle??”
A full quata — Baby-step Ben.
Jas
holla,
it were fitty, cuz dats how we roll.
Im sick in the pit of my gut. These monsters have pierced the heart of every honest law abiding savings account holder in the entire United States. No problem, its all good.
The risk has surely abated, and going forward we should not expect any financial pitfalls that plagued this marklet of HIGH interest rates, high unemployment, Infationary pressure. Than kjeebus for the rate cut, ita all solved.
TOO BAD THAT WAS THE PROBLEM. This is just criminal.
BB song to Wall Street.
http://youtube.com/watch?v=UAtYdDp6md4&mode=related&search=
Clearly a 1/4 point FFR cut would have negligible immediate effect, if any, and negligible real effect 9-18 mos hence. So today’s FOMC action reduces to a signaling game on whether the Fed intends to bail out fools.
Judging from today’s headline news stories, the MSM has already boxed the FOMC into a 1/4 point cut “necessary to calm the markets.” I thought the Fed’s job was to maintain a stable currency by keeping inflation contained? Besides, the Fed has already dumped massive amounts of “liquidity” since Aug 17 to help thaw the ice forming throughout the credit markets.
Rate Cut Has Foes on Main Street
Some Americans Think Fed Should Avoid
The ‘Hazard’ of Bailing Out Speculators
By GREG IP
September 18, 2007; Page A2
As the Federal Reserve prepares to meet today to decide whether to lower interest rates, there is an unusual public clamor in the background: Don’t do it.
With a freeze-up in financial markets threatening to turn the nation’s housing slump into a broader economic downturn, Fed officials have strongly hinted they are inclined to cut the central bank’s main target for short-term rates from the current 5.25%. Wall Street expects a cut of a quarter or a half percentage point.
But, in an unscientific reader poll by The Wall Street Journal’s online edition, 39% of the nearly 3,000 responses said the Fed shouldn’t cut rates at all. The poll was anonymous.
Ordinarily, Americans welcome lower interest rates. But many feel differently this time. Some think the economy is fine and inflation is the main danger. But a moral element is also at work: Many think a rate cut would reward foolish speculation and Wall Street greed at the expense of the thrifty.
“The Federal Reserve needs to stand its ground and not bail out hedge funds — they should have known better to begin with!” Suzanne Mitchell, an administrative assistant at a Houston real-estate company, says in an email. In an interview, she adds: “I’m very sorry that people took out $450,000 mortgages with no money down…people ought to be responsible for the loans they take out.”
http://online.wsj.com/article/SB119007144524930441.html?mod=googlenews_wsj
Ooh look!! The little people are talking!
“Most of the little people were mentally disadvantaged anyway, so this rate cut is working very well for them.”
Helmsley’s dog made $360,000 today
This should be an “interesting” day for sure. I’m already into some index puts, would love to see a fed induced spike over 1500 s&p to really reload.
foreclosure.com seems to be having database issues. So far this month the NODs I track have remained static for over a week. That’s never happened before.
What good is a company that reports and sells foreclosure info if the data doesn’t get updated?
That website has had constantly updated data for my zip code / county.
How does the supposedly-free U.S. press keep such stories out of the headline news in the information age? I find this quite remarkable.
Spread of banking panic forces ministers to guarantee savings
· Run on Northern Rock escalates
· Fears over other banks
· Intervention too slow, say critics
Larry Elliott and Ashley Seager
Tuesday September 18, 2007
The Guardian
(Northern Rock customers queuing
Customers queue outside a Northern Rock branch in Kingston-upon-Thames, Surrey. Photograph: Johnny Green/PA)
The government last night issued an emergency pledge to Northern Rock savers that their money is safe, after a third day of queues outside branches threatened to spread across the banking system.
Northern Rock’s shares shed a third of their value yesterday and the sense of crisis heightened as shares in rival mortgage lenders dropped sharply - Alliance & Leicester by a third and Bradford & Bingley by 15%. The falls raised fears that the contagion from Northern Rock was starting to spread through the financial system.
http://business.guardian.co.uk/markets/story/0,,2171571,00.html
How does the supposedly-free U.S. press keep such stories out of the headline news in the information age? I find this quite remarkable.
People who don’t read blogs live in a different world from those who do.
“People who don’t read blogs live in a different world from those who do.”
When Murdoch approaches Ben…Then everyone will be talking about the “Blog Bubble”
‘People who don’t read blogs live in a different world from those who do’
THAT IS ANOTHER QUOTE FOR THE HBB T-SHIRTS.
Bravo!
Something is not right with that story. It could be old. Other reports indicate the group, including NR, is rebounding.
http://tinyurl.com/2tm53y
“How does the supposedly-free U.S. press keep such stories out of the headline news in the information age? I find this quite remarkable.”
It was in my paper. Perhaps you should find another source for your news. Meanwhile, I’ll take a pass on government-controlled news media.
“Perhaps you should find another source for your news.”
Apparently I already have.
From The Times
September 18, 2007
How dare they tell us savers not to panic
Northern Rock? Northern Shifting Sands, perhaps
Libby Purves
Just for once, let’s hear it for the man in the street. More specifically, for the prudent and attentive citizens queueing outside branches of Northern Rock, or filling in forms from other lenders to transfer tax-free accounts. Some of the men-in-the-street may have gone a bit far, like the doughty spirit who barricaded a manager into her office because she wouldn’t hand over his million quid on the ground that it was an internet-only account. But given that the fragile Rock’s website had crashed under the weight of traffic, he had a point. And he had a right to make it: it was his money. No, salute the queuers for their nerve, patience and admirable impermeability to patronising advice.
For how dare the stuffed suits, financial and political (and indeed journalistic), use expressions like “Don’t panic” and “Keep calm”. The withdrawers are perfectly entitled to choose who looks after their lavishly pretaxed savings. Some of them actually need money right now – like the chap on the news who wanted to pay his builder – and others just prefer not to rely on an institution that goes begging to the “lender of last resort”.
http://www.timesonline.co.uk/tol/comment/columnists/libby_purves/article2477756.ece
The MSM has already narrowed the FOMC vote down to an easing of at least 1/4 point. By merely standing pat, he could confirm that the U.S. still has an independent central bank.
THE FED
25 or 50?
Bernanke’s Fed faces a key test
By Greg Robb, MarketWatch
Last Update: 1:57 PM ET Sep 17, 2007
WASHINGTON (MarketWatch) — When Federal Reserve Board Chairman Ben Bernanke sits down to write his book, the odds are that there will be a chapter on the meeting he and his fellow central bankers will have Tuesday.
http://www.marketwatch.com/news/story/25-50—-bernankes-fed/story.aspx?guid=%7B92E01528%2D6495%2D417E%2DBC0F%2DCAEA1734906F%7D
“he” = Big Ben
“Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, to raise the limit on the size of mortgages FHA can insure to $500,000 in high-cost areas of the country from the current $362,000″
http://money.cnn.com/2007/09/18/real_estate/bc.apfn.mortgages.aheado.ap/index.htm?postversion=2007091807
Ok I am angry! I need to get the US citizenship…I’m starting to get fed up, they do whatever with my taxes and I cannot even call “my representative”.
By the way if the caps are raised up to $700k, do you think it will change anything? I mean, banks are now asking for 20% downpayment (at least the last sales -end of August in Naperville, IL- show all of them with 20% minimum or more to reach the conforming -loan level), so a buyer of a $700k house would need at least $150k to close the deal. Do banks ask now for income/debt ratio or are they still thinking buyers will be magically able to pay their debts?
Also I have seen an increase on 5 years I/O arms…do they think the market will be booming again in 2012? or we’ll see the last adjustable ticking bomb in 2012?
“By the way if the caps are raised up to $700k, do you think it will change anything?”
Yes. $700K will become the new upper limit on the cost of ‘affordable housing.’
I don’t understand. Why are the people living in California better than the people who live in Peoria? Why are Northeasters more equal than Detroiters?
How come I get more rights and privileges from the Federals if I just cross state lines?
Not better, worse. They want us to pay more for housing.
“The worse the better.”
— V.I. Lenin
Because by and large the power in this country rests on the liberal coasts and they’ll do what they can to help their friends and neighbors. If it helps us in East Jesus flyover country well hey, that’s ok, but if it doesn’t, the likes of Frank and Co. couldn’t care less.
I’ve got an idea that may help out here.
There are 535 people, senators and congresspersons who need to be influenced. That’s not a huge number.
I ask myself, how many of these windbags have a financial stake in maintaining housing prices? I think most or all of them as homeowners.
Why don’t we start up a log of congressional participation in the bubble? As we find the record we can post the property description without a street address so as not to provide a security risk. I think we should come up with some people in power who are upside down on Flopida flips etc.
Thoughts, suggestions?
The spontaneous recovery in British mortgage banking shares proves that bailouts “work.” Notice how even the Financial Times has joined the U.S. MSM in tying BB’s hands. Is there such a thing as a lame-duck central banker?
Banking rebound leads FTSE higher
By Michael Hunter and Robert Orr
Published: September 18 2007 08:50 | Last updated: September 18 2007 14:46
Bank stocks made sharp gains on Tuesday as news that the UK government would underwrite deposits in crisis-hit Northern Rock steadied investors’ nerves.
Dealers also looked forward to the US Federal Reserve interest rate decision, which is due just after 7pm UK time.
A US rate cut is seen as a near certainty, with the debate focused on whether the Fed will cut by 25 basis points or even 50bp.
http://www.ft.com/cms/s/0/b77cdec6-65ba-11dc-9fbb-0000779fd2ac.html
What if Ben rocks Wall Street and doesn’t cut at all? The media bullies the Fed by relentlessly propagating the notion that rate cuts are guaranteed, it’s only a matter of how much.
At 2:15 today, Ben will show the world if he has the will to do the right thing for Americans, or if he’s a Wall Street toadie.
We all know what is going to happen; we know ultimately where the loyalty lies and whose bidding he has to do. He won’t bite back.
But wouldn’t it be surreal if, at 2:15 today, the headline in 48 pt. font on Marketwatch.com is “FED HOLDS RATE”.
We can dream, I guess.
This is what I think he will do.
Here’s a “way out” for BB.
He cuts to 5.00, and states “This will give the credit markets time to sort out liquidity issues. Going forward, the concern will be moderating inflation”. This would give a clear message that 5.00 will be as good as it gets, and not to screw around with hiding bad debt - just write it off and move on. I see holding at 5 until after the election, when it starts going up again to save the dollar. As I’ve said before, either way long term rates go up.
What I would really like to see is him cut the official rate and the RAISE the actual rate “unofficially” to draw everyones attention away from the “target rate”. That will really confuse the market!
Duh?
Wall Street needs to be rocked . I’m getting sick of the Wall Street cheerleaders trying to find a reason for a fake rally .
“What if Ben rocks Wall Street and doesn’t cut at all?”
He doesn’t have the minerals to do that.
BB is dancing to Wall Street’s lead.
September 18, 2007 12:26 P.M.ET
BULLETIN
Major U.S. indexes in rally mode
All rise to greet Fed bankers
As Bernanke and company convene, investors eagerly anticipate 2:15 p.m. decision news.
http://www.marketwatch.com/
I personally don’t see how an FFR cut will do anything whatever to fix the root cause of the credit crunch, which is a sudden dessication of trust from the international banking system, as nobody truly knows who the subprime bagholders are or how bad is the condition of their balance sheets.
Dow to go up at least 100 points between 2:15 and closing today I’ll bet.
He can cut the rate whatever he wants today, but I wonder what everything will look like the end of Oct with all the new resets. These people can’t qualify to refi. I’d say the panic mode is going to be upped significantly every month from now until spring. Any predictions on what this is going to look like by the end of March?
disaster of inflationary proportions.
what a mess, just keeps getting uglier and uglier.
NEW YORK, Sept 18 (Reuters) - Impac Mortgage Holdings Inc … said on Tuesday it will quit substantially all of its mortgage lending operations and has fired 144 workers, citing market disruptions and illiquidity.
The company said it will stop making “Alt-A” home loans, long its main business….
http://www.reuters.com/article/bankingfinancial-SP/idUSN1840908420070918
NEW YORK, Sept 18 (Reuters) - Accredited Home Lenders Holding Co … on Tuesday posted a $260.2 million quarterly loss and said it remained unsure it would survive the fallout from a slumping U.S. housing market.
The loss was $10.29 per share for the quarter that ended March 31….
http://www.reuters.com/article/bankingfinancial-SP/idUSN1839478920070918
Peak oil…supply is falling VS demand….In August world production of total liquids decreased by 430,000 barrels per day from July according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 84.60 million b/d, which is 854,000 b/d lower year on year from August 2006 to August 2007 and 1.53 million b/d
lower than all time maximum liquids production of 86.13 million
b/d reached in July 2006. The average production in 2007 up to
August has been 85.05 million b/d, comparable to the average 2006
production of 85.00 million b/d.
http://www.peakoil.nl/wp-content/uploads/2007/09/oilwatch_monthly_september2007.pdf
Global warming…artic ice at lowest minimum ever recorded…North pole will be ice free much sooner than climate model prediction.
http://nsidc.org/news/press/2007_seaiceminimum/20070810_index.html
http://www.junkscience.com/
If you think it’s a no-brainer that humans are causing catastrophic global warming, here’s your opportunity to earn an easy US $100,000!
Click the graphic to go to JunkScience.com’s ULTIMATE GLOBAL WARMING CHALLENGE!
First person to prove it, wins it! For the challenge and contest rules see UltimateGlobalWarmingChallenge.com.
I’m a geophysicist.
http://eapsweb.mit.edu/people/person.asp?position=Student&who=tang
He was my pupil.
I don’t know that humans caused it, and I don’t know that it’s catastrophic, but it IS happening.
That central fact just gets lost among all the yammering.
1. The Earth has been here a very long time.
2. The Earth, over that time, has warmed and cooled many times naturally. If you looked at a temperature scale over a long period of time it would look like a sine wave.
3. Records of temperature have only been held for a couple hundred years, giving us only a very small part of that sine wave.
4. The Earth only started coming out of a mini-Ice Age in the early 1800s according to geologists.
5. Due to point 2, no one has considered the point that maybe these icebergs are supposed to melt naturally, even if humans were not here.
6. We should still do all we can to reduce emissions. Cleaner air is good for everyone. I remember driving to L.A. for the first time from San Diego a few years ago. I was in Irvine and the landscape looked horrible.
End hypothesis: The Earth may be warming, but that just could be because it is supposed to warm. We only came out of a mini-Ice Age a couple hundred years ago, and what follows Ice Ages?
True. And it’s been happening for centuries. Other planets are warming up too. Is it because of greenhouse gases on those planets?? Human activity?? I think not. Just another bad joke.
Here’s the latest trend from Tucson’s formerly hot real estate market:
http://www.azstarnet.com/business/201761
–
Michael Hudson on Greenspan
It is a good read. I don’t have a link to this; I assume that it was sent via e-mail to the poster on a forum.
Jas
-x-x-x-x-x-x-x-x-x-
From: Michael Hudson
Here’s what I said today on BBC September 17, 2007, World Service, 9 PM GMT, discussion of Alan Greenspan¹s legacy, as his autobiography was published today.
Somewhat against my wishes, the interviewer insisted in starting the program with my anecdote about how I was designated to fire Mr. Greenspan in 1966. I was Chase Manhattan Bank¹s balance-of-payments economist at the time, and was writing a study of the balance of payments of the U.S. petroleum industry. Chase and Socony Oil Company each had paid $10,000 to finance the study, and Socony had insisted on bringing on Alan Greenspan. My boss in the Economic Research Dept., John Deaver, worried that Greenspan was so eager to get business by giving the client what it wanted, that few people had much confidence in his statistics. Greenspan was supposed to make statistics on US oil company capital investment. What he did was take a rough approximation based on total worldwide investment. He told his two statistical assistants (Lucille Wu and one other) to assume proportionality. ³It¹s all implicit,² she said. By ³implicit,² she meant, assuming that European and Near Eastern depreciation rates and other tax laws were identical to U.S. laws, obviously not the case. Mr. Deaver and I were invited up to David Rockefeller¹s dining room, who told me to inform Mr. Greenspan that unless he could provide specifically U.S. numbers and/or be forthright about his assumptions we would have to exclude his numbers. (Socony¹s rep. was a friend of his, and I think they made sure he got paid as their favorite business lobbyist de jour.)
Mr. Greenspan was an economic lobbyist for the rich, for large corporations and for Wall Street. That is the job of a Federal Reserve chairman these days. Like a good criminal defense lawyer or the ³expert witnesses² they hire, a good lobbyist makes a cover story believable. Mr. Greenspan crafted a myth that many people wanted to believe. The myth was that people just about everyone could get rich by going into debt, to buy property whose prices were being inflated by Federal Reserve policy of lowering interest rates and deregulating the financial sector to usher in a period of ³wild finance.²
Mr. Greenspan sponsored the confusion that increasing asset prices constituted ³wealth formation.² It was not the kind of wealth that Adam Smith meant in The Wealth of Nations. Posing as an enemy of ³inflation,² he tried to make people love one particular kind of inflation: asset-price inflation.
The distinguishing feature of asset-price inflation the bubble is that it raised the price of property relative to labor¹s wages. This put the class war back in business this time a class war by the financial sector against industry as well as against labor. It took more and more take-home wages to buy a house or a retirement income.
1. As the most vocal cheerleader for the Bubble Economy, Mr. Greenspan was more responsible than anyone else for loading the U.S. economy down with debt, leaving a legacy of negative equity in his wake. For almost the first time in history, people thought that they could get rich by borrowing to buy assets that were rising in price. This was the essence of America¹s Bubble Economy. Mr. Greenspan made America KOVE inflation at least, asset-price inflation.
The myth that he created was that people should treat their houses like a piggy bank. But borrowing is NOT like drawing down a bank account. It leaves a legacy of debt that must be repaid. And while prices for real estate and stocks may go down, the debts remain in place. Lowering interest rates enabled a larger debt to be carried, by a given rental income. Lowering down payments, and even giving ³reverse mortgages² where banks agreed to lend borrowers the interest, is what Hyman Minsky called the ³Ponzi phase² of the credit cycle.
2 His main role as economic lobby for his financial clients was anti labor. Although he claimed to support cutting taxes to ³spur markets,² he played a major role in raising taxes for most wage-earners. He did this as head of the Greenspan Commission in 1982. The rhetorical ploy he suggested was to pretend that Social Security and health care should be treated as user fees, not as part of the overall budget. This freed the wealthiest tax brackets from having to finance Social Security for the bottom 90 percent of the population. Mr. Greenspan happily approved the Bush tax cuts of 2002 but later, professed to be shocked, shocked, to find that there was gambling going on and the cuts on the higher tax brackets led to a large budget deficit, and recommended that the government cut back Social Security and medical care expenditures to pay for the tax cuts that benefited the upper brackets his constituency.
3 In the above respects, Mr. Greenspan was the architect of dollar devaluation, by flooding the economy with low interest rates. He put short-term stock speculation and bank lending over the dollar¹s long-term stability. But then, finance always has lived in the short run. The ³pro-Greenspan² man on the interview was Ron Susskind of The Wall Street Journal, author of The 1% Solution. He gave a pretty balanced judgment on Mr. Greenspan, and said that after all, he had created a lot of wealth for a lot of people, and increased home ownership. True enough but also a lot of debt and subsequently, foreclosures. Mr. Susskind made the good point that Greenspan praised Clinton, virtually as a good Republican for listening to Treasury Secretary Rubin and Mr. Sommers. True enough!
I wish I could have mentioned another anecdote. A few years ago the Minneapolis Fed asked me to write an article on Mesopotamian debt cancellations. I did, and was paid nicely for it. They had an artist draw up a really good diagram. But at the last minute, they cancelled the whole issue not only my article, but the entire issue was junked. I asked why. There was a bit of embarrassment, and my contact told me that Mr. Greenspan had asked them to do a survey asking their subscribers who the greatest economist of the 20th century was. Mr. Greenspan apparently was disappointed with the result. ³Do you mean, that he wasn¹t Number One?² I asked, somewhat naively. There was almost a one minute silence. Finally I broke it. ³I see,² I said.
Michael Hudson
Sept. 18 (Bloomberg) — The Bank of England made emergency loans to U.K. banks to bolster the financial system, saying it received “intelligence” that demand for money may prolong a surge in overnight borrowing costs.
The central bank said it loaned 4.4 billion pounds ($8.8 billion) of “exceptional” funds at its benchmark interest rate of 5.75 percent today in London, and will offer the same amount on Sept. 20 in seven-day debt. The overnight lending rate fell 33 basis points to 6.14 percent today in London.
http://www.bloomberg.com/apps/news?pid=20601102&sid=afrCm8IGMO3w&refer=uk
Received another junk mortgage junk fax today (not a typo, both the product and the delivery method are junk). 1.5% fixed for 10 years. Also, I assume, pigs fly, Jesus seen riding a Harley on the interstate, Elvis says hi, etc.
Thought people here might want to also call these scumbags, toll free, and enquire further about their “offerings”. 800-216-4623, “Promo #219″.
I would, except I’m still on hold waiting for the telemarketer who called to start talking to me…
Can anybody comment on whether I’m wasting my time?
I and some friends have made a sport out of finding craigslist posts for houses, looking them up on zillow, and if the zestimate is higher than the asking price, telling zillow it’s for sale. If it’s posted for sale on zillow for more than the craigslist ad, then we leave a “question” on zillow that indicates the craigslist ad is asking for less money.
The people participating have all been priced out forever (tongue in cheek here). We look at it as being proactive about improving the accuracy of Zillow’s data, which contributes in a small way to the likelihood that we’ll buy real estate in the future. It’s just a pebble in the pond, but it feels productive.
Does anybody know enough about how Zillow works to confirm that this is beneficial, or on the contrary, that this is a huge waste of time?
For what it’s worth, I’m in first place, having “updated” Zillow’s data for approximately -$1,000,000 on 20 local houses in the last 2 days.
I think that’s a worthwhile endeavour, but it will probably only help out an individual who reads through all the information on zillow for a given house.
You may be converting some new housing bears in your area, and that’s never a bad thing. Far too many people take zestimates to be the gospel truth, including most who have set their wishing price too high.
Well folks, I’ve now done my little part in the war to educate the masses on responsible home-buying. WBAL-TV news in Baltimore sent a reporter/cameraman down to the DC area to do a report on the housing crash, and I did a ‘man on the street’ interview while they were filming in my neighborhood. I tried to work in all of the HBB themes of responsiblity, downpayments, and waiting for home prices to come back to reality. Regrettably, I wasn’t able to work in “in the bag” anywhere.
I don’t know when the report will air, or how much of my interview will be shown, but check it out if you’re in Baltimore. I’ll be the bald guy/w goatee in a white shirt. Unfortunately, we don’t get the Baltimore channels down here, so I won’t actually get to see it myself unless they post it online.
Make sure you post a link if it goes online.
Interviewer: Next up is Chris (aside: your name is Chris, right?)
Chris: Yes
Interviewer:OK
TV Spot:
We asked 10 people whether housing prices were going up. The survey said:
Bill: Yes
Bob: yes
Chris: Yes
Sam: Yes
Sally: yes
…
There you have it folks!
Just in case housing inventory decreases a bit in exurban Phoenix in a few years as the bust plays out, this should bring those excess house numbers right back up.
http://www.azcentral.com/community/surprise/articles/0918bnsf0918.html
The idea of encouraging ‘traditionally underserved’ (aka low income) households to buy homes at a price tag of $417,000 is patently absurd.
And the D-ratic Congressmen want to do still more to encourage low income households to purchase homes they cannot afford and put themselves on the path to future foreclosure. Needless to say, the U.S. taxpayer will be forced to shoulder the cost of insuring this scheme.
House Pushing Mortgage Insurance Plan
By MARCY GORDON – 1 hour ago
WASHINGTON (AP) — Looking to help homeowners avoid foreclosure, the Democratic-controlled House wants to insure mortgages and provide affordable housing grants well beyond limits favored by the Bush administration.
The House bill would allow the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, to back refinanced loans for tens of thousands of borrowers who are delinquent on payments because their mortgages are resetting to sharply higher rates from low initial “teaser” levels.
The measure is Congress’ first legislative response to the mortgage-market tumult of the summer.
The White House wants to expand the mandate of the Depression-era FHA, part of the Department of Housing and Urban Development, to allow it to insure loans of delinquent borrowers that are refinanced to lower rates.
However, the administration objects to a plan by Financial Services Committee Chairman Rep. Barney Frank, D-Mass., to raise the limit on the size of mortgages FHA can insure to $500,000 in high-cost areas of the country from the current $362,000, to be added to the House bill being put to a vote Tuesday.
“The program should remain targeted to traditionally underserved homebuyers, such as low- and moderate-income families,” the White House said in a statement Monday.
Overall, the House bill makes crucial and desirable improvements but has raised “a number of significant concerns” for the administration, it said.
The administration wants the FHA loan limits to be raised to $417,000 in high-cost areas and from $200,000 to $271,000 in lower-cost ones.
http://ap.google.com/article/ALeqM5hhsOwOsGhKflopz_JpXK3wHVsCTA
‘The House bill would allow the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, to back refinanced loans for tens of thousands of borrowers who are delinquent on payments because their mortgages are resetting to sharply higher rates from low initial “teaser” levels.’
For anyone who does not understand insurance, this measure would create a massive wealth transfer from taxpayers to the lending industry, as insurance is not actually free (as those of you who have life, health, automotive or homeowners insurance probably have noticed). And I suppose some of that wealth just might help fund future D-ratic Congressional reelection campaigns.
A big reason that liquidity has dried up in the second home market may be directly related to the policy uncertainty created by all this bailout talk among politicians. Home sellers who believe a bailout will be used to artificially prop up purchase demand have a natural incentive to wait and see what comes out of these proposals, rather than reducing their list prices to levels more in line with end-user demand.
and banks to sit on REO’s?
Came across this little piece of info on Foxnews:
Dear Gail,
We were shocked to learn that our mortgage is going up nearly $500 a month. We knew that buying this house a couple of years ago would stretch our finances to the limit, but we really wanted our kids to attend this school district so we decided to bite the bullet and keep to a very strict budget in order to make this work.
We both have jobs, but there’s no way we can come up with another $500. And home prices have really come down since we bought our house, so if we have to sell, we’d probably take a loss.
I’m just sick over this. I heard that President Bush has announced a program to help people like us. What can you tell us?
Thanks,
Sheila
How about these for questions to Sheila:
1) Didn’t you consider renting in this particular school district?
2) Didn’t you consider how you would be able to pay any increase in property taxes/utilities/insurance in addition to the mortgage reset?
3) If it was a stretch with the teaser rate, how the heck did you think you could afford it when the rate reset?
4) Do you have car payments? If so, how about selling those and eliminating the payment(s) to cover your increased mortgage payment?
Yet again another example of “play now, worry about paying later” mentality.
Saw a builder this past weekend here in the Minneapolis area advertising a new 3/2 tri-level for $159,000 (reduced from $209,900). Not a bad haircut, and closer to economic “fundamentals” for home affordability/income.
Those kids are gonna need a good school…they certainly didn’t to inherit any smarts.
One more thing. These people stretched the limit so their kids could go to the best schools? It might be for the best that they have to move. Seriously. If you went to the wealthiest schools, it would suck that you had no money to do stuff. “Hey, Billy, I got an XBox 5000, a new pair of skis, a remote control space shuttle, etc for Christmas, what did your parents who can’t pay their mortage get you??”.
Billy responds with a sad look on his face, “I got a rock”.
In about three years, my family will be able to afford to live in one of Philadelphia’s toniest suburban areas (Radnor). NEVER will I subject my kids to being the “poor kids” in their school. Whatever their income, it looks like Sheila’s kids will be happier in a school with kids their income level.
Of course I know the answer to this question, but I have to ask it…”How the heck can you be “shocked” that your mortgage went up $500 a month!?!?!?”. I am certain that these people got their monthly statement and called the mortgage people and they said, “yeah, dummies. You had a ARM, blah, blah, blah”. Of course they had some silly teaser rate for the first couple of years (if that) and now it has shot up. They thought that the mortgage company would be nice and say, “we like these people. Let’s keep their ARM at 2.95% for the next 28 years. Better yet, since they have kids, we’ll let them live mortgage free forever (giddy clapping starts)”.
–
THE NAHB/WELLS FARGO HOUSING MARKET INDEX:
http://www.nahb.org/generic.aspx?genericContentID=529
Very bad across the board.
Jas
No cut my prediction. But I’m somewhat of a shoeshine boy.
My office mate is trying to refi his option-one note through HR Block. Message on answering machine today (Tuesday) says thier offices are closed.
??
They cut by 0.5%. Now we see their true colors.
“They cut by 0.5%. Now we see their true colors.”
We knew them already. I could hear the helicopters coming from miles away. Looks like gold and silver already had the news priced in.
This policy was announced years before BB took over as Fed chair. The man should get credit for staying the course in the War on Savers.
Now that the electroshock-therapy punchbowl-respiking fix is in, I guess the credit panic is over and the nation can get back to business as usual.
I can’t believe they did that. WOW! .5% rate cut…
I said they would a week ago.
You are brilliant, prof!!
Doesn’t the 1/2 point cut by the Fed confirm that the housing crisis is not contained? The stock market’s rally reaction may become more sober when they realize this move also indicates the Fed’s fear of a recession has greatly increased.
‘The move suggests Ben Bernanke, Federal Reserve chairman, overcame internal resistance from some central bankers concerned about the risk of stimulating inflation by cutting rates sharply.
It follows a call from leading executives for a decisive action by the Fed. The extent of the cut suggested a degree of “panic” over the outlook for the US economy, Alan Ruskin, an analyst at RBS said.’
http://www.ft.com/cms/s/0/a1fe0416-6610-11dc-9fbb-0000779fd2ac.html
“Ben, we need cash. How we we gonna unload these securities on the sheeple without a rate cut? Those idiots are getting wise to our game man. Some dude name Ben Jones is getting the word out.”
Yep.
BB caved to the Cramer’s and Kudlow’s. Cut 50 PTS
I think we may as well kiss the idea good bye of ever buying a house .
Inflation will eat up everything we have saved.
They will save Wall Street at the expense of our entire country and and let everyone else drowned.
Housing prices are still going to crash. No one’s buying and many won’t qualify anyway, so prices have nowhere to go but down. This rate cut will do nothing for the housing crisis. If you couldn’t afford to buy at the rates that we currently have( which are obscenely low by historical standards) there’s no way you can buy with a 1/2% rate cut. This rate is giving credit rate cuts to people who couldn’t get a loan to save themselves. Remember house values are way above income and a huge percentage don’t have a downpayment. If the prices were right a lot of us would be buying right now. We’re the ones with the downpayments. Dow may be up 400+ points today, but come Oct we may see 1989 all over again when more and more rates reset.
I agree with you about October 1989, the stock market is going down like a hot aired balloon.
Is it entirely out of the question, that Fanny and Freddy will increased the jumbo loan max to 600K?? After seeing what Ben did today with rates, anything is possible.
LOL, I mean lead balloon!
“This rate cut will do nothing for the housing crisis.”
A higher inflation risk premium in long-term T-bond rates would naturally translate into higher fixed-rate mortgage lending rates. Good thing nobody can afford to buy homes with 30-year-fixed mortgages these days…
http://www.bloomberg.com/markets/rates/index.html
Interest rates were falling during the 1985-90 housing bust in Austin. Lower rates did not change the psychology. Prices fell between 25% and 50% for SFH and more for land & condos. This due to a speculative bubble and not oil. Unemployment was 3% during that time.
“Interest rates were falling during the 1985-90 housing bust in Austin.”
Ditto for Japan (1990-???)
Fed cuts interest rates by half a point
By Eoin Callan in Washington
Published: September 18 2007 19:15 | Last updated: September 18 2007 19:26
The US Federal Reserve cut interest rates by 50 basis points on Tuesday, in an aggressive move designed to head off the risk of a sharp slowdown in economic growth that could culminate in recession.
The deeper-than-expected cut to 4.75 per cent followed weeks of turmoil in financial markets and mounting investor concern over the economic fallout from problems arising from the US subprime mortgage industry.
The move suggests Ben Bernanke, Federal Reserve chairman, overcame internal resistance from some central bankers concerned about the risk of stimulating inflation by cutting rates sharply.
http://www.ft.com/cms/s/0/a1fe0416-6610-11dc-9fbb-0000779fd2ac.html
I’ve never seen something so stupid. How many months ago did BB say the housing contagion was contained. And now we need a 50 bp cut ? Incredible.
Bukake Bernanke.
He ain’t called Helicopter Ben for nothing. DX hit 79.30 and Euro is pushing 1.40. Good thing most of my cash is in a solid currency like Russian Rubles. Thanks Ben! SOB!
USD Taking a Dump
“SAN FRANCISCO (MarketWatch) — The dollar fell against its major counterparts Tuesday, hitting a new record low against the euro, after the U.S. Federal Reserve cut its benchmark federal funds rate more than many investors had expected, thereby lowering the return on dollar-denominated assets. ”
http://tinyurl.com/2l69qu
The war on savers continues. I need to puke!
What idiots these people are.
They can’t see the bubble forming even though people are camping out to buy a condo in Florida and crappy mortgage companies are popping up everywhere. But when the situation reverses we immediately need a 50 point rate cut.
What happened to fighting inflation ? Wheat, barley and corn prices are through the roof. Crude is at an all time high. Metals are at an all time high. Yeah, we need a rate cut. Sheesh !
I’m beyond pissed off (although not entirely surprised). What’s the point of being frugal and saving if the government is just going to devalue the currency??? I should just join J6P and max out all of my credit cards on crap… but I won’t, because that’s exactly what those parasitic c0cksuckers want us few savers left to do.
I’m moving to f’ing Canada.
Don’t worry: Gold 28yr high. Oil new High, copper check.
Dollar new low.
Don’t bring any US dollars with you. They won’t be worth anything. Trust me, I know.
Ah yes, the gaines burger eaters who sold all their stocks and are in cash - pity pity pity.
Looks like Gold will be headed above $1000 per ounce, but the lower rates are also good for financial stocks in particular, but all stocks in general.
Doom and gloom has been postponed for 2 years. Alan Greenspans double digit interest rates will be here in late 2009 or in 2010. Meanwhile, should have bought DNA, TM, YHOO, NYB, BAC, PCU, …!
This interest rate cut to 4.75% won’t help the FBs. The guy in the cube next to mine has a Maricopa house that is overpriced. I had a mini-debate with him and explained that the no doc loans are dead. Also houses are already overinflated and wages have not gone up today by 15% last time I checked while the interest rates dropped by 50 basis points. He is blinded by the real estate greed.
sold my stocks because I like sleeping at night
simple as that
nice post bill
just look at all the long term money that got plugged into the longer term yield in bonds.
oops, long bonds got sold off and the only buyer was US.
i got no game in this market
as an investor, saver, manager, husband, and most importantly a father the confidence is shattered, again.
“Was the Federal Reserve right to cut interest rates by 50 basis points? Vote and share your views below”
http://www.ft.com/cms/6c2bf1ce-91b7-11da-bab9-0000779e2340.html?q=Y&a=tpc&s=646099322&f=141094803&m=7311002551
Comments from the Financial Times readership…
influenced by market forces and politically motivated
by simon 18 Sep 2007 08:14 PM
This just highlights how foolish the tax payer is to think that the government and the appointed individuals act in their interest. After all Bernanke was appointed by George Bush and the last thing the president wants now is another headache from market forces. Well done Mr Bernanke.
Fed Decision
by Peter Paul 18 Sep 2007 08:13 PM
No they made it wrong. Dollar will fall, oil will go up, US debt financing will become more expensive, speculators will be saved and inflation will go up. Tax payers will be penalised once again for unwise decisions of authorities. It is a matter of time that the markets will have a correction, if it will be a long and slow one or a short lived it would have depended on central bankers… It is a pity that Mr. Bernanke took a decision with one yie in the politics… a pity.
fed rate cut
by tradeprn 18 Sep 2007 08:09 PM
Did anyone stop to think the Fed may know of a pre-existing problem that we don’t. Two weeks ago, three of the FOMC voting members were adamantly opposed to a rate cut. Today, there was no dissent on record whatsoever. Something has changed. So why are equities reacting positively to a 50bp cut?
Fed Decision
by Clive Laband 18 Sep 2007 08:06 PM
Cutting rates now and potentially any further cuts in this strategic adjustment may boost inflation - the greater risk from deflation and systemic unemployment is a far worse alternative. It’s critical that the US and indeed the UK at least aknowledge that inflation is the flexibility which allows job creation and employment to grow. Step on the brakes or fail to accelerate as the Fed has now simply and ultimately flushes jobs down the sewer.
On balance, the Fed cut was spot on, maybe a week later than it should have been.
Fed 50 basis points rate cut
by Martin Marmolejo 18 Sep 2007 08:05 PM
mrmarmolejo@gmail.com
I think they did it right. The expectations component is extremely important. The lag factor likewise. The US (and the world as a whole) is much better off with agile central banks than with slow moving ones, provided that they ‘read the leaves’ appropriately.
Mexico City
Fed Res rate cut
by Raetia 18 Sep 2007 08:03 PM
too much of a cut that will just postpone the problem, a straw fire on the stock market we will pay for later with higher inflation
Fed Decision
by Joseph Hynes 18 Sep 2007 07:57 PM
The Fed has again and will continue to cut interest rates too aggressively, paying too much attention to sentiment and not enough to data. On this occasion however there is no strong dollar or Far Eastern productivity surge to save them from the inflation which this course of action will surely precipitate. Caenwee@yahoo.com
Interest Rate Cut
by Rob 18 Sep 2007 07:53 PM
Good move and late as well. They created this crunch and raised them too fast. And why is this so inflationary? Increased borrowing costs will be passed on to customers, right?
Rate Cut
by Julian 18 Sep 2007 07:48 PM
It seems that the deflationary impact of historic hikes has taken longer to work through the system than central banks generally have accepted. Consequently when it has come through, the credit squeeze has been tight, and although this is necessary medicine for reckless lenders, there is now the real risk of this spilling over into a major slow down or even recession.
Consequently the Fed was right to send a clear decisive signal to the markets at large, as well as the signal already sent to the financial community through the discount window.
Cynism and error-pronted attitudes
by Hector Mario Rodriguez 18 Sep 2007 07:47 PM
Mr. Greenspan (the Economist as someone had advised him to publish his website) showed us an incredible cynism while suggesting he callled “real estate froth” instead of “real estate bubble”.
Today, Mr. Bernanke surprised us with an inflationary decision to cut FED rate by 1/2 point. He will recognize, a few years on, he had meant “be careful, recesion is coming, don´t waste your last pennies”.
It´s a joke; a sad joke.
HMR
Fed rate cut
by Rupert Somerscales 18 Sep 2007 07:44 PM
In my opinion the 50pt cut is too aggressive, bearing in mind the obvious inflationary pressures and the ‘get out of jail free’ message it portrays to the financial markets. Better to have waited longer to let the market provide a solution to a problem they themselves created. Nanny state, with the poor tax-payer, as ever, providing the money.
fed decision
by maria flett 18 Sep 2007 07:42 PM
No, it will just postpone and exagerate the problem!!
mflett@ntlworld.com
Now I’m mad. We had “historic rate hikes” that caused all his problem. Someone string ‘em up!
I guess burgeoning gold prices are not a sign of building inflationary pressure, as gold is an asset, not a consumer or producer good (and hence not part of the CPI or PPI bundle)?
bulletin
GOLD FUTURES TRADE AT A QUARTER-CENTURY HIGH
Gold touches over quarter-century high in electronic trade
By Myra P. Saefong
Last Update: 3:25 PM ET Sep 18, 2007
SAN FRANCISCO (MarketWatch) — December gold climbed as high as $735.30 an ounce in electronic trading Tuesday afternoon in the wake of the Federal Reserve’s decision to cut interest rates by a half percentage point to 4.75%. December gold had closed out the regular session at $723.70, down 10 cents. Gold futures in New York traded as high as $732 in electronic trading last year, and the lead-month contract hasn’t traded higher than that since 1980, according to analysts.
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B294E6ABD%2D4DFD%2D450B%2DB415%2DED6EB6D78CC7%7D&siteid=mktw
Come on everyone, you knew this cut was coming. If you all put your money where your mouth is , you own lots of gold and made a lot of money in the past 2 hours. If your money is in a CD or money market fund, well sorry to hear.
I thought the interest rates would stay flat the rest of this year. A year ago I thought rates would go up to 7.5%! Way off, yet still I kept buying stocks and precious metals, as well as CDs, T-bills, savings bonds, etc.
I’m glad I hedged against my government securities! I recall a poster here on this blog who a year ago dumped all his stocks and got into cash. Painful!
Aladinsane is in the cat bird seat. Metals prices are poised to go up much further.
Already there, and moving more out of the dollar as things progress. I figured this would happen, but not this fast and not a 0.5% cut. Sad - so much for the dollar! I wish I could instead be paid in gold… or corn futures… or something with value!
NEW YORK, Sept 18 (Reuters) - Countrywide Financial Corp … Chief Executive Angelo Mozilo said on Tuesday the largest U.S. mortgage lender is “out” of the subprime business, apart from offering home loans eligible for purchase by government-sponsored enterprises.
http://www.reuters.com/article/bankingfinancial-SP/idUSWEN105420070918
http://www.bloomberg.com/apps/news?pid=20601087&sid=aYBOOiT5mAO0&refer=home
Actually there’s still nothing wrong w/a CD or MMF….this rate cut will NOT bring the economy back..
http://www.bloomberg.com/apps/news?pid=20601087&sid=aYBOOiT5mAO0&refer=home
General Electric is to take a charge of up to $1.4bn in the third quarter to pay for the exit from its Japanese personal loan business and US subprime unit in an attempt to reduce its exposure to troubled areas of the consumer finance market.
…
After a charge of up to $1bn for Lake, the Japanese business, and $400m for WMC, GE Money is expected to report profits of $4.2bn in 2007, up from $3.5bn last year.
http://www.ft.com/cms/s/0/5b14f74a-6605-11dc-9fbb-0000779fd2ac.html
Sept. 18 (Bloomberg) — U.S. homebuilder shares jumped after the Federal Reserve cut interest rates, bolstering speculation buyers may return to the housing market.
…
“Clearly the rate cut can be nothing but a positive for the housing market, not just because interest rates would be better but it provides a psychological boost that I think is needed for the housing market,” Chief Executive Officer Ara Hovnanian said in an interview.
…
“Maybe our boy has righted the ship,” Robert Toll, CEO of Toll Brothers Inc., the largest U.S. luxury homebuilder, said of Fed Chairman Ben S. Bernanke.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aAgXLze7UpVo&refer=home
‘“Maybe our boy has righted the ship,’’ Robert Toll, CEO of Toll Brothers Inc., the largest U.S. luxury homebuilder, said of Fed Chairman Ben S. Bernanke.’
The fix was amazingly simple!
The scary part about the rate cuts are the information that the Federal Reserve had in its possession that made it necessary. Obviously, the unemployment picture is a disaster as are the commercial paper markets and the residential mortgage markets. These alone justified a 0.25% rate cut. The unknown information, the dark matter in the banking system, has to justify the other 0.25%. This is scary. How much Mark to Model and Mark to Fantasy is out there?
As an aside this rate drop will have the side effect of substantially lowering the GDP of the US relative to other currencies and countries. Since China’s largest trading partner is the EU and since the Euro is going to strengthen against the dollar, it would not surprise me to see China allow the Yuan Renminbi to strengthen against the dollar adding a further slap. The fact that the bonds failed to rally when the discount rate and Fed Funds rate were cut suggests that there were foreign sellers of US Treasuries. The conjecture is that it is China, however it may be Japan selling treasuries. It looks like Mr. Peter Schiff is correct. A 50% drop in the dollar. It really sucks to have gold go up relative to the dollar but down to the Euro. I would have to pay a BS tax to the government on “a profit” when I lost purchasing parity to the Euro, if I were to sell. So much for the Federal Reserve acting to defend the dollar.
“The scary part about the rate cuts are the information that the Federal Reserve had in its possession that made it necessary.”
You mean like UK banking customers queuing up to withdraw their savings?
“It looks like Mr. Peter Schiff is correct. A 50% drop in the dollar. It really sucks to have gold go up relative to the dollar but down to the Euro.”
Hoz, sorry that you and other non-Americans are in the situation you are in. But thanks for posting; these last few months you have been very helpful. I owe much of what I have learned to you.
WASHINGTON (MarketWatch) — Reaching out to hard-hit borrowers in the subprime-mortgage market, the House on Tuesday passed a bill that lowers down payments for borrowers, raises loan limits and boosts funds for housing counseling.
…
Lawmakers also passed an amendment to the bill offered by Frank that would raise the agency’s loan limit from its current $417,000 to as much as $729,750.
http://tinyurl.com/237vjw
These people have absolutely NO BRAINS.
Gee, I woke up this morning thinking i was living in the USA, and found out this afternoon, that I’m in Zimbabwe.
Ya cause when I think of a first time homebuyer in need of a government helping hand for that little extra nudge to put him over the top and into home ownership, I’m thinking he should be buying a nearly 3/4 million dollar house.
mm hmm. Yep. Sound fiscal policy here.
F*ck it. Let’s just start electing homeless people to congress and the presidency. The guy talking to himself while pushing a shopping cart full of mannequin parts has his head on straighter than these buttwipes.
GAWWWWD.
I’m seriously done. I will vote for ANYONE other than the two major parties. I’m DONE.
I’m with you Seattle. I just got a call asking for donations for one of the two parties. I told him that this mess is the fault of both parties and I know longer have faith in either.
Don’t worry - by the time the dollar is done losing value (it lost about 1% today after the Fed’s idiotic rate cut), $750,000 will be small potatoes! Think of the fun of $10 a gallon gas, $500 grocery bills, and so on. Gotta keep blowing Bubbles!
Oh, and no, your wages won’t be going up. That would be INFLATION, and we can’t have that!
ARGH!
Gold Rises to Highest Since 1980 as Dollar Slumps on Fed’s Cut
By Pham-Duy Nguyen
Sept. 18 (Bloomberg) — Gold futures rose to a 27-year high after the Federal Reserve cut interest rates, sending the dollar to a record low against the euro and boosting the appeal of the precious metal as a currency hedge.
The Fed lowered its benchmark rate by 0.5 percentage point, more than economists forecast, to 4.75 percent, the first cut in four years. Five of the past six bear markets for the U.S. currency have sparked a rally in gold.
“Investors are scared,” said Ron Goodis, futures trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. “The rate cut is inflationary, and money is flowing into gold as a hedge.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aETKbEA6eXR4&refer=home
THE TICKER
Report: Chicago area 1st in high-cost loans
Associated Press
September 18, 2007
The metropolitan Chicago area leads the nation for subprime and other high-cost loans issued between 2004 and 2006, according to a report published Monday.
http://www.chicagotribune.com/business/chi-tue_brief1_0918sep18,0,4009251.story
UPDATE 2-U.S. home builder shares soar on rate cut
Tue Sep 18, 2007 6:02pm ET140
Market View
HOV (Hovnanian Enterprises Inc )
Last: $14.55
Change: +3.22 (+28.42%)
Revenue (ttm): M
Time: 4:01pm ET
UPDATE 2-US home builder confidence drops more in Sept-NAHB
(Recasts first sentence, adds CEO quotes, Fed Rate cut, stock prices byline) Snigger!
By Ilaina Jonas and Nick Zieminski
NEW YORK, Sept 18 (Reuters) - The Federal Reserve’s rate cut sent U.S. home builder shares soaring, but one influential home builder said the half-percentage point cut may be sending the wrong message.
“I would have done a quarter instead of a half because it signals we’re in deep doodoo,” said Robert Toll, chief executive of luxury home builder Toll Brothers Inc (TOL.N: Quote, Profile , Research)
The U.S. housing market has been in a steep decline for more than a year as home prices far outpaced incomes and buyers put the brakes on their purchases. The supply glut has been exacerbated by a crisis in the mortgage markets that started with defaults by the riskiest borrowers.
“Does anyone want to call this the bottom because of the Fed cut?” he asked, while speaking at the Credit Suisse 2007 Homebuilder Conference in New York. “I don’t think you can call it yet.”
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-18T220156Z_01_N18437095_RTRIDST_0_HOUSING-MORTGAGES-UPDATE-2.XML&WTmodLoc=InvArt-C2-NextArticle-2
50 basis points ya say? It won’t help. What BB is trying to do is to stave off a major economic Depression. The Wall Street will have some really good days for a while, the housing folks will feel better for a time, then the real issues will come back into focus. We are going into a Recession and nothing is going to help, we are in a very dangerous war that we don’t know how to handle, our supposedly erstwhile enemies USSR and China are coming back to haunt us, etc.
So, we have a bad time ahead that we will survive, but this little rate cut won’t help.
Sorry,
Roidy
Sept. 18 (Bloomberg) — Accredited Home Lenders Holding Co., the subprime mortgage company that fired 60 percent of its workers, agreed to a $296 million buyout offer from Lone Star Funds and said it would drop a lawsuit against the private- equity firm.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aiITiE44vqSY&refer=home
testy
…