Bits Bucket And Craigslist Finds For September 19, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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test
This is only a test. This has been a test of the Federal Reserve banking system. If this had been an actual economy you would have been instructed to get well educated, spend wisely, save some money, and expect a reasonable standard of living that diligence and hard work usually provides. But this is only a test.
Love it!
I’d laugh if I wasn’t crying.
SF — good one and well-timed.
I can eventually see a strange future where we won’t be paid in money but in credit increase limits on our credit cards and where we will NOT be allowed to pay off the balance - ever. Lunacy.. if debt = wealth, than money = nothing, and everything is free if you can steal it, I guess.
Stealing is unnecessary (unbeknownst to OJ) — all you need to do is figure out how to get in the “creditworthy” category, then wait for govt bailouts to work their magic for you when the going gets tough.
“Everything is free if you can steal it, I guess.”
If I were any good, I’d write a song around that one.
-”Don’t be greedy.” Big V
I wonder how long a government such as ours in the US can keep on
spending more than they take in on taxes. If we as individuals spend
more than we take in we eventually go bankrupt. Is our government headed for bankruptcy?
I wonder how long a government such as ours in the US can keep on spending more than they take in on taxes.
That’s easy, by cutting taxes. Where have you been?
Simpson’s Epsiode relating to this matter
——
Homer: Okay, boy. This is where all the hard work,
sacrifice, and painful scaldings pay off.
Employee: Four pounds of grease … that comes to … sixty-
three cents.
Homer: Woo-hoo!
Bart: Dad, all that bacon cost twenty-seven dollars.
Homer: Yeah, but your mom paid for that!
Bart: But doesn’t she get her money from you?
Homer: And I get my money from grease! What’s the problem?
I like Groundskeeper Willie’s quote better: “That’s me retirement grease!” Actually the grease was probably worth more than the balance in many boomers’ 401(k)s.
Stop pummeling me! It really hurts!
better yet ,get rid of agencies w Soviet sounding names- there’s zillions of them
We are already in technical default as a nation. The U.S. does not have the capacity to raise revenue in the amount necessary to pay down/off the debt already incurred. Nor does our gov’t exhibit any propensity to try. Therefore you can assume they intend to default at some point in the near future (handful of years or less).
This is no different than say a home buyer who signs a loan knowing that they are unable to abide by the terms of repayment but hope that price inflation will allow for them to Re-finance the terms later. It is ponzi-scheme finance and it will catch up to the U.S. sooner rather than later. IMO
We need a balanced budget amendment to the Constitution. There is no reason the gov’t should ever spend more than it takes in short of times of war and severe economic duress. Bush has been totally wreckless with our budget and future. Deficits for entitlements? NO WAY
But dont you know? We are always in a state of war.
That’s part of the reason we’re leasing away our infrastructure and merging territories (e.g. Mexico/Canada). Economic survival trumps sovereignty.
The Mexicans may be desperate, but the Canadians certainly are not. They wisely stayed out of the Iraq mess, they are resource rich, and the loonie is now worth more than the dollar. What, exactly, could we offer them? Canadians want no part of any “merger” with the US.
Well, the Loonie is approaching parity with the USD but it still has a little way to go. I don’t think this is good for Canadians.
Canadian Dollars went over parity in the early 1980’s, I believe. While this was not a great time in the US Rust Belt, I seem to recall it was worse in Ontario and Quebec manufacturing centers.
Parity will be terrible for the Canadians in the short-term, IMO. Lumber already is near-terminal. US auto plants are there in number, but that might not last. Canadian tourism from the US is on life support, though in large part that could be helped a lot by a Canuck reality-check re pricing.
Get ready for the Amero and no mas middle class. Buh bye…
Hopefully that depends on US. Of course maybe we have all become lemmings…
I agree with Yo Mamma, but perhaps in a cart-and-horse manner. I think the desire for erasure of sovereignty is driving the cart. Look at all the compromises that were made in Europe, in order to achieve sovereignty-light in the first instance and ultimately non-sovereignty. Done deal. Sort of like Rommel at the end — just choose your method.
“The U.S. does not have the capacity to raise revenue in the amount necessary to pay down/off the debt already incurred.”
Maybe not as a nation but Chicago is trying.
One Cook County commissioner wants to increase the county’s portion of the sales tax, and if approved, the sales tax in Cook County would go up to 11 percent. That tax increase would also apply to restaurant and hotel bills.
http://abclocal.go.com/wls/story?section=local&id=5664018
Taxes in Cook County are already high (8.75% on most things, I believe), which admittedly is kind of a pain in the arse.
But at least our local government realizes that revenue is necessary to provide goods and services. The “buy now make other people worry about it later” philosophy of BushCo. and others makes no sense to me.
Exactly, so what is the easiest way to pay down that debt? If we use Cheney’s logic that cutting taxes raises revenue, then why don’t we cause “phantom” inflation without the sheeple thinking there is inflation and “devalue” that debt.
Let’s raise taxes to European levels instead. I could go for a nice dose of 12% unemployment and Paris style riots myself. How about you?
“I wonder how long a government such as ours in the US can keep on
spending more than they take in on taxes.”
I imagine to the point where interest payments on the debt are around half of tax revenues, at which point banks and what not will become more reluctant to lend. Give or take.
This kind of story really tugs at your heart strings, it’s so hard not to feel sorry for these folks. Imagine not being able to have a jet ski on ones own pond! Hopefully time will heal their anguish….. :- )
http://www.nytimes.com/2007/09/19/business/19hedge.html?_r=2&adxnnl=1&oref=slogin&ref=business&adxnnlx=1190197535-D20QzRx5WSweDOMsEZVa1Q
Priceless quote from that. HF clown loses a bunch of investors’ money and:
Such distress can result in what some call a social contagion, as hedge fund executives let their woes at work affect their personal lives. Investors have said that their golf scores soar, that they lose their appetites and wake up in the middle of the night in a cold sweat.
I can’t believe the NYT actually published this garbage. These guys make 20M a year and up. They should sweat. Jesus!
“I can’t believe the NYT actually published this garbage.”
They do every Sunday. They have to appeal to their well-healed readers in the Hamptons.
Ya know, in the real world, when you don’t perform the job you’re being paid to do, you lose your JOB not your golf score!
“It has been a very challenging period for these people,” said Jonathan F. Katz, a psychologist who works with large hedge funds. “I have seen people shaken, their confidence eroded. They are upset and depressed.”
OH GAWD, now I’ve heard everything! Shovel in that Paxil, boyz, it may make you feel better temporarily, but it still won’t change the fact that at heart, you’re a parasitic piece of crap.
I haven’t even read the whole thing yet, still it’s stories and people like this that make me think the whole kit and kaboodle does need to just collapse. I’m totally disgusted with elitists of all stripes.
Not defending them, but you have to remember that these people live in their own worlds. To them, 20M is $100k to the rest of us. Remember the post last week about the guy in south Florida having to sell a personal yacht to cover expenses?
Most of these people are just lucky with little skill or skin in the game.
I think this has been posted on the HBB before, but it seems even more appropriate today. Pray for peace.
http://www.freedomsphoenix.com/Find-Freedom.htm?At=021862&From=News
You know, the types that like to jump out of windows after market crashes…
That’s the problem with this psychological counselling they get. The “therapy mints” (medication) prevent them from feeling anything vaguely resembling remorse or responsibility, so no one has the decency to jump out a window anymore.
“The “therapy mints” (medication) prevent them from feeling anything vaguely resembling remorse or responsibility, so no one has the decency to jump out a window anymore.”
You crack me up palmetto ,but you have a good point about this society being a avoidance society on all levels .People are suppose to feel good all the time and cheerleaders have taken over the news . The entitlement culture doesn’t want to pay their bills however ,so it was so easy for the REIC to hoodwink them into teaser rate pay later loans .
We need good Jobs for Americans ,not over priced assets they can flip, or a stock market rally based on expecting a bailout to avoid a recession . I would like to see value rather than hype .
What exactly is a good job? And who should provide these jobs? Evil corporations who dare to make a profit?
Just curious where these magic jobs are supposed to come from if corporations are not allowed to be profitable.
There is nothing wrong with making a profit. Unfortunately, our corporate leaders have gotten greedy. Soon, there will be no profit and no jobs. Small businesses survive by being fiscally responsible. There is nothing wrong with thinking large corporations, and our very nation, could do the same.
Yes, when I wuz a pup, my mom worked for a NY corporation that pulled in a very nice profit, paid their employees well, offered medical and reasonable vacation and sick days. And everyone worked strictly 9-5, family time was heavily encouraged.
It’s like watching the local Florida govs moaning about budget cutbacks these days. Five years ago, the services were a lot better with a lot less money. And we know the growth in population isn’t the reason they’re having a problem, since the (official) population is declining.
Thank you wittbelle ,could not agree more . I just don’t like the direction the global economy concept is going in terms of the loss of American jobs.I’m also getting sick and tired of calling up companies and getting a person on the phone that is on the other side of the world that I can’t even understand .
You must vote with your wallet. I avoid doing business with companies that employ those tactics, and if enough of us feel the same way, it will change.
You are welcome. It saddens me that there are people out there who justify the kind of greed we see in the corporate leaders of this nation. How much money do these people need? If it’s really a plan to squeeze out the middle class and have a huge chasm between the have and have nots, is that really going to make anyone feel good, to drive out of their mansion’s gates in their Rolls, through the streets of their once thriving town to see it littered with filthy, dying homeless people, begging for a something to help them hang on another day? Some cities are already starting to look like Tijuana: unwashed little kids with decaying teeth, selling chiclets to help pay for rotten food for their family and their plywood shack in shanty town. I understand that many people believe that if they work hard for something, they shouldn’t have to give it away to someone who doesn’t work. But when corporate leaders are making money hand over fist while their very employees of their very own company are being laid off or having their hours or benefits cut so that they can pay the rich stockholders dividends… well, it’s just not right.
I see the same picture you talk about . Without a strong middle class in American your vision is exactly what will happen .
I used to do a lot of consulting work for the NY Times. You have to remember: Classified & real estate advertising represents a truly huge chunk of their revenue. The same applies to many newspapers around the country. It’s the primary reason the media was so dishonest in reporting on the housing bubble.
Writing articles about fabulous houses is a bone thrown to real estate advertisers. We scratch your back you scratch ours.
NYTimes still making money from high-end real estate ads.
My fave is the shrink who counsels the unhappy rich…now there’s a sweet gig. Hand-holding at 500 an hour and up.
“I can’t believe the NYT actually published this garbage.”
I’m so glad they did though. That was priceless. I laughed so hard I almost peed myself.
I could barely read this one. Had to come back to this blog. Much more sanity here.
I am so very angry with this Fed! To hear all the cheerleaders yesterday actually upset me. BB has turned out to be a sissy. They want to recycle 2001 and punish the people that do things the right way. I’ve decided to go buy a house in a non bubble market, get in to some kind of cash business and stop paying taxes as much as possible. Nothing like being rewarded for bad behavior!@#$%^&*
We are at a stage in the game of empire economics where there remains little choice but to cut rates and keep pumping liquidity into the system. We are a “work ethic” economy, except none of us are required to work to make anything we buy. It is all made in China and places where labor is at just a few percent of the cost here. Really, if you think about it this does raise intriguing prospects about the viability moving forward with a society where your worth in the world is your job, but your job is not needed here any more.
I’ve decided to go buy a house in a non bubble market, get in to some kind of cash business and stop paying taxes as much as possible. Nothing like being rewarded for bad behavior!@#$%^&*
Pack it in and head to Austrailia. The next century ain’t gonna belong to the US. We were the opportunists after the rest of the world lay in ruin after WW II. We had our day in the sun.
Our capital is all spent, thanks to the buffoons in government.
International Living’s Top Picks for potential expatriates…
1. Mexico (how’s that for a reversal!)
2. Ecuador
3.Italy
4.Panama
5.Austrailia
6.Malta
7.Spain
8.South Africa
9.Malaysia
10. France
#22. United States
about half of this top-ten has severely overvalued housing markets (maybe because all the HBB readers are going to move there and support the ridiculous price level?).
Mexico is becoming a failed state; rampant crime, corrupt officials, insurgency blowing up pipelines, declining revenue from oil production, etc. etc, plus they don’t like Yankees. You would have to be insane to move there.
Why move to Mex when you can experience all that right here?
You get to pay for it too!
Mexico is becoming a failed state; rampant crime, corrupt officials,
I am pretty sure BlackJack Pershing said the same thing back in 1916…
My grandad (who died before I was born) fought with Pershing in WW1. From the notes my grandad left behind, Pershing knew whereof he spoke.
By some estimates the Mexican government has real control over only 1/3 of its territory. The border towns are firmly in the narc’s control. The gov’t even sent in the army to Nuevo Laredo to “restore order” and within a year the Mexican army retreated in defeat.
Expat living is only for a select few. From the sound of it a few HBBers might make a good go of it, but most hyper-consumers will simply lanquish on the beaches/shores of these lands until the natives expel their sorry butts.
But being a good expat-destination isn’t necessarily the same as being a country where all is well. It just means that a person with a world-class salary and/or good-savings can live comfortably in a friendly environment. In some cases the locals don’t live well at all, but the expats do.
If the locals aren’t living well, and the expats are, doesn’t that make the expats into targets?
In any country where an expat would want to go, there are locals who live well. They seldom if ever come into contact with the “little people.” The expats will move into their gated communities and hire the same bodyguard companies.
“The expats will move into their gated communities and hire the same bodyguard companies.”
But that’s a suckass way to live. One of the great things about living in the US, up until this point, has been freedom of movement. People didn’t HAVE to live behind walls and gates, with bodyguards, etc. Unless you lived in a really bad neighborhood, most places you could take a walk without fear of abduction or robbery, etc. Now, many of our formerly safe parks and modest neighborhoods are no longer safe.
People didn’t HAVE to live behind walls and gates, with bodyguards, etc.
Unless you live in SoCal.
A Seattle area friend in the mid 90’s said he walked past Bill Gates, wife and baby stroller in the local park. Is this (was this?) a great country or what?
When we are in the Philippines, my wife assigns a tall nephew to walk behind me just going to the mall.
Folks, please realize that housing bubble is dead, regardless of what the Fed does at this point. That bubble has been blown-up to capacity and there’s no where to go with it. We haven’t seen nearly enough in price decreases to allow for it. In 2001, housing was a convenient pipeline for all that low interest rate liquidity to be pumped to the masses. Again, that avenue has been exausted. The scary part of this thing is that because of this fact, money inflation will not be contained to the housing sector anymore. So get ready to pay $10 for a gallon of milk.
Your comment about running out buying a home is exactly the wrong thing to do. Time to strip down to the bare essentials and simplify. Get debt free, buy cheap, live cheap, and hunker down. Hopefully you’ll be one of the survivors.
maybe it’s dead in the US (although I’m not so sure yet, who knows what crazy idea Heli Ben will try next) but definitely NOT in the rest of the world. These desperate actions from the FED will soon be followed by rate cuts in Europe (to keep the euro down), which will cause the much bigger and older EU housing bubble to get even worse :((
just imagine what that will do to the bubble psychology, EU homeowners keep getting filthy rich by (not) owning their homes while american homeowners loose their shirts. I can hardly imagine such a situation to exist for a considerable amount of time. Maybe the riddle will be solved by EU speculators buying up all housing in the US …
An article I read yesterday on the CBC said that rates would most likely go up in Canada. They said the housing market is becoming unaffordable in the western provinces and they want to keep a handle on it. Imagine that…
we have heard similar stories from the BOE and ECB in the last months and everybody should know by now how that worked out. It’s all cheap talk, no politician or banker dares to threaten the bubble; it will have to collapse under its own weight.
At this point, I am starting to wonder if they will be able to print their way out of a collapse, Zimbabwe-style. Let’s see: rate cuts in the face of bad (and climbing) inflation, and now the House passes a bill to basically FHA into government-funded housing for all the crooks: raise the limits to over $700K and get rid of the down payment requirements. Yep, because it’s not like overpriced housing bought by people with no skin the game had anything to do with the current mess.
I am so very angry with this Fed! To hear all the cheerleaders yesterday actually upset me. BB has turned out to be a sissy. They want to recycle 2001 and punish the people that do things the right way. I’ve decided to go buy a house in a non bubble market, get in to some kind of cash business and stop paying taxes as much as possible. Nothing like being rewarded for bad behavior!@#$%^&*
I’d had been contemplating moving to a market less effected by the bubble were I could buy for cash, now that Bendover Ben has given in to the Banks and Wall Street it may be time for me to party, new house, new car and all the toys I can get for my savings while I can!
Don’t use your savings. Borrow it all, party like a rock star for a year, and then walk away from all of it with your savings and move to another country.
Apparently that is now the American way.
it is quickly becoming the European way too; what a difference does 15 years make …
‘I’ve decided to go buy a house in a non bubble market, get in to some kind of cash business and stop paying taxes as much as possible. Nothing like being rewarded for bad behavior!@#$%^&*’
There are alternatives to holding the US dollar.
What do you recommend, Ben? It needs to be something that can’t get confiscated by these crooks.
Technically, “any financial vehicle” can be confiscated. Gold just feels the worst because they take it from your physical posession.
If they can find it. On the other hand Argentina moved workers’ pension plans into government bonds just before the crash. Anyone who thinks the government isn’t going to destroy the value of a 401k, or outright confiscate it, will be working until they die.
While we are on the subject of confiscation, I’ll relate one more time a correspondence with my one-time state senator’s office in New Hampshire, whose state motto is “live free or die”.
I wrote a letter questioning the practice of confiscation of gold in the past and whether he might consider taking a stand against this in the future so that many of his constituents might have a reliable method of storing wealth for future consumption.
There is a bill stalled for years in the state senate calling for a return to the use of Silver as money within the state which prompted my letter.
The letter I received back from his office cited two different “acts” which allow for this confiscation. It also elaborated and stated that ANY asset may be confiscated should the gov’t decide it is in the best interest of the country to do so.
So basically the gov’t allows you to believe that you own what you have worked hard to purchase for yourself and family. In reality we own nothing, the gov’t “owns it” since it reserves the right to confiscate your property when it feels appropriate to do so. Avoiding this kind of abuse is was why the constitution was written, but we as citizens have not acted to protect these rights. We have allowed our gov’t officals to subvert our constitution and twist it’s words to convey more and more power back to the gov’t. This always seems to occur during times of national distress, witness the patriot act after 9/11. We are no longer a “free” people if we don’t/can’t enforce the ownership of private property, imo. This isn’t going to end well I’m afraid.
“Live free or die”, my ass.
It takes a village.
Quoting a very radical document:
“That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, –That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. “
It sounds like a revolution to me. Vive la America!
Anyone who thinks the government isn’t going to destroy the value of a 401k, or outright confiscate it, will be working until they die.
Didn’t the Clinton administration try to do something like that? IIRC he wanted to tax every 401(k) and IRA with a “one time” 10% assesment. After the ensuing firestorm that caused they quietly backed off.
How do I join?
“”Didn’t the Clinton administration try to do something like that? IIRC he wanted to tax every 401(k) and IRA with a “one time” 10% assesment. After the ensuing firestorm that caused they quietly backed off.”"
I have no memory of this. Can you provide a reference?
The Pigmen of Wall Street
http://www.stockmania.com/2007_09_19_archive.html
So now that the last bear on Wall Street is ostracized, and AG has said on the Daily Show that the Fed directly targets stock prices (in clearer language than he ever used as chairman, no less), I guess it is time to buy some shares and catch the next parabolic bubble blowout his comments will spark. Has there ever before been another instance of a retired Fed chairman bringing so much influence to bear on the markets? And where does this leave BB?
http://www.marketwatch.com/tools/marketsummary/
Out on his azz, if there were any justice. Greenspan executed a nice squeeze play, yakking up recession a few days before the Fed meeting. Still working for his pals. Yeah, he’s a maestro all right, just like Paulie Walnuts.
CFC’s Tanman… out of sub-prime.
http://www.usatoday.com/money/economy/housing/2007-09-17-mortgage-outlook_N.htm
This one bit of news is more significant regarding the housing bubble than anything the Fed can do.
“Angelo Mozilo, the CEO of Countrywide Financial (CFC), outlined a new strategy Tuesday that would transform the nation’s largest mortgage lender from an aggressive funding source for borrowers with tarnished credit into a more conservative thrift, dependent on savings deposits instead of Wall Street investors.”
Wow, what a concept! Spot on, Ben.
CFC is done. Stick a fork in em’. So now they are going to try and compete for deposits to stay afloat? Good luck in probably the most competitive market in yrs for banks trying to acquire low yielding deposits. EVERY bank, S&L, credit union, IB, etc., is fighting tooth and nail for deposits. Low yielding deposits are at the top of every financial institutions CEO’s list of objectives. Pay for good bus dev people who can bring in deposits is super high - $250k and up type packages. Shoot my bank is paying large referral annuity bonuses to anyone inside the bank who brings in deposits.
I don’t see how CFC can compete in this market.
I let Bank of America and Wells Fargo compete for my expense money. Wells Fargo won with a bid of 0.1% APR while BofA bid 0.15% APR.
Hmmm, wait a minute. Maybe I should go get my glasses and rescore this contest. Or maybe I’ll need a magnifying glass to see the difference in interest rates that low.
Correct, Ben… The FED may keep dropping rates, but now that Ho-Bo’s dead people, strawberry pickers, dogs&cats, can no longer get financing new problems arise in the mortgage industry. The FED can not lower rates and standards again, They are painted into a corner in this respect!
“Nearly 25% of Countrywide’s subprime borrowers were behind on their loan payments at the end of June.”
The resets are just beginning and we have 25% as of June 30, 2007. Any guess End of July? End of Aug? End of Sept?
Could we hit 50% by end of June, 2008?
I had predicted last yr that 90+% of these loans will default
I’d use my money as toilet paper before I deposited it in CFC or Bank of America for that matter.
What is your consern with Bank of America? Are they better off than ING? I have 100K I need to stash someplace (can’t keep it at my house because “it could be drug money” and therefore confiscated. )
I’ll be happy to hold it for you
Drive it across the border and use it to open an account in a Canadian bank.
ING is based in the Netherlands, one of the countries with the worst housing bubble worldwide. And ING is probably the biggest RE speculator among Dutch financials.
My wife refuses to bank with ING because of all the ING banners at the Spa-Francorchamps F1 race in Belgium last weekend. Once she heard they brought 1400 people to the race, it was game over for the Orange: “I don’t like banks that spend too much money.”
Let me give you an example of B of A sleeze:
Bank of America bought out MBNA a year or so back. I have a line of credit with MBNA which was purchased by B of A. A couple of weeks ago, I received a notice regarding my former MBNA account which stated that my interest rate was going to increase from 4.9% to 24.24% unless I reject the change in writing, via snail mail before 01/18/08. I just think of how many notices I get that I just put in the shredder, thinking that they are just more funny money checks. I’m so grateful I actually opened and read this one!
BOA did worse than that to me years ago. I made a phone transfer just a couple days before the grace period ended. They took eight days to post it. Raised my interest to something like 28% and reduced my credit limit to less than I owed, whcih meant I was subject to overlimit fees. I had an active account with them for over 15 years. The guy I complained to said “Well, banks are predatory. Did you read the fine print?”
I don’t do credit cards anymore.
state farm bank has a nice savings account program.
In gambling terms, keep in mind, banks are the house.
From the article:
Nearly 25% of Countrywide’s subprime borrowers were behind on their loan payments at the end of June.
Only 25%? I guess the other 75% just haven’t reset yet. Honestly, I don’t expect a SINGLE sub-prime borrower to pay back his loan. Memo to ratings agencies and European banks asleep at the wheel: Subprimes are subprime for a reason.
Countrywide has also stopped making loans to people with good, or prime, credit who lack documented proof of their income or assets.
Sounds like the ghost of Einstein just joined the management team.
Starting next year, Mozilo said, 80% of its mortgages will meet the standards of Freddie Mac and Fannie Mae, the government-backed institutions that buy loans to provide liquidity to the market.
3% down, no more than $417K, right? There goes all of California. And anyone who is smart enough to still have 3% cash down is too smart to buy.
Who needs subprime when the limits of Freddie and Fannie go to over 700k.
I still don’t know if they need Congressional approval for that. Barney Frank can huff and puff, but if it has to get past the filiblustering Senate, good luck. Not a bad thing, that. One man’s gridlock is another man’s checks and balances.
“but if it has to get past the filiblustering Senate, good luck”
Not to mention Bush, who is very much against raising the loans limits of Fannie and Freddie. (That I agree with Bush on anything is a sign of these crazy times…)
Dave, where are you getting $700K loan limits for F & F? I saw a post on this yesterday that really p*ssed me off. I did searches on it today and all I see is Barney Frank trying to ammend it to $500K from $417K.
Still total BS, but not as much. Now if the F&F limit was $700K plus, then Countrywide would be in better shape with their new policy.
Mabey Barney Frank just can’t say no to a guy with such a nice tan!
God, where have things gone in this country?
Here’s the info on the bill including who voted for it state by state. (Mostly Dems, but alas a few Reps including the idiot I’m under - Duncan Hunter. So much for fiscal conservatives.)
http://tinyurl.com/2kmbta
“As the shakeout in the mortgage industry continues, Mozilo said he expects Countrywide’s business to decline 25% next year compared with this year. The company has announced it will fire up to 12,000 of its employees. The plan unveiled Tuesday includes hiring more people in India who would take calls from delinquent borrowers hoping to renegotiate the terms of their loans and avoid foreclosure.”
Ain’t Globalization great?
I still know people putting 20% down despite my warnings.
Can someone help me understand the dangers of putting 20% down? Sure in this falling knife market, you are just giving your money away, but is this a general rule in all markets? If so, why?
“Sure in this falling knife market, you are just giving your money away,”
Bingo.
Generally speaking in other markets, it’s math and security. If a higher down payment enables a lower rate on the first (or getting a loan at any rate), then you might want to put 20% down because the imputed return on that down payment is guaranteed, and significantly more than you can get taking risk on other investments.
Others will argue that if you can buy the house without putting anything down, then you shouldn’t put anything down. Why put money at risk when you don’t need to?
From another blog (I forget the poster’s name):
“Teacher says that every time a bell rings a Countrywide loan goes into default”
I guess that movie could be called: “Its a Wonderful Bubble”
CFC traded in the Ferrari for a Mack truck
Welcome to the sloow lane
Because we all know it is an uphill battle from here…
“The company has announced it will fire up to 12,000 of its employees. The plan unveiled Tuesday includes hiring more people in India…”
Ironic. The company plays a role in this housing mess that raised the cost of housing and living to new highs in America. And then to add insult to injury, they fire 12,000 Americans and announce their intention to outsource future work to people where the cost of living is more affordable
Yea $500,000 dollar houses are really good for the economy.
But “it’s good for the economy”….. Have you learned the robotic language yet?
“where the cost of living is more affordable”
Affrodable no way!!!!!!!!!!!!!!
Check out the POS we get for a million dollars in India.
Here’s the proof. Click HRR-Bangalore and click “Independent House at Koramangala 3rd Block” in the following site.
http://www.hanureddyrealty.com/
This is disgraceful, i hope it kills employee morale, you mean none of the 12,000 America workers can do the job better then an
Indian 12,000 miles away?
==================
The company has announced it will fire up to 12,000 of its employees. The plan unveiled Tuesday includes hiring more people in India who would take calls from delinquent borrowers hoping to renegotiate the terms of their loans and avoid foreclosure.
includes hiring more people in India who would take calls from delinquent borrowers hoping to renegotiate
Not only is the outsourcing disgusting, but look at what they’re outsourcing — Dirty work! When you wanted to get a loan, they were all hearts and flowers. When you need to refinance, suddenly Apu can’t understand English but can sure give you the runaround.
Customer service meets globalization at its best.
Given where CFC is today, apparently not….
This is valid outsourcing. Why pay an american to say “No” and hang up. Seriously, training will take three seconds. “Just say ‘No’ and hang up. That’s all you do. Welcome to CFC!”
Sounds like one of those old credit card commercials with David Spade.
Looks like my posts are going through today. Anyway, I wanted to give a little anecdotal account of the local economy and population. I spent the better part of yesterday at the local county health clinic. (Hillsborough County, FLA has one of the best public health systems in the country. Any resident of the county can go to the clinics. For those of us who are middle income earners, they have a sliding scale system of payment. There’s even some wealthy folks in the area who go there and pay full boat, because the doctors are so fantastic. And then, of course, much of the clientele is rock bottom poor, on some form of public assistance or another. The county has an insurance program for those who make under $11,000 a year and some people are on state assistance). The place is usually fairly orderly and the wait times are no worse than in many a private doctor’s office. Yesterday, it was complete chaos. I heard comments from management that it has never been overloaded like that. There were people there who had come in from other parts of the county, I guess because services in their area had been shut down or something. I talked to one nicely dressed lady who had lost her job, her insurance and her car because of a domestic situation and re-located here because of a nearby shelter. She was starting all over and in tears and deeply ashamed because she’d never taken any form of public assistance before. She felt a little better when I pointed out that she’d been paying into the system all these years and was entitled. It is a bit of a shock to formerly middle class folks when they slide down and end up in a place like that, among some seriously down and out folks and all the illegals. I’m used to it, like many of us here who pay sliding scale, we know the place is not just for hard cases. But many folks don’t know that. It’s worth it to put up with the waiting room show to get to the decent doctors.
Anyway, I thought it was sort of ironic in some way that this clinic has seen an explosion in patients happening there on the day of the FED’s rate cut.
It’s not just your posts, the comment server got overloaded yesterday and we had to rebalance things. Not out of the woods on maintaining this database yet.
I’m not surprised, what with the FED’s outrageous rate cut. The clinic had FOX cable news on and when I saw the crawl about the rate cut, I wished I was home on the computer adding my two cents to the blog. But everyone said what I wanted to say anyway.
Ben, is there a problem where your current host can’t handle the traffic? Is it time for a fundraising drive to help support a move to a host/server that can handle the increased demand of the site now that things are really hitting the fan?
Just to give you an idea, the waiting room (which is huge) looked like Deliverance meets Escape from Tiajuana. If the local government budget cuts get deeper, that place will soon be history.
If I had the choice between that waiting room and a witch doctor shaking animal bones at me, I’d take the voodoo man.
“…I heard comments from management that it has never been overloaded like that. There were people there who had come in from other parts of the county, I guess because services in their area had been shut down or something….”
Hospitals and clinics have been laying off personnel (net) since February, Not -for-Profits have been laying off since June. I do not keep track of government layoffs, but I have noticed that Florida’s state, county and local governments are in slash mode (as are many government entities).
One of the reasons for the layoffs in the medical area is the lack of insurance for many. Medical care in the US has become a discretionary expenditure. People do not have moneys, they do not go to get treated. I will try to post Florida layoffs on Friday, Palmetto.
Thanks, Hoz, it would be interesting to see Florida layoffs. It doesn’t look too pretty around here. I overheard something interesting yesterday about the clinic having difficulty finding outside doctors for their patients they have to refer out, because so many doctors around here are not taking Medicaid patients anymore.
Makes me laugh picturing the hospital scene from “Idiocracy” where the medical tech can’t remember which probe goes in Not Sure’s butt and which in his mouth!
“Idiocracy” is a look into the future of these species, just 500 years early. That, and I doubt think it will take 500 years to get to that point.
We’ll NEVER make it another 500 years. We’re all too busy watching O.J. and Britney to see that the earth’s trying to shake us off like fleas.
Employees at Children’s in San Diego refer to the hospital as Tijuana General. A huge waste of money too as many of these people have problems that are not emergencys (some are not even urgent) and could easily be taken care of at a pediatricians or general practitioners office.
People getting free health care, yet complaining. Only in America.
JJ, you really need to improve your reading comprehension. I don’t get free health care there, I pay sliding scale, like a number of folks who go there. But the place seems to be experiencing an uptick in those on assistance.
JJ is a Kudlow disciple. He only believes in government aid to Wall Street and big business.
Sheesh, free health care indeed. My taxes support that place, in addition to the sliding scale payment.
as for me id love to pay my taxes for free health care for those less fortunate and I’d like to pay taxes for housing for those less fortunate. what bugs the heck out of me is paying taxes for wars of empire and war machines that are outrageously expensive and don’t even work! what a shambles.
I didn’t mean you getting it for free. I meant the (your words) rock bottom poor.
Ok. Thanks for letting me know, I thought you were taking a swipe at me. Combining the local clinic care with a catastrophic policy makes a heckuva lot more financial sense than a crappy HMO policy at an outrageous monthly payment.
Can’t say I disagree. But anyone getting free anything should be thankful they are getting it and not complain. That was my point.
HMOs suck. PPOs on the other hand have been quite good to me over the years. I have a high deductible, low premium policy for which I pay myself. I shopped around for my plan and got the best deal I could. I also do something few people ever do, I negotiate the price with providers. It always amazes me how people will go to 5 stores to save $20 on a DVD player but they’ll pay $150 to a doctor for a 10 minute consultation without thinking twice.
Most doctors/clinics/labs, etc have 2 prices. The insurance price and the non-insurance price. Tell your doctor/clinic/lab you’ll pay cash and in many instances it will cost you less than your insurance co-pay and/or deductible will be.
The way I see health insurance is no different that car insurance. I have car insurance if I get into a wreck and cause $50,000 of damages or if someone sues me for $500,000. However if I have a fender bender and it costs $300 to fix, I won’t call my insurance company. Same with health. If I ever need surgery or something serious, I’ll use my insurance. If I have the flu, I’ll pay for it myself.
We don’t need government run health care. We need some common sense.
I think you are misinterpreting. The lady he had been talking to was not complaining about the care. She was embarassed and felt horrible that she needed to be there. I think she felt like a freeloader. He pointed out the sliding scale and tax money she had already paid for the clinic. Where do you get that she was complaining about the care she received?
“I think she felt like a freeloader.”
She did. And it just about tore me apart. This was a productive member of society who had experienced a bad situation and was trying to get her life back together.
Feel the same way and I have used the same analogy of car insurance relative to health insurance - I don’t buy insurance to have oil changes done. You sound like you’d be a good candidate for a high deductible plan with a tax free HSA savings account.
Nothing is free. Someone, somewhere, pays for it.
Placing a pail outside to catch rainwater still costs something. It meant someone had to expend the energy to get the pail, place it outside, recover it, etc. It may not cost much, but it certainly isn’t “free.”
Ask the medical folks if their spent energy in providing care feels “free” to them. I am willing to bet they are tired when they get home. They may be compensated in the form of Fed Reserve Notes, but it hopefully illustrates the point that nothing is “free.”
Cutting the value of Fed Notes isn’t “free” either. There is certainly a group somewhere that is paying for it. Which group are you/we going to be in?
Did you read about Walmart’s medical plan for employees today?
“Wal-Mart said a worker choosing a plan with a $1,000 annual deductible and a $250 credit toward that deductible would pay $11.55 a month to $42.70, based on where they live and what kind of annual out-of-pocket maximum they choose. The $4.36 to $7.31 a month plan has a $2,000 deductible and a $100 credit, and the worker would be liable for up to $5,000 in additional costs for catastrophic medical expenses.”
Sounds pretty good. People rely too much on insurance paying for small things I think. Kid got the sniffles? Rely on insurance. I think this is what insurance was meant for: Catastrophic medical care.
I’m not impressed. My guess is they will make sure that most people won’t work enough hours to be insured. That’s what Starbucks does. As soon as you sign up for insurance your hours are suddenly cut. Those out of pocket expenses are a lot of money for someone who is making minimum wage.
BTW, did you know that each your local Wal-Marts cost the taxpayer an average of $250,000 in social services per year? That information is from a write up the UT did on Wal-Mart last year.
Have you paid cash for any medical bills lately? The drops for a simple ear infection are 100 dollars for a teensy bottle. And that is the Kaiser member price. My daughter’s ear infection (if I had to pay for it) would have easily cost me $500 for medication alone, probably more. People without insurance are charged more for their medicine and care than those with insurance too.
My daughter worked at Starbucks part time, was offered insurance and didn’t have hours cut at all. Starbucks is one of the few employers that offers its insurance to part timers. 2nd daughter worked there for summer and had same experience. Also, the 2 tier plan of payment usually charges more to cash customer, particularly hospitals. The bill will show real cost and then the cost to insurance co is much less. The best scam is they charge you the 20% based on the whole cost, not what they charged insurance. When kids were smaller, we used to do day trip to TJ to buy “bubble gum medicine” to keep around because it was $1.98 there and nearly $50 here. No mom need dr to know when kid has ear infection - easy to diagnose from middle of the night screaming and pulling at ear. Could treat for less than $2 rather than $65 for dr. and another $50 for meds. Never understood why the exact same med, same drug co, same exact label was so much less there.
LMOA. Yeah but find a doctor that takes it.
I pay $100 a month for my wife’s coverage (20% of the cost), and a $2000 deductible. I hate the month of April when the small business’s perennial “Oh No They Raised The Health Insurance Premiums by 30% Again This Year” meeting is held.
Just so everyone is clear, “J J” and “JJ” are two different people.
I may start posting under a different name….. (No offense meant to J J.)
Please do, I thought you were the same person.
Sorry, didn’t mean to take your name. I will change it to JJ GA
I noticed after yesterdays rate cut that there has been an increase of people feeling a little sick.
Could it be a fever. Maybe hitting a temperature of 14,000?
I don’t know about any of you guys, but when I have a fever, the only prescription is … (wait for it) …
MORE COWBELL!
Moo
In case that went over anyones head…
http://www.milkandcookies.com/link/12491/detail/
no - top 5 memorable skits for me.
Why, the DAX is up 2.5 percent and according to Spiegel, investors have been celebrating after the rate cut.
Am I thinking about this wrong? I have 100K saved up for a down payment on a house. I’m currently getting, on average, 4.75% interest. I began thinking about moving some money around to get a better return. I read the books about moving money overseas. I considered doing some of this and perhaps buying some gold or the like but then I decided that it wasn’t worth it as that better returns are not guaranteed. I also rationalized that since the 100K is exclusively for a down payment on a house that I’m actually getting better than 4.75% return since house prices have dropped by a few percent in the last year. So I’m just going to keep the money where its at and wait for some sane prices.
There are several FDIC insured options that pay well over 4.75%. I have some money in an FDIC insured money market account at 5.35% with a regional bank in Ohio. Only extra cost to you to move money around is the hit you will take on the credit score each time an inquiry is made when you open a new account.
You get a credit inquiry on your record when you open a money market account? That doesn’t make sense - you’re depositing money, not borrowing it.
Am I missing something here?
USAA has a high-yield savings account at 5.2%
If the dollar continues to weaken, then holding euros is smart. Its just a question of how much it weakens. At this point, it looks like a better bet than housing, since any housing is a depreciating asset for the foreseeable future. The dollar has broken 80 on the US dollar index, and, from what I understand, there is no precedent for this, thus, the term “no support under 80″ for the dollar. So, it could go quite low(50,30?), in which case the euro looks pretty nice, particularly if it is the new reserve currency for the world, as Greenspan was so nice to recently point out to us. Of course, there is always the possibility that all currency is in the toilet, and at least you will have a house. But I wouldn’t look to it for any returns, for a long long, LONG time. A little gold is a good hedge too, put like 80 thousand in euros, the rest in physical gold in a safe deposit box.
Maybe a dumb question - but how would one go about “investing in Euros”? Perhaps by opening a Forex account, depositing $$, then trading it for Euros/Yen/Denari/whatever? If so - how safe would such an account be?
It’s something I’d like to do (albeit obviously somewhat late). Thanks for any info.
P.S. When I say “safe” I mainly mean:
- Safe from confiscation/freezing
- Safe from liquidity problems (ala Northern Rock)
1 - everbank.com
2 - Currency ETFs (fxa, fxe, fxy, etc.)
Discussed yesterday I think
I think it is very unlikely that the dollar will weaken more vs. the euro than the current 1.40. It is the line in the sand for the EU burocrats. In fact if you check exchange rates from yesterday, the euro is declining too compared to gold or some of the Asian currencies. Probably from now on the dollar and euro will decline together.
Competitive devaluation, competitive impoverishment.
gold is a good hedge too, put like 80 thousand in euros, the rest in physical gold in a safe deposit box.
I split about 40 grand between euros, krona, canadian dollars, swiss francs, yen and pesos, and I bought gold through the gld ETF. It’s not physical gold, though, so as others have mentioned, you can’t hide it from the govt.
Your 100K, at 4.75% is rapidly losing purchasing power. The Fed/govt is expanding the dollar supply at something like 14% per year, which means you are losing approx 10% per year. The Euro, Yen, pound, etc are being inflated in a similar fashion, a classic race to the bottom. Lately the fed has been printing many billions of dollars to buy some real winner assets, like toxic bonds, etc, otherwise the pig men go out of business.
You’d be much better off in “stuff”, like oil, precious metals, commodities, where you at least have some chance of retaining your purchasing power.
that’s another thing that I don’t understand. Does that 14% expansion include the money that’s disappearing? ie, if a bank (or whoever) repo’s a house that it has on it’s books for 300K but only sells it for 200K, then hasn’t 100K essentially disappeared? If it has does the vanished money get calculated in the money expansion numbers?
The total number of dollars is simply increasing at 14%+ per year rate. This is an incredible rate of inflation. Some things decrease in price (housing, financial stocks), some things increase in price (food, energy, imported goods) - they don’t necessarily go up or down together.
The dollar is toast, and is getting crispier every day. Try spending your dollars overseas, and you will be in for a real shocker. I find it amazing the Fed is willing to destroy the dollar to protect the pig men, but then again, I’m pretty naive.
You need to reassess your viewpoint. If you put any savings (production less consumption) into a CD in the last 5 years, would you have gotten closer or further from being able to buy a home (ie, did home prices grow faster percentage wise than any CD rate you could find). The point is that stocks, bonds, and real estate aren’t factored into official inflation numbers. Yes, you are guaranteed to get a set rate, but that guarantee doesn’t imply your purchasing power will increase.
There are no guarantees, only very talented salesmen.
Cramer on the silver screen?
That’s right folks. Jim Cramer has a screenplay pf his life story floating around Hollywood. According to my husband’s boss, Cramer sent said screenplay to Michael Chiklis, star of “The Shield”, who’s just started a small production company.
Hubby’s boss’ wife is a producer in the company and is currently considering several screenplays. Cramer’s is one of them. Cramer, apparently, has contacted her several times, desperate to have Chiklis play him on the big screen.
My husband says there’s little to no chance of this movie being made because there’s basically no movie to make with this story.
Then again, worse things have come out of Hollywood.
Plus, think of the possibilities: We could bring back the old custom of throwing sodas and other junk at the screen during horrible films.
I’ll keep you guys posted on any developtments, though it usually takes years for a screenplay to make it to the screen.
“Cramer sent said screenplay to Michael Chiklis, star of “The Shield”, who’s just started a small production company.”
Perfect. “The Shield”. They can call the Cramer movie “The Shill”.
The Shrill
Thinking of possible hyper-inflation yesterday I wanted to start a blog entitled “Jim Cramer Wants Old People to Eat Dog Food.” But I don’t have the time and energy to do it.
The reason he ticks me off so bad is that he and all of CNBC are trying to sell the notion that everything is going to be a-o.k. I don’t know which commentator it was that yesterday said, “100 a dollar barrel for oil won’t be so bad.”
Cramer himself the other day said that a ‘little’ food inflation won’t be so bad.
What a jerk. I bet it matters to people on fixed incomes like my parents. They will be o.k. but many won’t.
Nothing would please me more than to see all of these people to be shown for what they are: shills for Wall Street.
Cramer is a jerk.
Oh, go back through the Real Money archives and read his nauseating comments about shopping at Whole Foods and how he can be sure they aren’t selling him and his rich friends any crap, unlike the regular grocery stores. He loves to slop on that “I’m rich and you’re not” stuff. He is truly an odious, repulsive parasite. And I used to like him!
inflation is great for those who owe alot of money it just kills savers. And the economists wonder why Americans don’t save more ?
Now that one was a keyboard destroyer!
I’ve got two weeks worth of house guests to entertain and a free website to design for a friend starting up a grooming business but I am going to start collecting those quotes and consider starting an anti-CNBC blog. They really don’t care at all what happens to the regular folk. When it affects old people and kids that gets my blood boiling. Healthy adults can fend for themselves and have every opportunity in this country, but kids and old people? Don’t get me going.
Alsl txchick, thanks for all of your advice. I’ve conservatively learned to play the ticker we have, up or down. I’m way far away from option strategies but can make a bit of dough just knowing resistance levels, etc.
Speaking of CNBC, Rupert Murdoch says that it has too much Wall Street perspective. His new Fox business channel will save us from that. It will have a Main Street perspective. Or so he says.
I loved the comments I read yesterday afternoon about “managers” “Putting money to work” aggressively yesterday afternoon. Whose money would that be? Not theirs! And why now instead of at s&p 1375 when it was low risk and you would know immediately if you were wrong?
Sickening.
This is an example of short term herd instincts at work. The half point cut in the fed funds rate will hammer the dollar and increase the inflation risk. The result will be higher long term rates which are NOT good for businesses or home buyers.
–
Chick,
As John Boggle says, “We don’t have an ownership society; we have an agency society.” Financial agents work in whose interests? Mostly, not the owners of the capital.
Jas
The Europeans aren’t going to be happy with the devalueing of the dollar. It make US exportors more competitive and European exportors less competitive. We may see competitive devalueing of currencies. We could see a flight out of currencies and into precious metals and commodities. Inflation would sky rocket. I think the flight to gold is well under way. If we get other central banks droppng rates, gold should go though the roof.
The world could soon be one massive carry trade.
Maybe the FED will realize the error of their ways and announce an emergency rate rise. Then again, maybe pigs will fly. Ooops, in fact the pigs did take flight, yesterday.
You speak of these things as hypotheticals but they are already happening.
expect an ‘unexpected’ rate cut from tricky Trichet soon to keep the euro down (especially with recent talk about still being vigilant about inflation). If it works for Greenspan and Bernanke, why not for the ECB?
Mark to market!
Sept. 19 (Bloomberg) — Morgan Stanley, the world’s second- biggest securities firm, said earnings fell more than analysts estimated as fallout from subprime-mortgage defaults drove down fixed-income revenue and produced losses on takeover financing.
Third-quarter profit from continuing operations declined 7 percent to $1.47 billion, or $1.38 a share, from $1.59 billion, or $1.50, a year earlier, the New York-based firm said today in a statement. Earnings missed the $1.55-a-share average estimate in a Bloomberg survey of 17 analysts.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aYvjGsS0gm2g&refer=home
Hardly a big deal. If these guys don’t take losses, they’ll have done a great job. The question then becomes, who is taking the losses?
That’s what I want to know…..where are all the losses?? Is Wall Street just sitting on them, or did they successfully export the losses overseas somehow??
“or did they successfully export the losses overseas somehow??”
I was reading a link posted yesterday that said exactly that. Trouble is, I can’t recall who posted it and in what financial column it was.
I think they are all hiding the loss from the public. Who knows how much their CDOs is worth. One thing we know is that there ain’t many buyers of these CDOs, just like there ain’t many buyers of houses now.
Maria B on TV this am……exhorting us to now go out and spend money. No Maria, this little piggy is NOT going to market. THAT that was my first thought/strategy when I heard about the rate cut yesterday.
Whoever posted yesterday afternoon about Maria and the 350 point schlong, that had me laughing out loud in the middle of the night.
Yeah, I saw that and had a good laugh myself. I needed it.
That was me. Glad you enjoyed it
That is one reason I love this place.
“Maria B on TV this am……exhorting us to now go out and spend money.”
Sure, just like in the quote below, apparently the whole global house of cards economy depends on the US “consumer”. Now that the bubble is bust and there’s no home equity to tap, what are we going to buy all that Chinese crap with now, our good looks?
But if DaBoyz want to send a little money my way from their “Bone-USes”, I promise to buy a good used car.
I’ll go out and buy if the CNBC crowd lends me their credit-cards.
I’m sorry I missed that - #$%@ job. Anyway, if savers ever had any power it might just be now. This is the time to scrutinize every purchase we make. Can we do without something? Can it be bought used? Can we buy it directly from one of the few countries left with a weaker currency? Stay liquid and flexible - the future is up for grabs.
King loves eating own words. Yummmmy… Hmmmmm!
Sept. 19 (Bloomberg) — The Bank of England abandoned its opposition to emergency three-month money auctions and loosened lending standards, a week after Governor Mervyn King said such steps would encourage “risky behavior.”
“This measure is being taken to alleviate the strains in longer-maturity money markets,” the bank said in a statement today. The Bank of England said it will accept “mortgage collateral” at the auction of 10 billion pounds ($20 billion) in loans next week. It will have a penalty rate of 6.75 percent.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPfnrYPF6dXs&refer=home
The Bank of England abandoned its opposition to emergency three-month money auctions and loosened lending standards, a week after Governor Mervyn King said such steps would encourage “risky behavior.’’
He ended up getting “Colin Powelled”. He should have resigned and retained some of his integrity.
Northern Rock’s shares gets rocked again.
Sept. 19 (Bloomberg) — Northern Rock Plc dropped in London trading on speculation the bank may be acquired for less than its market value following the bailout by the Bank of England.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahsyW3oucc_4&refer=home
There’s that word again, “Market Value”.
(I don’t think those words means what you think it means.)
Didn’t one of the rating agencies say markets were overreacting to subprime? Today, Moody’s argues central banks can’t fix credit market problems.
Sept. 19 (Bloomberg) — Central banks may not have the tools to restore stability to credit markets amid the “Panic of ‘07,” and instead should demand greater transparency from financial companies, Moody’s Investors Service said today.
…
“What turned an overdue risk reappraisal into a financial panic is the combination of untested financial innovation, price-sensitive accounting rules, leverage and opacity,” Mahoney and Cailleteau said. “This cocktail has proved explosive.”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a.Iup2b4XNsA
From today’s IHT: http://www.iht.com/articles/2007/09/19/business/leonhardt.php
The U.S. Federal Reserve has sent the stock market soaring. So can it stop the decline in home prices, too?
Don’t count on it. And that is bad news for the global economy, which heavily depends on the U.S. consumer.
From the late 1960s until 2000, the price of the typical American home and the income of the typical family moved almost in lockstep. House prices rose a bit more quickly than incomes during the occasional real estate boom, but would always settle down again. In 2000, the median home cost about $130,000, roughly three times the typical household income - almost precisely the ratio that had held since the ’60s.
Then came a real estate boom unlike any before it. By last year, this ratio of prices to incomes had suddenly shot up to four and a half. For it to return to its old level, home prices would have to fall by an almost unthinkable one-third, and probably more in California, Florida and the Northeast.
“And that is bad news for the global economy, which heavily depends on the U.S. consumer.”
GAHHHH! Who wants to be known as a “consumer”? Well, that’s how the US citizen can undermine globalization. Cut consumption and demand jobs. We need to be producers, not consumers.
Agreed palmetto, but according to our neighbors down south and our illustrious leaders in D.C. Americans don’t want to work anymore. Maybe if this globalisation boom takes off even more, perhaps “consumer” may become a real occupation. I’m sure there are many ladies, and men too, that would love to fill in the occupation line on the 1040 with that moniker.
“Agreed palmetto, but according to our neighbors down south and our illustrious leaders in D.C. Americans don’t want to work anymore.”
So I’ve heard and IMHO, this is propaganda to degrade and demoralize the American citizen, after giving them a good dumbing down in the school system and exposing them to the community terrorism of illegal immigrants. I never saw some many anchor babies lined up in carriers at one time as I saw yesterday at the clinic. Their mamas were sitting there placidly waiting to “consume” some taxpayer funded health care.
I’m doing my part. Buying nothing except food and rent. Screw the consumer economy.
Me, too. Food and rent. Oh, and we’re also buying the kids’ fall/winter clothing from a consignment store that opened up in, get this, the old mortgage broker’s office in my town. Gotta love it!
While I agree that buying used certainly is better than buying new, supporting the secondary market also supports the primary market.
And I don’t mean to target you specifically redhead68. I’ve seen people talk about only buying used CDs to not support the RIAA, etc, so I’m not specifically referencing your purchases. I’ve just seen many people ignore the fact that while they’re contributing less to the “problem” they see than they could be, they’re still contributing.
If people can’t sell their used CDs they no longer like (because there’s no market), they’re less likely to buy new CDs IMO. Likewise with clothing, tools, mortgages, etc.
Again, if you’re going to buy, buying used is a great way to 1) get a discount and 2) not directly support the retailers/producers. However, I think it’s a pretty safe statement that demand in a secondary market helps drive demand (or enables demand) in the primary market.
J
“We need to be producers, not consumers.”
If only we couldn’t get that concept adopted by one of the candidates…..or will thinking we need a middle class sound too anti-big business?
Obama is calling for tax cuts for the middle class and taxing the corps and the wealthy more. Interesting.
“If only we couldn’t get that concept adopted by one of the candidates…..or will thinking we need a middle class sound too anti-big business?”
It really wasn’t a taxation or political comment. It was more an education and cultural commentary. I hope we can resurrect the knowledge in the industries we have decided were below us. I think we’ll be finding out the hard way we’ll be needing those skills to collectively survive.
No what it will be called is class warfare.
You are so right on SFBAGal!
Sadly unless the cash flow is one way, it will be labelled class warfare.
Absolutely! That is all we are is “consumers”. At one time this nation was about more then just it’s economy. Has that all gone by the wayside?
Housing DEPRESSION anyone? yikes!
U.S. August Housing Starts Fall to 1.331 Million, 12-Year Low
Sept. 19 (Bloomberg) — Builders in the U.S. began work on the fewest homes in 12 years in August, raising the risk the real- estate depression will spread to other parts of the economy.
The 2.6 percent decrease to a lower-than-forecast annual rate of 1.331 million followed July’s 1.367 million, the Commerce Department said today in Washington. Building permits dropped 5.9 percent to a 1.307 million pace, also the lowest since 1995.
The housing slump may deepen after borrowing costs rose and lenders shut off access to credit, causing growth to slow even more, economists said. Federal Reserve policy makers yesterday lowered the benchmark rate by a half point to prevent a broader economic slowdown.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aFoq4XQmFQ1A&refer=home
As AG pointed out in a recent Financial Times article, the problem is not just a slowdown in construction, but also that even after the slowdown, there is not sufficient purchase demand to afford it. I guess this is where the $700K+ GSE limits come into play — to make these McMansions “affordable” again?
Also not sufficient purchase demand to “absorb” the recent pace of new home construction — don’t remember the exact numbers, but roughly 1.3m pace of new home construction versus around 0.8m pace of new home sales leaves behind around 500,000 excess units per annum.
Sorry to keep re-reminding, but a bad year for U.S. housing starts is, historically speaking, around 1 million. We are still above it for starts.
Not for new home sales.
Interestingly most of the home builders prices jumped up yesterday and are continuing up today as part of the knee-jerk to the BB Bubble.
Give ‘em another day and they’ll be good shorts again.
Great entry today at Charles Hugh Smith’s blog this morning:
Here is my two pence on the meaning of the Northern Rock run. Though some pundits are tsk-tsking that foolish people are following the herd in a foolish stampede, they are missing the real point: people no longer believe The Big Lie (everything is fine) or the authorities’ increasingly threadbare reassurances.
Markets require confidence in the basic rules. If you have no confidence in the institutions, the rules supposedly in place or the authorities who are supposedly enforcing the rules to protect the participants–then you no longer have a market.
The depositors withdrawing their money aren’t lemmings; they’re trying not to be the ones sent over the cliff by slick authorities trying to prop up their banking pals who have been reaping billions.
Great post. I’ve been saying this all along. Money = confidence, under our “fiat” currency system. No confidence = no money.
Confidence in the US is pretty much toast at this point, both politically and financially.
The depositors withdrawing their money aren’t lemmings; they’re trying not to be the ones sent over the cliff by slick authorities trying to prop up their banking pals who have been reaping billions.
Gee, sounds like what’s happening in the U.S.
Actually, since the U.S. personal savings rate has been negative for some time, I would argue our would-be savers took a preemptive first strike at the bankers. No need to queue up and reclaim savings that were never deposited.
Good one, PB.
It seems to me that if we cannot rely on our leaders to use our tax dollars responsibly, (i.e. maintain infrastructure, provide emergency services), we most certainly cannot trust them with our voluntary savings.
then pow, right in the kisser- this interest rate cut will have the quickest inflation reaction ever due to the energy increase of sept
he 0.1 percent fall in overall prices reflected a hefty 3.2 percent drop in energy costs. It was the third straight decline in energy and the biggest drop since last October. The price of gasoline dropped by 4.9 percent while natural gas prices were down 4.2 percent.
These are lagging indicators. Lets see what happens when oil hits $100/barrel.
In Phoenix the reduction in gas demand due to the construction slowdown has kept prices low - we are now near the lowest in the country ($2.55). And this is with oil going to $81 from the mid-60s when gas here was $3.10 earlier this year. If the demand from refineries continues to drop (or not meet growth projections), I’m not sure there will be a direct translation from $100 oil to $4 gas. I could be wrong about all this, but for the last 5 years AZ has had way above aveage gas prices, and now we don’t. Also look at the ratio of 4 cylinder cars sold to V8 pickup trucks - much higher than any time since the early 1990s.
any sign of morts getting cheaper ? not that I see
Yeah, the local news financial shill was hyperventilating how the rate cut would make mortgage and credit card rates go down. LMAO! In a pig’s eye.
The MSM is bulging with misinformation regarding this rate cut. No need to worry though, reading a NYT article will give most folks a pounding headache.
Actual line overheard on the bus yesterday coming from a member of this country’s much vaunted youth:
Girl #1: Reading newspaper on way to school.
Girl #2: ” Girl, way you readin’ that paper - tryin’ to look all smart and sh#t? You ain’t even at school yet!”
See, “Idiocracy” in the making…
Maybe we should pump more Brawndo into the financial system? (It’s got what sheep crave!)
The IHT article is taken from the NY Times, which has what I believe is the most reasonable prediction for housing prices:
http://www.nytimes.com/2007/09/19/business/19leonhardt.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1190207456-VN80OfE97KWzWob/9UTDWg
To get back to historical ratios, the national housing price would have to fall by one-third — far more in some markets — relative to incomes and inflation. Because interest rates are very low now historically, however, a 20% decline might be more like it — 10% in nominal dollars, followed by several years of inflation and income catching up as prices stagnate.
Of course, if inflationary expectations jack up interest rates, that one-third decline may occur.
I’m w you on the 10/20% real scenario
yesterday was the nominal prop
“I’m w you on the 10/20% real scenario
yesterday was the nominal prop”
Ok, but what I don’t understand is why all these bearish forcasters are limiting the damage to a 20% decline in real dollar terms, while the stats they cited in this article show that, if you believe in the “reversion to the mean” idea, we should see an average 33% decline.
I dunno, but it still seems like even the most bearish commentators won’t go so far as to admit that a 30% to 40% decline is a possibility…I mean, we’ve read some articles on this blog that prices in S. Florida, California, LV and other frothy areas have already gone down by 25%, while Indiana, Michigan and Ohio have seen steep declines as well.
I reckon in a year or so, you’ll see more of these forcasters calling for a 30% to 40% decline in real dollar terms.
“…followed by several years of inflation and income catching up as prices stagnate.”
This seems to implicitly assume that falling housing prices will not tend to lead to falling incomes, or that Fed and other respiking efforts will succeed to fully offset any such tendencies.
Not only that, but he states:
The scariest part of a national decline like this is that it could be more like 40 percent in some parts of the country. That’s difficult to fathom — and, in fact, construction would probably come to a halt in those places, cushioning the price drop locally and, by extension, a bit nationally. But 40 percent is not out of the question in a few places, like the southwestern coast of Florida.
OK, if construction comes to a halt, what do the builders do with the homes they’ve already built? They do the Hovnanian - and dump them. And that doesn’t depress prices further? I mean, when the builder just unloads his last 100 houses 30% below what some FB paid for theirs, do they really believe they can excape with just a 10% dinge?
And incomes will catch up why, exactly? Because of outsourcing? Or insourcing? Or, are our vaunted executives going to suddenly realize the importance of the middle class and that a nation can’t be run on minimum wage, dead-end, no security and no benefits service sector jobs?
The week is but 2 1/2 days old with far more drama to come, including Thurs hearings on Capitol Hill starring BB and HP in the leading rolls. It appears the supersized 1/2 pt FFR cut yesterday may have exposed the Fed to charges of “too little - too late” action to remedy the “worse-than-expected” subprime situation. One benefit of the gradualist 1/4 pt FFR approach to easing is that it does not convey a sense of panic to the unsuspecting sheeple nor to the Senators who govern them.
Bernanke faces political heat on subprime
By Eoin Callan in Washington
Updated: 11:12 p.m. PT Sept 18, 2007
Ben Bernanke will on Thursday face political heat on Capitol Hill after the Federal Reserve reversed course and cut interest rates for the first time since 2003.
Mr Bernanke will testify to Congress on the mortgage crisis after the Fed on Tuesday said in a statement that there was increased “uncertainty”, and acknowledged “the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth”.
The Fed chairman faces criticism from Democrats who argue federal regulators and policymakers failed to anticipate the growing crisis in the subprime mortgage market and the risk to home owners and the economy.
Mr Bernanke had told Congress in March that “the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained“.
Senator Charles Schumer, Democratic chairman of the joint economic committee, said Mr Bernanke now had his “hands full considering August’s bad economic news – zero job growth, a weakening housing market, and a severe spike in foreclosures”.
“When a conservative Fed drops the interest rate this much it is obvious that the economy is in some degree of trouble,” he said.
http://www.msnbc.msn.com/id/20845776/
dow down almost 300 points to 60 at the open.. wellwhatyaknow..
damm.. ignore that.. i misread something..
Did you catch Jon Stewart’s interview w/ Easy Al last night? The stock market must always go up, to keep the U.S. economy humming.
Oh, man, I got all excited.
Did anyone see the surreal interview of Easy Al on the Daily Show last night? Any of our posters who don’t believe the Fed targets the stock market to ensure “stocks always go up” really needs to catch this. The Fed has evolved from “leaning into the wind” to “inflating into the stock market dips.” Jon Stewart seemed a bit concerned about the implications of this for people who work for a living.
John Stewart Takes Big Shots At Greenspan and the Federal Reserve
Tuesday September 18th 2007, 11:35 pm
Filed under: New World Order, US Constitution, Federal Reserve, Stock Market, John Stewart, Alan Greenspan, Banking
I can’t believe that let him get away with this. Don’t be surprised if Jon Stewart gets busted by the cops or drawn into a scandal. These banking guys don’t fvck around when it comes to people who even think about interfering with “their” system.
http://wikiprotest.com/blog/index.php/2007/09/18/john-stewart-takes-big-shots-at-greenspan-and-the-federal-reserve/
The Greenspan-Bernanke put appears set to lock in a new strike price around 13,800 on the DJIA…
http://www.marketwatch.com/tools/marketsummary/
So now that AG has come out on national TV and basically acknowledged that the Fed directly supports U.S. stock prices, isn’t another parabolic bubble blowout for stocks pretty much in the bag? Too bad for the greater fools that this will end pretty much like the tech stock bubble ended in the early 2000s. It is only possible to drive a wedge between asset prices and fundamental values for so long before the invisible hand squashes the greatest fools.
http://wikiprotest.com/blog/index.php/2007/09/18/john-stewart-takes-big-shots-at-greenspan-and-the-federal-reserve/
Jon Stewart is brilliant. Certainly a better interview than 60 mins.
The latest RealtyTrac’s foreclosure numbers in charts:
http://www.recharts.com/foreclosures.htm
House Plan Widens Mortgage Aid
By THE ASSOCIATED PRESS
Published: September 19, 2007
WASHINGTON, Sept. 18 (AP) — The House approved a plan on Tuesday to expand federal backing of mortgages in hopes of helping struggling homeowners avoid foreclosure.
The bill, which passed the House 348-to-72, 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 Bush administration objects to the bill’s increased limit on the size of mortgages that the F.H.A. can insure. Under the bill, the limit would rise to $500,000 in high-cost areas of the country from the current $362,000.
http://www.nytimes.com/2007/09/19/business/19house.html?ref=business
Republicans — cut benefits for the poor, cut tax rates for the rich.
Democrats — increase benefits for the upper middle class, increase tax breaks for the upper middle class.
Perfect together.
testy
Don’t tell this to the folks who drove builder stocks skyward after yesterday’s FFR cut…
Will Fed rate cut provide base for builders?
Morgan Stanley analyst argues Fed easing won’t help housing fundamentals
By John Spence, MarketWatch
Last Update: 9:59 AM ET Sep 19, 2007
BOSTON (MarketWatch) — Although Tuesday’s Federal Reserve rate cut may soothe the market’s psyche as evidenced by stocks’ rally, the event will have little if any impact on the main problems in the housing market such as the inventory glut, falling home prices, a difficult mortgage market and rising foreclosures, according to a Morgan Stanley analyst.
“While the Fed rate cut will likely help some homeowners with [adjustable-rate mortgages] that are about to reset, we believe it will have little overall impact on housing fundamentals,” wrote Robert Stevenson in a report to clients Wednesday.
http://www.marketwatch.com/news/story/analyst-says-fed-rate-cut/story.aspx?guid=%7BD3577118%2D1971%2D4A67%2D811F%2D42A84B05C44B%7D&dist=sp_inthis
If foreclosures go up 115%, then next year you could be seeing over 530,000 foreclosures monthly, or maybe over 6.3 million a year. Talk about a housing crisis, but not really.
Quicken Loans is advertising the Secure-Advantage loan. $150,000 with a monthly payment of $450.00. I couldn’t read the fine print on the TV but what the heck, who reads that stuff anyway. I’ll shop around and see what FHA has to offer. If I default, I think FHA would be more sympathetic to my circumstance and offer me forebearance.
For myself and all of the other Jane and Joe 6paks, can someone please explain how this rate cut will effect the housing downturn? Does this mess up our plans? I’ve been calling this bubble for 3 yrs. and some friends called last night and asked what does this mean, and honestly I didn’t know. Thanks for the help.
Patricia, The rate cut should not effect the housing downturn. The rate cut was to help financially insolvent banks get moneys. This does not lower mortgage rates, it does not adjust ARMs. It makes gasoline more expensive, food more expensive, clothing more expensive and heating more expensive. It does not stop the company layoffs or put moneys for the people that can use it.
thanks Hoz
I feel better…
you do?
Yep, I have my down payment….I don’t buy into all the shopping b.s. I buy what I need, never did follow why people need a 600 dollar purse. I work 1 minute from home, a tank of gas lasts 2-3 weeks, so I’m good.
So true Hoz . I was sick all day yesterday after the rate cut. Watched Cramer yesterday cheerleading the stock market and it just got to me .Well, we now know the direction the Feds will go in and we know that a big loan bail out plan is in the works with the taxpayers being set up to pay the defaults pursuant to government backed loans .
What is going to happen when they find out that a good portion of those loans that are going bad are simply fraudulent loans and the borrower doesn’t want to be in the game long term, and it was all about a short term investment .The run -up in prices wasn’t about home ownership for Americans like they would like you to believe . How can the stock market rally when the Americans can’t take on more debt to buy and it hasn’t been disclosed what the loss regarding real estate is yet ?
“What is going to happen when they find out that a good portion of those loans that are going bad are simply fraudulent loans and the borrower doesn’t want to be in the game long term, and it was all about a short term investment.”
I don’t think it matters, so long as the Pigmen get their taxpayer-provided guarantee of the loan proceeds.
Well Professor Bear you have said all along that you thought that the Powers would try to inflate out of this mess along with a tax funded bail out by government backed loans .Inflation and tax increases is what it looks like is coming rather than Justice and rewarding of good behavior . It’s a mad mad mad world .
it DOES lower mortgage rates, LIBOR declined significantly.
This may reflect the sense of panic the Fed may have inadvertently signaled with its larger-than-expected rate cuts.
Some impact on ARMs but fixed rates are headed higher. They price off of the 10-year treasury.
based on my limited knowledge of housing economics:
lowering the fed rate would make it slightly easier for developers to borrow $$ to build more properties, which they hope will keep the “bubble” floating on at least until the next prez administration.
they’re also hoping that a lowering of the fed rate will equate to a lowering of the mortgage rate, thus allowing a lot of on-the-edge borrowers to refinance before they lose their homes… but i’m not too sure that will happen. a few years ago as the fed rate was rising, the mortgage rates were either lowering minimally, or staying put. so it’s possible that mortgage rates will still continue to rise, and this lower rate will only help the builders and the “infinite consumer”.
Next up on CNBC “how the rate cut will effect housing”
It will have the opposite effect since foreign investors “WHO” buy mortgages will demand a higher rate of return or decide not to invest at all.
THe Sacramento Bee has hands-on help to offer:
http://www.sacbee.com/103/story/386801.html
http://biz.yahoo.com/ap/070919/debt_limit.html?.v=3&printer=1
AP
Congress Asked to Lift Debt Limit
Wednesday September 19, 10:25 am ET
By Martin Crutsinger, AP Economics Writer
Paulson Tells Congress the Current Debt Ceiling Will Be Hit on Oct. 1
WASHINGTON (AP) — Treasury Secretary Henry Paulson told Congress on Wednesday that the federal government will hit the current debt ceiling on Oct. 1.
He urged quick action to increase the limit, saying it was essential to protect the “full faith and credit” of the country, especially at a time of financial market turmoil.
“The full faith and credit of the United States, to which we all remain committed, is a national asset and a cornerstone of the global financial system,” Paulson said in his letter. “In light of current developments in financial markets, which would be exacerbated by uncertainty in the Treasuries market, I urge the Senate to pass the legislation reported by the Finance Committee to increase the debt limit as soon as possible.”
“If we max out our credit card then we won’t be able to pay bills, so to insure faith in us and so that we can pay our bills, we need you to raise our credit limit.”
and then Warren Buffet’s top advice from young people, “Stay away from Credit Cards.”
Well the FED just killed the dollar so I am sure that will have a so called positive effect on how foreign investors view this environment.
Txchick sounds awfully bitter today.
The US Mint has temporarily halted selling the uncirculated gold eagle coins on-line, presumably to adjust the unit price upwards…gold prices were approaching the price of uncirculated coins.
Congress Asked to Lift Debt Limit
Wednesday September 19, 10:25 am ET
By Martin Crutsinger, AP Economics Writer
Paulson Tells Congress the Current Debt Ceiling Will Be Hit on Oct. 1
WASHINGTON (AP) — Treasury Secretary Henry Paulson told Congress on Wednesday that the federal government will hit the current debt ceiling on Oct. 1.
He urged quick action to increase the limit, saying it was essential to protect the “full faith and credit” of the country, especially at a time of financial market turmoil.
ADVERTISEMENT
The current debt limit is $8.965 trillion. Unless Congress votes to raise that ceiling, the country would be unable to borrow more money to keep the government operating and to pay debt obligations coming due. The United States has never defaulted on a debt payment but the decision on whether to raise the debt ceiling often sparks a prolonged political battle in Congress….”
Where is the poet laureate for the HBB?
Nine Trillion Dollars, Nine Trillion dollars
That’s a lotta zeros, when is the $10,000 bill going to be issued for everyday usage?
This means that the US Govt is carrying a credit card balance that is 68% (!!!) of the total GDP of the US in 2006 ($13.2 Trillion).
How would a creditor look at you or me if we were carrying almost 70% of our annual income on a credit card and wanted to get a credit limit increase?
But then again, we can’t just print more money like the Govt can.
Go figure!
Did libor fall in response to Fed rate cut, BoE’s Mervyn King word eating acrobatics, or both? From Bloomberg:
The London interbank offered rate that banks charge each other for overnight loans in dollars dropped 39 basis points to 4.94 percent today, while the corresponding pound rate fell 25 basis points to 5.89 percent, according to the British Bankers’ Association.
…
The three-month rate for dollars fell 35 basis points to 5.24 percent, the BBA said. The three-month rate charged by banks for pounds declined 20 basis points to 6.55 percent.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aSYUvEs._W8s&refer=home
If the economy is so great, then why this: “After 39 years, Snow Country, a family–owned specialty retailer of ski equipment, is going out of business” (Rochester, NY). Snow Country, you have been great and I will miss you.
Maybe because Rochester isn’t exactly the greatest place for skiing.
DeWitt Sports went out of business last year too. (Syracuse area) My close to 50 yr old husband was nostalgic at the loss as it was where he and his family had gone for all their skiiing and boating equipment growing up. Personally I thought the store cut their own throats by chosing merchandise lines w/Vail crowd price points.
The internet is the reason small speciality retail shops go out of business. I’m sure that whatever model of K2 parabolics Snow Country was selling for $400 were available online for $259.
We recently bought a child car seat for $219 with no tax and no shipping that would have cost $279+tax at Babies R Us. Seems cruel to not “support your local merchant” but you can’t be stupid with money, and efficiency should be rewarded, otherwise we’d all still be paying $500 for a VCR.
What do you anticipate for the market? My guess is that this is an emotional rally and that not much has or will change in the underlying fundamentals for CFC, HOV, WM, FED, DSL and the like. How high are you going to let things go before you reposition for the next down? Anyone have historical perspective on how long things rally before they continue their slide (recession is here, after all)?
CCC
I still think it’s an affordability issue. Last year we took equity out of CA house we knew we were sellling and bought in OH looking to retirement - yeah, I know not what others would consider a retirement area, but we were looking to buy something that we could support if we had nothing more than SS in the future because I didn’t trust the markets and wanted to keep it simple. Figured with the way health care is going, we would need plenty of savings for that in future. Never spent much time in midwest or east coast and it’s quick/cheap travel to all sorts of places. Secured a good 30 yr fixed. Don’t have to care if market goes up or down. Got 3 times the house for 1/3 the money. Even last year you could find tons of good houses almost anywhere except the coasts for less than $100K. Barely got CA house sold after 9 mos w/o going short. I don’t think we were alone in moving our equity to cheaper places. Only bad part is year apart while I wait for retirement vesting for job. Point of my story is that no matter the rates or machinations of the Fed - “it’s the affordability, stupid” that will make or break housing.
I am set up in the same manner you are ,but based on what Greenspan said yesterday about the government maybe not being able to meet the obligations of SSI in the future ,there are alot of baby boomers that will be hurting because their investment in real estate didn’t pay off if they expected it to pay for their retirement .If the baby boomers SSI is also cut ,your going to get some starving in the streets .
Wiz - that’s when you’ll see a real push for the government to step in. I’ve always said they are not going to allow millions of old folks to be living on the streets and begging for food. Maybe we’ll actually see extended families living together again. Grandparents providing morality and childcare for grandchildren and kids learning to take care of their elders.
And the yield on the 10-year is up 8bps today. And the Fed cut was going to help borrowers? Not if you’re looking for a fixed rate loan.
Let’s see what happens next, but if the move in the long bonds is any indication, the market feels the move yesterday was inflationary, and we’ll see how long BB & Co. can bite their lower lip on inflation.
Nobody in bubble zones can afford to buy with fixed rate loans, anyway, so why worry about it?
All else equal, a higher 10-year squeezes out the marginal buyer who still thinks they want to buy.
More downward pressure on home prices. Leading to weaker economy? Leading to further rate cuts? Leading to more upward pressure on the 10-year and downward pressure on home prices?
Vicious cycle.
fixed rate loan? what is that, some kind of exotic financial instrument… this is so passe
It’s probably one of those exotic old-fangled “self amortizing” loans where after all the payments you don’t get to pay anymore.
Seems like a good idea. I just be afraid to see if the ACLU or some advocate group tries to shut it down:
http://www.greengojoe.com/
If you’re in Arizona, have I got a phone number for you:
http://www.mcso.org/include/pr_pdf/s%20Mobile%20Illegal%20Immigration%20Billboards.pdf
We need a Joe Arpaio down Tucson way.
We could use more then a few of him in DC too.
For clarification, the 80% jump is for just one month, not year-over-year.
Foreclosures countywide jumped 80% in August
By Emmet Pierce
STAFF WRITER
September 19, 2007
There were nearly 4,900 San Diego County foreclosure filings in August, an 80 percent increase from the previous month and the first of several waves of mortgage failures anticipated by real estate analysts.
“What we are seeing in San Diego we are seeing across the Southern California region: an increased number of bank repossessions,” said Rick Sharga, vice president of marketing for Irvine-based RealtyTrac, which released foreclosure numbers yesterday from across the United States.
“That will be important to watch because there will be at least two or three more waves of subprime adjustable loans due to reset in the next 15 months,” Sharga said. “If real estate conditions don’t change, each of those could deliver another spike in foreclosure activity.”
http://www.signonsandiego.com/uniontrib/20070919/news_1n19default.html
http://www.time.com/time/magazine/article/0,9171,1661682,00.html
THESE ARE THE KINDS OF THOUGHTS THAT occupy Yale economist Robert Shiller, who with Karl Case of Wellesley has done more than anyone else to document the postmillennium real estate boom and warn about the inevitable bust. Shiller first made his name in the early 1980s attacking the notion, then widely accepted, that the stock market rationally reflects the true value of the companies whose shares are traded on it. He and real estate specialist Case then teamed up to show that home prices are even more subject to booms and busts than stocks. They did it by measuring repeat sales, which give a better picture of price movements than the figures published by the real estate industry. In 1991 they turned this into the business that supplied the price data used in this article.
After publishing a best-selling critique of the stock bubble, Irrational Exuberance, just as the market peaked in March 2000, Shiller set to work adding a chapter on real estate for the second edition. As part of that effort, he cobbled together an inflation-adjusted index of home prices going back to 1890, which showed that a) the price runup from 1997 to 2006 was by far the biggest on record and b) home prices can fall for decades. Put those two together, Shiller argues, and it’s at least possible that we’re due for an epic decline in prices. “People think that home prices go up a lot,” he says. “But home prices in 1990 were at about the same level as in 1890.” Shiller allows that the scarcity of property near the coasts might mean prices there will remain high, but then notes, “We can’t make any more of the land, but we can build huge high-rises on the beach.”
Sept. 19 (Bloomberg) — The regulator for Fannie Mae and Freddie Mac reversed policy and will allow the government- chartered companies to buy more home loans in an effort to ease the worst housing slump in 16 years.
…
The change “is a drop in the bucket and will have zero impact,” said Howard Glaser, a lobbyist who was chief legal adviser to former Housing and Urban Development Department Secretary Andrew Cuomo. Ofheo’s “appearance of an effort is worse than doing nothing at all.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aJ97aykgj8lQ&refer=home
“Ofheo’s “appearance of an effort is worse than doing nothing at all.’”
Wrong — the appearance of an effort creates CYA insurance for the OFHEO.
Mortgage Meltdown
Double-digit home price drops coming
Three quarters of housing markets - many in crashing Sun Belt areas - face price declines over next few years.
By Les Christie, CNNMoney.com staff writer
September 19 2007: 12:02 PM EDT
NEW YORK (CNNMoney.com) — Over the next few years, more than three-quarters of the nation’s housing markets will suffer a decline in home prices. Many will experience double-digit hits in a forecast that has worsened considerably in recent months.
According to an analysis conducted by Moody’s Economy.com, price declines will exceed 10 percent in 86 of the 379 largest housing markets. And 290 of the cities will experience price drops of 1 percent or more. All are median prices for single-family houses.
Nationally, Moody’s is projecting an average price decline of 7.7 percent. That’s a jump from the 6.6 percent total price drop that the company was forecasting in June and more than twice that of last October’s forecast of a 3.6 percent price decrease.
Many of the worst hit cities are in Sun Belt areas…
http://tinyurl.com/26vuk5
Is it a little of ‘who controls the past, controls the future…” or were we right all along and the economy is rapidly heading in to the latrine?
Sept. 19 (Bloomberg) — U.S. home starts fell still more last month and consumer prices unexpectedly dropped, validating the Federal Reserve’s interest-rate cut to head off a further slowdown in the economy.
…
Builders broke ground on 1.331 million homes at an annual rate, the Commerce Department said in Washington, the fewest in 12 years and below economists’ forecasts. Consumer prices fell 0.1 percent from July, the first decline this year, the Labor Department reported. From a year earlier, inflation slowed to 2 percent from 2.4 percent.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aInkvpE6JK8U&refer=home
Sept. 19 (Bloomberg) — Absolute Capital Management Holdings Ltd., whose co-founder Florian Homm quit abruptly yesterday, stopped investors from withdrawing money from eight hedge funds that manage $2.1 billion.
…
Absolute Capital shares dropped 55 pence, or 46 percent, to 63.5 pence ($1.27) at 3:56 p.m. in London, valuing the hedge-fund company at about 44 million pounds. The stock fell 70 percent yesterday.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGxW2NiQIQ78&refer=home
Newspaper responds to criticism from Bloggers -
http://bakersfieldbubble.blogspot.com
Maybe the FBI didn’t want the paper to get the scoop before them.
Whilst Wall Street Berserkers celebrate:
Sept. 19 (Bloomberg) — As many as half of the 450,000 subprime borrowers whose mortgage payments increase in the next three months may lose their homes because they can’t sell, refinance or qualify for help from the U.S. government.
“Short of the cavalry riding in over the hill, a lot of these people are just stuck,” said Christopher Cagan, director of research and analytics at Santa Ana, California-based First American CoreLogic, the risk management unit of the biggest U.S. title insurer.
http://www.bloomberg.com/apps/news?pid=20601109&sid=akOEPec30TR4&refer=home
Some back-of-the-napkin theorizing on the shocks coming to or economy in the next year, related to mortgage loan resets:
1. The turmoil in August (loss of sub-prime and alt-a lending collapsing hedge funds, the call for the US government to bail homeowners out and/or cut interest rates) was in a large way caused by defaults on loans, many (most?) of which were ARMs that had “reset” about six months earlier. According to the Credit Suisse ARM reset chart, we were due for about $75 billion in resets during that time frame (1st quarter, 2007).
2. The next 3 quarters utterly dwarf the amounts of resets we had in the first quarter…and these resets are happening in a much more credit restrictive environment, with entire loan programs disappearing, and the remaining loans only available at much higher rates. In Q2, we were due for $105 billion in resets, Q3 we were due for $127 billion in resets, and in Q4, we are due for $146 billion (!!!) in resets.
3. If we assume that the aftermath of resets takes about 6 months to work their way through the system (notices of default, foreclosure proceedings, etc.), and we assume that the August/September turmoil was caused in large part by the Q1 resets ($75 billion), what can we expect in Q4, when the Q2 resets ($105 billion) work their way through the system? And Q1 2008 when the Q3 2007 ($127 billion) resets start tap-dancing on the economy? And I’m not even going to go into the Q4 2007 reset burden($146 billion), due to hit the economy with defaults in Q2 2008…
It’s been a long time since I’ve seen a “this could get REAL UGLY” post, but, this could get real ugly…
As an asside, we are talking $423 billion in loan resets for all of 2007…almost half a TRILLION dollars. Not all of them will result in default, but even so, it’s not a very good credit market that they are reseting into.
As a further aside–it was much easier to refi such a crazy loan in January/February/March than it was in August. What we are to feel in pain for the $423B of resets in 2007 is going to be roughly equivalent to what the first $250B (plus or minus) is going to feel like in 2008. In other words, the pain caused by ARMs adjusting in early 2007 was muted significantly by continued credit morphine flowing in the market in the first part of the year. There is no such muting of the pain now and for the foreseeable future.
LA Times/Data Quick has SoCal median numbers out for August 2007:
http://www.dqnews.com/ZIPLAT.shtm
LA county median is still positive (+9.1%) YoY, OC median is +3.6% YoY, Riverside is -3.7% YoY, San Bernardino is -4.7% YoY, and San Diego is +0.9% YoY.
Remember, these are changes in median prices, not changes in house-to-house prices or changes in $/sq. ft. , so sales mix can skew these numbers.
Interesting none the less…I’ll try to analyze the $/sq. ft. numbers later.
My apologies if this has already been posted. Peter Schiff discussing the rate cut.
http://www.europac.net/Schiff-CNBC-9-18-07_lg.asp
It is funny on Monday because of an article Mr. Peter Schiff wrote last week, I closed out my short stocks. I invested more moneys in mining companies (not gold, I have no interest in gold only industrial metals) in Canada and South Africa. Further invested in Japan and India. I have no positions in China any longer (closed those over a month ago - a little early, but I will not give up an 80% profit in less than 9 months).
As a short term trade, today I initiated a small short position in the US equities market. Why I believe the US equities market is going into the tank is simple. Using Robert Schiller’s method of calculating PE ratios, the S&P500 has never traded as high. The second highest it traded was November, 1999. With 18 month GDP growth projected at 1.25%, should the stock market continue to trade at these levels, forward PE ratios would be greater than 30.
I am shorting a German car company because Forbes believes it to be a good investment. I will fade Forbes. The American consumer is tapped.
In a mild rant, it is upsetting that the US Federal reserve decided to sacrifice the dollar to bail out lousy investments by banks, investment houses and hedge funds. What upsets me the most about it is that I am going to pay income tax on purchasing power parity as the dollar collapses. Gold has gone up relative to the dollar but not relative to the Zloty. So why should I pay income tax on gold or any other commodity because of malfeasance by the Central Bank. It is not true income. Oil has not gone up relative to the Euro, but it is going to cost more to fill my tank.
So the dollar drops and I am not in dollars, but I have to pay taxes on fake profits. Welcome to inflation.
This was supposed to be placed under wickedheart’s column. My apologies.
“So the dollar drops and I am not in dollars, but I have to pay taxes on fake profits. Welcome to inflation.”
But at least your wages and investment income is increasing, right? “It’s all good”.
‘Welcome to inflation.’
Welcome back inflation.
With the success of reunion tours, the Fed and inflation have announced that they are getting back together for a reprise of their hits from the 1970s. This will be a global tour but the first leg will cover North America. The Manhattan and DC dates are already sold out.
The Subprime Lending Disaster and the Threat to the Broader Economy By Alex J. Pollock
Posted: Tuesday, September 18, 2007
TESTIMONY
Joint Economic Committee
Publication Date: September 18, 2007
…
The Federal Reserve and other central banks have already provided significant amount of liquidity support to the panicky international credit markets, which are suffering from not knowing who is in trouble from leveraged speculations in subprime securities and from great uncertainty about what such securities are worth. Many voices are calling on the Fed to lower the fed funds rate and the expectation is that they will have taken a first step by the time of this hearing. Lower short term rates make it cheaper to carry leveraged positions in securities unable to be sold at prices acceptable to the seller and help ease the panic.
In any case, panics are by nature temporary and the liquidity crisis won’t last forever. Large losses will be taken, who is broke and who is solvent sorted out, risks reassessed, models rewritten, and revised clearing prices discovered. Market actors will get back into business trading with and lending to each other again. Liquidity will return for markets in prime instruments. An astute long-time observer of finance, Don Shackelford, has predicted that “the panic about credit markets will be a memory by Thanksgiving.”
He may well be right; however, the severe problems with subprime mortgages and securities made out of them, related defaults and foreclosures, and falling house prices will continue long past then.
http://www.aei.org/publications/filter.all,pubID.26828/pub_detail.asp
I have noticed EBay trying to get people back to their site. (A fascinating study of a collapsing economy in itself.) EBay is a retailer. As retailers get hurt by the collapsing consumer, internet companies will be impacted. Remember July’s increase in sales was the result of 2 unusual phenomena 1) The Apple IPhone and 2) Harry Potter. Amazon had an excellent quarterly report as a result of Harry Potter books ordered in March, but not delivered until July. This is not going to happen again. Without the Harry Potter book and movie coming in July, retail sales would have been down. The consumer tapped out in July.
The new name of the game in the global CB cartel: Print money backed only by devalued mortgage collateral. Moral hazard rules!
Bank of England in money market U-turn
By Chris Giles, Economics Editor
Published: September 19 2007 12:30 | Last updated: September 19 2007 12:30
British banks will be able to borrow from the Bank of England for three months using mortgages as collateral, the central bank announced in an extraordinary U-turn.
(Comment and vote
Mervyn King
Can Mr King survive this extraordinary U-turn or has his position become untenable?
http://www.ft.com/cms/6c2bf1ce-91b7-11da-bab9-0000779e2340.html?a=tpc&s=646099322&f=191094803&m=3721042551&r=3721042551#3721042551 )
The humiliating move for Mervyn King, Bank governor was announced on Wednesday morning when the Bank said that next week, it would be willing to swap £10bn of cash for a wider range of commercial bank assets “including mortgage collateral”.
Up to now, Mr King has insisted that such action would be tantamount to bailing out banks that had made risky lending decisions and would sow “the seeds of a future financial crisis” because it provides after the event insurance for risky behaviour.
http://www.ft.com/cms/s/0/43a7b3ac-66a2-11dc-a218-0000779fd2ac.html
King is now contained. He was last heard crying yummy, yummy words.
I trust that the comments by AG and Shiller about how severely overvalued housing currently is will bolster support for numerous ill-conceived pending bailout measures, thanks to the current state of panic which is gripping policymakers.
The out of context quote from Shiller suggests that he fails to make the connection between lax lending standards and falling home prices. But we would never have reached such absurd levels of overvaluation without the lax lending standards, and a return to traditional qualification standards is a driving force behind price declines.
US expert warns of fresh shocks
By Eoin Callan in Washington
Published: September 19 2007 14:59 | Last updated: September 19 2007 18:53
Fresh economic shocks on the scale of the current credit squeeze will occur if US house prices continue to fall, one of the country’s leading housing experts warned on Wednesday.
Robert Shiller, a Yale university economist, told a US congressional panel that he feared “the collapse of home prices might turn out to be the most severe since the Great Depression”.
“The decline in house prices stands to create future dislocations, like the credit crisis we have just seen,” he told the Senate’s joint economic committee.
Warning signs
There were fresh signs of weakness ahead for the US housing sector as figures showed applications for building permits fell to a 12-year-low.
Housing starts also dropped to the lowest level since June 1995, declining 2.6 per cent to an annual rate of 1.331m units.
The decline in construction activity appeared to be spreading to the north-east, where starts were 38 per cent lower.
Patrick Newport, an economist at Global Insight, said: “The eye of the storm is just ahead.”
…
The warning underlines an increasingly widespread view that the turmoil in financial markets and tightening lending conditions are early consequences of a slump in the US housing market that is gathering momentum.
Mr Shiller, who designed the respected Case-Shiller house price index and predicted the bursting of the dotcom bubble in a bestselling book, said that while there had been a focus “on lax and irresponsible lending standards, I believe that this loss in housing value is the major ultimate reason we see a crisis today.”
Alan Greenspan, former Federal Reserve chairman, told the Financial Times this week that double-digit falls in house prices from their peaks would not be surprising. A fall in house prices on that scale would be unprecedented in US history and would have an economic cost several times greater than the meltdown in the subprime mortgage market that triggered the current financial crisis.
http://www.ft.com/cms/s/0/31d8aba4-66b6-11dc-a218-0000779fd2ac.html
Is inflation still contained one day after the larger-than-expected FFR cut?
Oil
Barrelling upwards
Sep 19th 2007
From Economist.com
OIL prices have been hitting new peaks this week. The latest came on Tuesday September 18th after markets reacted to the Federal Reserve’s decision to cut interest rates. The price of benchmark West Texas Intermediate for delivery one month ahead soared to an intraday record of $82.38 per barrel, closing at just over $82. More highs are likely. Prices have risen by a third so far this year, driven partly by worries that supplies cannot meet robust global demand. Last week prices rose despite a decision by the Organisation of the Petroleum Exporting Countries, a cartel of producers, to boost production by 2%.
http://economist.com/daily/chartgallery/displaystory.cfm?story_id=9827989
The Fed
Looking down
Sep 18th 2007
From Economist.com
The Fed’s bold cut
Reuters
IS THE Federal Reserve running scared of the financial markets—or the housing market? On Tuesday September 18th America’s central bank cut its target for the federal funds rate by half a point, to 4.75%, the first reduction for more than four years. Financial markets had thought a quarter-point cut a shade more likely, but prayed fervently for a half. Rejoicing, the S&P 500 jumped by nearly 3% after the Fed’s announcement and the Dow Jones index closed more than 300 points up.
Once the cheering stops, it may be worth reflecting on what the Fed’s action—and words—say about the state of the economy, especially the housing market. The “tightening of credit conditions”, said the Fed, “has the potential to intensify the housing correction and to restrain economic growth.” The Fed seems to be trying to act before things get worse: the cut, it said, “is intended to help forestall some of the adverse effects on the broader economy”.
http://economist.com/world/na/displaystory.cfm?story_id=9826026
This is absurd.
http://www.cnn.com/2007/US/09/19/lawn.dispute.ap/index.html
It is indeed absurd. A brown lawn is no reason to rough up and arrest an old lady. I do think poor old Grandma has more serious issues though. She chose to turn off her own water 9 months ago.
Can the Fed keep manipulating the stock market now that everyone knows they do so?
September 19, 2007 5:25 P.M.ET
BULLETIN
The ‘Bernanke Put’ lives on
Rally in benchmark indexes goes on for a second day
Sentiment remains strong after the Fed and as global markets rally, even though Wall Street heavyweight Morgan Stanley disappoints.
http://www.marketwatch.com/
BBs = the size of B.B.’s cojones.
I think that many people were upskirting the wrong bush, so to speak. BB’s cut will save Mrs. Watanabe sushi. Now to watch her unwind, slowly and carefully.
I’d short the 2007 class of Japan’s divorce lawyers.
The global full court press to stem the credit crunch is on. Will this obviate the question of where all the bodies lay hidden? And is it safe to say that hedge funds with bearish MBS positions just took a major hosing?
Equities rebound as central banks intervene
By Our International Staff
Published: September 19 2007 21:03 | Last updated: September 19 2007 22:23
Share prices surged around the world on Wednesday as central bankers and policymakers unveiled unexpected measures aimed at stopping financial turmoil spreading to the wider economy.
The Bank of England retreated from its previous hardline stance by announcing plans to inject funds into the stricken three-month money markets.
In the US the Bush administration caved in to pressure by agreeing to let government-backed mortgage lenders buy another $20bn (£10bn) worth of subprime loans.
Regulators gave Freddie Mac and Fannie Mae, the government-chartered companies that own or guarantee 40 per cent of US home loans, extra flexibility to help distressed homeowners refinance from high-risk subprime loans.
These steps, combined with Tuesday’s decision by the Federal Reserve to cut US rates by 50 basis points, raised confidence among some investors that policymakers were willing to do whatever was necessary to alleviate the credit squeeze.
http://www.ft.com/cms/s/0/9be152fc-66e9-11dc-a218-0000779fd2ac.html
What will happen when it comes time for Freddie and Fannie to pony up on all those defaulting contracts? WHO WILL PAY FOR IT?
test
Good Article
Seizing Your Assets To Cover Retirement Promises: How The Government May Do It
http://news.goldseek.com/GoldSeek/1190214870.php
Maybe one day it will simply be illegal to own anything?
They already do. What do you call a 15.3% FICA payroll tax?
Vote Ramen in 2008!
Rejoice, comrade. You are screwed. Ve are here to take care uf you.
What was the Schwarzenegger movie, in which he was a peon who took his vacations via a brain implant?
Total Recall. Sharon Stone played a brief but “mammorable” role as his wife.
Inflate away I was afraid the FED would choose this path. Sort of spreads the pain from the upsidedown home debter to everybody as the cost of basic items goes up and any savings goes down. So what happens now/ Shortages as buyers hoard items calculating they will be worth more in the future?
hey wait a minute thats what happened to houses
Who is running U.S. monetary policy these days — is it Cramer or the D-ratic Senators who are pulling the puppet strings? And is the Fed part of the executive branch these days?
Democrats force Fed to change approach
By Eoin Callan in Washington
Published: September 20 2007 02:13 | Last updated: September 20 2007 02:13
Federal regulators appear to be shifting tack following intensified criticism from Democrats on Capitol Hill over their handling of the mortgage crisis.
Ben Bernanke, chairman of the US Federal Reserve, indicated government-backed lenders could play a limited role in alleviating stress in the so-called jumbo mortgage market.
The Office of Federal Housing Enterprise and Oversight also provided increased flexibility to Fannie Mae and Freddie Mac to provide “greater assistance to subprime borrowers and others who may have difficulty refinancing their existing mortgages in the current environment”.
Senator Charles Schumer told the Financial Times that pressure from Democrats was “finally starting to stir the administration from its slumber. We seem to be getting through”.
http://www.ft.com/cms/s/0/1a212266-6701-11dc-a218-0000779fd2ac.html
A month old, but the first part of this is a real chuckle.
http://tinyurl.com/ytc43d