Bits Bucket And Craigslist Finds For September 24, 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.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
May 2024 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
Fanny and Freddie to get super-sized. You knew the Bu$h administration was full of it when they said they were against the growth of the GSEs. They just wanted to get that on the record but it was all just another Bu$h lie. Yes, I voted for him twice.
Anybody that doesn’t believe the Feds will pump in billions and billions of our tax dollars is kidding themselves. Bankruptcy, here we come.
And good cheery morning to you!
That’s what happens when you walk to work and can count on having machine guns pointed at you. It happens every time Ahmadinejad is in town. We work close to the UN. The black Suburbans with machine guns sticking out of the windows are all over the place.
Squawk Box pi$$ed me off this morning. The last thing I heard as I was walking out the door was, “have the homebuilder stocks bottomed out?” That is bottom number 124 that they have called.
Everybody sing: “I love New York…”
http://www.cnbc.com/id/20883613
I can’t believe lightning didn’t strike during this speech.
“The default rate on U.S. mortgages is stabilizing, an American housing official said Monday,”
In a related story, the housing official’s nose grew by a foot. Seriously, how can you say something like that with a straight face when the autumn tsunami of resets is about to break?
Government officials still have access to the best dope.
And appear to be inhaling 24/7…
“Subprime mortgages democratize credit, and so we don’t want to throw that option away,” she said. “Not all of these loans result in foreclosures.”
That’s quite the ringing endorsement. Just what we need, more support for efforts to put people in greater debt with bad terms. I guess we shouldn’t have expected a former corporate lobbyist to favor the interests of home buyers over those of lenders/investors.
Loan defaults are half of what they were in the 1980s and interest rates are low compared to the double-digit rates of 20 years ago,”
Unfortunately, many mortgages have soared to double-digit rates; and since rates have been low, the prices are now five times what they were in the eighties. So, a slightly lower rate on five times the principal… sorry, can’t start cheerleading over that.
DP
“Subprime mortgages democratize credit”
Exactly what does this mean? Robbing a bank democratizes wealth?
“Subprime mortgages democratize credit.”
Robbing banks democratizes wealth.
A return of the usury laws would help matters. Not all people qualify for or can manage credit. Taking those who do not and making matters even worse with terrible terms is clearly not the answer.
I said much the same thing below, GH. It was a sad day when the usury laws went by the boards.
Teaser rates democratize credit!
“The default rate on U.S. mortgages is stabilizing, an American housing official said Monday,”
Has it reached a permanently-high plateau?
So if one catches a glimpse of a net down below, as they are plunging from the top of a 50 story building…
Would that be considered “stabilizing”?
“Loan defaults are half of what they were in the 1980s”
That’s because we’re not experiencing the unemployment rates of the (early) 80s….yet.
http://research.stlouisfed.org/fred2/series/UNRATE
I’d also like to insert the words “so far” to his interest rate comments too:
“and interest rates are low compared to the double-digit rates of 20 years ago”
Bushco is using the old ad man’s credo: “Perception is reality”.
I think the usury laws are still on the books in many states. The real problem was a Federal court decision (as is often the case). In 1978 Marquette Vs. First Omaha Service Corp allowed banks to use the interest rate limits of the state where the bank was based, not the customer’s state of residence. This encouraged “forum shopping” with many banks’ credit card operations rebasing to South Dakota as a result. Your state may try to protect you but the Federal courts have long since undermined those protections.
http://tinyurl.com/22pj3b
LOL. When I was a pup and all the talk was of whether or not the UN should admit Red China, my dad used to say “Admit the UN to Red China” and.
“and” that will be the end of the problem.
Lemme guess you are a Columbia grad.
Moi? Or NYCityBoy? My dad was something of an old-school red-baiting conservative. Wouldn’t have let any kid of his go to Columbia.
It is hard to believe that in the early 1950’s, Truman would take walks around D.C., quite regularly…
It sounds like distractions are getting in the way of the real story. One of the things that the Fed has shown with its actions is that this is a global bubble and many nations will not necessarily follow the US Fed.
As far as Iran goes, there is currently a nasty bubble there with inflation running completely rampant. To make matters even worse most development has been focused in urban areas such as Tehran which are extremely vulnerable to earthquakes such that, as in the SF Bay Area in the US, a disaster is a matter of when rather than if.
These are the relevant factors that need to be followed. This housing and asset bubble is global. It is one of a number of factors causing inflation to bloom in markets all over.
The GSEs do deserve some mention. Both Paulson and Bernanke spent something like 20 minutes or more insisting that real GSE reform was critically needed in the short term. This may or may not happen and likely won’t come out the way most would prefer, but the way testimony gets misrepresented on blogs because of political agendas has to be rejected.
yes, the bubble is global (at least for the anglosaxon world and countries that heavily trade with them). But it is clear too where those bubbles started - around the big bankster capitals - and the Greenspan FED played a big role right from the start. What about Iran then? Well, where does their current (relative) wealth come from, and what does that have to do with US economic policy?
and regarding other nations not following the FED … please give a good example. The BOE has already proven that they use FED policy, the ECB has publicly stated other policies but follows exactly the same in(re-)flationist policies as the FED and as for the BOJ - we don’t even have to discuss that.
Start spreading the news, Ahmadinejad is in town
He wants to pay respects to you, in old New York…
RE: And good cheery morning to you!
LOL~
I think NYCityBoy is that old time poster from Vermont (any old time BBN posters remember his screen name?) who’s been reincarnated as a denizen from NYC.
That was Lingus.
I have to admit I sometimes favored his stance toward equity locusts who, unfortunately, have invaded the place.
Ah, good show SFJack…
Lingus-You have described him to a T.
I enjoyed his posts
However, NYCBoy has done much to fill the void (laugh)
You know this is coming. The main stream media is mostly reporting how wonderful this will be, instead of calling this what it really is. A taxpayer’s bailout of people who wanted granite counter tops, a house bigger than the Jone’s, 2 SUVs, and vacations to Disney World.
If anyone gets bailed out it will be the lenders and their Wall Street friends, not the FBs. After all, the FHA “guarantee” only protects lenders–a buyer who forecloses still loses the house etc.
Bought another big wad of NZD bonds Friday. Will buy another big wad of AUD bonds as soon as my ML guy gets in today. Maybe ISK or BRL again tomorrow.
No heavy metal?
I give you the next bubble: precious metals.
It would be a bubble only accessible to cash and carry customers…
I just can’t see the alphabet soup of bad finance rules creeping into the realm of reality~
If precious metals are the next bubble, they have a long, long way to go. Gold is still below it’s $800 highs set way back in 1980. So for 27 years gold has basically languished below its highs. If you adjust it’s 1980’s highs of $800+ for inflation, that would be $2700 in today’s dollars (or significantly more, depending on who’s inflation math you use).
So if gold is the next bubble, we haven’t even begun to see it yet. When we break $2200/oz. a couple years from now I’ll start calling it a bubble. And then (much like the housing bubble) it will probably still have another 3 years of growth from that point.
I tend to call bubbles way too early. And even I wouldn’t call PM’s a bubble yet.
I prefer AC/DC and Metallica
Dirty Deeds Done Dirt Cheap?
Metallica isn’t from Australia. What bands hail from New Zealand?
“Bought another big wad of NZD bonds Friday. Will buy another big wad of AUD bonds as soon as my ML guy gets in today. Maybe ISK or BRL again tomorrow. ”
I hear you, the AUD is paying about 6% overnight right now. I have been loading up on Swedish Krona… low rates but strong account balance and a budget surplus!
DP
My brother-in-law and wife moved to Sweden last December and they have really enjoyed the benefits of being paid in Swedish currency and their increased purchasing power in US dollars.
My girlfriend is Swedish. Perhaps I should make her my wife. Most people in Sweden seem comfortable…
I was approached at a gas station by a middle aged Swedish couple a few weeks ago. They didn’t know how to use their Credit card at gas pump and asked for my help. I’m not bashing the Swedish (I’m part Swedish), I’m just guessing that they’re used to paying for things with money that they actually have!
My daughter in her business deals with the Sweeds all the time. They are always amazed at the material aspects of our society. How many TV.s, cars, size of home, size of yard. They live in a very socialist enviroment where the government takes care of their lives for them.
Been living in Sweden since February this year. Still renting as the bubble is here too. (Followed this blog for years now!)
I’ve been *told* by about 20 people since I moved here that I should buy a place as soon as I can because prices only go up.
As for Sweden being socialist, they still like to have nice stuff. Seems like everyone here has a luxury car (albeit a Volvo most of the time.)
I live right by a new development here called Eriksburg in Gothenburg. It used to be warehouses, but they’ve redeveloped the whole shoreline. On my walk home from work, I can count 9 cranes in about a 1km square area.
holgs,
Are you enjoying it there? If you’re an american, are you being paid in krona or US paper? love to hear more.
Thanks.
Enough gushing over the swedes, don’t forget these are the same socialism lovers that put Olaf Palme into power. 76%-101.2% tax rates!
Sweden now enjoys a far higher standard of living than the US. nice to hear how the other half lives.
This centrally-controlled market manipulation that passes for capitalism here ain’t making it.
Dang! My Ameritrade broker cain’t get me no foreign bonds!
Doh!
Did the vote to allow them to get bigger pass?? I didn’t read anything about it, do you have a link?? Thanks in advance.
And good morning to all, hope your weekends were good.
OFHEO has stated that as early as February they could have an unlimited cap. They do need to file timely financial statements before this can happen. That would make people say, “well, that’s never going to happen.” But the way they are stepping down the requirements makes me think they will just say, “have at it. We don’t need those timely financial statements. We just need you to tell us you are working towards filing timely financial statements.” They keep lowering the bar one notch at a time. Soon it will be on the ground.
It’s all over Squawk Box this morning. I don’t have a link. Turn on CNBC, if your stomach can take it.
I’m at work….can you watch CNBC online live??? I can’t tell by looking at their site, however I’m also Internet Illiterate.
Anyone can file timely financials - do those financials have to be accurate? Can it all be “marked to model?” Does anyone actually think that goons running the game will actually care what is on their books so long as the debt is monatized and housing prices remain high?
Are the GSEs solvent? If they are solvent and interest rates increase, will they remain solvent?
the USA is going bankrupt anyway with Bernanke and Paulson at the helm (leaving foreign investors with the bill), so why worry about GSE’s being solvent?
The GSEs are just a big boondoggle. I know a couple of IT guys that work for them here in Metro DC and they basically have the best of both worlds. As a government entity they get stable gov’t jobs where they are given very little to do, so they have lots of time to just BS around and do nothing for their money. Then because they are government corporations they do not have the statutory requirements on compensation and because they “compete” with the private sector they are compensated at a private sector rate. Basically, if the GSEs were private sector these guys would be unemployed because they would have farmed out their jobs to India years ago. Instead they make six figures and do very little and really are not very good at their jobs, but obviously they are at least bright enough to manipulate the system to make private sector pay yet work in a low stress, low demand gov’t operation. So on that count my hat is off to them, but wonder how long it will be before it all comes crashing down and takes them with it and then they’ll have to work like dogs to make 1/2 the money they make now.
Oh please stop with this “poor govt workers arent paid enough” nonesense. If you add up total compensation (salary, pension, vacation, health insurance, holidays, etc) govt workers earn far more than private sector workers.
My father in law retired at 57 from the federal govt. Full pension, full benefits for life. When he retired he had 6 weeks vacation per year. Aside from executives, no private sector employee could ever expect anything so generous.
And here’s the kicker, after about 3 months of retirement ge got bored. So what does he do? Goes back to work as a “consultant”, essentially doing his old job and getting paid twice for it.
Yes, but government employees have it so bad. Give me a break.
JJGA,
YOu completely misread Joe’s post. Try again.
What in God’s name are you talking about, J J? Who said gov’t workers aren’t paid enough? I thought Joe’s post said just the opposite and pointed out exactly what you are pointing out.
Thanks, spike66. I thought maybe I had misread something. Same with J J’s post about being a Columbia grad. Another misread.
“Then because they are government corporations they do not have the statutory requirements on compensation and because they “compete” with the private sector they are compensated at a private sector rate.”
They get paid private sector rates. The implication is that private sector rates are higher than public sector. The post said they work in the best of both worlds: govt job security and private sector pay, again implying that govt sector pay is below private sector pay.
That’s what I understood from the post. Relax.
JJ GA: The logic of your inference is correct, but in reality you’re in error. My post did not refered to total compensation, while I did not say what I meant by compensation I did refer to the fact that compensation is capped by statute, the statue purely speaks to salary. Private sector pay is not capped, but competitive forces in the market do pu tpressure on compensation (both upward and downward). Private sector workers have the “potential” to earn more, but in reality they are often kicked to the curb to India, etc. Those that keep their jobs work like dogs. The GSE system for pay is an odd hybrid that has a gov’t payscale based upon notional #s from the private sector that nobody really achieves.
Conclusion: If gov’t worker pay (or “total compensation”) annoys you then GSE pay/compensation should really piss you off.
First JJ says that his pop made more as a government worker than he would have ever made in the private sector. Then he states that his dad retired, got bored, and became a consultant, getting paid twice the amount that he did as a government worker doing the same job.
Which is it? Are governement workers paid more than the private sector or not? You can’t have it both ways.
1. Father in law, not father.
2. Overall compensation for what he did was much more than he could have made working in the pvt sector.
3. Getting paid twice as much as in getting paid a pension, getting health benefits AND ON TOP OF THAT consulting fees. I thought that was clear enough without needing a breakdown.
I think when you bake in their ‘birth to death’ rich benefits package, gov’t ees earn more. If you are talking salaries only, I think J6P can earn more in the private sector.
IMHO…for what it is worth
Garbled marble mouthed communication is the end result of failed attempts at floating a flawed ideology.
Brains are brawn here.
FNMA was listed in Fortune’s Top 100 companies to work for.
Now we know the rest of the story.
They just wanted to get that on the record but it was all just another Bu$h lie. Yes, I voted for him twice.
I dunno. I thought Bush was pretty easy to figure out, which is why I voted against him twice. Bush is *for* what ever his buddies are for (especially if they helped him out along the way) and what will make him more popular and against whatever his buddies are against.
If he was a true Repulican (or even something close to that), I would have voted for him in a heartbeat. As it stands, Bush is not worth the time or energy to get angry at. I don’t think he’s lying at any moment in time: he’s merely expressing what his buddies think. My suggestion would be to redirect some of that energy into writing your congress people instead of worrying about a wanna be king. All the energy directed at fretting about the opinions of man who changes his mind with the wind direction could have gotten the guy thrown out of office by now.
At any rate, removing the caps may have some short term effect and has the potential to put us all on the line. However, Freddie and Fannie both require private investors. Is still true that they pulled an auction because they couldn’t find people to buy conforming loans??? Toxic garbage is still that even with government “blessing”.
Fannie Mae mulls preferred sale, details core capital
By Greg Morcroft
Last Update: 8:06 AM ET Sep 24, 2007
NEW YORK (MarketWatch) — Fannie Mae (FNMFannie Mae
FNM) said Monday that it is mulling a sale of preferred stock this week. It said because of the possible offering, it provided its regulator OFHEO with information about its capital levels, showing the firm’s 2007 core capital exceeds requirements. “The information submitted to OFHEO indicates that Fannie Mae’s June 30, 2007 core capital of $42.38 billion exceeded the OFHEO-directed minimum capital requirement of $39.42 billion by $2.96 billion, and exceeded the statutory minimum capital requirement of $30.32 billion by $12.06 billion,” the firm said in a press release. Fannie, which has not released any financial statements since the end of 2006, said the numbers are its best estimate, but remain subject to change.
LMAO! Think anyone will believe those numbers?
I think they will be swallowed hook, line & sinker by this government.
Hook, line and sTinker.
The I-Banks have an itch they can’t scratch. Call in FNM to scratch it!
I bet the I-Banks buy the preferred shares with FNM reciprocating by purchasing the crap MBS from the I-Banks. Choreographed by the PPT of course. JMO.
and if there are no takers in the US there always are the European pension funds who will buy anything related to US housing at any price.
“I bet the I-Banks buy the preferred shares with FNM reciprocating by purchasing the crap MBS from the I-Banks. Choreographed by the PPT of course. JMO. ”
Yeah, flush that toxic debt down the IB’s toilet- with the taxpayers waiting down below with beer funnel and tubing. GO GO GO GO…..
You know, I was reading a book on international taxation this weekend. Under the 16th Amendment, Americans are taxed on any income they receive, throughout their lifetimes, from whatever source. This includes “foreign source income”, even if the foreign government also levies a tax. Uncle Sam/IBs/ruling cla$$ own our a$$eS. Only option is to stop earning. They’re just gonna take it and burn it anyway.
DP
Still? After all this? If they insist on going back to a poisoned well after drinking the first time and getting sick, what can you do about it?
If you live overseas, you do get a nice $75k+ tax break.
The US is the only country in the world that taxes the income of its citizens working abroad but US Expats on do get some breaks. Up to $82,400 of foreign source income for expats residing abroad can be shielded and housing expenses within some limits depending on your location can also be deducted.
The only developed country. I think Zimbabwe and Libya might also tax their citizens overseas… can’t remember the exact list that the USA is part of…
Of course, if you live in Sweden, all you have to do is fill out Form 1116 and you can bet your Swedish taxes will more than offset and US income tax, so your net US obligation will be zero.
If you live in the US and receive “foreign source” income, you get a tax credit for any income tax you paid to the foreign government. Read your 1040. (There must be a lot of HBB people who fill out their own 1040’s, no?)
Will this help FNM dress up its balance sheet for a future reinstatement of timely financial reporting?
If what you say is for real, we will probably need a little bit of this to keep us comfortably numb:
http://www.youtube.com/watch?v=0dc45zHdfRg
hope raines and the rest go to jail - yet another failed gov program- has there ever been a sucessful gov program ?
I believe one was enacted back in 1776.
That one was a piece of junk, we had to re-do it in 1787.
Hardly. It’s the 1787 one that is junk.
As sure as night follows day, the Republicans and the Democrats are going to bend over the Middle Class. Should we take Bobby Knight’s advice to heart in this situation?
Got lube?
Ah yes, one of Bobby’s more, um, politically incorrect musings.
“A nation of sheep will beget a government of wolves.” - E.R. Murrow
His prediction has come to pass.
We are now a nation of sheep ruled by a government of wolves.
We are now a nation of sheep ruled by a government of wolves.
s/b
We are now a nation of whores ruled by a government of pimps.
..
“The average man is a conformist, accepting miseries and disasters with the stoicism of a cow standing in the rain.”
- Colin Wilson
“Anybody that doesn’t believe the Feds will pump in billions and billions of our tax dollars is kidding themselves. Bankruptcy, here we come. ”
Cheer up NYC. I’m around the corner from you so it took me 20 minutes to get from 59th to 43rd on the Lex Ave. bus (I knew I shoulda walked but I was reading Naomi Klein’s article in Harper’s). It doesn’t matter, but you having voted for Shrub twice is dropping you a notch on my respect-o-meter. I knew before he got elected that he’s the biggest of the big-government politicians. DHS- the biggest govt agency in human history…
DP
At least I will admit a mistake. I still think the alternatives weren’t much better. In a nation of 300,000,000 this is the best we can come up with?
A hypocrite is the kind of politician who would cut down a redwood tree, then mount the stump and make a speech for conservation.
Adlai E. Stevenson, Jr.
That was part of the problem, IMHO. I thought GW was fundamentally a decent man (still do), but he wasn’t the best GOP candidate either. I’m still glad I voted for him given the alternatives, but since 2000 I’ve sort of concluded all the elitists will help each other before us heathens, despite all their bickering. That won’t change if a Dem moves into the White House.
“I thought GW was fundamentally a decent man”
I disagree with this on every level, based on the evidence.
Your “evidence” could probably apply to Dems as well.
I’m with you Blano. I had to hold my nose to vote for him, though, since the Dems didn’t give me a good alternative (well, not to my mind). Kind of a choice between big nanny government and bigger nanny government. Sigh. It wouldn’t surprise me at all if Bush does get on the bandwagon of bailouts when it all comes around to it.
a choice between big nanny government and bigger nanny government.
I did not vote for him, but I was not adamantly against him either the first time around. I was in a kind of “wait and see” position. But look what we got. We ended up with a humongous bloodsucking nanny government that steals money from the pockets of savers to pay for misguided wars and shady bankers. Oh, the irony. Sometimes I wish you could turn back the clock to 2000 so we could all go out into the streets to force a recount.
I don’t want a recount in Nov 2000 - I want a recount in the *primaries* in 2000. Then maybe we could have had a better set of choices.
I have to admit, I voted for Bush pretty much only because I despised Gore. And again because I disliked Kerry. Note: Only “dislike”, and I could have lived with JK in the White House; at least Kerry acts like Dem and is a Dem, instead of Bush acting like a Dem and saying he’s a Repub. (Gore, on the other hand, says he’s a Dem and acts like a crazy man on a mission, yikes.)
Like I said before, I am VERY apprehensive about what the White House will do as the subprime mess works its way out. Given the ethanol and other well-known boondoggles of late, it would not surprise me in the least to see a vastly expensive and yet vastly unproductive government program take shape in the name of “working together with Congress to help the people”.
Your “evidence” could probably apply to Dems as well.
Why does everyone automatically assume that if you dislike Bush your a Democrat?
Are you all serious? Do you really believe this country would be worse off than it is today if Gore had won in 2000?
I don’t want a recount in Nov 2000 - I want a recount in the *primaries* in 2000. Then maybe we could have had a better set of choices.
Yeah, I remember thinking at the time that it would have been much better to have both primaries losers running against each other.
test….just tried replying here, and I don’t see it.
Never mind.
“In a nation of 300,000,000 this is the best we can come up with?”
No, not the best WE can come up with. The candidates represent the best the parties and PTB decided to finance and promote. Totally different situation.
Hey NYCboy pool etc…….are we going to meet up for a drink?
I’m right off the 7 train in sunnyside…….
Comment by aNYCdj
2007-09-24 11:26:26
Hey NYCboy pool etc…….are we going to meet up for a drink?
I’m right off the 7 train in sunnyside…….
Beer? Count me in… I take the 7 most of the time. Let’s go to Sidetracks.
Im starting to think even though the FED is not overtly capping the 10yr, the GSE are being used in the process of CAPPING the 10yr through the expansion policy….looks like an end run on, could just be this shiny hat I got on.
nhz, I don’t know what happened to your post. It must be lost.
Hey Ben, that new Dutch filter you added to the blog finally seems to be working.
Good morning! I hope everybody has a great week. It will be beautiful weather all week.
Careful NYC, all weather is local…and they’re not making any more of it…
?
I didn’t post on this thread yet, except for the one just above that shows up without a problem
Ben, the Dutch filter is busted again.
LOLOL!!!!
Maybe I’m missing the joke here, but what the heck is a Dutch Filter?
This is a very very slow trainwreck to have to watch. Everyone in the know, know’s it’s going to happen. Why not just get it over with, bring the market down, let the chips or houses fall where they may. Guess a lot of it has to do with timing next years election?
” Guess a lot of it has to do with timing next years election? ”
I’m with you. I think many of us here want this to be over with. I know I do. This propping up of the house of cards is agony.
“I’m with you. I think many of us here want this to be over with. I know I do. This propping up of the house of cards is agony. ”
Say it again, brother Palmetto. I feel like I’m watching a serial with the final episode coming every week, then saying “To be continued…”. It’s driving me nuts… short drive… no, walking distance.
I hear you palmetto. Last week I over heard two people say that they’re out looking for a house to buy because of the rate cut and before the prices start to rise again. When will they ever learn? The catch phrase of the reators now seems to be “don’t try to time the market, you’ll never know when it’s the bottom, hurry and buy now.” True, I may not know when it is the actual bottom, but one thing I do know is we are a long way from it. History tells us that the true bottom is achieved when there are few news stories, no one is talking about RE, no one cares about RE.
Postponing the inevitable and in the process, making it worse. Sigh. That’s the part I hate about this whole thing. I really don’t want some global, or even national, depression. Just a good, cleansing recession with housing prices dropping like a rock and the garbage from the bursting bubble all cleaned up. But NOOOOO, the big swinging dicks have to try even more engineering, which is what got us into this mess in the first place.
That’s the funny part of it all. Most everyone in the system is doing their “job”, the fed wants to keep it going for as long as possible then pass it off, the realtors want to keep it going, whoo hoo!, the appraisers, the mortgage people, banks, all want to party. It’s us potential buyers that won’t buy that are putting the damper on their party, shame on us, we’re the only ones that aren’t doing our jobs. We’re to blame for the oncoming depression. Down with people who won’t buy! Whoo hoo Debtors RULE!
I’ve had opportunity to watch many bubbles, all tiny in comparison to this Goliath…
But the human rules are every bit the same, and here’s what goes on in the players minds
Heat of the bubble: Intense interest
Post bubble partum: Intense lack of interest
i.e.
Many people try to distance themselves from someone that has been in a horrible car wreck, and is horribly disfigured, or someone that has a few months to live, due to lingering illness.
A distancing effect, if you will.
The powers that be wants to keep this train moving forward. Dollar is as weak as a person dying of cancer. The other day, I say our local gas station changes the price of gas up 30 cents in one pop. Hmmmm. Increasing the limit to $700,000+ will only save large investors. ” Save the Women and children first” is not the motto from our government.
Dollar is as weak as a person dying of cancer
These days the bubble talk is eerily similar to some conversations I overhear my hubby (an MD) have with other doctors re very sick patients. They go something like “We need to get the liver going, but not too much or it might bust the kidneys. And don’t forget the heart. If we push too hard he might go into arrest. OK, let’s try this first and see what happens”. Sounds like Bernanke to me.
Deron’s take -
It’s a 5 step process that takes a bubble asset to a true bargain:
1. Concern
2. Fear
3. Panic
4. Disgust
5. Neglect
Well, I for one welcome any and all delays in the crash until after I close (3 weeks). I suspect that anyone in the know can use the opportunity to get out of the way. A slow crash is better for all involved because it gives people more time to make better decisions.
The problem is when they don’t even allow a slow crash and instead let the tension build.
Ok Dan,
We’ll delay it for 3 weeks just for you. After that, all’s fair. Crash away my friends, crash away.
We don’t let them hit the skids without a lot of entertainment first. I want to be entertained.
Roidy
Yeah! I like things to be funny! And writhing misery from those who deserve it–developers and builders–is funny. Bring on more writhing misery, and also some scrambled eggs, please. I’m still hungry on this pretty autumn morn.
American in Canada
http://www.stockmania.com/2007_09_24_archive.html
Could this happen here? From the TimesOnline:
High street banks are slashing credit card limits and turning away droves of borrowers in a consumer credit crackdown.
…
Half a million Barclaycard customers have seen their credit limits reduced in a continuing review by Barclays of its customers’ spending behaviour.
http://tinyurl.com/3926ll
“Could this happen here?”
I welcome this happening here. It’s about time.
Yep, it could happen, probably will. CCs are a joke. No real terms to speak of. All that paper “disclosure” crap that they send out boils down to “We can do anything we want, at any moment”. Even people who think they are “safe” by paying off every month aren’t. OOOPSIE, they “never received” your payment.
It was a sad day when the usury laws went by the boards. Those were instituted to prevent situations that are occurring now.
A good customer will get the benefit of the doubt in such “oopsie” cases. I’ve been late with a payment here and there, due to simply forgetting. Many moons ago when I actually wrote checks and mailed them, a check was lost in the mail too.
Since I am not a deadbeat and I am very profitable, the cc company has let me slide and removed the late pay charge and whatever interest was charged. It is in their best interest to let me slide since the $35 late charge profit would be lost the very next month when I took my business elsewehre.
Not everyone’s out to get you.
Goodbye Credit Spigot…
http://www.youtube.com/watch?v=wDlSlwqNcmY
Its beginning to happen here in Russia as well. Russky Standart Bank, one of the big consumer finance companies (more of loan shark than a bank) is having problems with western short term financing upon which it is highly dependent. The bank also came under fire about a year ago for numerous hidden fees and strong arm collection tactics.
http://www.moscowtimes.ru/stories/2007/09/24/042.html
I saw that. It’s very alarming. The crunch spreads to Russia.
I saw that Russian M3 was growing at some outrageous pace - something like 40% over the last year. Now I can see how that might have happened.
Most of the growth in M3 is due to the Central Bank practice of printing rubles to buy up the USD from exporters in what is termed “dollar sterilization”.
I can’t imagine American banks slashing credit card limits in October. The PPT would be displeased by any discouragement to Christmas shopping.
“The Treasury is consulting on how the FSCS might be reformed.
Angela Knight, chief executive of the British Bankers’ Association, suggested that £100,000 may be too large a sum to protect.
“We’re very much prepared to enter into a discussion on how to get this right,” she said.
“We need to look at the average amount in a deposit account because at the moment we are making policy on the hoof.”
Wuh W’oh!
The Dallas Morning News reported something very similar about 2 weeks ago. Credit line reductions, quicker declarations of default and more selective new card issuance. Pretty much has to happen.
Here’s one for the bail out talkers; these artificially high prices have stimulated over building. How does any BO program fix the problem of there being too many houses out there?
I don’t think it fixes the problem. It just flushes a bunch of government money down the toilet without addressing the true nature of this mess. That is the worst thing about these bailouts. It is a crude transfer of wealth, once again, to the upper echelons.
“It just flushes a bunch of government money down the toilet without addressing the true nature of this mess.”
I’m guessing that wouldn’t be the first time. Nor the last.
By building more houses, silly. Believe me, none of these guys are the sharpest tool in the shed. Even when a down turn is obvious they think, “It’ll hit everyone else, but not me”. Which is why they all end up following the same strategy thinking it’ll work for them, but it doesn’t because they are all doing it.
“BO program”
Great acronym!
What’s more, if prices continue to fall over the next 3-5 years and homedebtors refinance today, it will be more like a bail-in than a BO.
Effectively, a BOP institutes price controls. This can do no more than delay the inevitable decline in the market.. but i believe that this is the whole intention.
While nobody could rationally believe a inevitable correction can be avoided by artificial means, the market’s downhill path and speed can be controlled somewhat, and I think govt efforts are geared toward this end.. the object being to avoid sudden market panic, which would cause wider and more serious effects than need be.
Actually, such a course is more likely to guarantee unnecessary panic. Market manipulation schemes are destined to fail and the larger the distortion, the larger the failure. In 2000, a 2-3% contraction in consumer spending would have sufficed to return the economy to a sustainable pace. That number is now more like 5-7%. Correcting that will take a long time and lead to lots of layoffs, with all of their consequent multiplier effects. Stupid and unnecessary.
What the hell is wrong with a little panic anyway? It’s part of the natural course of a free market. Let it be already…
“How does any BO program fix the problem of there being too many houses out there?”
Rather than fix the problem, I expect BO problems will worsen the new home glut. By continuing to keep prices at bubblelicious but unaffordable premiums to the market clearing price, BOs provide a windfall to homebuilders with the unfortunate unintended consequence of stimulating further overbuilding into a glut. A crash is still baked into the cake, but at least the day of reckoning is delayed.
One would have thought all the bright economists who work at the Fed would have thunk this through, but apparently panic clouds judgment.
The bailouts will be targeted towards the moneyed lobbying groups and friends of the top people who run various investment houses and hedge funds.
There are only a few million houses that are targeted by foreclosure. Are these people voters? My guess is that they probably vote less than the regular population because they may be poorer and/or less intelligent.
The number of houses that will be foreclosed upon I think is a very small fraction of US homeowners, and will not impact a significant number of the voting populace.
I don’t have the number or the cites for this, but this is my impression. If someone has any numbers that support or contradict my theory, it would be interesting to see them.
“The bailouts will be targeted towards the moneyed lobbying groups and friends of the top people who run various investment houses and hedge funds.”
One good turn deserves another. These targeted groups will provide a bountiful return in the form of campaign contributions to Dodd, Frank, Schumer, etc etc etc.
I had a question for everyone: Many hundreds of companies have been bought out with borrowed money over the past 5 years. Will the banks end up owning all of these companies if they can’t pay their debt? Will this result is massive centralization of the means of production?
“Will this result in massive centralization of the means of production?”
I suspect sanity will once again prevail. Those companies that practiced good business sense will prosper; those companies that binged on the kool ade of an excess of borrowed money will go under. Darwin will rule. Everybody will end up better off.
Everybody will end up better off.
Except the employees at the firms run by kool aid drinkers.
I guess many of these companies are not owned by the banks but by anonymous paper holders, just like with the CDO stuff.
i wouldn’t worry about banks running everything.. Bankers have zero imagination and know nothing about running businesses, nor do they have any interest in learning.
I suspect a bank will be anxious to sell off whatever businesses end up on it’s books, like it would foreclosed homes.
Private equity has poisoned the well. Many otherwise well-run companies are going to fail due to the excess leverage employed to buy them out. Many of the LBOs of the last 2-3 years have ridiculously high leverage ratios, with current (peak) cash flow covering debt service with only a small cushion. With a slowing economy, those cash flows will fall and good companies forced into BK because of too much debt. The bondholders will end up owning the companies when the thin equity layer is wiped out but are more likely to liquidate to get what they can than recapitalize so many jobs will be lost.
Pirate equity is more like it. Their recent practices are the equivalent of subprime mortgages and will have similar neutron bomb-like effects.
http://tinyurl.com/yqeyyj
So last week the DC Examiner was talking about how great the DC housing market was holding up and had more or less bottomed/stabilized.
Now this week they report that the area will have its first mass auction of sub-prime homes that could not be sold by the banks via REO agents. Of course they note that DC has a low foreclosure rate, but one must appreciate the significance of the event. The last time this sort of REO auction was held in Metro DC was ~15 years ago, which was when the area was in the midst of the last housing downturn.
A ton of those seem to be from Manassas and Woodbridge.
It’s working from the outside in…just like the last time.
Good… good - let it all fall!
The sooner the madness around DC (Maryland in my case, but Nova, etc.) ends, the better. I am so sick of hearing the BS line that it is “different here” and that we’re all rich” because we’re near DC.” Total nonsense, but people around here believe it.
Much of the population of the DC area is delusional. I am a contractor and live here temporarily. Citizens wax and wane about their ugly (& I mean really ugly) houses being worth millions. Bores me to tears. It is hard not to laugh.
There are a couple of other bubbles in DC , one is arrogance and the other is veiled ignorance. There are PhDs and graduate degrees every 2 feet, but that education seems to go on the escape people when talking about their “dwellings.
I was at a cocktail party last spring and someone asked why I didn’t purchase a townhouse. I was honest and said I didn’t see any townhouses in the Metro area that would even tempt me to buy, and I would not pay $750K for what is in reality a $375K dump. Maybe I had had one glass of wine too many, but you should have seen their faces. Stunned. Have these people never lived anywhere else? Maybe they were all from northern industrial areas and this truly is Mecca to them.
These folks need to get out more and see the rest of the country. There are far more cosmopolitan cities. Maybe those cities don’t have the same number of museums or PhDs, but musuems and PhDs alone don’t mean much to me. Quality of life is based on far more than those two things.
Amen brother!
I swear, the folks that have lived here a long time think they live in the best place in the world — that DC is some sort of cultural paradise. It’s not.
Believe me, there are places in the middle of the country with more culture, cheaper (and much nicer) housing, less traffic, and less attitude.
I work with people who have lived in the area for much of their adult lives. The agencies I go into are made up mostly of people who have lived in the area all of their lives. Sad. It is a cloistered place that hasn’t a clue about life outside the beltway.
I have lived in a few grand large cities and never I have heard such lame babble from highly educated people as I do here. And they don’t look so good. Bad haircuts, no style, and shoes haven’t been shined in 2 years.
Most of the “good” restaurants are at best mediocre. There are a few lovely sections close to the District, but true beauty is found in western VA and MD. DC itself is so full of itself. OK, it is great for a career. I will grant anyone that. That is why I am here. Yes, I have a PhD, but I have a damn good haircut and don’t buy my clothing at Eddie Bauer. (I go to NYC, Atlanta, Dallas and Charleston to buy clothing. Color…DC is starved for color.) Yes, one can have a PhD, make good money and dress attractively. You don’t see it often, but there are a few of us. I may shock clients when I walk into a meeting dressed as a polished professional business woman should. The men and women stare, but I can tell you they find out quickly I am as smart or smarter than any in the room. It works. A woman doesn’t have to dress like Albert Einstein to be taken seriously.
So when my contract is up, I will take the experience, the portfolio, the money and my PhD to Charleston or Asheville. And I won’t live in a ghetto dump!
The fishwrap of record endorses computer blip heavy metal…
http://www.nytimes.com/2007/09/23/business/yourmoney/23gold.html?_r=1&oref=slogin
London Stock Exchange Controlled by Arab States
QATAR has upped its share in London’s Stock Exchange to nearly 24 per cent, giving the gulf state and neighbour Dubai a controlling stake of nearly 52 per cent.
Quoting LSE sources, a Qatari newspaper reported the gas-rich Gulf state bought an additional 3 per cent of shares on Friday, a day after it bought a 20 per cent slice of Europe’s oldest stock exchange.
The Qatar Investment Authority (QIA), the investment unit of the Qatar government, initially bought a 20.8 per cent stake off two hedge funds.
This would put the QIA’s overall share in the LSE at nearly 24 per cent.
The United Arab Emirates’ group Borse Dubai meanwhile agreed to buy a 28 per cent LSE holding from Nasdaq, meaning the two now hold nearly 52 per cent of the stock exchange.
LOL! Just in time for the crash.
Great for the LSE that they could sell at the top!
testing the Dutch filter again
Dutch home prices reached a new all time high last month at EUR 258K euro median price; this is 3% higher than the previous month and 7% higher than same month last year. Sales numbers increased by 8% compared to last year. As you can see, with some extra government intervention the housing bubble is unstoppable! (Dutch bubble now in its +/- 16th year with price gains in the 600-1100% range).
With one of those overpriced Dutch houses, do you get a tulip garden as well?
for 258K you don’t get much of a garden but yes, tulips are a priceless option with some Dutch homes. At least the bulbs magically multiply underground, unlike the home itself. Come to think of it, maybe the Dutch government can organise a housing bailout when the bubble cracks by sending every citizen some tulip bulbs in the mail and igniting tulipmania again. Even a few years ago many rich Dutch investors lost their shirt by speculating in a tulip bulb fund, just imagine what some government propaganda can do!
they magically multiply unless you have SQUIRRELS!
haven’t seen any squirrel feeding requirements in the Dutch RE ads yet …
I don’t feed them, they dig up and eat my bulbs all on their own…
possibly you don’t have that problem there!
Nothing that a 10 year old boy with a blowgun couldn’t fix
How about some wooden shoes???
NHZ, why don’t builders build on some of that endless green land I spied on the train between Amsterdam and the Belgian border? Or does everyone have to live in the city?
yeah, there is plenty of land available …
the problem is the ‘grondpolitiek’, the biggest conspiracy in Dutch politics. It effectively blocks anyone from building on farmland etc. unless approved by some politician (who only grant permission when the land is owned by their buddy developers, fellow politicians, former state-owned housing corporations etc.). Only 11% of the Netherlands is built land (that includes roads, industrial areas etc.); increasing the built area to 12% would provide enough land for building homes for the indefinite future. Of course it would also reduce the current land prices so it is politically unacceptable. Politics simply does everything it can to create an artificial shortage in land and ever rising land prices; it doesn’t help that many politicians in the current government are owners or directors of developer/building companies (although officially the owner is usually their wife, nephew or some anonymous corporation). Just mentioning this issue has brought down two Dutch governments and many politicians.
This is an issue, but you are highlighting one side of it. Your view of “the indefinite future” does not map well beyond a few hundred years and there is already evidence of the need to sustain development for many thousands of years. Eventually all areas will be pushed closer to infill only development because they eventually have left only the wild and farm lands that appear to be needed. By adjusting to this reality some decades ahead of other industrialized areas some future crises and problems with competitiveness may be avoided.
correct, but in many parts of Europe population growth has stalled or is negative already; some experts think the Dutch population will see a net decline this year or within a few years. Emigration from Netherlands (no one talks about it … mostly well-educated and higher earning people) is higher than immigration (you know, all these ‘muslims that are invading the country’). This seems a sure trend in Europe unless we get an unprecedented crash that sets back civilisation by many centuries (you never know …); probably such a crash would decimate the population to start with.
The only factor that is pushing up demand for land / more homes in Netherlands is that average household size is shrinking (more singles, smaller families, more divorce etc.). I’m not sure about other EU countries but I guess this trend exists there too.
I would certainly object to using wild land (nature) for development because there is hardly anything left (and even then, real undisturbed ‘nature’ does not exist here, that vanished many centuries ago). As for farm land, if giving up about 2% of total farmland area would cure the problem of ridiculous land prices / building space for at least the next few generations, I think that is a little price to pay.
With tax-payer support, any Bubble can be sustained almost forever. Sure, the cost is terrible in the long-term, but I don’t think anyone running the show cares about that.
Here is something to think about. Northern Rock proves subprime lending is not simply a US phenomenon. If the BoE lowers rates, the pound could also lose value. From Bloomberg:
Last week the pound fell to as low as $1.9881 after Britain bailed out mortgage bank Northern Rock Plc. The rescue raised concern that more lenders may seek emergency funding and prompt the Bank of England to cut interest rates, hurting the pound by reducing the relative attractiveness of U.K. debt investments.
“This is an important turning point for the pound,” said Jim McCormick, London-based global head of currency strategy at Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage-backed bonds. “The expectations around the economy and monetary policy on the back of what has happened to Northern Rock have shifted pretty significantly.”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aaF3u9cWlBmY
We are probably due for a round of co-ordinated rate cuts from the ECB and BOE so that the Fed can go lower in the coming months.
This is what I expect too. Glad to see I’m not alone.
I dont enjoy thinking about the “coordination”. But, when the big boys are boxed in buy the red dragon, all bets are off..
strange, these same people always tell us that lowering rates is good for the economy and the stock market … so what is the problem?
This may be why people buying foreign currencies are going to need to be nimble to stay ahead of the game…
In turn each (of several) nations are forced to reduce rates because of credit market lockups, each currency, in turn, is hit. So, the dollar goes down, the dollar goes up, the pound goes up, the pound goes down.
Anyone got seasick pills?
No wonder some people prefer gold.
I think the Kiwi dollar mentioned above is a nice example. Rates of 7-8% on shortterm deposits sound nice… But look at the rollercoaster ride of the Kiwi $ vs. the dollar/euro over the last few years and you can see that it is easy to loose far more on your investment than you get extra by having your money there for a few years. If the carry trade really stops some people will only get out with major losses, despite earning a good yearly return for some years.
NZ, from what i’ve read…
Has much shakier national debt, than we do~
That’s saying something.
if I remember correctly NZ has a bigger current account deficit by %, but not the other big financial problems that the US has.
Vermonter:
‘… removing the caps may have some short term effect and has the potential to put us all on the line. However, Freddie and Fannie both require private investors. Is still true that they pulled an auction because they couldn’t find people to buy conforming loans??? Toxic garbage is still that even with government “blessing”.
Ooooooh! You’re right! Fan and Fred have to unload the shite they take on! And them furriners are demonstrating remarkably little appetite for more stinky entrees of American shite, even when it’s served up pretty by Fannie and Freddie.
That cheers me up.
‘Sides, think how fast Fannie and Freddie go. By the time they get it figured out and ready to implement all those FB’s will be living in tipi’s. Things are going bad reeeeeal fast.
Didn’t the IMF have a single thing to say about the moral hazard of a rush to bail out bad actors?
And it seems to me that a mortgage market rife with fraudulent and predatory lending could use a bit more regulation.
MORE REGULATION — LESS BAILOUT.
IMF Weighs In on Mortgage Meltdown
By Bob Davis
Word Count: 469
WASHINGTON — Although global economic fallout from the U.S. subprime mortgage meltdown is likely to be “protracted,” governments shouldn’t “rush to regulate everything,” said the International Monetary Fund’s top financial review official, Jaime Caruana.
In its semi-annual review of global financial issues, the IMF concluded that the “threat to financial stability increased,” in good measure because of the uncertainty over how credit problems are transmitted globally and how deeply the credit crunch will bite in markets around the world.
http://online.wsj.com/article/SB119040314332435514.html?mod=hpp_us_whats_news
I remember the IMF coming down loud and hard in Russia and Central Europe about government support of illiquid or insolvent companies. Don’t hear much out of them about letting Western Banks go down the tubes “for the greater benefit of capitalism”
the IMF is even worse than the FED and ECB, filled with failed politicians and other incompetent burocrats that couldn’t find a highly enough paid ‘job’ in their own country.
“…letting Western Banks go down the tubes…”
And I recall U.S. economic pundits decrying the Japanese banks bad debts which led to their fifteen-year-long economic flu. Where are these pundits now that the U.S. banking industry is hiding away its troubles behind a mountain of “illiquid” assets they are afraid to sell, for the price discovery that may ensue?
Actually, the IMF chastised the Fed for courting a repeat of the 1930s on numerous occasions.
The Associated Press September 24, 2007, 11:59AM ET
IMF: Credit market woes to be protracted
More from BusinessWeek
WASHINGTON
A credit crisis gripping international financial markets will probably be “protracted” and slow growth of the global economy, the International Monetary Fund said Monday.
The effects of financial market turbulence sparked by losses in the U.S. subprime mortgage market have so far mostly affected the United States and Europe, the IMF said. But developing countries, especially those which have experienced rapid credit growth in recent years, may also suffer.
Meanwhile, regulators need to make changes in the way they supervise financial institutions, incorporating lessons learned in this first test of new, innovative financial products used to distribute credit risks, the IMF said.
“The potential consequences of this episode should not be underestimated and the adjustment process is likely to be protracted,” the IMF said in its latest Financial Stability Report. “Credit conditions may not normalize soon, and some of the practices that have developed in the structured credit markets will have to change.”
http://www.businessweek.com/ap/financialnews/D8RRTUP80.htm
news snippet for those on the blog with an ING Direct savings account:
ING just reported they have 28.7 billion euros invested in US Alt-A loans. These are loans ‘without any significant risk’. Of course the risk is low, ING already reported a few weeks ago that their billions in subprime slime are perfectly safe, they expect less than 1% loss on their subprime portfolio…
Do you anticipate an ECB rate cut?
yes, IMHO it’s just a matter of when, not if.
Beggar thy neighbor’s currency.
When Airbus starts talking about layoffs (which they have), that pressure alone will force the ECB to cut.
Which Way Is Scarier?
Fed Move to Steer Away
From Recession Threat
Awakens Inflation Fears
By E.S. BROWNING
September 24, 2007; Page C1
The Federal Reserve cut interest rates last week in order to address a pressing concern: the risk of recession and of a breakdown in credit markets.
By lowering rates before it really wanted to, however, the central bank has revived another fear that had been dying down: inflation.
That has left the Fed and the investment world in a tight spot.
http://online.wsj.com/article/SB119058515796236665.html?mod=hpp_us_whats_news
Duck typing for a recession: If it walks like a duck and quacks like a duck, I would call it a duck.
I recommend investors stay away from bubble gum and beer — bad for the teeth and midsection. TRY SOME OF NEIL’S POPCORN INSTEAD!
Expecting a Bumpy Ride Down, Investors Prep Portfolios, Stocking Up on Slump-Resistant Picks
By Karen Richardson
The housing downturn, credit crunch, gloomy employment data and a parade of maudlin financial forecasts have been enough to send some investors scrambling for bubble gum and beer.
While economists jawbone about whether the U.S. will sink into recession, investors already are thinking of ways to prepare their stock portfolios for a downturn.
Even if there isn’t a full-blown recession — usually defined as two consecutive quarters of negative economic growth — many investors and strategists are bracing for a significant slowdown in growth.
It’s going to feel a lot like recession,” says David Kostin, global investment strategist at Goldman …
http://online.wsj.com/article/SB119058923538436773.html?mod=hpp_us_whats_news
Fed to Congress: No mea culpa.
Fed Chief Says Global Factors
Contributed to Home-Price Boom
By Greg Ip and Deborah Solomon
From The Wall Street Journal Online
WASHINGTON — Federal Reserve Chairman Ben Bernanke, responding to critics who contend the Federal Reserve’s low interest rates earlier this decade helped create a housing boom and bust, said global factors that held down long-term interest rates world-wide were a more important factor.
Mr. Bernanke told lawmakers at a House hearing on the nation’s housing slump that while Fed policy does work in part by influencing asset prices, “I think the primary factor leading to increases in house prices — not only in the U.S., but in many countries around the world — was the generally low level of [inflation-adjusted] long-term interest rates in global capital markets.”
http://www.realestatejournal.com/buysell/markettrends/20070924-ip.html?mod=RSS_Real_Estate_Journal&rejrss=frontpage&rejpartner=wsj_hpp
Damn right they were low. The Fed Funds Rate from 2003 through 2005 was negative!
The only other time to my knowledge that the Fed Funds Rate was negative was in the mid 70’s. We know how that 70’s show ended don’t we?
BB’s mea culpa blames the global savings glut for forcing the Fed into setting rates at ultra-low levels. It is quite unclear to me how this causality works, as the Fed is an independent central bank (right???).
“global savings glut”
I wonder what old Ben Franklin would have to say about these idiots running the show these days. Saving is a vice and consumption is a virtue. Like it takes some serious skill or personal sacrifice to be a consumer. I think I’m gonna puke.
“A penny saved is a penny not spent.”
By negative Fed Funds Rate I mean after adjustment for the official inflation rate at the time.
“We know how that 70’s show ended don’t we?”
With everyone getting stoned in the basement? There MUST be an analogy in there somewhere…..
“…while Fed policy does work in part by influencing asset prices…”
Does anyone have information on exactly which asset prices Fed policy targets?
the ones ,when going up, create UPHORIA
Don’t count your bailout chickens before they hatch.
MARKET SNAPSHOT
U.S. stocks extend prior week’s gains
Investor optimism fueled by Federal Reserve’s interest-rate cut continues
By Kate Gibson, MarketWatch
Last Update: 9:52 AM ET Sep 24, 2007
NEW YORK (MarketWatch) — U.S. stocks were mostly higher Monday, as investors remained upbeat about the Federal Reserve’s surprise half-percentage point interest-rate cut last week that helped propel Wall Street’s biggest rise since March.
“The bailout of the markets and potentially the economy moved investors from the sidelines into stocks. We are expecting the market to continue to advance due to the good feelings around the Fed cut,” said Paul Nolte, director of investments at Hinsdale Associates.
The Dow Jones Industrial Average (Last: 13,808.40-11.79-0.09%
9:57am 09/24/2007) advanced 5.4 points at 13,825.5, with 101of (SIC) its 30 components trading higher, led by General Motors Corp.
http://www.marketwatch.com/tools/marketsummary/
It looks like the aging bull is going to need more Viagra for the touted gains to kick into high gear today against a backdrop of recession worries on display in the pages of the WSJ…
Ample viagra has been supplied to give the aging bull its erection…
I have bad news for those who believe administering Viagra to an aging bull can make it all good again every time: The ravages of old age ultimately render Viagra ineffective.
Weren’t you all saying the dow has done nothing when compared to gold over the past 5 years. Or that when converted to Euros, the dow is where it was 5 years ago.
Now it’s an aging bull.
Can’t have it both ways.
I can’t speak to what “y’all” were saying — I speak for myself.
P.S. This old bull has been on life support for years, now. Not sure when the invisible hand will pull the plug, though.
September 24, 2007 10:08 A.M.ET
BULLETIN
Fresh gains greet new week
Follow-through buying at the open lifts stocks in the wake of last week’s rate-cut rally. The dollar slips against the euro, again. Gold gains, reclaims $740 level.
Plunge protection measures are in place at the flat line, though touted stock market gains appear dubious (aside from higher gold prices).
http://www.marketwatch.com/
Why does the DJIA get plunge protection, but not the Russell 2000? DISCRIMINATION!
Companies with international incomes gain from the crashing dollar. Small business, built mostly on U.S. based income are killed by the falling dollar.
Good point.
Seeing the DJIA and NASDAQ remain buoyant while the Russell 2000 index drops like a rock thrown into the deep blue sea reminds me of the saga of the Nifty Fifty in the 1970s, which stayed up while other stocks sank — for a while.
Does anyone else find it rather bizarre how the marketwatch.com headlines (accurately) predict the direction of the stock market’s movements? Back in the day, market commentators waited until after a price movement to report it.
??? Journalists are not little nostradamuses. They just look at the futures market and make it a headline. And FYI, they get it right as often as the futures market does.
Speaking of nostradami, does anyone remember the overlaid plot of 1987 stock market vs fall 2005? (or some such years.) It was ominously implying a precipitous drop.
So much for finding patterns in the price movement…
so apparently we are not going to see the 1987 pattern; but there were a few pre-crash patterns from other years that also fit well with recent market action. We will see…
But that’s the point, there are ALWAYS several other years that fit with today’s market action. Several point up, others point down, some go flat. However, this one was wrong:
http://tinyurl.com/2bbsmk
It may go down, but the reasoning should be causation, not correlation.
I see your point now. The futures sometimes count too heavily on bailout measures, and not enough on fundamental market forces.
Did someone cast an Imperius Curse on the yield curve? It appears frozen in place today.
http://www.bloomberg.com/markets/rates/index.html
http://en.wikipedia.org/wiki/Unforgivable_Curses
Now that the trading day is drawing to a close, the view through the rear view mirror suggests a better marketwatch.com headline would have been “Fresh losses greet new week.” Perhaps the PPT could step up to the plate in the last twenty-five minutes of the trading day and remove some of the egg off the marketwatch.com journalists’ faces.
http://tinyurl.com/2qxnp
This Is Why I Rent: Median Incomes Do Not Support Median Home Prices
Sep 17, 2007 — When you rent, most people mistakenly assume the decision
is made out of necessity, not rationality. But there is a very good reason
to rent in today’s bubble-stricken market: median incomes do not support
median home prices.
http://efinancedirectory.com/articles/This_is_Why_I_Rent%3A_Median_Incomes_Do_Not_Support_Median_Home_Prices.html
right on bear. and at the end of the day it’s the only true barometer that means anything at all. if J6P can’t afford it, you can hold your hand on your ass forever waiting for some uninformed schmuck to ante up. and whether anyone likes it or not, the first time homebuyer is still the straw that stirs the drink.
Good news about our government…
Increasingly, every morsel of lie that comes from our politicians has me convinced we’ve taken up the mantle of Pravda, in a big way.
And consequently, I am dubious of nearly everything they do, as they are tied to the hip, with big business, in a $iame$e twin fashion.
The only government bit of finance that I know of not one shenanigan ever happening, is the stated purity & weight of Silver & Gold American Eagle Coins.
I vouch for their goodness, easily redeemed always.
Does anyone know a reputable coin dealer in Florida?
Or should I just use an internet site and have coins mailed to me? I’m feeling somewhat paranoid about that. I’ve had mail stolen and “lost” in this district. Also, while I am home during the day, FedEx and the others always seem to miss me. I’d feel a lot better buying in person.
I’d look in the yellow pages for somebody in your area, and then google the name of their business…
If they’ve done anybody wrong, internet word of mouth vengeance is swift~
Makes sense to me. Thank you, I think I just needed some handholding. Looks like I have a couple of options in this area.
Funny, I stopped buying coins as a collector years ago and have spent my small amount of “blow” money every month on comic books instead … so I didn’t even know where the coin dealers were. (Hoping for nice recession so I can complete my Milestone Comics collection at a reasonable price, since DC won’t release STATIC as trades.)
Do not fret the propaganda; the inevitable is staring us in the face. And we are moving into October, which is often an ominous month for financial markets. I can see a “perfect storm” (financially speaking). Most on the contributors to this blog would prefer to see us take our macroeconomic lumps and get on with the adjustments so that we can return to the good ‘ole’ days of positive savings rates and affordable housing. The governments best efforts to rescue the “not allowed to fail” crowd will only worsen the outcome.
I say, “let the markets ride”!
We’ve seen this movie before and know how it ends. The sheeple go to sleep now thinking there is no way the market is going to fall. What’s more, even if it starts to fall, the Fed will save them. The professionals, however, are selling into this rally and reversing their positions. When it begins to fall, the sheeple will look on in suspended disbelief.
The trouble with policies (like the Greenspan-Bernanke put), which lull sheeple to sleep by making them believe that risky assets have been transformed through free Fed-provided plunge protection measures into a sure thing, is that overvaluation also becomes a certainty.
“History has not dealt kindly with the aftermath of protracted periods of low risk premiums.”
– Guess Who –
http://www.dailyreckoning.co.uk/article/alangreenspanssidesplittingcomedy.html
The glorious San Diego city government is turning a luxury condo tower project into low income housing:
http://tinyurl.com/3bzsgz
“The redevelopment agency is backing the $89 million project because it achieves two goals: It creates more affordable housing for families and the housing is north of Broadway. Most of the recent publicly financed projects downtown have been in the lower East Village and Marina neighborhoods.”
At $89M for 226 units, that’s nearly $400K per unit. You’d think you could get low income housing built for less than that during a real estate downturn.
Goodbye KB Homes, the national developer who got approval in April 2006 for a ritzy 184-unit condo design on B Street between 10th and 11th avenues.
Enter a San Diego firm planning to tweak that blueprint into 226 apartments for families who earn less than $42,000 a year.
HOLY MOLY Batman! We have been talking about this going to happen. This is the first example I’ve seen where they are doing it….
Pruitt-Igoe rises like a Phoenix from the ashes!
http://en.wikipedia.org/wiki/Pruitt-Igoe
Beware of high-rise buildings designed by Yamasaki.
“Background and development
Designed in 1951 by architect Minoru Yamasaki (who would later design the New York World Trade Center of 1972-2001), the complex was named for St. Louisans Wendell O. Pruitt, an African-American fighter pilot in World War II, and William L. Igoe, a former U.S. “
Only in San Diego. The sunshine is expensive now days isn’t it. Let’s hope there is a little money left for suntan cream as the taxpayers in San Diego are getting creamed!
At $89M for 226 units, that’s nearly $400K per unit. You’d think you could get low income housing built for less than that during a real estate downturn.
Especially when you consider that in most of fly-over country, 400K buys a very, very nice house.
You could probably buy out a recently “converted condo” development at half or less of the unit cost of the downtown project and provide useful housing that is closer to schools and services.
The cynic in me wonders if this downtown project is more about funneling money to a developer than in providing housing for the working poor. Nothing meaningful happens in providing low income housing since before the housing boom and now that a developer is about to lose their shirt something finally happens. In all likelihood, the city is paying far too much for too little.
Will those low income units come with pre-installed graffiti?
It’s SoCal. The outside will be tagged early and often long before move-in. As for the inside, it depends on who they let in and how the building’s managed. It doesn’t have to be bad.
I don’t know who else here is holding any PWI (Prime West Energy Trust), but I’m curious what this news means to the average shareholder: http://www.bloomberg.com/apps/news?pid=20601087&sid=aMv9iKlHW6oQ&refer=home
Abu Dhabi National Energy Co., the state-owned power generator and oil producer, agreed to buy PrimeWest Energy Trust for about C$5 billion ($5 billion) in cash and assumed debt, increasing crude output in Canada.
Abu Dhabi National will pay about C$26.75 each for PrimeWest’s outstanding units and exchangeable shares and assume the income trust’s debt, the company, also known as Taqa, said in a statement today. That represents a 34 percent premium to PrimeWest’s closing price on Sept. 21.
Is this the type of event it makes sense to sell into and assume the price will settle back down after the purchase? That’s a pretty big one-day jump.
Never owned stock in a company that is being bought out. Not sure how to play it. Any input appreciated..
And yes, I realize this isn’t a stock board, but it sounds as if a lot of people here are invested in oil+energy as a way to ride out the inflationary environment, dollar devaluation, etc. At least I know Bill in Phoenix was big in to royalty trusts like PGH.
I bought 300 more shares of PGH at prices around $16.00 and $17.00 in recent weeks. Life is good!
I spent an hour yesterday putting together letters to Schumer, Dodd, and Frank with a list of 157 people accross the country saying “no bailout” a couple of dozen different ways. They hit on most of the ideas we’ve had here. Was the comments section from a CNN article about the GSE’s being allowed to grow to buy up more bad debt.
One guideline that’s been helpful to me over the years has been to get data from sources that are close to the action but not directly part of it. Such sources have enough information to be useful but far less incentive to lie or conceal than players with an overwhelming financial interest. That’s what made the Credit Suisse report so valuable - note that it came from the homebuilder analyst, not the one covering mortgage lenders. In that spirit, I present Wolseley - a UK based heating and plumbing firm, with a sideline in building materials. Naturally their US business has fallen off with the housing crash - down 75% on the new construction side. Interestingly, the remodeling and upgrade business is also off sharply:
“The group’s warning that the crisis in the American housing market had spread into the home repairs business pulled trading profits across North America down more than 19 per cent to £487 million after one-off acquisition and other costs.”
http://business.timesonline.co.uk/tol/business/industry_sectors/construction_and_property/article2520336.ece
This is despite good core plumbing and heating revenues. Just another confirmation of what we’re seeing at Home Depot.
Accusations fly in UK over continuing ‘reckless’ financial activities of beleaguered Northern Rock bank: see http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article2512384.ece
It “is still offering mortgages of six times salary to potential borrowers,” and later “offered a so-called “negative equity mortgage” worth 117% of the value of the property [the investigative reporter] claimed to be interested in buying. The mortgages offered by other banks to the same potential borrower were significantly lower.”
“Financial experts were this weekend stunned that Northern Rock is offering such loans a week after it was forced to turn to the Bank of England for emergency funding.”
NR is “pushing ahead with a plan to pay a £59m dividend to shareholders and executives this week,” 30% higher than last year’s dividend. “Politicians yesterday expressed dismay that the government and its regulators had not stepped in to supervise Northern Rock’s business practices following the government bail-out.”
I guess that is exactly what politics and the banksters had in mind: it’s contained, business as usual. If anything goes wrong the taxpayer gets stuck with the bill just like they always planned it and the fat profits for the banksters keep flowing.
in Netherlands you can still get 10x income loans and 110-120% mortgages (although probably not all at the same time with IO or ARM flavors). Why worry, Dutch home prices are making new all-time highs every month so everything is fine. And just in case someone still worries, the minister of Finance and the president of the Dutch Central Bank have assured us that there is no housing bubble in the Netherlands.
Someone rejected the idea of a possible rebound in housing sales before they hit the skids. I thought it sounded plausible. So did the flippers.
From: http://www.cnbc.com/id/20956040
“So get this. Over the weekend several foreclosed properties held open houses. We were there. And so were the flippers! After all that’s happened, a new wave of speculators has descended, hoping to take advantage of the 10%-15% below market values these homes are selling for. Their plans? Fix ‘em up and sell ‘em at a profit! To whom, I haven’t a clue.”
Flippers are the perfect group to catch the falling knife which will ensue when it becomes apparent that bailout measures are an exercise in futility!
According to the article, the reporter is going to be there tomorrow reporting live! I may just have to tune in to see them!
How is that newfangled home builder’s business model looking these days?
Investors look to housing data, builder results
More bad news expected in home sales and reports from KB Home, Lennar
By John Spence, MarketWatch
Last Update: 1:11 PM ET Sep 24, 2007
BOSTON (MarketWatch) — The housing market will again be in focus this week as investors brace for expected reports on August new- and existing-home sales, while two of the nation’s largest home builders are slated to report financial results that will likely include quarterly losses and write-downs.
Builder stocks got off to a rocky start Monday.
Standard Pacific Corp. (SPF:Last: 7.02-1.08-13.33% 1:57pm 09/24/2007) said it would offer $100 million in convertible notes, and that its board of directors has eliminated the company’s quarterly cash dividend. The company expects to save about $10 million annually, with the funds to be used to pay down debt.
“Given the relatively small aggregate amounts involved, we have believed that home builders would cut/eliminate their common dividend only when faced with a severe near-term liquidity crunch where every penny counted,” wrote Morgan Stanley analyst Robert Stevenson in a research note Monday.
The news that Standard Pacific had eliminated its dividend “prompts us to reexamine this view,” he said. There has been persistent speculation in recent months that some home builders may not have the financial strength to survive the current downturn.
http://www.marketwatch.com/news/story/housing-market-may-face-more/story.aspx?guid=%7B05B5CE86%2D507C%2D40E4%2D8A94%2D14C374F7066B%7D
Many builders have been hit with credit downgrades. Their cash flows are weak to negative and most of them have very little cash in the bank to boot. If they are desperate enough to cut their dividends, the hounds are on their heels.
Late post on Target
LOS ANGELES (MarketWatch) — Target Corp. (TGT:target corp com
“TGT64.30, -1.35, -2.1%) on Monday evening cut its forecast for September sales at stores open more than a year to an increase of 1.5% to 2.5%, down from its previous forecast of 4% to 6%. In a recorded message, the Minneapolis-based discount retailer said there was weaker guest traffic in September than expected, and it said that sales in the northeast were particularly weak. Target shares were down more than 4% in after-hours trading. ”
Everything we see just confirms the macroeconomic picture: tapped-out consumer, declining home values, offshoring of jobs, stagnant wages, falling dollar, inflation in commodities (read: necessities).
If anyone wants to short the retailers, try stock symbol SCC.
ATLANTA (Reuters) - Retailer Lowe’s Cos Inc (LOW.N: Quote, Profile, Research) warned on Monday that full-year profit could trail its prior forecast, saying dry conditions in some parts of the United States were hurting sales.
http://www.reuters.com/article/ousiv/idUSN2431831920070924
Damn weather fouling up the economy again!
an article from realty times has me disturbed. i need some feedback about this issue. if realtors like it something is wrong.
http:realtytimes.com/rtpages/20070924_poisedtake.htm
an article from realty times has me disturbed. i need some feedback about this issue. if realtors like it something is wrong.
http//:realtytimes.com/rtpages/20070924_poisedtake.htm
Breaking news
A judge just shot down the Florida property-tax cutting amendment, saying it was unconstitutional. It has been ordered off the Jan. 29 ballot.
Judge said it was confusing and misleading saying it would actually phase out the Save Our Homes exemption instead of preserving it.