Bits Bucket And Craigslist Finds For September 28, 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
Location:Northern Arizona, United States
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Crash Proof!!
I have finished reading Peter Schiff’s book that has been made available for all to read and pass on by NYCityboy. It’s ready to go to the next person. Just send me your address and I ‘ll get it of the way. The idea is for it to make to Ben(Jones) after it makes it’s rounds. My e-mail is wmbz@bellsouth.net
I just hope nobody gets too excited reading about all of that credit destruction and pages get stuck together.
Ji$m?
Jismnasium.
Jismnauseam.
Schadenfreude is sticky.
Icky!
But funny.
I couldn’t be too critical, though. I get quite excited myself. After reading about all the builders, Lennar, etc. writhing in misery, in the articles Ben posted the other day, why, I had to stop breathing so hard and go have a nap to calm down.
Funny you should post that. I’m currently fighting off my ADD and trying to finish that book as well and meant to ask if anyone else was reading it.
After reading the first two chapters, I swear Schiff is on this blog somewhere.
Long time lurker, never posted.
I’m almost finished with Crash Proof. One thing I haven’t seen addressed yet is that it’s not just the United States that’s in a housing bubble — Schiff doesn’t seem to mention that many other countries are in bubble territory also. This makes me question his analysis of overseas markets in general.
IMO, Schiff is overestimating the capcity of Asian countries to go thru the American Armaggredon he so vividly predicts in his book. Sure, the chinese middle class is growing, but what about the billion other chinese barely making ends meet and the peasants (still a vast majority) rebelling every day and facing one terrible drought in the north. What shocked me in this book is the advice he gives people to sell their houses and invest the money in foreign stocks with his brokerage firm. I just received a letter from Euro Pacific Capital to damage contol the panic after the hit their customer’s portfolios took recently.
lafayette, you bring up a very good point. Western economists often grossly overestimate the capabilities of asian countries. India for example still has 40% population below poverty line (thats measured as 2 square meals a day in india), infrastructure outside (and often within) big cities is in shambles, and corruption…don’t even get me started. I had to bribe a couple of city clerks to get my Dad’s death certificate.
Yeah, I recently read reviews of the book on Amazon and that was brought up by some of the more negative reviews. That and how he seems to discount the possibility of deflation. I haven’t read far enough to know whether those are fair criticisms but they stand out as such nonetheless.
I have read it twice in the last 4 months. He is spot on about the problems in the US.
It is an oft noted critique that he spends far too much time shilling EuroPac but after watching all of his MSM interviews on the cable channels and talking to him on his radio show about his shortcommings, he is in my opinion genuinely concerned about getting as many everyday Americans out of trouble here in the US.
I did take exception to his dismissal of Everbank on his radio show.
I think he needs to focus on figuring out how China, which is run by a totalitarian regieme can handle the unbriddled success that he predicts for them. I have grave and severe reservations that the political structure of China can handle it.
Don’t get me wrong, I like Schiff, but I found Crash Proof lacking in appropriate proof proving methods. There are no footnotes or references other than graphs. I found it is simply an endless editorial with many “suggestions” along the way about how you should invest in Euro Pacific Capital.
In other words, I didn’t learn anything new that isn’t found on this blog.
I am shocked at how he suggests Canada as an alternative investment country. Canada is way ahead of the US and most of the world in white collar crime. Nothing like having your investments stolen and having a judge say “C’est la vie!”.
Riding the Horsemen
http://www.stockmania.com/2007_09_28_archive.html
For A Song…
http://cbs4.com/topstories/local_story_264095336.html
I wonder what the homeowner fees are?
Crossposted back to the Bits Bucket, where it belongs.
That was me, thanks for the follow-up. This does not surprise me at all.
As I’ve also previously mentioned around here, I’m a slug in the D.C. area.
Yesterday afternoon for the first time every I passed up a ride home. The
car had a big ‘rejected’ sticker in place of the state mechanical
inspection sticker. I had seen one previously, as well; and also saw one
while out bargain hunting at yard sales a few weeks back. Before two
months ago, I don’t recall seeing any.
This thing is real, even when it’s different here, people are feeling the
financial pain.
As a final aside, I tossed Ben some cash, the ill-gotten gains from my CFC
purchase at $17.15 and sale at $20.15 courtesy of the tip from a HBB
poster. Granted, +$3 per share looks really nice, but when you take out
comission and taxes, and understand this was just my ‘fun’ money… well,
Ben didn’t get that much. But it was enough to cover the PayPal expenses,
at least.
tax to pay for DC =bummer
Thanks to the insurance-car body shop feedback loop, where insurance companies pay above-market prices to body shops for repairs then charge the damage costs back to customers through higher premiums, paying for body shop work does not pencil out (unless one is willing to pay over $500 to remove minor dings).
I had to do that once (ate up a whole paycheck) when I backed into a wooden post with someone else’s car. With a $60 replacement rear light, it came to $550.
Stupid, stupid, stupid!
San Diego shocker! Who could have possibly foreseen this?
BTW, can anyone familiar with a definition of recession as ‘an extended year-to-year loss of jobs’ please provide a reference? This article is the first place I have heard that one.
My guess: Gin is attempting to lift the bar on what qualifies as a recession in order to avoid having to say San Diego is in one after two consecutive quarters of negative economic performance.
SD was the canary in the coal mine for the housing bust; will it play a similar role for the national economic picture?
S.D. economic forecast looks ‘pretty bad’
By Dean Calbreath
STAFF WRITER
September 28, 2007
San Diego County’s leading economic indicators took a sharp plunge in August, signaling that the county faces its greatest threat of recession in half a dozen years, according to a report released yesterday by the Burnham-Moores Center for Real Estate at the University of San Diego.
All six components used in the index were negative last month. Building permits, stock prices, help-wanted advertising and consumer confidence fell. Unemployment filings rose. And the national economic outlook weakened.
The index fell 1.4 percent in August. That is the steepest decline since 1979, although USD economist Alan Gin, who compiles the index, cautioned that there may be some upward revision. The index has fallen 16 of the past 17 months.
“Things are pretty bad,” Gin said. “Not only are all the components down, but they’re down by hefty amounts.”
Gin still thinks there is less than a 50 percent chance the economy will go into a regional recession – meaning an extended year-to-year loss of jobs. But he said the chances of that happening are the highest since at least 2001, when the national economy briefly dipped into recession.
CLICK!
http://www.signonsandiego.com/uniontrib/20070928/news_1b28sdecon.html
This post misfired — it was supposed to stand alone (not as a comment on another post).
“That is the steepest decline since 1979, …”
Note that the years 1980-1982 were the period of the worst U.S. recession post-WWII. I would be really curious to know how Gin came up with his 50 percent probability (sounds suspiciously like “heads we recess, tails we do not”).
“…the years 1980-1982 were the period of the worst U.S. recession post-WWII”
Yes, 1982, sweet memories…purchased a VA home loan @15.5% fixed…$26,000…3 bdrm 2 bath home in Nebraska. Then, in 1991, I tried to sell it…talk about timing…Charlie Brown, you’re a BlockHead!
In 82 we assumed a VA mortgage at 14.5 and thought we were doing “good”.
That eCONomist’s ramblings are no tonic, to a thinking man…
I have noticed a significant decrease in San Diego traffic during my morning commute, starting in August. Yesterday was the first time in months I spent any time sitting in traffic, which was a common event when we moved to our present location a year and a half ago. And that was only because of a malfunctioning stoplight at Black Mountain.
In fact, the last time I remember traffic being this light was when during the “immigrant strike” last year. Traffic is now almost that light all of the time, at least along my normal commuting route.
My commute is out of Escondido down the I-15 corridor. I carpool. The carpool lane for the metered onramps >6months ago were filled with beat-up pickups loaded with construction tool or lawnmowers, almost to the point where there was no benifit between using the regular lanes and the carpool ones. However, the last few months it’s been a breeze getting on the freeway, a lot like it was during the 5/1/06 immigrant strike…
good for you. since the beginning of september traffic from south bay (chula vista) is so much worse. more trucks and more cars, everyday.
That “less than fifty-fifty / heads-or-tails” recession prediction has wide currency…
Greenspan sees chance of recession increasing
By Simon Kennedy, MarketWatch
Last Update: 7:18 AM ET Sep 28, 2007
LONDON (MarketWatch) — Former Federal Reserve Chairman Alan Greenspan said Friday that the chances of a U.S. recession have increased as the housing market slump has hit consumer spending power, though he added the odds “are still less than 50-50.”
http://www.marketwatch.com/news/story/greenspan-sees-odds-recession-rising/story.aspx?guid=%7BB5C949B6%2DC6BD%2D4F36%2DA168%2D0E98B0C724B7%7D
You’re a slug! Cool! I slugged once, with my boss, for some super-secret reason that had to do with work, I just don’t remember what.
I used to work for PRTC (OmniRide). We had a love-hate relationship with the sluggers. On the plus side, you guys support us at budget time, since we’re your ride of last resort. On the minus side, you guys have an annoying habit of slugging in the morning and riding the bus in the evening, meaning we have to have more buses for the PM peak than the AM peak–which is quite expensive!
BTW, if you travel from Pentagon to Dale City and take the FX-1 Friday-only Express midday bus home (say, if you work an abbreviated work week–four 9’s and one 4), that was me. I came up with that route. *grin*
No such luck, but it’ a handy route. PRTC is one of the better run public transits. Not quite as impressive as BT (Blacksburg) but with a heck of a lot less subsidy.
I’ll admit to slugging and riding in the afternoon on occasion, but usually only because the HOV hours are too short. They need to be extended. After about 1745 it’s impossible to slug, so: off to the bus lines we go.
Repeat after me: HOT is a bad idea.
I’m so pretty, pretty!
http://www.huffingtonpost.com/tag/edwards-subprime-lending
“his tie to Fortress, which paid him $479,500 for 14 months of work”…
Man, nice work if you can get it. Guess I’m not pretty enough.
Edwards is an ankle-biting shyster.
Thanks for the link. Edwards is a phony; a dishonest hypocrite running a campaign on the plight of the working poor, all the while living in a 30,000 square foot monster house. Despicable.
I should add that we can’t have a balanced, prosperous population with the likes of him. It is because people are able to live and behave like him, that we have a nation of debtors and have nots.
Hey, Ben. What are the rules on posts not showing up? I don’t post often, and generally just let it go if they get eaten, but this one’s gone twice (trying to reply to Hoz). Don’t want to repeat myself with a double post, either though. Know you’ve been working on the comments server, but what’s a good rule of thumb?
Nevermind, there it went.
You just have to watch the motherf*##$@3 profanity. My posts never get on - Ben thinks I’m an idiot.
This is good
http://www.minyanville.com/articles/index.php?a=14276
Those are strong, scary words.
OT: Chronos - just out of interest - are you using a Greek or English keyboard?
So, would you say today looks good for shorts based on the idea that the market is being sustain until bonuses are set (9/30) and that yesterdays dim economic news has created a suckers rally looking for further rate cuts?
Methinks this is a turning point.
I went ahead and dipped a toe in the short waters of CFC and TOL around noon today. I’ll double down Monday if I got it right.
Rod Stewart - Not Cat Stevens
Cat Stevens had the original…Rod Stewart and Sheryl Crow were covers.
LOL - “Kind of like Marie Antoinette saying to the man behind the guillotine – ‘Just a little off the top, please.’”
Interesting book that they mention. It was last published in 2004. My library system already has four holds on that edition, but I am getting an older edition (1994) through interlibrary loan. Abebooks.com and Amazon also have a few copies left.
Whoops, this was supposed to post above in response to txchick’s post about the minyanville article. The book is titled “The Creature from Jekyll Island.”
As some of you may remember, my sis in FL is selling her house. She did her homework, priced out the neighborhood, figured out which house that was the least priced and the closest in size, etc. then priced her house 15% less than that. Her house was put up at 749k , she had some woman who looked at her house 5x, had her father fly in from italy to look at it, then offers $612,382 cash. Admittedly, my eyebrows went up at, not only the random number but 140k plus haircut.
My sis, of course knowing me, says that she and my bil figured I would cheer this woman on (which silently,in my head, I did, then denied vehemently)
I adore my sis, and admittedly she is in the most resonably priced house in a multimillion dollar gated community with acres of land but part of me wants to tell her take the money and run.
She has some kind of logic that there will be a rebound by next year. I just sighed and said for her sake I hope she’s right. (but once again, my head is screaming NOOOOOOOOOO!)
“Her house was put up at 749k , she had some woman who looked at her house 5x, had her father fly in from italy to look at it, then offers $612,382 cash. Admittedly, my eyebrows went up at, not only the random number but 140k plus haircut.”
I don’t know where your sis’s house is, but unless it is in Palm Beach, Sarasota, the exclusive parts of Miami (Star Island, etc.), maybe Naples, $749K for a house in Florida is mind boggling, unsustainable no matter how many gates the community has and she should have grabbed that offer. JMO, anyway.
Melbourne…alot of aerospace people. My bil designs sattelites(sorry,no spell check) And there is a lot of horse people. Don’t know too much about it other than the community is visually breathtaking.
IMO you’re probably right but i do know that she is, without a doubt, priced at more than half of what the majority of the houses there. Granted, they’re house is smaller (2800sq ft?) and has solar…people tinf they built they’re house too practical. How these people come to this conclusion is beyond me.
tinf….think
sorry
Sounds like your BIL works at Harris. I worked there for a few years an engineer and he probably makes what the other engineers I know made. It isn’t enough to afford a million dollar house or a 740k house. People down there went house crazy just like everywhere else.
In fact, there was a whole club of engineers who decided to get rich by pooling together and buying investment houses. Bright people but caught up in the mania in a big way.
He did work there at one point and truth be known, don’t know how much he makes. All I know they are super conservative (credit for emergency only, pay off balances, keep the same car for 15 years, save save save etc)
They built the house pre boom on property that they owned outright.
Could they afford a 749k house? nooooo.They didn’t pay that much to build it.
The question is: Were they living in a 749k house? Apparently they think they do…i’m still skeptical, no matter how beautiful it is.
Danni — $749K today in Melbourne for a 2,800 s.f. house is nuts, IMO. As I recall, Melbourne/Palm Bay just had the biggest decline, or one of the biggest, in Florida, if not the country.
Do you know the name of the subdivision? The Cloisters does not have large lots, Windover Farms is not gated. The type place you mentioned sounds more like Viera. Whatever, if they are not directly on the ocean or a river, they may be hard pressed to get a similar offer again, for such a relatively small house.
And to claify, Palm Beach ISLAND, not West Palm, Palm Beach Gardens, or any of the other inland areas.
I may have to digress with some bloggers on this point, but I truly do feel that oceanfront/beach access properties are special, and will maintain value FAR better then the McMansions on the other side of the intercostal waterway (similar to where I live). I would pay a very large premium to be beachfront, and I feel that many others feel the same way. Deep water access as well will maintain value much better, imho.
However, that said, I do agree with Palmetto’s point, that home had better be something VERY special. Which, given my familiarity with the area, I can almost promise it’s not. That’s probably a 3000-3500 sq/ft house in a gated community west of 95. Basically throw a rock and hit unimproved land ripe for development. Anyone who thinks we are running out of land in Palm Beach is a total moron.
Jupiter Island is pretty nice too, like this: http://tinyurl.com/preview.php?num=2fy9nf
Waterfront always holds up best, even in hurricane plagued Florida because they are not making any more of it.
Jupiter Island isn’t about housing. It’s about rich people and their palaces. A Beverly Hills of Florida type of place — interesting but not comparable to much except other very small, very rich enclaves.
Stupid question, but I assume that when you say she priced hers at 15% below the “price” of the lowest priced home in the neighborhood, you meant selling price, not asking price?
Yes…selling
The exact offer thing is an old negotiating tactic.
The offer is exactly 81.75% of her ask price. Sure, a 140K haircut sucks, but that’s life sometimes. If I had a sister in the same boat, I would be honest about how I felt about the housing situation. Speak the truth in love, then let it go is what I’d do. That also avoids the “why didn’t you say something” conversation later.
‘. If I had a sister in the same boat, I would be honest about how I felt ….’
-Sorry, but she is’nt going to ‘Give the House Away’.
-Sorry, but she isn’t going to “Give the House Away”.
Yup, you nailed it on the head… and as we all know, there is no talking to people who think that way.
It would be like slammin’ my head against a brick wall.
I figured the same as you and Sobay, my sis might do the same. So I might just say my piece and shut up, as you’ve done. At least my conscience would be clear.
There are so many houses for sale in Florida, that it would be foolish not to find 5 houses you like and offer 20% below the last comp sale price for each of them. You’ll probably get your house.
And if you really want the house to live in, even though you know full well that it might really end up being “worth” 40 or 50% less than asking, at least you sort of met in the middle.
To show an example:
http://www.flickr.com/photo_zoom.gne?id=998445269&size=o
This is a zillow page of two developments within 1/2 mile of where I own a chunk of land. There are actually twice the number of homes for sale than the red flags indicate. Some have been on the market for more than a year.
All these homes are, more or less, identical. If I really wanted one of these shitboxes, I’d make 40% discounted offers to the 5 lowest price house, and presume someone would make a counteroffer in the middle somewhere.
(The flip side is that basically everybody who still has a house for sale there has already lost money. Selling prices are now below what Rydex sold them for in 2004! So some of these people may just have them “for sale” until their money runs out or the bank/county takes it back.)
But I saw on CNBC this morning that the Atlanta Fed President said that the economy in Florida is growing. Am I missing something?
she needs to take it and cross her fingers that the people don’t back out
1980 is always on my mind…
I watched the Silver bubble explode from $5, to $48 in less than a year’s time, as a late teen.
When it started down, there were the usual suspects that claimed that it wouldn’t go below $40, then $30, then $20 and finally there were no believers anymore…
Once confidence goes away, game over.
This might make you feel better (or maybe not).
PS-This is in Wisconsin, for crying out loud…LOL.
http://milwaukee.craigslist.org/rfs/433513580.html
Why not tell her to counter at 699K?
She doesn’t want to insult the buyer.
I think she did
LOL!! Jim Cramer was on the Today show a couple of days ago saying to NOT buy a house right now. Well, a bunch of pissed of RealWhores (as my niece calls them) wrote in to say it was a great time to buy. Well, they had Jimbo back on today with some NAR douche. Not surprisingly, said douche brought out “real estate is local, blah blah blah”. He then gave three good markets to buy in: Indiana, Ohio, Michigan. LMFAO!!! Sure, its great if you don’t need a job. Douche then went on to say that he spoke at the Indiana Realwhore convention and “they were optimistic that things would turn around”. Man, are these people allowed to vote or drive cars? scary sh!t. Anywho, to end it Cramer brought a piece of paper to read a quote. Something to the effect of “The NAR predicts in August that home sales have bottomed. This was August 2006.” Wow, either Cramer now reads here or he was been replaced with a HBBot. Can someone try to find a video? great stuff.
I get the feeling Jimbo’s been with us, for some time now…
Will the real Jim Shady please stand up:
http://www.youtube.com/watch?v=UDd4Ly9cD4c
Cramer turned just in time…
If he hadn’t, he’d have been ripped apart.
The Realtors ™ will always sell… its like asking the kid at best buy “should I get a larger plasma screen?” The answer is always “buy it!”
Got popcorn?
Neil
All his buddies must be re-positioned to the short side and Jim’s marching orders are to stampede the sheople to the exits and off the cliff.
News flash for Jim Shady: Everyone already bought!
When egomaniacs like Jimbo capitulate, is it time to buy?
I distinctly recall Cramer calling a bottom in RE last November (’06). He was quoted as “I think people will look back on this as a good time to buy a house”. He went on to say: “I am planting the flag on the homebuilders as all of the bad news has been priced in. Buy! Buy! Buy! [the homebuilders}”. What a tool.
Jim Cramer is trying to back track, that idiot called bottom so many times on the housing market in the past. Probably trying to dump all his homebuilder stocks at the time. Now he says it will get worse, it truly shows how much of a moron he really is. He is trying to cover his tracks, but his comments are now well documented in the housing blog.
Why anyone even listens to that blowhard is beyond me. He’s only been proven wrong time and time again. Don’t even bother.
The only reason he’s on board now is because is because bubble talk is now “in”. It’s easy to predict rain when storm clouds are overhead and lightning’s crashing all around.
Yeah, I don’t like him either, but it was fun to watch him hack the balls off the president elect of the NAR.
Plus, Cramer is a big cheerleader for stocks ,so how is he any different than the real estate cheerleaders .He just wants people to put their money in stocks so the stock market can get a big bull run so his stock calls will work out .
I wish someone involved with main stream media would just discuss the reason why real estate is unstable (excess building ,excess speculation ,unqualified buyer demand ,fraud ,hit the mark appriasals ,to much easy money available ,etc ),and expose the market for the mania it was .That way than bail outs will seems stupid .
Cramer isn’t the guy to take on the NAR when he is saying “Buy Buy Buy stocks” in a economy that is going into recession .
Can’t speak for Ohio or Indiana, but they are getting desperate in Michigan. I have a realtor in Harbor Springs (which is an upscale resort dating back to the Victorian era) that is calling me about once a month. I told him I’d buy when we get back to Victorian pricing. Once a month he gets the “We’re not there” speech from me. It’s pretty humorous how desperate they’re getting up in the woods.
Don’t know if you’re from the Chicago area, but I’ve said more than once that when the Chicago buyers go away, the west side of Michigan is in for a world of hurt.
Cramer on CNBC-
http://www.cnbc.com/id/15840232?video=533257614&play=1
Please forgive me if this has been discussed already…
http://www.law.com/jsp/nlj/PubArticleNLJ.jsp?id=1190883778183
As the global slowdown in the market for mortgage-backed securities threatens a core practice area of Cadwalader, Wickersham & Taft, the New York law firm is also wrestling with a $70 million legal malpractice suit brought by a major issuer of such securities. Cadwalader is one of the nation’s top law firms when it comes to securitizations, and its large practice in the area has helped catapult the firm to the top of the profitability charts over the past few years.
Oh that’s interesting! Great find! The Vinson Elkins of the real estate bubble!
Ben thanks for the great blog. Hope my clicking on your site ads gets you a nice dinner out.
This is a week old, but it’s still a very nasty and scary chart showing the August debalce in the Washington DC market. Very scary if you’re a seller. Let’s see if my clicky links work.
Charting the (DC Metro) Market
For full/bigger view of chart
Holy smokes. Thanks for posting that - I’ve had an impossible time trying to get numbers from peak - usually only Y-O-Y figures are put out.
So, sales in our area are down 50% from ‘05 peak. Inventory has tripled.
Supply triples, demand falls by half. Prices? Hmm….
This will be good for affordability in the area, sooner or later seller must cut price in the face of these market conditions (huge supply, waning demand) only so many have the financial ability to rent out properties that cannot sell in the hopes of a rebound that keeps on getting pushed further and further into the future!!
But buyers do not have to buy, as rental inventory is exploding!!! I can get the same place as a rental for 1k less than purchase so I’m renting for 2 more years and forgetting about buying until I’m 6 months out from lease renewal.
In the interim I’ll make some popcorn and watch all the news about housing and foreclosures and mortgages etc.
The charts don’t reflect the impact of the tighter lending standards coming into play. I wonder what the charts will look like a year from now.
are you in Ocean City NJ or MD?
You went to that auction but I can’t remember which state it was
I think the charts DO INDEED show the impact of lending standards.
August is normally a reasonably good month here for house sales. But not this year, as you can see from the dip from July that is far bigger in percentage this year than in years past. I also personally know sellers who have lost sales in August specifically due to the finance crunch. Seems that a couple of late payments only added a half percent to your mortgage interest rate before, but now the whole mortgage package is being rejected.
Just wait till September. Ouch.
Hmmm… Seems my clicky-link version never went through. Let’s try again:
Here’s some dire and scary charting of the DC Metro market debacle now in progress. August numbers were truly abysmal.
Charting the Market:
http://www.print2webcorp.com/news/washingtontimes/homeguide/20070921/p18.asp
For full view of chart:
http://www.print2webcorp.com/news/washingtontimes/homeguide/20070921/img/a_1_p18.jpg
“Her house was put up at 749k , she had some woman who looked at her house 5x, had her father fly in from italy to look at it, then offers $612,382 cash. Admittedly, my eyebrows went up at, not only the random number but 140k plus haircut.”
To be honest, unless this house is in a prime area in FL (and I doubt there will be any ‘prime’ areas in FL in a decade), she’s better off cutting the house by 20% each week until it’s sold. I don’t say this to be insulting or rude but FL is in for a rude awakening; I make no claims of being an expert on FL but from what I’ve heard this area of the country is going to take a huge reaming. THe southeastern countries down there will all take a big reaming but FL is the biggie, and I wouldn’t be surprised if this is the last RE bubble ever in FL. I just can’t see how that entire section of the USA can pick itself back up after a RE meltdown.
I agree with you right up to the last sentence. FL will pick itself back up. It is, for all the negative press, a really great place to live. I love it here and can’t really picture myself leaving for a long, long time (or for an absolutely crazy job offer). Once prices get back in line with incomes FL will start to see a net in-migration again, and the building will start again. But the days of 300/sq/ft for a tract “McMansion” are OVER… Median home price in my area was 10X median personal income. That’s never, ever, ever, going to happen again. But FL will always be a desireable place to live, and will eventually pick itself back up from the smoldering ashes of the housing collapse.
There is a TON of pain to be felt in FL, that’s for sure. I just don’t think that you will ever see this area as a ghosttown; it has too many positives for that; it’s truly the only place in the US you can live and NEVER have a winter day. For some people (like me) that is very attractive.
Florida will be attractive when it is affordable.
The question is, can a state with a large senior citizen population, with their Medicaid burden, be affordable to the non-rich without a state income tax? Either other public services will collapse, or property taxes will rise to the moon.
And what about insurance?
Those are real, long-term problems to offset Florida’s assets.
So they caved in and let the camels nose into the tent. Good-bye Unions, it was nice.
Why should you care? Because those union workers could afford to buy decent cars, homes, vacations, and send their kids to college. Eventually the unions will end-up accepting 50% for all new employees etc… Not just the “core” jobs.
So tell me what happens to the area’s of this country where manufacturing/auto industry still has some strength? Housing prices? In 5 years if the automotive jobs are there they will be increasingly filled with people making a lot less. If you figure 3x income and your building houses you will be selling into a shrinking income group and they will be buying a depreciating asset - regardless of ARM reset etc. This will be the slow death by a thousand cuts economically of whats left of the industiral sector.
They deserve it? Pardon me but I don’t think so. A 100k a year was crumbs from managements table. Add in the ROI to the community of those jobs plus the ability to afford to educate your children and it was a win/win for everyone.
Nice precedent for the future of Americas working class. Not a good omen for future economic and social stability either.
Where have you been? Union’s days have long passed. Tough medicine but time to move on. BTW, new Toyota factories in TX are awesome. Happy employees to boot…
The UAW joined the rest of the labor movement by agreeing that to make up for the fact that prior generations were overpaid for too few years of work, younger generations will be paid half as much.
And who do you think will lose health care? Getting that money up front, but not enough of it, means those in early get all they want, and those coming along later will see the money exhausted when they hit their 50s.
Another shot in the generational war. I’m not buying another UAW car.
I’m not buying another UAW car.
Better not buy a Corolla or a Tundra, then.
Another snippet of data to toss into the computation is, in “the old days”, folk dropped dead about 15 minutes after they picked up their last paycheck. Today, we’re enjoying longer life. The companies didn’t put enuf aside on the one hand, and didn’t count on the current aging generation lasting so long.
” Happy employees to boot…”
Whatever you feel about unions, they were the last bulwark against globalization. There is really no protection for American workers now. Lots of folks have no sympathy for assembly line workers making a decent buck with health care. Fine. But the design, research and marketing jobs are easily outsourced now.
And the Japanese carmakers, who find if useful for tariff reasons to keep US factories, may just as easily move to Vietnam for cheaper workers, once the American car industry is completely hollowed out. The bell has already tolled for all of us, Americans’ income and living standards are being driven down. If you choose to view manufacturing jobs as the plankton of the American economy, they explain where higher end fish are going to feed.
Unions aren’t the last bulwark against protectionism: Congress is! Where’s Smoot, where’s Hawley, when you need ‘em, eh? :-O
Unions aren’t the last bulwark against protectionism:Congress is!
Really doesn’t matter as there is less and less to protect anyway.
At least they can still sell houses to each other.
Unions or none, my feeling is that the only thing to bring back the American economy in general is a lowering of standards of living across the board. Then, once those in India and China rise, an equilibrium will be met that allows manufacturing to be a profitable endeavor again.
I have no interest in participating in a race to the bottom…
Neither am I. Perhaps I mean living within one’s means as opposed to standard of living.
I’m torn on this argument since I’m not entirely supportive of moving toward a global economy, however, if we truly want a free market then why shouldn’t corporations find the most cost effective labor they can?
On the other hand, it kills me to see corporations complaining that American incomes are eroding revenues and then they turn around and pay CEOs 10s of millions of dollars to go away after a few years of dismal returns.
“if we truly want a free market”
Why would we want that? Every other country protects itself.
Check out China and Japan, for example, and their mercantilist policies.
Exactly.
I don’t know, I guess that’s the big question. When people say they desire a free market, does that mean only within US borders?
Toyota also chose to build a new factory in Canada, due to a combination of health care costs and worker competence. Smacked from both directions on that one.
If I remember correctly, somewhere in the south where the proposed factory would have been affordable, in the sense of wages, the prospective employees (somewhere in the deep south) required colored posters as teaching aids, their comprehension of verbal instruction was so poor.
This ‘two-tiered’ rate of pay was adopted by the UFCW in 2004.
The unions have thrown their own children under the bus.
Until workers’ bellies are scraping their backbones, unions will continue to languish.
Yes, it is all about global economics and free market blah, blah.
What did that well paying job offer the US? No, not just the shareholder but us, the community.
The ability to buy a home, to feed, clothe, and educate the kids. That cash the union guy brought in put a lot of baby boomer offspring through a state college. Regardless of your generational bias the gov. makes more in taxes off a college grad. Not going to be a lot kids going to college from the money Dad made working at Toyota in Texas. That paycheck supported local merchants also.
Forget your feelings about unions. Who will pull America out of the recession as over the next few years the workers discretionary income turns into burnt offerings on the corporate altar? Housing values - there will be no recovery - ever, in some areas. Welcome to Eastern Europe of 15 years ago. The effect of the hollowing out of jobs combined with the housing bubble and globalization will be playing in your neighborhood soon. It won’t be pretty.
Please stop with this class warfare, it so old. Unions made up only 30% of the workforce at the peak of union power in the 1940s and 1950s. Some way or other the country ran just fine, people went to college just fine too with the majority of people not belonging to a union.
That reminds me of the Toyota commercial where a guy in a Tundra pulls up in front of a McMansion and tells his littel boy: “I built that house”, while the J6P who lives in the Mc Mansion tells his little boy “I built that truck”.
If ads were more like real life it would be: Juan 6 packs pulls up in front of a house in his 15 year old vehicle and tells his boy “Yo construi esa casa”, and Toyota’s J6P would be saying “I can’t afford this house, my ARM resets next month, the monthly payment is going to double and I can’t sell it because I’m 100K underwater”
50% less cost for labor = cheaper goods for me. Unions were useful in 1907. In 2007 they need to go away.
Always ready to provide the lulz, J J.
I hope you ( but not your children ) play with lead paint toys from china. This country was made strong by the “new thinking” of our founding fathers, not the old boys club style more for me less for you thinking of the lords of england. Consider this also. The boston tea party threw TEA into the sea. Yeah, tea is big for the english, but cmon, they were fighting a tax on TEA for cripes sake. If we all had a bit more fairness in our hearts for our fellow americans, we might not be so quick to throw them under the bus to save 2 dollars on silverware from china instead of america. Unions were an extention of the American idea that business owners shouldn’t exploit people (like they do in China) even though they *could* for cheaper consumer prices.
Here is how you avoid being exploiter by your employer:
Option 1. Quit your job and go find an employer with better conditions
Option 2. Start your own company
Unions are dead. Stop trying to revive them. Soon enough GM, Ford and Chrysler will die as well and put the final nail in the coffin. Don’t worry, aside from Avis and Budget, nobody will notice when the Big 3 is gone.
I summer in Michigan. The UAW was just recognizing that their days of setting terms are over. Michigan is still feeling the hangover of the terms demanded by the UAW in the 1970’s strikes. They may have gotten what they want, but they shot themselves in the foot because anyone that wanted to build an auto plant built in a right to work state (Texas among them), especially the foreign auto makers that were not already unionized. The issue of globalization was lost a long time ago.
I’m with NOVA and Palmetto on this. No other nation is throwing its workforce under the bus with such glee, as the US. As long as it happens to the other guy, folks seem happy enough.
There is zero political will to protect the middle class-virtually all of their jobs can either be outsourced or done more cheaply by imported HB-l labor. A great deal of government paperwork will continue to move offshore as well. Even such presumably “hands-on” work such a nursing is increasingly done with cheap imported labor, and lowered standards.
Absent the stable middle class, America becomes a very different country. Housing collapse is just the bellweather.
Time to start calling out the architect of destroying the American worker: Robert Reich.
Yeah, we know it started before that, but he–a so-called liberal!–thought it was a great idea and accelerated the process enormously. He also was behind a lot of the changes in our trade relationship with China.
Reich’s as wrong as Greenspan … Robert Reich, I am calling you out.
Then call out Allan Blinder as well…he was the “outsourcing guru” under Clinton, who espoused the “service economy”.
Never did explain that many “service” jobs can be outsourced easily as well…financial, insurance, marketing, engineering, design, etc. Now, he says he’s rethought his position, and regrets some of his outsourcing enthusiasm.
It’s about time to start outsourcing economists and presidential advisors…the home-grown versions are ill-informed, incompetent and clearly, overpaid.
Some economists has already been outsourced.
I would be more sympathetic to union workers if tehy weren’t such hypocrites. Their attitude of “I got mine so screw you” doesn’t sit well with me. They demand over market wages and benefits but don’t want to pay anyone else more than slave wages when they buy stuff. All the union people I know here in MI shop at walmart and are the cheapest bastards when it comes to tipping, etc. They will buy things online, bypassing the local merchants but scream and get red in the face if anybody buys a foreign car.
And that makes them just like every other American. Just like NIMBYism. I got my house, now shut down development.
Americans by and large have voted with their wallets. Those fit to compete on the global stage are surviving (and thriving, as developing markets move toward consumer markets), those not fit are floundering. Mag Lights are expensive, but people buy them because they are damn good–and, incidentally, made in the USA.
I am willing to pay more for a product of equal quality made in the US, and willing to pay a lot more for a superior product made in the US. Cutco knives would be one example–expensive, but damn good with an unbeatable warranty. They are arguably not better than their German competitors, but close enough for me. I am willing to do so because I can.
I am not willing to pay more for an inferior product just because it is made in the US–that’s a bit too socialist for me.
I’m with NOVA and Palmetto on this. No other nation is throwing its workforce under the bus with such glee, as the US. As long as it happens to the other guy, folks seem happy enough.
With apologies to BonHoeffer.
First they came for the steelworkers jobs, but I said nothing because I wasn’t a steelworker.
Then they came for the autoworkers jobs, but I said nothing because I wasn’t an autoworker.
Then they came for the electronics jobs, but I said nothing because I wasn’t an electronics worker.
Then they came for the construction jobs, but I said nothing because I wasn’t a construction worker.
Then they came for the office jobs, but I said nothing because I wasn’t an office worker.
Then they came for the IT jobs, but I said nothing because I wasn’t an IT worker.
Then they came for my job, and no one said anything, because there was no one left.
But we don’t need no stinkin middle class jobs in the future because every child is supposed to go to college now and get a “real” job - not one of those vocational or assembly jobs. Maybe that’s the next bubble - education.
Education is already a bubble (at least for the adminstration / institutions themselves) — the cost of a university education far outstrips the rate of inflation or wage increases. The amount of student debt taken on can now approach that of a mortgage payment …
Absent the stable middle class, America becomes a very different country. Housing collapse is just the bellweather.
All too true.
(FWIW, I agree with NOVA and Palmetto as well. Far as I’m concerned “don’t engage in class warfare” is code for “Don’t get any high-falutin’ ideas, you stupid drone — the trickle-down theory works … TRUST US.”)
Besides that, a sheepskin is no guarantee these days. For instance, IBM has completely offshored entire divisions, from the VP all the way down.
Absent the stable middle class, America becomes a very different country.
Indeed! America cease to exist without a solid middle class
“Education is already a bubble ”
I agree. Just like many older people wouldn’t be able to afford their house at today’s prices, many people also wouldn’t be able to get into their alma matta if they had to apply today.
I gotta call some BS on MarketWatch and Bloomberg on the consumer inflation that is being reported. As far as I can tell inflation looks like its up 50% from 2006 per the BLS. The headline inflation number would have been blown out of the water without a decrease in…ENERGY! Tell me how $83 dollar oil and that USD devaluation is going to play out in the future. Get ready for that 70’s show!
“During the first eight months of 2007, the CPI-U rose at a 3.7 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 2.5 percent for all of 2006. The larger advance thus far this year was due to larger increases in the energy and food indexes. Despite registering declines in each of the last three months, the index for energy increased at a 12.7 percent SAAR through August.”
BLS Report
http://www.bls.gov/news.release/cpi.nr0.htm
You need to focus on core inflation, excluding food, energy, shelter, health care, taxes, insurance, and imports.
Because nobody uses food or energy. -or healthcare or insurance or pays taxes or buys anything imported from anywhere.
I don’t breathe, or occupy 3 dimensional space either. It’s too expensive.
Leaving what? The infamous basket of goods BS? If energy costs go up, everything else will follow. Or else the gubment CPI stats lie? Nah….that couldn’t be it could it?
Don’t look at that man behind the curtain….
What are the expenditure shares of the excluded food + energy + shelter? I am guessing maybe 80%?
Bush said he isn’t concerned if core inflation is high, because most people in his home state of Texas drive trucks anyway.
Did he really say that?!
No, he didn’t, I was just making a bad joke. Imagine him saying “core inflation” with his Texas accent. core=car, tars=tires, etc.
NEW YORK, Sept 28 (Reuters) - The U.S. Federal Reserve on Friday said it added temporary reserves to the banking system through 3-day repurchase agreements.
Federal funds, the benchmark overnight lending rate to banks, last traded at 5.25 percent, above the Fed’s targeted rate of 4.75 percent.
same bat time, same bat channel
NEW YORK, Sept 28 (Reuters) - The U.S. Federal Reserve said on Friday it added $4.75 billion of temporary reserves to the banking system through 3-day repurchase agreements.
The Fed said the collateral accepted on the 3-day repurchase was made up of $4.45 billion of agencies and $300 million of mortgage-backed securities. A total of $23.75 billion in bids were submitted for the 3-day repurchase.
What is the significance of the 50 bps gap between the level the FFs last traded and the 4.75 percent target?
It means the fed will continue to provide additional “liquidity” to force down the market rate to the target rate.
Here is a link discussing further:
http://www.mises.org/story/2695
Bluprint — great link — thanks.
A key sentence: “If losses were large enough and the Fed exhausted its surplus of treasuries, the temptation to rewrite Section 16 would be overwhelming.” No kidding.
ahem,
it means the lender of last resort is settling transactions in the private markets due to lack of appetite by investors.
ya see, all the long-winded roundabout way of saying the FED is providing liquidity is short for, the credit derivative debt market is an absolute f*cking shambles, and since we dont want the system to simply shut down, They have to come to the rescue.
let the tyranny of the majority commence.
if you read Jungles comments in the Clifornia thread, it ties into this thread:
Business is off.
the financials are crashing.
The FED is sucking money out of the system.
The dollar is crashing.
but, and a big but….the fraudsters are about to go home. And the power of the dollar is gonna come back with a vengence. Get ready for bigger bubbles. Cause the big, the ones she coming.
Did Wall Street pull the wool over the Fed’s eyes? I’m confused why the Fed had to cut rates 50 basis points. GDP had it’s best performance in several quarters, consumer spending was higher than expected in August, initial unemployment claims the past few weeks have been lower than expected, and we keep hearing that the global economy is keeping fundamentals sound and is driving U.S exports and earnings higher. It seems the economy is doing fine. Why did the Fed cut rates again?
To bail out the banks and Wall Street gamblers, with the full knowledge that such action will screw you and me.
You really should investigate shadowstats.com…. Guvmint debris is convoluted, twisted, strangled and maimed to approximate goals they wish were actual. Goldilocks is dead.
Sept. 28 (Bloomberg) — Bank credit risk rose in Europe amid renewed concern lenders are having difficulty raising funds in the money markets, according to traders of credit-default swaps.
http://www.bloomberg.com/apps/news?pid=20601087&sid=amp7Xtnhc6MQ&refer=home
TXChick some dude posted up an interesting leading market indicator on another blog that I frequent that is based on the 10 day EMA of the $TICK high correlated to the S&P 500. Since you are our resident TA expert I woud appreciate any comments about the linked chart below:
Stockcharts.com
http://tinyurl.com/2xtn7y
That makes my head want to explode. I’m an ADD sort. Give me the usual moving averages and chart formations one side and the tick/trin on the other. I don’t understand what that chart is supposed to tell me.
I think the theory behind the indicator is that as the market either tops out or becomes nervous about a future decline the high outlier Trin readings begin to decrease. When the 10 day EMA of the HIGH Trin readings decline below 1025 (the horizontal red line in the lower chart) a substantial correction usually occurs in the broader stockmarket. Looks like the guy has tried to match up the 10 day EMA High Trin readings in the lower chart with the S&P 500 in the upper chart. Does the description make sense from your experience?
Seems like he got a very low reading on his indicator in late July 2007, April/May 2006, and March of 2005 all of which were followed by declines in excess of 5% in the S&P 500.
First time I have come across this type of chart although obviously there are a million indicators out there. Didn’t mean to give you a headache!
My mistake. Please substitute high outlier TICK readings in my description above. Its TICK not TRIN.
Ok, that makes sense. Tick/Trin are my favorite indicators. Since so much of the volume these days is program trading (futures) they are really useful. I know some people chart them but in my case, I use them intraday only.
Remember when 5000 people applying for 530 jobs at Walmart was National News? Not Today in Detroit…it’s just another story
http://cliffschecter.blogspot.com/2007/08/depressing-as-hell.html
And only 60% of those jobs were full time.
–
David Rosenberg, ML Research; 09/28/07:
“New homes sitting on the market much longer — Another interesting statistic from yesterday’s home sales report was the median number of months for sale since completion, which shot up to 5.9 months in August – nearly 70% longer than last August. In fact, looking back at the month of August historically, this is the longest time new homes have been for sale since completion since August/92. More evidence that this is indeed a buyers’ market and that we could see further price concessions going forward.”
BTW, during the bull market in housing August used to be the strongest month, both in price and volume increases. It is very expensive to have completed homes sitting empty. That is a 12% a year hit not including the price decline.
Jas
http://www.youtube.com/watch?v=Ubsd-tWYmZw
This house is special. You guys can do this.
Prolly living out of the car by now.
At least they don’t have to mow the yard any longer.
Roidy
No matter how many times I see that, it turns my stomach..
Good thing food and energy prices or so volatile, or all this news of rising prices would stir up inflation concerns and force the Fed to raise interest rates in order to convince the markets that it remains vigilant in fighting inflation.
Historic Surge In Grain Prices Roils Markets
By SCOTT KILMAN
September 28, 2007; Page A1
Rising prices and surging demand for the crops that supply half of the world’s calories are producing the biggest changes in global food markets in 30 years, altering the economic landscape for everyone from consumers and farmers to corporate giants and the world’s poor.
“The days of cheap grain are gone,” says Dan Basse, president of AgResource Co., a Chicago commodity forecasting concern.
http://online.wsj.com/article/SB119093856250042023.html?mod=hpp_us_whats_news
In Sequel, Fears Of Stagflation Haunt Economy
By Michael Hudson
Word Count: 476
Like the movie fiend who can’t be killed off, talk of stagflation re-emerges just about any time the economy slows or inflation perks up.
Such fears are making another appearance. Mark Hulbert, of Hulbert Financial Digest, says the financial newsletters he tracks are buzzing about stagflation.
“I utter the word in my darker, more depressed moments,” jokes T.J. Marta, an RBC Capital Markets strategist. In sunnier moments, he says there’s little chance the U.S. economy could be visited by the scary tandem of weak growth and soaring inflation.
For good reason.
http://online.wsj.com/article/SB119093994806542006.html?mod=todays_us_nonsub_money_and_investing
Dow Reaches 2-Month High Despite Jump in Oil Prices
By PETER A. MCKAY
September 28, 2007; Page C1
Stocks rose modestly to a two-month high despite the biggest percentage rise in crude-oil prices since mid-May.
Crude futures for November delivery soared $2.58, or 3.2%, to $82.88 a barrel, up 35.8% on the year at the New York Mercantile Exchange.
http://online.wsj.com/article/SB119094580291642289.html?mod=todays_us_nonsub_money_and_investing
So maybe the US government should stop paying farmers to not grow crops (keeping the prices up). This kind of welfare is really irksome. Why should people be paid to do absolutely nothing?
Aside from that, the idea of using food grain (corn), which uses fossil fuel as a production input, as a substitute for fossil fuel that goes into gas tanks seems pretty shaky.
Locally here, a cotton magnate grows a crop that could be grown elsewhere cheaper, virtually anywhere outside of our borders and has received around $25 Million in subsidies the past decade or so, growing something that would be unprofitable, without said subsidies…
You must be in southern Jawja.
I get $~100/acre under CRP to not grow or graze on 46 acres that border a stream and subject to potential erosion. This is a 10 year contract. When my previous CRP contract expired in 2004, I was notified it would not be resumed -ergo, I was planting. It was renewed and I have not planted. In some parts of the US, CRP is profitable for the landowner, the agricultural land is $500/acre to purchase and CRP pays $50/acre. If I take my land out of CRP before the contract ends, I have to pay the US back for the moneys received for not planting. The land is capable of producing 35-50/acre of soybeans. At current prices $9.23 at local mill, gross income of $320/acre less $50/planting and harvesting cost. I lose $170/acre keeping in CRP. This is a very unusual year. The flooding in Minnesota and Wisconsin caused a lot of bean rot and decimated the crops. The prices for crops were kept artificially low for the last 20 years. Now prices are up in the world, the reason is that Asia has moneys and people that need to be fed. Fortunately for the American consumer China has banned the importation of US pork products - unsafe to eat , so there will be some inexpensive food products in the US.
The total amount of subsidy to the American farmer is less than the subsidy to the ETHANOL ENERGY industry! Last year mailbox milk moneys averaged less than $11 and my costs were $11.25. The soybean price support was $5.75 - surprise it traded at $5.75.
As I pointed out in the spring on the HBB, the biggest problem we have is using food for energy. It is not and never can be feasible. I make moneys at $5.75 on beans (no chemicals, no insecticides, no fertilizer). I make a lot of moneys at $23 mailbox UNTIL the winter comes and the cows must be fed with crops that are saleable for more than the milk sells for.
A farm is an asset, it is supposed to generate income. It is not get rich quick.
My parting words on this subject: If you think prices are high now, wait until the spring.
“The total amount of subsidy to the American farmer is less than the subsidy to the ETHANOL ENERGY industry”
I don’t understand how that makes either “OK”.
I cannot think of one industry in the US that is not supported by the government either through tax incentives or direct support.
Most of these industries receive more moneys than agriculture receives. Airlines do not pay fuel use taxes, Auto manufacturers receive tax incentives, baseball teams have monopoly status, the USGA has a special income tax defer provision that will make Tiger Woods a Billionaire (in todays dollars) when he retires, etc. I do not know one individual in agriculture that would not enjoy having a level playing field. Some agriculture needs support, in Arizona there is a small market of Jojoba beans, this crop could be vitally important for raising the standard of living of the native Americans living in the desert. Jojoba oil is not just used in shampoo and hair products. It is chemically close to whale oil and is a strategic resource. Even though I will receive no moneys from supporting this fledgling industry, I consider it vitally important to the well being of the country to continue to give tax incentives to this form of agriculture.
There is waste through special congressional additions (even Mr. Ron Paul has placed dubious agriculture exemptions on bills), but without price supports, the overall price of agricultural products would be a lot higher. e.g Would I grow 3000 acres of beans if the current market price in May was $4 - not a chance. But with price supports of $5.75, yes. The reason is that I am going to have years where I lose my crop. $4 does not cover my risk/reward ratio. I have lost entire crops to early freeze, hail and rains and lost many crops to drought.
In most years price supports are the only assistance available and in most years the price of grains trades higher than price supports. And in some years, even with price supports, the prices are lower than the posted price supports. Price supports are a loan from the government.
Without price supports, the overall price of agricultural products would be a lot higher.
Hoz, I love your posts, and I mostly agree with you. but I have to disagree with this one. Prices would have been naturally higher without all the market intervention that kept them artificially low for all these years. This would have helped a lot of developing countries, but the developed world preaches free markets only when it benefits them in some way, if not, they pull rank. Price supports in the US and Europe have kept other grain producing countries out of profitable markets, and it has been done on purpose to keep people farming in developed countries. This is not right from a “free market” standpoint although I do see why it makes sense from a political and strategic point of view. The EU is the biggest culprit. That is why it irks me when I see that people assuage their guilt about the awfulness of the African situation by sending them wheat while it would be much better to let those people to produce their own food (which they would do if they could count on a free market to sell it) and pull themselves up by their own bootstraps. I do not disagree with the way you deal with a warped situation in your own business, but justifying it sounds like a bit of a stretch to me.
The government supported experiment in turning corn crops into fuel is playing havic in the food market. Poor and middle class consumers are much more exposed to food inflation than the rich since it makes up a larger percentage of their budget.
At the end of the day would you rather import your fuel or your food?
Spot on.
Just be glad you aren’t a poor person in India.
The rise in grain prices is worldwide, but even poor Americans are insulated because the raw material — grain — is a small share of what they pay for food. Not so in India, Africa, etc.
I read they are protesting a rise in pasta cost in Italy.
the peasants can’t eat pasta? then let them eat cannolli!
Immigration, Real Estate Creating Wider Economic Inequalities
…The danger in all this is that extreme distance between economic classes has often been a harbinger of social unrest. It was one of the underlying causes of riots like those in Watts and other parts of Los Angeles in 1965 and 1992.
http://tinyurl.com/24m2zh
Perhaps you might want to share your thoughts with the environmentalists out there. The reason the govt is doing this is to placate those who want to be “green” at all costs.
“The reason the govt is doing this is to placate those who want to be “green” at all costs.”
See also: Nuclear Energy. If France can supply 70%-80% of their electricity needs with nuclear energy, why has the US all but shut down the nuclear industry for the past 30 years? Well, I guess it’s cool to have all of those new coal fired plants liberating carbon into the atmosphere, and dumping thousands of TONS of radioactive material into the air:
http://www.ornl.gov/info/ornlreview/rev26-34/text/colmain.html
“Based on the predicted combustion of 2516 million tons of coal in the United States and 12,580 million tons worldwide during the year 2040, cumulative releases for the 100 years of coal combustion following 1937 are predicted to be:
U.S. release (from combustion of 111,716 million tons):
Uranium: 145,230 tons (containing 1031 tons of uranium-235)
Thorium: 357,491 tons
Worldwide release (from combustion of 637,409 million tons):
Uranium: 828,632 tons (containing 5883 tons of uranium-235)
Thorium: 2,039,709 tons”
If I were a stock-market type, I’d be bullish on stuff related to nuclear plants, over the long term. If this coming winter is very cold, energy bills could begin converting nuke-aginners to nuke proponents. Most people believe that no power is worse than nuke power.
Better put, “…having no power is worse than having nuke power.”
Nonsense. The government support is to benefit investors. Period. No environmentally conscious person person condones the malinvestment in ethanol.
Is it any big mystery about why inflation is surging, given the signal the Fed sent the markets with their “larger-than-expected” 1/2 point FFR cut last week, not to mention the stock market’s mysterious propensity to correct to the flat line (on the DJIA) on the first sign of weakness?
inflation expectations are anchored…on a sinking ship
Luckily gold prices are not a CPI component…
METALS STOCKS
Gold rallies as dollar tumbles to fresh low vs. euro
By Polya Lesova, MarketWatch
Last Update: 10:15 AM ET Sep 28, 2007
NEW YORK (MarketWatch) — Gold futures rose sharply Friday, buoyed by the dollar’s plunge to the latest in a dramatic string of all-time lows against the euro.
Gold for December delivery surged $10.50, or 1.4%, at $750.30 an ounce on the New York Mercantile Exchange.
“Prices took off at a frenzied pace once again overnight,” said Jon Nadler, senior analyst at Kitco Bullion Dealers.
http://www.marketwatch.com/news/story/gold-rallies-dollar-falls-another/story.aspx?guid=%7B8CE0B858%2D7C67%2D4CA0%2DB4D8%2D710E16A8AB4D%7D
Whither the strong dollar policy?
CURRENCIES
Dollar hits new euro low after tame inflation data
By Lisa Twaronite, MarketWatch
Last Update: 10:30 AM ET Sep 28, 2007
SAN FRANCISCO (MarketWatch) — The dollar dropped across the board Friday, sinking to yet another fresh record low against the euro, after data showing core inflation over the past year has dropped to its lowest level since 2004 suggested that the Federal Reserve could further cut interest rates.
The euro was at $1.4200, after rising as high as $1.4213 hit earlier and well above $1.4147 in late U.S. trading Thursday. The dollar was buying 115.12 yen, down from 115.65 yen Thursday.
Friday marks the seventh consecutive trading day that the dollar has marked a fresh historical low against the European currency, which began trading in January 1999.
http://www.marketwatch.com/news/story/dollar-hits-fresh-record-low/story.aspx?guid=%7B1DB95E5C%2DE431%2D48F9%2D9DD8%2DB5640D45085D%7D
In a related piece:
Fields of dreams
…Around the world, wheat stocks are estimated at just 114 million tonnes - the lowest since 1981 - and with so many of the northern hemisphere’s wheat harvests damaged by drought, wheat buyers perceived Australia and Argentina as the solution to tight supply conditions.
…But Australia hardly has any stored in its silos either: “We will be as close to an empty cupboard as we have ever been by December,” Storey said.
http://tinyurl.com/2gwjyr
Leave renovation while drinking to the professionals…
PROPERTY REPORT
The Three-Martini Renovation
To cut costs, some homeowners are throwing remodeling parties. Jennifer Saranow on the often sobering results.
By JENNIFER SARANOW
September 28, 2007; Page W1
Cocktails and power tools don’t mix. But they sure do mingle.
As the housing market cools, homeowners looking to save money on renovations are hosting parties where they invite friends over for an evening of ripping out walls and laying floors. But when novices who’ve had a few drinks get a hold of crowbars, drills and Sawzalls, the results are sometimes less than satisfactory.
One reveler near Chicago hung a sheet of drywall backwards, while a partygoer in Seattle messed up the host’s bathroom floor by installing the tiles crooked. During her recent “Martini Bash” renovation event in Toronto, Debora Beam wandered upstairs to find one of her friends halfway through sledgehammering out the wrong wall. “I was kind of like ‘oh my God,’ ” she says.
http://online.wsj.com/article/SB119094223537442131.html?mod=hpp_us_leisure
You just can’t make this stuff up (shaking head)
The Law Offices of James Sokolove will be advertising by Tuesday.
Ok… what non-bubble city do you, or would you, choose to live in, and why?
Curious,
Bill
ECONOMIC REPORT
Biggest gain in consumer spending in two years
Core inflation retreats to 1.8% annualized growth, best in three years
By Rex Nutting, MarketWatch
Last Update: 9:11 AM ET Sep 28, 2007
WASHINGTON (MarketWatch) — Boosted by good deals on the auto lots and falling prices for consumer goods, U.S. real consumer spending increased 0.6% in August, the fastest growth in two years, the Commerce Department reported Friday.
“That is good news for those worried about a recession,” wrote Peter Morici, a business professor at the University of Maryland.
http://www.marketwatch.com/news/story/consumer-spending-shows-biggest-gain/story.aspx?guid=%7B737E670B%2D13C7%2D46B6%2DA28F%2DBC0568194C39%7D
Really, Peter? Then why is the stock market plummeting on such good news?
http://www.marketwatch.com/tools/marketsummary/
The stock market is behaving as though it has decided the Fed has abandoned its policy of controlling inflation in favor of propping up the stock market. If the market believed the Fed would act to contain inflation, news of burgeoning gold, food and PM prices would send the market south.
I wish the government would stop publishing the “fantasy inflation data” It is so off target it is outrageous!
I keep flawless records and buy most of the same things and brands at the grocery store.
With food, household products, energy, medical, insurance, etc my cost of living has risen 12.6% in the past year.
I know they manipulate the date to help businesses keep their wages low, but they could at least come in at 50% of the real inflation.
When Cagey B told Ron Paul the inflation rate was holding steady @ 2%, you caught a glimpse of an professorial type wrestling with his conscience…
“…but they could at least come in at 50% of the real inflation.”
Such accuracy would be very expensive when you consider that govt payrolls and many govt retirement programs (e.g. SS) are inflation-indexed.
Better not buy TIPS since they’re based off the same flawed inflation figures.
–
That is why I buy the pure long Treasuries (without inflation indexing). With 99%+ of people in the inflation camp I like to be the contrarian. I expect the yield on 10-Year Notes to go below 2% and UST prices to soar duing 2008-10.
Jas
Got burnt once, will never do it again! TIPS are for suckers.
“England is a nation of shopkeepers” Napoleon
“America is a nation of keepshoppers” aladinsane
http://news.bbc.co.uk/2/hi/business/7018397.stm
They’re all wearing winter coats in that picture.
Thanks Bendover for craping the USD and giving the middle class an inflation tax on everything we import in order to help your buddies on Wall Street. SOB!! The DX has broken 78 and is around 77.93 or so.
http://quotes.ino.com/chart/?s=NYBOT_DX&v=s
Amazing that foreigners even hold US Treasury Bills and Bonds yielding anywhere between 3.7% to 4.8% depending on duration with the USD devaluing almost 4.4% over the last 30 days. Is there some sort of mark to model used on US Treasury securities?
–
Yup, all those stupid foriners are buying all American assets in sight, US treasuries included. They are buying companies, manufacturing plants, and even some condos. They have to. What else can they do with their current account surpluses?
The net result is that part of Americans’ current and future incomes (some in the form of taxes from which the interest on Treasuries is paid) go to those foriners. That is the important point. In a way, foriners are collecting taxes from Americans’ wages and other incomes.
Jas
Good point Jas.
Those foriners are creating a big moral hazard for the Fed to trash the dollar in order to reduce the value of those future external commitments.
FCBs have been net sellers of US treasuries over the last 6 weeks. Japan was a buyer of 9.6B in treasuries last week. Probably bought to support the dollar. Japan also may have been sellers of the 50B in treasuries sold in the previous 5 weeks - not reported yet.
There have not been many purchases of US assets by foreign companies. The reason is the US has made it difficult for foreign companies to buy into the US market. Very few (if any) foreign companies wish to go through the scrutiny that happened to CNOOC or to Dubai. Perhaps there are some individuals buying small condos, but not enough to make a dent in the market.
Slightly off topic, but with all of the news lately about the dollar falling, I am hoping that someone could fill in the gaps in my knowledge of the fed’s philosophy on managing the dollar since the 1980’s.
I seem to recall that after Volker raised rates to kill inflation in the early 80’s and the dollar strengthened considerably, that in the late 80’s Greenspan talked a lot about pegging the dollar’s value to a ‘basket of commodities’. This made sense to me at the time, and so having more important things in my life to worry about than dollar policy, I conveniently tuned the Fed out until the stock market bubble of 2001.
But by 2001, the Fed seemed to have turned to managing interest rates for control of the economy rather than having any interest at all in managing the value of the dollar. I heard no further talk of the ‘basket of commodities.’ And obviously since then commodities have risen and the dollar has fallen.
Is my recollection of events correct - was there a ‘basket of commodities’ approach? If so, any thoughts on how and why things changed - and would it not be better to have stayed looking at that basket of commodities?
“… fed’s philosophy on managing the dollar…”
Strong
dollarstock price policy…2000 - 2003 is really 3 separate incidents
2000 - dot com crash. would have been a short painless recession if it hadn’t been for
2001 - 9/11 caused shockwaves in the financial markets and a liquidity crisis because the US was finally attacked. not just the US, but the financial epicenter of the US. if the WTC had collapsed on it’s side it could have literally wiped out the entire financial district in NYC and we would really have been in a severe recession. The WTC was HUGE. the pile of rubble was like 10 stories tall. we are lucky it didn’t fall on the sorrounding buildings and destroy them.
2002 - Enron/MCI/Tyco. huge companies declared BK for essentially lying on their financial statements by billions of $$$. crisis of confidence that everyone else was doing it on the same level
The Fed had to drop rates to essentially nothing to get the economy going again. he even admitted that they created this inflationary boom and planned to deal with the consequences later. they were just deathly afraid of big deflationary bust
What’s a down payment?
China hikes mortgage rates, down payments
Seeks to cool overheated property markets
By MarketWatch
Last Update: 11:30 PM ET Sep 27, 2007
HONG KONG (MarketWatch) — China lifted interest rates and increased the minimum down payment requirements for the purchase of second-homes and commercial real estate in a bid to cool down the property market, according to reports.
The changes were announced late Thursday in a joint statement by the People’s Bank of China and the China Banking Regulatory Commission, according to Dow Jones Newswires.
http://www.marketwatch.com/news/story/china-ups-mortgage-rates-down/story.aspx?guid=%7BFE0515ED%2D03AC%2D484E%2D8F9D%2DB16D04AAC55A%7D
Principal residence - 20% down for up to about an 800 sq.ft. McHut, then 30% down for anything over that. Skin in the game — how old-fashioned is that?
OT - but important for anyone considering taking supplements. Recently, I wrote the “Stop Aging Now” manufacturer to see what they meant when they say their products are “Made in U.S.A.”. One would think that means that their INGREDIENTS come from here, too, correct?
Not so … here is the reply I got. (I wrote back to tell them I found their claim “Made in U.S.A.” was deceptive and chided them for their claim that they “must use China as a source of vitamin C.” I told them I would think that they would want to support American workers and that I would never buy any of their products as a result of what they said. So far, the only true American mfr that I have found that uses ingredients from the U.S.A. is Tom’s of Maine.
All of our products are made in the USA. Furthermore, we make our supplements in facility that is physically inspected by FDA agents. Furthermore, we require that this facility make our supplements to pharmaceutical grade standards. This means that all of our raw ingredients undergo the strictest standards in terms of testing for quality, potency, contaminants, etc. both before and after the production process. When possible, we source our raw materials from US and European sources. In some cases, as with vitamin C, China is now responsible for over 95% of global production, so in this instance, as with almost 99.9% of all supplement companies, we must use China as a source of vitamin C. That being said, all Chinese suppliers are not created equal, and we use a very reputable company with a global reputation as our supplier. Consequently, we purchase the most expensive and highest grade vitamin C possible. More importantly than where the raw material comes from is the testing which is applied to this raw ingredient before it is used for production. And as I mentioned before, every particle of raw ingredient goes through vigorous laboratory testing before being approved for production.
I hope this answers your questions. We have 100% confidence in our product. Regardless of whether you decide to use our product or another, we strongly encourage you to use a product that is made in the USA (many supplements are not) and ideally are made to pharmaceutical grade standards in FDA inspected facilities. This is your best line of defense.
The correct description would be “Assembled in USA”.
I noticed that many products do not list where they are manufactured but instead list a US distributor on the product label. Personally I think this is code for made in China.
There is a law named COOL, which is Country of Origin Labeling, which was passed by Congress in 2004. It is not being implemented by our President, one of the many he chooses not to implement. It would require all foods be labeled clearly as to origin. For example, you would know what is grown in China, or in NAFTA countries, which use human sewage as fertilizer. American farmers strongly support this law, as many feel, rightly, that safety-conscious Americans would support American grown food. But Bush and friends think you have no right to know. I’ve contacted my senators on this, Schumer and Clinton, so far, nada from either.
Thanks for the lowdown Spike. I’m going to follow up on that with someone I know at Florida Fruit and Vegetable.
The Shrub strikes again…
“On May 13, 2002, President Bush signed into law the Farm Security and Rural Investment Act of 2002, more commonly known as the 2002 Farm Bill. One of its many initiatives requires country of origin labeling for beef, lamb, pork, fish, perishable agricultural commodities and peanuts. On January 27, 2004, President Bush signed Public Law 108-199 which delays the implementation of mandatory COOL for all covered commodities except wild and farm-raised fish and shellfish until September 30, 2006. On November 10, 2005, President Bush signed Public Law 109-97, which delays the implementation for all covered commodities except wild and farm-raised and shellfish until September 30, 2008. As described in the legislation, program implementation is the responsibility of USDA’s Agricultural Marketing Service.”
http://www.ams.usda.gov/cool/
I’ve also discovered that even Whole Foods gets their supplement ingredients from outside the U.S.
When someone on this blog first mentioned that the ingredients for most supplements came from China, I was astounded … but now I see they were correct.
This blog has such outstanding info on it.
Reminder - please help support this blog - SEND A DONATION TO BEN TODAY!!
:)
Sally,
I’ve been in the supplement and personal care inductries for over 20yrs. I can tell you that there is no way around ingredients from China. There are very few chemicals manufactured in the US. Even U.S. companies that may have done chemical manufactureing in the U.S in the past, now have their ingredients manufactured for them in China. This includes almost all vitamins and herbal extracts and most of the other chemicals used in supplement and personal care products.
For further info on food, where it is grown, how, and under what conditions, including all the imported additives the large manufacturers do not wish you to know about which are imported from China, including food dyes, preservatives, vitamins and fortifiers, etc., check out Marion Nestle’s What To Eat. Published in 2006.
If you want to know what you’re really eating or feeding your kids, check out her chapters on processed foods…cereal, cookies, chips, twinkies. Available at any public library.
anybody want to go halvesies on a 72,000 square foot building, that used to belong to a scallywag?
Yeah…landlords will revolt against renters!!!
The incoming president of the NAR recommends Indiana, Michigan and Ohio as the places to buy a home…
The Rust Belt is back, baby!
Good Lord, I’m laughing again. You can’t be serious!!! Do you have a link??
Twas uttered on the Cramer piece on the today show today…
The new incoming NAR president isn’t the sharpest knife you ever saw, by the way.
She’s from Michigan. Yet another way for a realtwhore to say “It’s different here!”
Yes you can buy a home here(OH) as long as you don’t need a job to go along with it to make the payments. Housing in my area is in line with income, however your income better come from investments and pensions, because the job market is slim. Michigan is even worse off than Ohio.
I would like to welcome the economics group of Goldman Sachs to the community of reality-based analysts. They have apparently abandoned their previous thesis of a global economy “decoupling” from a troubled US. Apparently, they recently noticed that Japan is troubled and also a large consumer and that Europe is weakening. Shocking I say!
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/27/bcngold127.xml
“It is an abrupt change of tack for the bank known as the “cheer leader” of the global boom. Until now Goldman has insisted that Asia and the developing world are strong enough to shrug off an American slowdown”
No Sh!t Sherlock — you don’t say.
Sept. 28 (Bloomberg) — More American homeowners are missing mortgage payments, pushing defaults on privately insured home loans up 30 percent last month according to a trade group.
…
“These defaults are a lagging indicator, so they’re probably going to get worse from here,” said Michael Darda, economist at Greenwich, Connecticut-based equity trading firm MKM Partners LP.
http://www.bloomberg.com/apps/news?pid=20601087&sid=auhMAssm3RNY&refer=home
Yet more confirmation that the Financial Enablers are going to suffer increasing pain - regardless of the Fed.
This echos what many here are thinking
http://money.cnn.com/2007/09/28/news/economy/sloan_bernanke.fortune/index.htm?postversion=2007092813
“However, if you look at the financial markets’ overall reaction to the Fed move - not at just the stock market’s reaction - you realize that as a result of the cut, those of us who keep score in dollars and didn’t need to be bailed out are less wealthy than we were in terms of anything other than our home currency.
Why? Because the rate cut contributed heavily to the dollar’s recent sharp drop in the currency markets - parity with the Canadian dollar, for God’s sake! - and to the price spike in hard assets like gold, silver, copper, and oil. So our wealth, relative to these other things, has diminished.
And wait, there’s more….”
Another man-hug goes out today to Sloan.
“It’s too bad that the governors of the Federal Reserve Board don’t have to take such a pledge when they assume office, because their recent interest rate cut has done a lot of harm to those of us who’ve managed our finances prudently.”
It’s too bad that none of our civil servants have to take such a pledge. I am so disappointed in our leaders that I am contemplating becoming an anarchist. Anyone have any good anarchy links?
Pretty good article. Hits on all the most pertinent points including the War On Savers. Reiterates my belief that the rate cut was about bailing out Wall Street pig men.
“However, if you look at the financial markets’ overall reaction to the Fed move - not at just the stock market’s reaction - you realize that as a result of the cut, those of us who keep score in dollars and didn’t need to be bailed out are less wealthy than we were in terms of anything other than our home currency.
Why? Because the rate cut contributed heavily to the dollar’s recent sharp drop in the currency markets - parity with the Canadian dollar, for God’s sake! - and to the price spike in hard assets like gold, silver, copper, and oil. So our wealth, relative to these other things, has diminished.”
Link please?
This was suppose to nest up above.
Cess Poole says if the market starts to tank…I mean economy starts to tank the Fed is ready to cut.
Fed ready with more rate cuts if needed: Poole
By Greg Robb
Last Update: 2:48 PM ET Sep 28, 2007
WASHINGTON (MarketWatch) — The Federal Reserve stands ready to cut rates again to keep the economy on a moderate growth track in the face of the financial market turmoil, said William Poole, the president of the St. Louis Federal Reserve bank on Friday. “My guess is that the inherent resilience of the U.S. economy along with future policy actions, should they be desirable, will keep the economy on a track of moderate average growth and gradually declining inflation over the next few years,” Poole said in a speech in New York City. Poole said he saw tentative signs that the financial markets are beginning to recover from the recent upset, although financial fragility is obviously still an issue. “If the upset were to deepen in a sustained way, it might have serious consequences for employment stability,” he said.
We’re bullish on Inflation!
Commodities Head for Biggest Monthly Increase in 32 Years
“Commodities headed for the biggest monthly gain in 32 years, led by wheat, crude oil and gold, as the dollar’s slump enhanced the appeal of energy, grains and precious metals as a hedge against inflation.
The 19-commodity Reuters/Jefferies CRB Index was up 8.7 percent this month, the most since July 1975. Wheat climbed to a record in September amid a global grain shortfall, boosting corn and soybeans. Oil also hit a record, and gold reached a 27-year high. The Federal Reserve cut borrowing costs to bolster the U.S. economy, sending the dollar tumbling.
“The Fed has signaled pretty clearly that they will answer the problem of a slowing economy with greater liquidity,” said Chip Hanlon, who manages $1 billion at Delta Global Advisors Inc. in Huntington Beach, California. “We’re in a bullish phase for commodities.””
http://tinyurl.com/2rt4kf
Too late to buy gold?
METALS STOCKS
Gold rallies to 27-year peak as dollar tumbles
By Polya Lesova, MarketWatch
Last Update: 2:12 PM ET Sep 28, 2007
NEW YORK (MarketWatch) — Gold futures rallied to a 27-year high on Friday, as the dollar’s tumble against other major currencies boosted demand for the precious metal.
Gold for December delivery surged $10.10, or 1.5%, to end at $750 an ounce on the New York Mercantile Exchange.
http://www.marketwatch.com/news/story/gold-rallies-27-year-peak-dollar/story.aspx?guid=%7B8CE0B858%2D7C67%2D4CA0%2DB4D8%2D710E16A8AB4D%7D
I have taken a position long the dollar over the weekend. I have shorted the Euro, I will never get to greedy. At some point (obviously, I believe here), the dollar is grossly oversold. This does not mean I believe the dollar has bottomed. But a continuous waterfall against the Euro, which I believe is the most overvalued currency in the world, does not seem justified.
If I could get some shorts off in the Chinese ETFs I would. I have not been able to get any shorts off, maybe Tx can (be she so inclined).
In the last 10 days the profits in Asia make the last 5 years of the S&P500 look like a go-kart at the Indy 500.
Most foreign listed industrial metal stocks are up over 30% since Aug 9, 2007 some are up over 200%. IMHO unsustainable. Profit taking time.
Have a great weekend all, Go Packers, Go Badgers, Go Cardinal -please win (close against Oregon last week, but another loss - alas).
Keep a careful eye on euro purchases of oil. There is a lot of mumbling out there oil is going to be sold in euro’s in the coming future. That is going to be a hard hit on the dollar being the “reserve” currency.
LONDON (Reuters) - Stricken British mortgage lender Northern Rock … may have borrowed a further 5 billion pounds ($10.1 billion) from the Bank of England in the past week, an economist said after analyzing Bank of England data.
http://www.reuters.com/article/bankingfinancial-SP/idUSL2836218420070928
Seems as though the BOE is pouring money down a rat hole…
Oh, the humanity! Europeans were speculating too. From the FT:
The price of second homes in the Mediterranean and eastern Europe could fall as a result of the credit crisis, a leading property expert has warned.
…
Savills, the estate agency, says the value of British-owned homes overseas have risen from £7bn in 1994 to £52bn ($106bn, €75bn) today through new purchases and rising prices.
The most common motive of buyers is to make a profit – rather than to have somewhere to go on holiday – according to a survey by the company. This speculation might have made some markets even more precarious. Some buyers might have overestimated the potential rental returns that they can get through letting these properties.
http://www.ft.com/cms/s/0/f29aeeb8-6de8-11dc-b8ab-0000779fd2ac.html
Nice end of quarter rally, no? Statements were made and now they will be mailed. Every turd was polished, wrapped, and bowed. Stinky little buggers won’t shine for too long, however.
Have any of you noticed if the HomeDepot or Lowes parking lots near you are less full nowadays?
Our HD is a morgue after 6:00pm. I was in there last night and I bet there were 4 cars in the parking lot. I needed some pipe cut and was talking with the guy working the plumbing dept. He told me that the store is so dead that management has cut hours and made most F/T staff P/T. He went from 40 hours to..get this..16! Insurance goes away then too.
I firmly believe the economy is in recession and sliding further fast.
Went to Wal-Mart today. Wife dragged me in, else I’d have stayed in the car and listened to Sirius. Haven’t been inside in quite a while — didn’t seem crowded at all. Biggest surprise was that we could be second in line at any register — that got my attention.
Contact page for the FED
http://www.federalreserve.gov/feedback.cfm
Shocking news: Britons face payment shock too! From the FT:
About 80,000 homeowners with patchy credit histories face increases in their mortgage payments of hundreds of pounds a month because of the global credit squeeze, according to the bleakest assessment yet of the UK’s subprime market.
…
“The likely scale of this upcoming effect, and the potential subsequent impact on borrowers’ payment behaviour is relatively severe by recent standards,” said S&P.
Furthermore, borrowers are facing “one of the largest payment shocks witnessed since the 1990s”.
http://www.ft.com/cms/s/0/d212fd44-6dbf-11dc-b8ab-0000779fd2ac.html
Wahoo! We got us a bank failure. First bank since the S&L crisis.
http://www.netbank.com/
Is it too late to make Bank Runs an olympic event next year in China?
It’s a stretch, but, at this pace, maybe. We’re off to a good start, however.
Nice. That one was a coffee spitter for me!
Kudos to these bloggers, for the timely if somewhat comical timing of this blog post!
September 28, 2007
Why Is NetBank Still Open? (NTBK)
If you have followed the saga of NetBank (PinkSheets:NTBK), this has been a long slow death. We’ve been reviewing this on and off for some time and never with anything positive, at least not in years. This looked like a classic situation of a financial company masquerading as a dot.bomb turning into a flameout.
On July 26, 2007, back when we were just deemed as petty emerging bloggers, I wrote a piece about how this one was stinking up the room when shares were around $5.50. I had actually been covering this one negatively at one of the predecessor operations prior to 24/7 Wall St. since 2003 or 2004 because of how the company was being run and how it looked like it had a tsunami headed straight at it. They would have made a great asset and could have become part of a much larger company at one point, but that was way back when and is now ancient history. The yield boost they were offering on CD’s compared to traditional banks was eating their financials inside out.
http://www.247wallst.com/2007/09/why-is-netbank-.html
Moral of the story: Beware of banks which offer above-market interest rates to attract deposits and CD purchases. This is a signal of heightened risk for a future bank failure (as some of us learned the hard way during the unfolding of the S&L crisis two decades ago).
Countrywide Bank attracts deposits of $50 mln/day
Fri Sep 28, 2007 8:42pm BST
NEW YORK, Sept 28 (Reuters) - U.S. mortgage giant Countrywide Financial Corp (CFC.N: Quote, Profile, Research), scrambling for sources of cash following this summer’s broad credit crunch, says its savings bank unit is attracting more than $50 million of new deposits a day, the Wall Street Journal reported on Friday.
Countrywide has turned to bank deposits to fund its lending business after turmoil in credit markets stymied its ability to raise cash by selling debt and loans.
The largest U.S. mortgage lender plans to double the number of Countrywide Bank branches offering savings accounts to more than 200 over the next four to six months, the Journal reported, citing an interview with Countrywide President and Chief Operating Officer David Sambol. The branches offer above-average interest rates on certificates of deposit and money-market accounts, the Journal said.
http://uk.reuters.com/article/bankingfinancial-SP/idUKN2824027120070928
Thank you, sir! May I have another.
Technically it’s not a bank, it’s an S&L supervised by the OTS. So far this year we have had two credit union failures and one S&L failure. NetBank is the first publicly-traded depository institution to go into receivership. I wonder what IndyMac and Countrywide shares will do tomorrow?
By the way, the FDIC almost always seizes an institution on a Friday after close of business and equity markets.
It was too small to save.
tomorow the plan is to “pint in shants”
the real fun starts Monday Morning.
Tuxedo — that’s very interesting. Thanks.
Forbes Article on the closure. Have to click through the advert. screen. Evidently $100 million in depositor cash in excess of FDIC limit get to join other creditors in the receivership line.
http://www.forbes.com/feeds/ap/2007/09/28/ap4168581.htmlys
“NetBank, which had no physical branches, “sustained significant losses in 2006 primarily due to early payment defaults on loans sold, weak underwriting, poor documentation, a lack of proper controls, and failed business strategies,” the OTS said in a statement.
Anybody know any other banks or financial entities that fit the above description?
The FT has more:
ING Direct, a subsidiary of the Dutch financial group, on Friday said it would take over some deposits and customers from NetBank, an online lender with $2.3bn in deposits that was shut down Friday by the US government following losses on subprime mortgages and other loans.
ING said it would take on about $1.5bn in NetBank deposits that are insured by the Federal Deposit Insurance Corporation. ING said it paid a 1 per cent premium to acquire the deposits. ING will also acquire $724m in assets from NetBank, which filed for bankruptcy protection.
http://tinyurl.com/238pah
If you haven’t already…
Panic before the public panics
From the BizJournal:
NetBank is the largest bank failure in Georgia history, is the second FDIC-insured bank to fail this year and is the first in the state since AmTrade International Bank of Atlanta closed in September 2002.
…
According to the Office of Thrift Supervision, NetBank’s significant losses began in 2006 with early payment defaults on loans sold, weak underwriting, poor documentation, lack of proper controls and failed business strategies.
NetBank primarily issued subprime and adjustable rate mortgage loans backed by online national deposits. The company issued mortgage loans particularly in southwest Florida, an area hard hit by the housing slowdown and mortgage meltdown.
http://tinyurl.com/2ejydg
History of NetBank from the AJC:
http://www.ajc.com/business/content/business/stories/2007/09/28/netbanktimeline.html
Posted but not seeing link. BizJournal reports exposure to SW Florida and subprime loans. Largest GA bank failure. Plus, it’s the second FDIC failure.
More details from the AJC:
NetBank’s employees … full-time ranks numbered 1,229 as of June 30. That figure is down from 2,343 a year earlier.
Outside NetBank headquarters, there was no sign of the turmoil inside. About 20 cars sat in the parking in front of the block-long, single-story brick and glass building.
The sole indicator of possible trouble was a sign posted over the NetBank ATM that said, “Out of Service” and a Forsyth County Sheriff’s Office vehicle.
An FDIC official collected his black leather bags from a parked minivan and went inside after referring all questions to the agency ombudsman who was in an employees’ meeting.
NetBank’s failure is the first in the country since Metropolitan Savings Bank in Pittsburgh in February.
http://tinyurl.com/2rlaw5
Customers are posting comments at the bottom of the linked page if you are in to that kind of stuff. Here is one by Steven:
I used to be a NetBank depositor, however I got my money out in the nick of time. When I first learned of the merger with EverBank, I moved my paycheck ACH and most of my assets to the local bank. I left enough in my NetBank account just in case the merger went smoothly. I happened to learn about the merger falling through the day after the PR went out, but not via email from Investor Relations. I pulled the rest of my money out that same day. I’m glad I did! I would not have lost money due to FDIC, but it would have been a major hassle.
This is why we can’t rely on the FDIC to take care of us. We need to keep an eye on those who keep an eye on our money and bail out when there is a whiff of anything rotten within.
My condolences to the innocent victims of the NetBank failure, the depositors.
This is the best blog in the world! From the AP:
NetBank had $109 million in deposit accounts that exceeded the FDIC limit. Those customers will become creditors in NetBank’s receivership, the FDIC said.
http://tinyurl.com/2cqu5m
Amazing! People forget how dangerous it is to exceed $100K in any one bank ($200K for joint accounts).
They need to collect taxes based on the STATED INCOMES of the FBs to help out those depositors who lost their $$$.
“They need to collect taxes based on the STATED INCOMES of the FBs to help out those depositors who lost their $$$.”
Reuven — outstanding idea.
WASHINGTON, Sept 28 (Reuters) - EverBank Financial Corp, a privately-held bank, on Friday said it acquired about $700 million in mortgage assets of NetBank Inc … a failed Internet bank shut down by U.S. thrift regulators.
http://tinyurl.com/2k7vs9
Hmmm… this casts in great doubt my continued interest in purchasing a $100K Norwegian Krone CD from EverBank. Wonder if they bought the “really good” AAA-rated stuff.
http://money.independent.co.uk/property/homes/article2996808.ece
UK realtor just published a book exposing the sleaziness of the RE business. Article also discusses specific dirty tricks realtors use to con unwary buyers. Realtors on this side of the pond will no doubt pull out all the stops to prevent this book from being marketed in the U.S.
‘Tips, Tricks, Traps’ by P Sheen, £9.99 Details from http://www.BeatTheAgents.co.ukHenry Sutton is the author of ‘The Househunter’ (Sceptre, £7.99)
Pav’s 10 top tips to avoid being conned by realtors:
1 When you are viewing the property, ask questions and insist on getting answers. For instance, “Why so many cracks in the wall? Is this subsidence?”. Your questioning will both elicit information and put the agent off-balance.
2 Avoid displays of positive emotion when viewing. Be quiet, calm and sceptical, even dour. It will disconcert the agent, who will be unsure what line to take with you. When he asks questions, let your answers be short, to the point, and delivered with a poker face.
3 Always remind the agent of how experienced a buyer you are. The awareness of a solid buyer can play a key role in negotiating the price. From the owner’s point of view, better a solid buyer and a lower price than a risky buyer offering the full price.
4 To avoid gazumping, get a friend to call up the estate agent about the property you have agreed to purchase to see if they are still marketing that property. If the agent is still accepting viewings, then it is possible you’ll be gazumped. Confront them with their duplicity, and look for other properties.
5 By law, all offers must be communicated to the vendor. If you mistrust your agent, try to exchange telephone numbers with the owner, once you have agreed a deal. Use an excuse, such as wanting to discuss the sale of furniture. This will ensure communication between yourself and the vendor. Failing this, try to drop a note through the vendor’s letterbox with your name and telephone number.
6 When calling to book a valuation, always tell the agent that you are looking to put your property on the market. This will always guarantee a free valuation. If you tell the agent that you need a valuation for a re-mortgage, or a divorce valuation, they will always try to charge you for it.
7 A common tactic used by agents before signing is to state that they have a minimum contract term. In reality, this is not the case. It is merely another sales tactic, first to give the agent maximum exclusivity for selling time, and, second, to freeze out the competition. In fact, the contract can be amended, so do not be misled.
8 Throw the agent off-guard by invoking “parallel reduction”. If you have to reduce the price on your property, then the agent should be willing to reduce his commission. If you have to take a hit, why shouldn’t he?
9 A good tactic a vendor can use to get a lower fee is the play-off close, when the vendor plays one agent against another. For example: “We’ve seen a few agents and we’ve narrowed our choice down to you and one other agent. We would prefer to go to market with you, but the other agent has offered a lower commission. If you can match that, we’ll come on the market with you.” While doing this, smile.
10 Beware tea and coffee. Agents will always try to increase the amount of time spent with a potentially strong buyer. Although agents often work against each other in the office, they sometimes join forces in what is called “office assistance”. Another agent offers the buyer a beverage, a display of manners with an ulterior motive. The more time an agent has with you, the more time they have to make you comfortable and sell you other products.
The holier-than-thou premise that might be assumed for this books is blown away by #6 above. So it’s not a book about principle, but about how to gain relative advantage. Not judging that, just noting it.
http://www.ronpaul2008.com/
Dr. Ron Paul, the only candidate of either party running on a strong Constitutionalist platform, is well on his way to raising a million dollars in grassroots donations by the end of this quarter (September 30). Unlike his Wall Street-owned Republicrat “competition,” not a dime of Ron Paul’s money is coming from the banksters and transnational corporations. Compare that to the laundry list of lenders backing Hillary, Chris Dodd, Obamba, and the bon vivants on the GOP Establishment.
I’m seeing more and more Ron Paul bumper stickers and a sign twirler or two. IMO, it’s interesting, given that he is such a dark horse and it is 13+ months before the elections.
Could’ve sworn I posted this earlier: I am seeing a pretty good number of Ron Paul bumper stickers and a occasional sign twirler or corner waver. Surprised me for this early in the cycle. Good for him.
got a call from uncle fixed income millionaire:
tells me: Nothin to worry about Bubba, the bad debts goin away, and the doors of opportunity are about to open. Good Job? Steady life?
Nuthings gonna change, except you are about to know the power of real money, not the funny money.
So, chicken little be damned, the power of the “real” dollar is coming back.