Bits Bucket And Craigslist Finds For October 1, 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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http://tinyurl.com/yruccf
Very Good article by Cuyahoga County Treasurer.
Slavic Village: The future by predatory, subprime lending coming to an RE speculator overrun community near you.
I especially like how the REIC lobbied the state to prevent the cities from stopping them from destroying communities an people’s lives and then the corrupt state politicians realize they screwed the people that vote for them, but by then its too little too late. This is now playing out at the federal level.
Must reading, that article…
“The interest-rate cut won’t help city governments, either. It does nothing for the 10,000 vacant structures in Cleveland, almost all of them abandoned since the late 1990s. Nor will it cover the $100 million demolition bill facing this city. You see, most of these vacant structures will never be restored; all you can do is pull them down. They’ve been stripped of anything of value — copper piping, furnaces, windows, doors, you name it. Cleveland City Councilman Michael Polensek recently described to me the scavengers’ efficiency: They arrive at a house less than a day after it has been vacated and strip it clean within hours.”
Great link. Reason to pause before buying munis…
–
In the coming depression municipalities and states will be bankrupt all across America led by California. Only the greedy would invest in Munis because of the extra after-tax yield. Some day the risk materializes and that some day would be lot sooner that people expect.
Jas
Only the greedy would invest in Munis because of the extra after-tax yield.
WTF? Anyone who wants to beat taxes LEGALLY can’t be called “greedy”. Greedy is refinancing you home with an i/o mortgage that you can’t ever pay back because you want a Hummer.
–
You misunderstood. I was talking about the risk of munis. The after-tax part was simply because that is how they are sold to investors. The higher after-tax yield is with much greater risk than perceived. The risk has gone up exponentially in recent years due to high debt levels and leverage.
USTs are much better investments than the munis.
Jas
Oh! I get it! You’re saying that only the greedy would take the extra risk involved in a muni when there are other tax-advantaged investments out there! That I agree with! (Though I have some $$$ in CA tax free funds.)
Reason to pause before buying munis
The Supreme Court is hearing a case soon that questions the constitutionality of certain states giving tax breaks to in-state munis vs. out-of-state munis. Muni investors may want to pay close attention to this (depending on which state you live in of course)
Thank you for posting this article.
The community tried to pass reforms, but were lobbied out by RE, MB, etc. I am truly speachless, frightened and at times, hopeless. Bless us all.
Leigh
No doubt this played a big part of the downfall of the Broadway/Fleet neighborhood. But realistically, the neighborhood had been in decline at least since the 80s, and the ethnic European enclave accelerated their departure during this time. In their absence the locale gave up its island of ethnicity, and became, or is becoming, just another inner city urban neighborhood.
In this case it is no different from any inner-city neighborhood, except that its demise is more recent, and not one of 50 years and more.
The demise was hastened by local politicians who gave up quality of life for its residents through a series of sweetheart deals to “developers,” not to mention tax breaks for businesses that resulted in virtually no jobs.
It is a sad story, but indicative of the tailspin of Cleveland and the county, and there are a lot more bad guys than RE speculators.
–
“…there are a lot more bad guys than RE speculators. ”
As in a bad econo-political system? The “system” favors interests of the businesses, corporations, bankers and financiers over that of the people, systematically (no pun intended). As Spengler pointed out, democracy is a system of domination of those with money and via the use of the media.
More and more the money gets concentrated worse and worse the system gets for the honest and hardworking Americans. I have a hunch that this blog attracts lot of honest and hardworking Americans.
Jas
I’m still fairly honest, but I don’t work much anymore. No point.
Maybe in a few years things will be different, but for now any salary under 200k is chaff in the breeze.
Manufacturing? We don’t need no stinkin manufacturing!
Why would we want to make things when we can be a “service” ecomomy?
And of course the greek origination of the word servant means slave.
Nice huh? Lets all walk around excited about being a “service economy”…. Friggin liars.
–
And if a slave can be brainwashed into believing that he, or she, is not a slave all the better for the masters!
Tocqueville: “Servitude lies in the act of obedience, I could care less who the master is.” If you must obey 10,000 laws you can’t be free. Yes, obeying some laws is not slavery but beyond that slavery becomes widespread, a norm, and people don’t recognize it as such.
Jas
I felt badly for the guy until he tried to tug on my heart strings, (good luck): “And they need to do it for Cookie Thomas and Joe Krasucki.” Cookie and Joe are off this rock and good for them! Politicians…
I used to like John Edwards. He was handsome, articulate, seemed to be a decent human being. Then he gets his terminally ill wife to do an internet ad for his campaign, (looking all disheveled and sounding all plugged up, her hair visibly thinning, no make up), so people called him on it. They said, don’t pull on our heartstrings! Don’t play the cancer card! She shows up on Larry King (looking remarkably better, by the way, wearing make-up, her hair neatly coiffed to cover the bald spots). She swears her reference to running out of time has nothing to do with her dying! You know what I say: Bu!!$h!t. I put nothing past the slimy b@stards. Nothing.
What sort of power hungry cretin would jump through hoops to be in politics, nowadays?
Most of em’
You see, most of these vacant structures will never be restored; all you can do is pull them down. They’ve been stripped of anything of value — copper piping, furnaces, windows, doors, you name it.
What happened in Cuyahoga County in OH is so true in lots of areas. Many houses for sale have been stripped of siding, windows, doors,copper plumbing, bathroom fixtures, and furnaces. They did many newspaper articles and TV news spots on this stripping in our area. (The extreme southeast section of NE OH)
What is also sad is that the legislators were supposed to work on mortgage regulations, but dropped it. Some realtors really pushed it, but sadly other greedy ones fought it. But our legislature is noted for basically doing nothing. The courts declared school funding unconstitutional 6 or 7 years ago and they’ve done nothing about it. Here, last election, no matter the party, if you were an incumbent running for office you were gone. The scandals and corruption uncovered over the last several years is disgusting and I guess taxpayers had finally had enough.
Ode to the Beach Boys…
If everybody had a loan
Across the U.S.A.
Then everybody’d be Serf”n
Like Californi-a
You’d see em’ wearing their hairnets
Fast food uniforms too
A few missed loan payments & it’s over
Serf”n U.S.A.
You’d catch em’ Serf”n, living out of their car
Assistance from the county helpline
Santa Cruz and the No Cals
Inland Empire’s not doing so fine
All over Manhattan
Real estate’s down in every way
Everybodys gone Serf’n
Serf’n U.S.A.
Well all be planning that route
Were gonna take real soon
We’re waxing down the economy
We can’t anticipate a swoon
We’ll all be foreclosed on by next summer
Were on Serfari to stay
Tell the teacher were Serf’n
Serf’n U.S.A.
http://www.youtube.com/watch?v=h9JwveKr_Rc
LOL!
Mr. Greasepan…. Funny how few people understood what he was saying for the last 18 years, now he uses regular language.
http://www.reuters.com/article/ousiv/idUSL0112895120071001
“As in similar situations of inventory excess, I would expect home price declines to continue until the rate of inventory liquidation reaches its peak,”
Wow! Profound. The guy gets paid millions to state the obvious.
Today’s Master Of The Obvious (MOTO)
I believe this is the 3rd such honor, i’ve bestowed upon his green-ness…
Hey, I have a Ph.D. and make my money stating or asking about the obvious. People don’t ask the obvious question all the time.
Its a new line of work - its called predicting the past. I need to find out how to make money on reporting history.
Find questions of broad interest which most folks believe to be unresolved for which you already have in hand the answer.
LOL
This is somewhat OT: When Easy Al, BB, etc., carefully watch their words and spin their meaning in some of their public announcements, they are trying to avert a “panic” as they say. Now, what really disgusts me is what they are actually doing: trying to prevent people from taking corrective action that is in their best interests. Easy Al would term this as not yelling “Fire!” in a crowded theater. Yet, there is a fire and people should leave and in a hurry.
To be blunt: lying is not telling the truth and a forthright manner.
Roidy
They whisper ‘fire’ in the ears of their top Wall Street constituents, while urging the sheeple to remain calm, as everything is ‘contained.’
Well, really, he just starts makes an announcement about how exit doors and signs are sufficient. Bankers and Wall Street types know that’s their que to get first in for the exits.
Don’t forget the last and most critical part of the equation: they set the fire.
Actually it’s a lot like when the planes hit the Twin Towers on 9/11 and the Port Authority was telling the rank-and-file workers to stay at their desks while many bigwigs ran down the stairs. The ones who followed their gut instincts and got the hell out of there made it… those who did as they were told got buried under several thousand tons of concrete and steel.
By suggesting that inventory liquidation has not yet peaked, is AG implicitly predicting that housing market liquidity is on an uptrend?
Don’t be hatin’ so much. Easy Al just told us how to know when the bottom will come in.
Good post. What an a**wipe Greenspan has been. Single handedly destroyong 2 centuries of hope and growth in housing in this country. How low will his failed monetary policy take us?
http://tinyurl.com/yruccf
Sunday Washington Post Article
Very Good article by Cuyahoga County Treasurer.
Slavic Village: The future by predatory, subprime lending coming to an RE speculator overrun community near you.
I especially like how the REIC lobbied the state to prevent the cities from stopping them from destroying communities an people’s lives and then the corrupt state politicians realize they screwed the people that vote for them, but by then its too little too late. This is now playing out at the federal level.
3rd REIC
What a great read, thank you for posting it.
UBS Reports $3.4 billion writedown associated with subprime. The Fed has got to be an accomplice to financial fraud by Wall Street and the US banking industry to keep these losses hidden using “market to “Make-Believe”. How long can Benny and Boyzz hide their losse?
I love this term “negative revenue” used in the article.
“Swiss banking giant UBS on Monday said it will take a 4 billion Swiss franc ($3.4 billion) hit in the third quarter from its subprime mortgage exposure and plans sweeping management changes and job cuts at its investment-banking division.”
The group estimated that it would report a quarterly net loss — its first in nine years — of 600 million francs to 800 million francs, compared with profit of 2.2 billion francs in the year-earlier period.”
http://tinyurl.com/2sfxwk
Citigroup sees 60 percent drop in 3rd-quarter net…
http://www.reuters.com/article/ousiv/idUSN0132278020071001
At some point you have to start some write downs…
In unrelated news, stock market futures are indicated higher this morning.
Gotta hold it together until the 401K money comes in today.
Beware the Ides of October
Indeed, Professor Bear. I would like to wish all HBBers a merry month of October, the first month of the tsunami of mortgage re-sets. Let the fun and games begin.
We really ought to name it Mocktober, as there will be much to make fun of, as the desperation sinks in…
Futs down now.
I watched the futures start to drop on BBerg as the 60% drop in profits announcement from Citi flashed across the screen.
The desparation doesn’t seem to be sinking in with the market. Is the rally really because the fed might cut the rate again in ONE MONTH? I see the pump, when’s the dump? It’s like the god damm everready bunny, it just keeps going and going.
Someone could pee in the Andes Mountains and people would take that as sign to go out an buy stock.
Funny, isn’t it, how sensitive those thin-skinned Europeans’ stock markets are to bad new reports? They ought to grow thicker skulls, er, I mean, skins like U.S. investers. U.S. stocks (almost) always go up!
Bank warnings hits European stocks
By Neil Dennis
Published: October 1 2007 08:47 | Last updated: October 1 2007 13:09
Europe’s banking sector was weighed down on Monday after two of the world’s largest investment banks issued profit warnings.
The FTSE Eurofirst 300 was down 0.24 per cent to 1,554.22 in early afternoon trade. Frankfurt’s Xetra Dax fell 0.1 per cent to 7,853.38, the CAC 40 in Paris lost 0.4 per cent to 5,694.40 and London’s FTSE 100 was 0.1 per cent weaker at 6,459.3.
http://www.ft.com/cms/s/0/88a0961e-6ff2-11dc-a6d1-0000779fd2ac.html
we are talking about 0.0-0.2% losses; sensitive??
Once all the bad news hits the market should crash, however that was before the plunge protector team factor. It’s pretty clear the market is rigged so it’s difficult to really know what it will do…I mean why is country wide stock worth anything, it just does’nt make scense….
OK, it’s contained again; EU markets up 0.5% on the ‘good’ banking news.
beware the ides of October - if you are short or bearish …
Chewbacca defense?
Stock Strength Seems to Belie Economic Reality
By Justin Lahart
Word Count: 516 | Companies Featured in This Article: Coca-Cola, Hewlett-Packard, 3M
Remember all the trouble stocks ran into over the summer? Neither does Wall Street.
The Dow Jones Industrial Average advanced 75.44 points last week to 13895.63, putting it 1,050 points above its August low and not far from the all-time high of 14000.41 it tagged in July.
The stock market is often seen as a leading indicator of economic growth. But there seems to be a disconnect here, because the economic outlook sure doesn’t seem bright.
http://online.wsj.com/article/SB119119989571944308.html?mod=todays_us_nonsub_money_and_investing
‘Citigroup sees 60 percent drop in 3rd-quarter net…”
Don’t worry though. All is well.
“Citigroup shares were up 2.4 percent despite the warning, after Charles Prince, the bank’s embattled chief executive, said he expected the bank “to return to a normal earnings environment in the fourth quarter.”
All bad news that ever has occurred, is occurring or will occur is priced in already. The U.S. stock market is all-seeing and all-knowing. It has reached a permanently high plateau of hyper-efficient omniscience.
I would love to stick a bug or 2 in the plush offices of the financial powers that be, just to hear them spin things…
You’re not serious, are you?
Sorry, question was for PBear, didn’t refresh screen.
UBS to Report Big Loss Tied To Credit Woes
By Jason Singer, Carrick Mollenkamp and Randall Smith
Word Count: 1,318 | Companies Featured in This Article: UBS, Bear Stearns
Swiss banking giant UBS AG, which recently ousted its chief executive in the wake of losses at an in-house hedge fund and defections of top investment bankers, plans to write down as much as 4 billion Swiss francs, or $3.41 billion, in assets, including securities tied to U.S. subprime mortgages.
http://online.wsj.com/article/SB119122747351544695.html?mod=hpp_us_whats_news
it’s interesting that the first big losses were with some German banks (Germany: gruendlich, far removed from irrational exuberance) and now a big Swiss bank(Switserland: the most conservative banking country in the world?).
It has to make one wonder about the losses in less conservative countries, which is pretty much everybody else.
Similarly, if the biggest fish in the banking world (Big C) is reporting a 60 percent drop in 3Q net, how will the profit reports from the little fish look?
More importantly, why didn’t a 60% drop seriously hurt the market? Why, all those buyout announcements, of course! Oh, and the fact that they just wanted to push to a new high.
For whatever reason, Germanic people didn’t play the housing bubble, this time…
Their banks had no problem getting involved, however.
UBS chief takes charge of investment banking
By Peter Thal Larsen in London and David Wighton in New York
Published: September 30 2007 23:59 | Last updated: October 1 2007 08:33
Marcel Rohner, UBS’s new chief executive, is to take personal charge of the Swiss bank’s investment banking arm after heavy fixed income losses plunged it into the red in the third quarter.
The move came as UBS said it had written down its fixed-income portfolio by SFr4bn ($3.4bn), mainly because of losses on US subprime mortgage-related securities, triggering a third-quarter loss of SFr600m-SFr800m.
It is UBS’s first quarterly loss since it was forced to write off its investment in Long-Term Capital Management, the hedge fund, in the summer of 1998.
http://www.ft.com/cms/s/0/8b486d02-6fe7-11dc-a6d1-0000779fd2ac.html
Oh the humanity! I wail and nash my teeth in mourning over plight of these hapless investment banking victims.
UBS becomes biggest victim of credit turmoil
By Peter Thal Larsen in London and David Wighton in New York
Published: September 30 2007 23:59 | Last updated: October 1 2007 08:08
http://www.ft.com/cms/s/0/75399ada-6fa7-11dc-b66c-0000779fd2ac.html
sure, it’s time for a big ECB rate cut before we get more high profile casualties …
negative revenue?
Paging Mr. Orwell, George Orwell
‘When I use a word,’ Humpty Dumpty said, in a rather scornful tone,’ it means just what I choose it to mean, neither more nor less.’
‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’
‘The question is,’ said Humpty Dumpty, ‘which is to be master - that’s all.’
Truthiness
UBS pegs hit from subprime at $3.4 billion; 1,500 jobs to go
Bank stocks are rallying on the news. And four of the top five gainers on the S&P are CFC, CTX, DHI, and Pulte. They must figure that “all the bad news is behind us”. Well, it is- except for all the bad news that’s still in front of us. When we have seen a few TRILLION in write-downs I’ll believe we’re getting it behind us. Until then, they are just sweeping it under the rug, around the clock. Those who don’t LEARN are destined to BURN.
DP
There is absolutely nothing positive about builders at the moment. These buyers are either idiots or manipulators. Leave ‘em be. They deserve a pounding.
http://tinyurl.com/23b665
2008 Housing forecast for Metro DC, we have nowhere to go but down!!
You know its bad when you put 5 economists in the same room and they all agree!!
And, of course, the banner ads on that bad-news web page are for… luxury condos! (oh how I hate condo ads. They make you feel like such a failure if you’re not painting walls and living it up at their clubhouse. That’s partially how I found Ben’s blog.)
Surprise, surprise…
“The National Association of Realtors has a more optimistic view. The group forecasts that the national median price of an existing home will drop 1.7 percent this year and rise 2.2 percent next year. New-home prices, it predicts, will drop 2.2 percent this year and go up 1.7 percent next year. The group doesn’t make local forecasts.”
i sort of get the idea that NAR might be close in that prediction, although the numbers may be off… and next years expectation upward is unlikely.
Here’s my reasoning.
“National median price” is actually the median, national sales price. Sales have pretty much come to a stop.
Without any sales, home prices, including median price, would remain where they are. Little change in the numbers, up or down, would be expected until sales pick up speed.. and that won’t happen for a while, imo.
I was under the impression that sales were robust - for a normal market. I had heard/read that sales had reached 2000 levels.
Wasn’t the inflation of the RE bubble first started back in 1997 or 1998 when there was a capital gains reform, allowing people to avoid taxes on some significant level of real estate gains?
It seems to me that the real estate sales market is far from frozen yet.
“The group doesn’t make local forecasts.”
What ???
All their newest advertising campaigns about why you need to call a Realtor ™ is because ALL REAL ESTATE IS LOCAL.
That’s there new schtick. So, how, i ask you, are they able to make these “national” forecasts??
These schmucks come up with a new excuse for you to BUY real estate every month. Don’t worry it’s down today, but tomorrow you can start flipping houses again.
You get better financial advice from winos on the street corner.
I still have an active RE license even though I don’t practice anymore and I tell anyone who calls me that they’re crazy to even consider buying probably until 2009 or beyond. No one with a brain should buy in this market. If you think you’re getting a deal, in six months you’ll think you’ve been screwed.
The NAR doesn’t make local forecasts? Well that’s interesting, because I seem to remember the NAR coming out with 135 local market “anti-bubble reports” in October 2005 in which they swore on their mothers’ lives (with fingers crossed behind their backs) that it would be almost impossible for house prices to fall in each of these local markets.
“These downloadable 10-page reports show that the facts simply do not support the possibility of a housing bust — not for these 135 markets and not for the nation.”
http://www.realtor.org/research.nsf/pages/anti-bubblereports
I cannot believe they still have these up. They said no chance of a bubble burst in San Diego and that they expect a 68% increase in prices over the next three years. (This was in 2005.)
Darn - better buy a house soon as they are going to go up 48+% over the next year here!
I recommend all of us go to this site, print the main page to Adobe and download the town that most closely represents the area nearest us. We may be able to use it against them the next time these “experts” testify in front of Congress, etc. I don’t think these reports will last long after the first time they are called on them.
Oh, no, it’s different in DC. Everyone wants to live there, because it is the epicenter of government. Property will never go down there, because of all the government officials and lobbyists who have plenty of money. And since government is expanding its powers, well, we’re gonna need housing for all the recruits and new lobbyists and CIA and generals. (sarcasm off)
I see you’ve heard a few of the “stories” about Real Estate, too.
You should go get David Leareah’s book: “Are you missing the Real Estate Boom”, published in 2005. (and why it won’t bust)
I think your statements are to be found in their somewhere, also.
Perhaps a sequel - “Are you missing the foreclosure boom (publish date 2008) (and why it wont bust)
Citibank Net Income Down 60%
Oct. 1 (Bloomberg) — Citigroup Inc., the biggest U.S. bank, cut its third-quarter earnings forecast, citing “weak performance” in fixed-income credit markets and writedowns on leveraged loan commitments and mortgage-backed securities.
Citigroup expects to report a decline in net income of about 60 percent from the same period a year earlier, the New York- based bank said today in a statement distributed by Business Wire
Citigroup Warns of Profit Slump Amid Credit-Market Woes
By Kevin Kingsbury
Word Count: 368 | Companies Featured in This Article: Citigroup, UBS, Merrill Lynch
Citigroup Inc. warned it expects third-quarter net income to slump about 60% from a year earlier due to “dislocations in the mortgage-backed securities and credit markets, and deterioration in the consumer-credit environment.”
http://online.wsj.com/article/SB119123763857044747.html?mod=hpp_us_whats_news
Citi must hear the loud whir of rotating helicopter blades. But perhaps they did not notice all the brown stuff hitting said blades.
Citigroup warns of 60% drop in earnings
By Daniel Pimlott in New York
Published: October 1 2007 12:34 | Last updated: October 1 2007 13:13
Citigroup warned on Monday that it expects third quarter net income to drop by 60 per cent because of the credit turmoil over the summer, but said it would return to “normal” earnings next quarter.
”Our expected third quarter results are a clear disappointment. The decline in income was driven primarily by weak performance in fixed income credit market activities, write-downs in leveraged loan commitments, and increases in consumer credit costs,” said Charles Prince, chairman and chief executive of Citigroup.
But the bank remained bullish on its profit outlook, calling the third quarter trading performance an “aberration”.
http://www.ft.com/cms/s/0/d3bef808-700f-11dc-a6d1-0000779fd2ac.html
Of course they were bullish on LBOs, right as that mess was hitting the fan. I guess they’re “still dancing” on other idiot loans too.
Not to pile on, but…
If South Park were to do a $hiti Bank episode, i’d be cool with it.
Another Buffett Rumor
http://www.stockmania.com/2007_10_01_archive.html
Spot on! LOL.
Good job kahuna~
Chuckles.
http://tinyurl.com/yvor86
Renting vs owning in Metro DC
Outside of the interest rate risk the tone of the article indicates that the consensus among agents in the area (when not in need of a fat sales commission) is to rent and wait for the foreclosure tsunami finish coming in and going out to sea and see what prices are like when its done before you buy.
A good housing bubble story:
Found out this weekend that the housing bubble helped out a friend of mine in a divorce. His ex-wife desperately wanted to keep the townhouse (northern VA). So she had to pony up a few tens of thousands cash for him AND he got to keep all his retirement accounts free and clear. Now, presumably, his retirement accounts are still there and the townhouse is bleeding value by the minute.
She treated him terribly. I wish he had gotten an even better deal, but this, at least, is something.
Weak dollar works well for some…
Dollar Lifts Exporters, Blunting Housing Bust
By Timothy Aeppel
Word Count: 2,228
PITCAIRN, Pa. — Gary Bence sees the impact of a weaker U.S. dollar every time he wheels his truck into the sprawling rail terminal in this gritty Pittsburgh suburb.
As a driver for AGX Intermodal, which hauls containers for local companies here, the 57-year-old has seen a surge in recent months of boxes filled with locally made products headed to customers overseas. Of about 15 loads he handles each week, 10 are for export, he estimates, including a shipment of mineral oil bound for Bolivia that he dispatched earlier in the day.
http://online.wsj.com/article/SB119119627348544237.html?mod=hpp_us_whats_news
This is the good scenario…we can’t afford to buy much of anything, or to retire, but we keep our jobs working to pay the pensions of those who came before.
Mineral oil to Bolivia.Maybe not enough fiber in their diet? Hey, come to think of it, the Bolivian president was just on the Daily Show the other night. He closed the interview assuring Jon and his audience that he was not part of the axis of evil. This brought the house down. However, this quote pulled from Wikipedia begs to differ. It has evil written all over it:
“ The worst enemy of humanity is U.S. capitalism. That is what provokes uprisings like our own, a rebellion against a system, against a neoliberal model, which is the representation of a savage capitalism. If the entire world doesn’t acknowledge this reality, that the national states are not providing even minimally for health, education and nourishment, then each day the most fundamental human rights are being violated. ”
I’m feeling especially mutinous and my bounty is already overseas…
We’ll meet again
Ethanol bubble, we hardly knew thee.
Ethanol Boom Is Running Out of Gas
By LAUREN ETTER and ILAN BRAT
October 1, 2007; Page A2
Ethanol’s frenzied growth over the past year is coming to a halt — at least for now.
The price of ethanol has fallen by 30% over the past few months as a glut of the corn-based fuel looms, while the price of ethanol’s primary component, corn, had risen. That is squeezing ethanol companies’ profits and pushing some ethanol plants to the brink of bankruptcy.
http://online.wsj.com/article/SB119119537455444220.html?mod=hpp_us_whats_news
I’d swear we are living and breathing “Atlas Shrugged”…
PB,
I think that Ethanol producers have shown abiltity to produce more. At least they are not trying to limit - such as the gassoline producers have done. I think in following years farmers will produce more and thus the price of the raw material for ethanol should come down. In regards to the oil companies not being able to blen fast enough, I don’t think they want to because they would lose revenue.
I spoke to a guy a few months ago who sells farm equipment, he let me know that sales are very good. The raw materials for ethanol production are seasonal and it will take some time to ramp up. This will take a few more years, however I think ethanol is still a good alternative. I’m sure the oil companies are scared of this, and will do everything in there power to hinder ethanol.
“…however I think ethanol is still a good alternative.”
Read this then report back to us on what you learned…
Advanced biofuels
Ethanol, schmethanol
Sep 27th 2007 | EMERYVILLE, REDWOOD CITY AND SAN CARLOS, CALIFORNIA
From The Economist print edition
Everyone seems to think that ethanol is a good way to make cars greener. Everyone is wrong
http://economist.com/science/displaystory.cfm?story_id=9861379
How much have you invested in oil?
Zero. Contrawise, my parents own farms and make money when corn goes up.
I still say ethanol is cr-p.
I think oil prices are headed down, too. Nothing like a nice recession to make the bottom drop out. Plus OPEC has pledged to up production. Remember, it’s not just about SUPPLY, it’s also DEMAND.
I saw an Insight (still?) on the road today. Looks like a solar racer car. Which made me wonder why they didn’t put a nice solar panel on that practially horizontal back windshield. I mean, it’s florida–you don’t need MORE greenhouse effect inside the car. Use that radiation for motive power.
Plug-in solar … c’mon, you can do it! The owner had written “56 MPG” in soap crayon on the back. Pfft. Unimpressed.
It is another scam.
http://tinyurl.com/25r8ry
Not only will a recession kill oil demand in the USA, the vehicle mix change will also reduce it. I rarely see large SUV’s on the roads - lots of the smaller CUV type vehicles but Suburbans and Escalades are a rarity. Pickup truck sales are tanking too now that real estate is dead and Home Depot is not the Saturday morning soccer game. As airlines cut back flights, that will also reduce demand. As consumer cut back on buying tainted chinese junk goods, China’s economy will suffer. All futures point to lower oil demand and prices.
It is cheaper to import than to produce. It is going to cause food to skyrocket in the next 6 months. It is profitable because of governments assistance. It uses more energy than it produces.
In summary Ethanol production from food stocks is a malicious joke.
when you lose control of the dollar reserve, you gotta starve the unwashed masses in order to convince the foreign PTB that, well….you might wanna think about getting your hands on some US treasuries.
I agree: and worse - it replaces consumption of a resource we can live without (oil) with consuption of a resource that is vital to our survival (water).
WHAT!
Hoz…
I am of the opinion that people should be “investing” in foodstuffs, as in…
http://lds.about.com/od/preparednessfoodstorage/Food_Storage_and_Emergency_Preparedness.htm
What says you?
Better than investing in Plasma TVs.
Or getting your investment money, from Plasma…
I agree. And the fact that ethanol is not an economically viable alternative has been known for quite a while. Talk about toxic kool aid. What are these people thinking. We are already headed for a bad recession and the last thing we need is hungry and angry mobs in Mexico and the US raging about the price of tortillas. Has everyone gone completely nuts? What are the poor supposed to eat?
Cass, I am more worried about Uncle Vinnie’s relatives rioting over Pasta than angry mobs in Mexico raging about the price of tortillas. His relatives have a lot more moneys.
The US government has said that the war on poverty is over.
Poverty won.
Kind of like hydrogen fuel cells, but worse because it got farther and hence more waste is involved.
I say catenary for electric trolleys are a lot less “ugly” than high prices on food staples!
Horrible alternative. I believe the ratio is 1 gallon of gas to produce 1 gallon of ethanol. Again another reason for the government to stay out of the markets. There are much better ones out there i.e. sugarcane etc. but I think the tech isn’t there yet.
Ethanol from corn is a terrible idea on almost every level. It uses as much energy as it yields. The finished product is not economically viable and requires huge subsidies from the taxpayer. The false demand created by the subsidy has pushed up corn prices dramatically and pain is being felt along the entire food chain where corn is used as an input. High corn prices are increasing planting, crowding out other grains and pushing up prices there as well. All highly inflationary, irrational and economically unsustainable.
Hedge Funds Could Lose Offshore Shelter
By Anita Raghavan
Word Count: 792
The U.S. Senate Finance Committee is reviewing whether to change the nation’s tax rules to prevent offshore hedge funds from sidestepping withholding taxes on U.S. stock dividends by using derivatives, people familiar with the matter say.
The evaluation is at an early stage and is part of a multipronged examination of taxation of hedge funds by the committee, these people say.
The U.S. Treasury loses more than $1 billion in potential tax revenue each year through this practice, accountants and others in the industry estimate.
http://online.wsj.com/article/SB119119460025744215.html?mod=hpp_us_whats_news
In the 90’s when Michael Huffington spent around $30 Million of his own money, in an unsuccessful attempt at garnering the position of being California’s senator, a job that pays $150k…
Alarm bells went off in my head, and they’ve been ringing ever since.
Anyone know how the “Blackstone Bill” is coming along?
In the WSJ Sept. 21st Corrections & Amplifications “The Federal Reserve half-percentage point drop in short term interest rate should result in savings of about $30 a year for the typical household, which carries a median credit card debt of $7,000. A Personal Journal article Wednesday incorrectly gaid the rate cut would result in a savings of about $30 a month.”
gaid = said
WOW,
They sould be able to afford about 25 double cheesburgers at McD’s with all that extra money!
“Not everything that can be counted counts, and not everything that counts can be counted.”
Albert Einstein
That dude was pretty smart.
…and way before his time with the whole “bed-head” thing.
Every day was a bad hair day…
About 20 years ago, an unpublished photo of him wearing an indian headress showed up at the dead people’s auction in el lay and I was the underbidder, @ $600.
Isn’t $30 enough for the downpayment on a new Ditech mortgage? The Bubbble is back! People are smart!
LOL
Was probably mentioned yesterday but just in case:
http://www.washingtonpost.com/wp-dyn/content/article/2007/09/29/AR2007092901614.html
Hundreds of families living in housing subsidized by Fairfax County taxpayers exceed income caps designed to ensure that only the neediest receive assistance, a review of county records shows.
In the most extreme cases, Fairfax is underwriting rents for families making well into six figures: One household getting help makes more than $216,000 a year; another, $184,000. Dozens of others — making $60,000, $70,000, $90,000 — exceed eligibility caps. And they do so with the tacit approval of county housing administrators, who do little to encourage occupants to move on when their fortunes improve.
The fact that higher-income families choose to remain in subsidized housing illustrates the critical lack of affordable housing in Fairfax, named the nation’s most affluent county last month by the Census Bureau. The median new-home price in the region’s largest jurisdiction is $960,000, and the average monthly rent for a two-bedroom apartment is $1,306, according to county data.
There was much more opposition to government benefits for the poor back when they actually went to the poor. Are they going to blame the next recession on Blacks, immigrants, the poor, and those living in older central cities again? They’re the reason I cant’t pay my debts!
sounds very Dutch
It is rumoured that many Dutch millionaires live in heavily subsidized rental properties (most of them probably have additional properties in other countries, but Netherlands is a tax heaven for the rich and high income earners). And of course it is very Dutch to live on the cheap whenever possible.
One of my good friends is Dutch and she spends money like it’s water. She brings in about 700K a year and I’d be suprised if she saves 10% of that. Of course she lives in Dallas where the spending bug is unavoidable.
What does she do in Texas that brings in 700K a year? That’s just an assinine salary; I get annoyed when I hear the hedgies making that much money (which, I realize, is a bad year for them on Wall St.) but in TEXAS, making 700K a year? Wow! I need to get my butt in gear!
Self employed attorney.
I don’t believe spending money like water is necessarily a “Dutch” thing, but more likely a generational thing. My husband is 100% Dutch, (born in Holland, raised in Canada by two 100% Dutch parents). They are all extremely frugal. I think people that have seen economic despair first hand don’t ever want to see it again and don’t waste their good fortune or spend what the don’t have. People who have never been truly poor or raised by those that have, don’t realize that it could actually happen to them.
that is a very un-Dutch income but still - I think the Dutch spending habits are mostly about not having the neighbours notice that you are rich; in the US that is clearly not an issue …
“I think the Dutch spending habits are mostly about not having the neighbours notice that you are rich; in the US that is clearly not an issue …”
A regrettable side effect of false affluence. I have always thought that US citizens have created many of their own problems by flaunting prosperity in recent years. Many of the less fortunate in other countries have watched this like beggars with their noses pressed to the glass windows of a wealthy home at the holidays, and it has built great resentment around the world. It would have been better if we had just blacked out all communications to the rest of the world after 9/11, taken stock of what we were doing wrong, healed our own internal wounds and emerged a more sober citizen of the world. But no, if ya don’t got it, flaunt it anyway!
The old money in the US learned well the lesson of keeping money quiet. But the “new rich” hedge funders, etc. have to act like a bunch of loud mouth schnooks. Why? Because part of the jollies they get from the money they suck from the economy is to use it to make others feel like they are less and in the process make themseselves feel like they are “the better people”. These parasites would be nothing if it weren’t for the successful companies they strip, which were built by more productive people than themselves. If they want “offshoring”, I say, give it to them, by offshoring them to wherever it is outside the US they want to go, permanently. And forever be forbidden to enter the US or do business with any US entity. EVER.
I agree. Trying to make oneself look bigger by making others look smaller is hideous. But, ego is the center of much human misery.
George Orwell summed it up nicely a lifetime ago:
“How does one man assert power over another, Winston?”
“By making him suffer,” Winston said.
“There’s only two things I hate in this world. People who are intolerant of other people’s cultures and the Dutch.”
- Nigel Powers
I have a Dutch acquaintance that is married to a former US ambassador. They do have a rather large estate but its got to be over 70 or 80 years old. They rent out several apartments on the property. She drives a Volvo that’s somewhere between 5-10 years old and comes across as quite frugal. Their furniture and art are an ode to their travel years not brand spanking new faddish items. I would say if you didn’t know their address or his background you might make the mistake they had a less exciting background than they do. The funny thing about her is I met her not long after she moved here. She was not shy about explaining her dismay of many American practices most notably our lack of efficiency.
Is she single??
Goverment housing subsidies for the well off sounds Dutch to you. It sounds like New York City to me.
no surprise if you know the history of NYC
It all started with shafting the Indians out of Manhattan, for $24
According to the Manhattan Indians, it was a lease.
Seems like the tenants took “adverse possession”.
LOL, nhz
“It all started with shafting the Indians out of Manhattan, for $24.”
If the wise native indigenous population had invested the $24 at the Uncle Vinnie rate of 9%, compounded since the purchase, they could buy the entire island back today. It was a great sale, premium price, clearly a bubble peak.
It was not a shaft, the question is, Would the indigenous population wish to buy it back today?
I have heard this “if they invested it” argument before, and almost used it myself. Then I stopped and thought, but if we were on the gold standard for most of this timeframe, with zero, or almost zero, inflation, remind me what investment would have yielded 9%.
We were on the “bead standard” all those long years ago, but I am sure Uncle Vinnie’s ancestors were collecting more than 9%. The gold standard was never popular in the Americas, beads were the first fiat currency.
Got Wampum?
Actually, it sounds a lot like what rent control does for some in San Francisco.
wanna make sure first date = last date?
“let’s go dutch!
I read that. Local corruption isn’t news. The real news is Fairfax is “the nation’s most affluent county.” All based on our tax dollars.
Government intervention is kinda like the “cascade” effect of medication: Person takes medication, gets side effects, gets more meds to handle the side effects, which further generate more side effects, need more meds to handle those new side effects, and so it goes.
How in the heck do those numbers work out? 1,300/mo for a 2BR is high, but certianly NOT off the charts at all. That’s similar to what a 2BR would cost in S. FL in a good area. How in the heck does that equate to a 960,000 median home price? What is the median home in that area??
I just don’t see how the math works out here. The only other areas that I can think of with 1M dollar median home prices might be NYC; where a 2BR rent would probably be 5K a month. That’s STILL very bubbly (the 1M dollar home price should support a ~7.5K rent), but how in the heck do we get a 1,300 median rent with a 1M dollar median home??
Somebody please help me here, this is messing up my bubble meter!
The median rent is for a 2 bedroom apartment. The median house price is probably for a single family 3 or 4 bedroom, and with more or less land depending on the town. It is very bubbly, but not quite that bubbly.
If I was one of those families… I would stay there and use the goverment to help me save up enough money for a good downpayment on a house somewhere else…after a few years that family could pay cash…you giveth I taketh…
Reality sets in at the SDCIA.
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=2166757
All of the predictions indicate the market won’t bottom until mid 2008, maybe even 2009. Are there any places in California close to bottoming now?
All mainstream predictions are in that time frame (they don’t want to scare anyone or cannot think further ahead), but there are several opinions that the bottom will come later mostly due to the amount of adjustable loans resetting over the next four years.
Ergo no recovery until after 2011, right?
They all certainly assume that when the bottom is reached that it will immediately start back up. Wonder what Japan would say about that?
I bet I could throw blindfolded darts at a dart board and hit picks at the same rate a lot of them do.
What exactly is a blindfolded dart?
droog: blindfolded really in this case is an adverb modifying the verb “throw” not an adjective modifying the noun “darts”.
thanks, 45north. Perhaps I should have used my sarcasm font.
You have a sarcasm font?! Give it to me! I need it! I have the cruel mockery font already.
I’d like to propose we use Spanish-style punctuation to denote sarcasm, like the ¿ or the ¡ symbols, as in:
¡No, that dress doesn’t make you look fat!
or
¿Of course a 35-year old shouldn’t feel ashamed to live at home with his folks?
I admire your mule crockery font!
What is all this I am hearing about a cruel mockery font?
¿Un ejemplo, por favor?
In the next six months, we’re going to see the mortgage resets coming down like an avalanche. Where’s David Lereah to spin this one?
No, No…Cramas$ will counter rotate the spin:
“…They know NOTHING!”
Just sent this email to Rachel Beck (rbeck@ap.org) a financial columnist whose writing appears weekly in the Palm Beach Post (I apologize for its length):
Dear Ms. Beck:
Every week I look forward to reading your column in the Palm Beach Post, especially when you address macroeconomic topics, such as the credit crisis or the actions of the Fed. You are not afraid to speak your mind, even though your analysis often contradicts both conventional wisdom and the mainstream media.
In your October 1st column, “Builder bets against itself with bond deal”, concerning Standard Pacific Corp.’s bond offfering, you state:
“The unfolding [housing] reality is that things are far worse than even the most bearish housing-industry watchers had anticipated. It’s like peeling an onion that’s rotten to the core.”
I would like to acquaint you with the Housing Bubble Blog (http://thehousingbubbleblog.com/index.html) whose members were speaking out about the imminence and severity of the housing collapse since (to my knowledge) 2005. Two years ago, there was a shrill chorus of housing cheerleaders, such as David Lereah of the National Association of Realtors, who crowded out any dissident opinions of housing’s upward trajectory. The patient members of the blog were ridiculed as “bitter renters” and Cassandras; yet they were spot-on in their observations about the elements that led up to this disaster (fraudulent appraisals, rampant speculation, lax credit qualifications) as well as the extent of the inevitable price collapse and the impact on the overall economy.
While Ben Bernanke asserted that the subprime contagion was contained (”Bernanke Believes Housing Mess Contained”, Forbes.com 05/17/07 - http://www.forbes.com/markets/2007/05/17/bernanke-subprime-speech-markets-equity-cx_er_0516markets02.html) posters on the HBB noted the prevalence of stated-asset, stated-income loans (AKA liar loans), fraudulent cash-back purchases, and deteriorating collateral.
I would posit that the mainstream media, who ignored the problems in the housing market for years, had a stake in the status quo and shouted down any contradictory opinions.
I’m glad to see you continue to speak your mind about the true state of the housing mess, and would like to point out that you’re not alone in your conclusions. Many sagacious minds have been raising the hue and cry on this debacle, long before anyone would listen.
Regards,
yada yada yada
Good one, droog. I especially like the phrase about being “shouted down”, which is exactly what happens these days when anyone advances an opinion or fact that is counter to what the shills (political, economic, etc.) want people to believe. It’s one way to get rid of free speech.
Good one, but did people really call HBB’ers Cassandras? Cassandra’s predictions were never believed , but also always right. Why would people call guys Cassandras when they thought you were wrong. I say “you guys” because I’ve really only been here since about February of this year.
Just curious if the name callers suspected you were right or had a profound misunderstanding of ancient Greek literature.
They were right AND had a profound misunderstanding of ancient Greek literature. The posters here WERE Cassandras, and not believed, and yet their predictions have been unfolding exactly as, well, they predicted.
Here’s what wikipedia says:
In Greek mythology, Cassandra (Greek: Κασσάνδρα “she who entangles men”) (also known as Alexandra) was a daughter of King Priam and Queen Hecuba of Troy whose beauty caused Apollo to grant her the gift of prophecy (or, more correctly, prescience). However, when she did not return his love, Apollo placed a curse on her so that no one would ever believe her predictions.
http://en.wikipedia.org/wiki/Cassandra
Needless to say…
Good letter!
“I would posit that the mainstream media, who ignored the problems in the housing market for years, had a stake in the status quo and shouted down any contradictory opinions.”
Your point here is spot on. I wish more people would realize that generally speaking the MSM is not your friend, not unbiased and is agenda driven about way more then just finance.
Check out CNBC’s take on flippers…
http://www.cnbc.com/id/21080234
The mention of speculators spurs a flurry of cliches by industry experts: there’s no free lunch, trees don’t grow to the sky, not having a place to sit down when the music stops.
“Sometimes they’re vilified but they shouldn’t be,” says Barry Habib, chief executive of Mortgage Market Guide, a real estate market information service in Holmdel, New Jersey.
“That’s the American way. They go back to the Gold Rush.”
Speculators “add jet fuel” both on the way up and on the way down, he said. “Nobody was saying ‘hey, the speculators were bad’ on the way up, when people were selling their homes and making lots more money.”
‘Speculators “add jet fuel” both on the way up and on the way down, he said.’
Jet fuel is great fun when the plane is accelerating into a vertical nose dive towards the hard ground below.
“Nobody was saying ‘hey, the speculators were bad’ on the way up, when people were selling their homes and making lots more money.”
I was on the other side of the trade, azzzzhole! i was simply looking to buy another house.
so yes, I was saying the speculation is BAD and will eventually kill this hot Florida market. It took 2 years longer than I thought and will probably take another 2 before affordability gets in line with current pricing. I am seeing some declines.
I saw a sign on a Clearwater Beach townhouse yesterday.
I was listed at $197,500. I almost fell off my bike. I wasn’t sure if it was the price of the townhouse or a broker trolling for prospects.
That is the range of the original prices from 2003-3004. Many had been boosted to near $600k, all for sale, no buyers, no action for a year. Everything sitting. Lots of “for rent” signs, and dead.
Maybe they are really trying to get out from under the debt.
I did not stop to get the number and call.
I may inquire next week.
I have several stories today. I will be breif.
First, I saw a sign on a brokerage house yesterday.
It said: “The truth about the real estate market” come ask us.
I almost ran off the road. It was put up by a Realtor(tm).
Do you think they know anything about the truth of the market, other than it ALWAYS GOES UP, You’ll get priced out, All real estate is local, and NOW is a great time to BUY OR SELL. What low-life pond scum.
The latest billboard in Tampa/st. pete is “Price Reduced”, there’s never been a better time to buy.
“The latest billboard in Tampa/st. pete is “Price Reduced”, there’s never been a better time to buy.”
LOL! Did you read in the Tampa Tribune about Jim Norman’s grandiose plans for a huge sports complex in eastern Hillsborough County? Unreal, especially in the middle of all this. They oughta put a billboard on the door of the Hillsborough County Commission chambers that says “Price Reduced”. Also “Intelligence Reduced”.
Good morning all, y’all sure are off and running early.
OT a bit, but since Michigan’s economy is going so well that the governor and legislature just passed a big tax increase (with very little cuts or reforms), I thought it might be worth a few chuckles to see what the new 6% services tax is going to apply to:
Astrology services
Baby-shoe bronzing
Bail bonding
Balloon-o-grams
Coin-operated blood pressure testing
Check room services (coat checks)
Concierge services
Dating services
Social escort services
Fortune telling
House sitting
Coin operated locker rental
Palm reading
Party planning
Porter services
Psychic services
Rest room operation services
Shoe shine services
Singing telegrams
Wedding planning
Wedding chapel services (not churches)
Genealogical investigation
Social introduction services
Numerology services
Personal fitness training
Coin operated photographic machines
Phrenology services (what’s that??)
Document preparation
And a host of other “non-essential” stuff.
whatya mean “non-essential”?
This is the best description of the “Real” economy I’ve seen in some time.
I’m against any tax on services, but interesting to note they exempted legal services and golf.
Blano, what happened to the health care for teachers (Mich pays on average 45% more than other states)?
As I understand , allegedly there’s “agreement” on “working” to have health open to bidding in order to reduce costs. It would require the MEA to open up their books, which they don’t want to do.
It’s just a foggy “side deal” as I understood it, whereas the tax increases aren’t. What a shock.
Phrenology is the “science” of fortune telling by “reading” the bumps on someone’s head. It is as valid as astrology, numerology or tea leaf-reading.
This is amazingly pathetic. It looks like Michigan has run out of things to tax. Baby shoe bronzing? Is this list a joke?
No, this list is NOT a joke. It’s not even the entire list. Took it right off the Detroit News article this morning, though I did assume it was accurate. I doubt the News made it up though.
Wouldn’t our economy be improved if we sent these people off to colonize space? Them and the phone sterilizers?
Yeah. Next they’ll tax your first born and last born.
That is an AMAZING list of vocations, indeed. They are absolutely the types of jobs that you could train for right here:
http://www.SignalHillInstituteofTechnology.com
Well, thank goodness, dog walking didn’t make the list. Surprised the pols chose to tax escort services though, since they’re often major clients. And nothing on using public toilets at airports to meet and greet?
OT: guess I see now why the VP has half his assets in euros….
http://www.newyorker.com/reporting/2007/10/08/071008fa_fact_hersh
Just when you think it could not get worse…
Darth Cheney is a real Benedict Arnold, ain’t he?
I sent a lot of my money overseas, too. Feel guilty. Unfortunately, actions of people like him have put us in the prisoner’s paradox and I feel like I have to protect myself … even if it means screwing you (by doing my 5-figure bit to accelerate dollar collapse). No animal like a cornered animal.
Another ancecote.
As many of you know i work for a housing supply manufacturing company.
In the past few months we finally had some layoffs, about 10% or so.
Most of our business has survived the slowdown by attrition, retirements, and job quits. Layoffs had been rare, but replacements of jobs where the person left wasn’t happening.
Our volume of business has been running about 20% of our peak. Maybe 30% on a good week. It’s been slow.
Last week, out of the blue, our management decided to shut down one of our other plants and ship the work to our Florida location.
It was smaller facility. The smallest of all our plants, but they are located in one of the so-called stable housing market areas.
There equipment is being shipped to our Florida facility.
That is good for me, as it makes my location a more valuable resource.
Things don’t look good. Management is finally realizing that the “slowdown” will last much longer and we are not yet at the bottom.
They took a while to “get it”. Must be reading too much from Greenspan.
“…a housing supply manufacturing company”
Bugs: “eh Daffy, I’ll give you 2 carrots for that brass doorknob you got there.”
Daffy: “Hey Bugsy, could you make it 2 carrots and a radish…I’ve had nothing to eat for 2 days now.”
The scariest thing about this is that the numbers on executive “confidence” was already spectacularly low last month, wasn’t it? And that is with some executives in housing supplies only just getting the message?
Wasn’t the measure on that survey an 8? Does it go negative?
100% pure schadenfreude…
I must read it again~
http://www.amazon.com/Good-Soldier-Svejk-Fortunes-Classics/dp/0140449914
A superior translation of “The Fateful Adventure of the Good Soldier Svejk” by Zdenek K Sadlon & Emmett M Joyce can be found at http://www.zenny.com/nspage.html. There are four books in the series.
Thanks for this link, Bill. I also read it decades ago in college when I was thin, had hair on my head, and watched the draft number lottery.
U.K. August Mortgage Approvals Fall to Four-Month Low (Update2)
By Brian Swint
Oct. 1 (Bloomberg) — U.K. banks approved the fewest mortgages in four months in August as borrowing costs increased, a sign demand from buyers in the residential property market may start to slow.
Lenders granted 109,000 loans for house purchase, the least since April, the Bank of England said in London today. Economists forecast 110,000, according to the median of 24 estimates in a Bloomberg survey. House prices stagnated in September for a second month, a separate report showed.
http://www.bloomberg.com/apps/news?pid=20601102&sid=a6QKmsZn0yRE&refer=uk
Housing Crisis: US Property Values Plummet as Cheap Credit Ends
Posted by Bill Bonner on Oct 1st, 2007
“A fresh blow to the housing market ,” is how the Financial Times describes it.
The Daily Telegraph comes up with a more bodacious headline:
“US housing market in freefall as prices crash”
And follows up with this:
“Sales of new homes in the US plunged in August at the fastest rate since modern records began, prompting fears the economy is sliding into a full-blown recession…”
http://www.dailyreckoning.com.au/us-property-values-fall/2007/10/01/
“…What happened to that US$300,000? It vanished. Poof. That’s what put the ‘d’ in deflation. Money d-isappears. Wealth d-issipates. Values d-ecline. The economy d-egenerates. People get d-epressed.”
I’m not d-epressed…I’m D-elighted!
Daffy: “…that’s disssssssssssssssssssspiclble!”
Careful with what you wish for. While pretty much all of us on this blog are looking forward to reasonable house prices (if not for ourselves, then for our kids), we don’t want the economy to crater. Even if you are financially independent, what good will that do if you get mugged by an angry unemployed punk ? (especially one with a gun)
Our personal opinions about this mess aren’t going to dictate its severity. They will, however, dictate how we prepare for it and ride through it. Don’t rain on our pessimistic parade.
UPDATE 1-Tough love or bailout? UK wary of Greenspan legacy
Mon Oct 1, 2007 12:26 PM BST138
By Christina Fincher
LONDON, Oct 1 (Reuters) - Bank of England Governor Mervyn King has praised former Federal Reserve chief Alan Greenspan as a great economist, but the two men stand poles apart in their response to financial crises.
Greenspan’s willingness to ride to the rescue whenever things got tough earned him plaudits and the nickname “maestro”.
Britain’s central bank governor, in contrast, has been pilloried for his tardy response to this summer’s credit squeeze and for turning a drama at cash-strapped mortgage lender Northern Rock into a crisis.
When the dust settles, history may judge differently.
http://investing.reuters.co.uk/news/articleinvesting.aspx?type=allBreakingNews&storyID=2007-10-01T112644Z_01_L01882285_RTRIDST_0_BRITAIN-BROWN-GREENSPAN-UPDATE-1-ANALYSIS.XML
Thanks to Neil for organizing the biggest HBB party yet. We had a nice time.
I second that. Thanks Neil.
I want to give my apologies for not coming
I hope you all had a good time, and hope to make the next one.
Hey Neil,
Maybe next time…you might want to move it inside…we might be less of a “drive-by” target by a disgruntled: “reality estate agent”
It was fun, wonderful people…great location!
a little late = as scheduled
***********
NEW YORK, Oct 1 (Reuters) - The U.S. Federal Reserve said on Monday it added $7.25 billion of temporary reserves to the banking system through overnight repurchase agreements.
The Fed said the collateral accepted on the overnight repurchase was made up of $3.25 billion of agencies and $4.00 billion of mortgage-backed securities. A total of $65.55 billion in bids were submitted for the overnight repurchase.
The repo amounts are roll overs. On Thursday Sep 27, the fed rolled over 6B into 1 week and 20B into 2 week rollovers, today it has to rollover at least 8B and probably 30B for the week. Total amount of fed repos = 45B which equals the total amount of Federal Reserves. There has been no infusion of new funds, just keeping up with the funds injected in August.
borrowings at the discount window total 300M which is historical normalcy. A drop of 2B in the last week.
Is this saying that the MBS’s were accepted at full face value?? Is that a problem??
Since the MBS are guaranteed by Fannie and Freddie, it’s only a problem for the taxpayer.
Yes, the MBS are accepted at full face value. it creates a problem only if the MBS’s are monetized. Monetization can happen by the bank becoming insolvent, the Federal Reserve makes the repo ‘evergreen’ (keeps renewing eternally) or by substituting US treasuries for the MBS. The latter is not very likely at this time as there are few treasuries available to swap.
IMHO - Evergreen is likely. Large Banks defaulting is next most likely.
Thanks for the monetization explanation, I’ve often wondered what “monetization” meant. So are you saying the Fed will just continue to roll them over, and if a bank fails, just eats them?? Thanks.
The Federal Reserve would like to get paid back, but they do not have the strong arm tactics that Uncle Vinnie uses.
The key is to see how the banks report and account for the ‘off balance sheet’ losses. Since Mark to Market may make every major bank insolvent, there will be shifts of marketable securities (on balance sheets marked as ‘held for sale’) to ‘portfolio assets’ where the MBS is marked at par.
The writedown that Citi reported this morning may only reflect a small percentage of its total exposure. Citi may have moved a larger portion into ‘portfolio’. Until the 10Q comes out, there is no way to know, but the “loan loss” reserves of $2B suggest the transfer of $125B into portfolio. (From the banks viewpoint this is better than writing down another $20B+).
The banking situation is getting worse, not better. Earnings and earnings growth should be impacted for years. How the banks increase loan loss provisions for the next few years will be fun to watch.
Can somebody explain why the stock market is skyrocketing upward this am?
http://www.marketwatch.com/
Beginning of the quarter. Monkeys trying to make bonuses.
Sickening. I can’t even watch this. It’s the same as the summer.
CFC added almost 5%. I bought 2 more puts on what I hope is the cheap!
And once again, that 1375 S&P was a hell of a buy.
Now, when it comes down to that for the third time, I won’t be so quick to jump on it.
Heard this gem somewhere recently:
“In what inning is the housing slump?’
“I’d say about the middle of the National Anthem!”
I really can’t understand why Platinum and Palladium are going up in price…
Their primary purpose is use in catalytic converters for automobiles, and car sales have plunged into the abyss.
Not so my good friend, Platinum is not used as much in the auto industry as it was 20 years ago. Primary use today is high temperature alloys. Platinum is an industrial metal in short supply, along with cobalt, the rare earths etc. It is categorized as a strategic metal by the US, but the US has sold its reserves to try to keep the price low.
I stand corrected, i’ve never liked them all that much, as they have no history of wealth going for them…
Platinum being close to the same density of Gold, was actually used to make counterfeit Gold Coins (they’d gold plate them) in the 19th century, when it wasn’t worth much.
Tungsten is common, fairly cheap, can be gold plated and has a density of 19.25 g·cm−3.. but it’s difficult to work.
Gold is 19.3 g·cm−3… virtually the same density.
Anyway, about platinum, i did some reading and it seems there’s plenty of it in the ground, but the big boys just stop mining it when prices are soft.
There are about a million people of Persian heritage in the city of angles and giving gifts of Gold coins for almost any occasion, is steeped in their culture.
The Pahlavi (about 1/4 oz), issued during the reign of the Shah, has always been popular, and crafty counterfeiters in the jewelry district, mint fakes out of 8 to 10k gold, and gold plate them, to give the illusion of being higher karat.
I can spot a fake, a yard away.
cute nickname:
“Tehrangeles”
p.s., congratulations are in order for both of our NFL teams…
About 10 years ago, the Russians gamed the auto industry, as it had decided to use Palladium for catalytic converters and it went from $100 an oz to $1300.
I remember selling off my whole inventory of 3 pieces of 1 oz ballerinas for almost $4k, and for once, thanking Russian shysters for their efforts.
If only the Cardinal could have shown up to play. A shame.
Dallas 4:0 & Green Bay 4:0 & O.J. in jail - back to the ’90s
I remember that. Good times!
Norilsk Nickel coming out with endless announcements about problems supplying the market (mining problems, transportation, winter conditions, government interference, holidays, mine running short on platinum, etc.).
They had that scam going for awhile (seemed like a few years) until the automobile manufacturers started looking around for alternatives or ways to eliminate the platinum or palladium from the catalytic converters.
P’cP…
How do you ply your trade, in Russia?
Honest and true and a few pennies poorer because of it.
I’ve never heard of any insult for the word “honest”…
Here’s a brain surgeon who thinks he’s got it all figured out:
serv-436790379@craigslist.org
If it were that easy, anyone could do it. Spare us jerks like this one.
Corrected link. This clown thinks he can leverage the Canadian $ into Texas real estate.
http://dallas.craigslist.org/lgs/436790379.html
Couldn’t he just do one of those “do it yourself” Nevada/Delaware incorporation things? Or is Texas a good place to incorporate because of some kind of non-recourse protections.
Surely it’s some kind of scam, anyways — he’s going to try to convince Mom-and-Pop-from-Calgary that he’s getting people some kind of deal investing in “undervalued” Texan real estate with “now-powerful” Loonies. Of course, the only the only person who makes money in the end will be him and maybe some real estate agents.
Exactly. And someone who wants to be chintzy with legal fees is going to be someone you wouldn’t want to deal with. Either undercapitalized or a scammer, take your pick.
One of the bigger coin shows in the world was in Long Beach, last week…
I called a few bigger coin dealers I know, to gauge reaction.
Both said there was absolutely no retail customers…
This convention has an attendance of some 400 dealers, and to be honest, is primarily wholesale.
Beware of collectibles, nobody really needs $2,500 1929 PCGS MS 67 Standing Liberty Quarters, that have $2.50 worth of silver, in content.
IMO collectibles will not do so well over the next 20-30 years as their primary market segment - blue hairs (including baby boomers) - die off. This will both reduce demand for such collectibles, and increase the supply as their now-very-much-in-debt offspring hock the inherited estates.
That being said - I collect coins. Not for investment reasons though, for enjoyment.
Coins are great little pieces of history, and somewhat plentiful compared to any other artifacts, as nobody ever throws away money.
Problem: DJX hits an all time intraday high but the DJT is not even close to breaking its 200 day EMA.
Solution: The PPT needs to allocate more funds to the Transports so we can get confirmation.
PP
It’s a gigantic Dow Theory non-confirmation. Near perfect for a top, especially with similar non-confirmations all over the place. None of the smaller cap indicies is even close to a new high: RUT, SML, MID. Heck even the S&P is failing to confirm the new high in the Industrials. That could change as it is only a little more than 1% below that level currently.
To me, the most interesting non-confirm is silver vs gold. Similar implication to the large-cap small cap divergence. New high in the stable, low-beta investment. Severe failure to confirm in the high-beta cousin. That tells me that risk-aversion is alive and well.
The only exception to this is that the NDX high seems to have been confirmed by the Nasdaq composite. We’ll see if that holds up on the close.
As mentioned during the August meltdown, catchup would be played in the beta (Nasdaq) stocks.
I certainly called the stock market rally wrong. I didn’t think the Fed would be dumb enough to cut 50 bp (more like 25 bp or nothing). Maybe I should be a bigger participant in the stock market…it seems like the government will do anything possible to protect stock market values, and by the time this whole thing breaks up, the DOW may be at 20,000 or higher. I’m watching people who have saved a much lower percentage than me for years eclipsing me on their 401(k)s because they are all invested in stocks…it is certainly very frustrating. Of course, our 401(k) options are limited and I refuse to track the S&P 500 as it has a history of underperforming the broader market, especially in inflationary/stagflationary times. What are all you guys doing with your 401(k)s?
That’s a really good question. I was going to ask the same. My husband and I both have ours in mixed mid/large cap, global tech, funds. I’d like to switch it to something stable before the crash but don’t know what… especially with the dollar going lower. We could go into gold or other precious metal funds but those are too risky for my blood.
Ya know, TIAA-CREF and others like them have me really worried. Most - if not all - of their investment funds hold MBS. I called and was told all is ok, and I should not worry.
This caused me to worry that much more.
Roidy
I like the Vanguard Treasury Money Market Fund, backed by the full faith and credit of the U.S. Government.
There’s a lot of yakking by legislators on both sides of the Aisle that the mortgage industry failed consumers by not explicitly telling them of the risks.
Though my evidence is anecdotal, I reject this claim. I don’t think ANYTHING could have stopped people taking up mortgages when the only thing they could afford is the “teaser rate” and only then, just barely.
For example, a co-worker was telling me about how he was going to by a downtown Orlando condo, for $420K as an investment with an I/O mortgage. The apartment wasn’t even nice! It was a converted rental building. Paint it and shove in granite and _voila_ you have a Condo!
Anyway, I told him that it’s awfully risky if he can’t sell it in two years! No amount of convincing could stop him. It was as if he felt I just didn’t want him to have his piece of the pie. I don’t have to tell you his situation now.
And my drunken Mother-in-law, who’s been BK three times in her life, and never met a get-rich-quick-scam she didn’t like, talked current boyfriend (after 5 husbands!) into buying an “investment property” in the Vegas sprawl. I said to her “it’s not like they’re running out of land in the dessert! Why would one condo every be worth anything when there’s tons of empty land next door to build more?” Now, bf/fiancee is going BK. And they had the nerve to ask us for a loan! HA HA HA HA! “Why not just take our money now and flush it in the toilet” we asked. It’s not like any amount of money can help them. They need to hand the keys back to the bank.
Stock mkt makes ZILCH sense. Citigroups warns of 60 percent earnings drop and Dow up 200 pts.
Sally O, There are a lot of stock markets around the world. The average increase this year is around 35%. The 57th worst performing market is the US stock markets (DJIA +11.8%, S&P500 +7.6% etc.). Even on a day like today where it appears that the US markets are doing well, in South America the Bovespa (Brazil which has gone from 35,000 to 62,000 this year as well as appreciating 10% against the dollar) is up 2.8%. The Mexx (Mexico) has gone from 21,000 to 30,500 YTD and is up 2%. Also benefiting from the strong dollar (lol).
The current quant theory is invest in the US because it has to catch up with the world and the quants have a lot of OPM.
It is not going to happen. Financially the US has become a high risk investment. The dollar is not being supported, there are few exportable commodities from the US and foreign companies are having a difficult time buying US companies.
As the US GDP (in dollars decreases over the next 18 months, it has already dropped against the other currencies), so do the prospects for good earnings.
This year, the stocks that are up the most in the S&P500 in the US are mining and commodities. Banks are down over 10% this year, retail is down over 5%, housing is down over 40%. Not a very good year to be in the US markets.
If you were to have thrown a dart at a board of the worlds stocks and bought whatever stock the dart hit, it is not likely you could have done worse than just investing in the US stock markets.
But…but…Larry Kudblow just told me on the teevee that the Bush economy is the bestest ever.
AP article today on “Flippers”
http://www.nytimes.com/reuters/world/lifestyle-usa-housing-flippers.html
It’s amazing how biased the press is. “All she wanted was the American Dream” they led with.
Why not “All she wanted was to get rich, quick, without working”. That’s more accurate.
A conversation with a NYS legal assistant yielded the fact that the seller does not receive a bank check for the balance of his home until day(s) after the closing. Something about the deed being properly posted? Really? the seller signs over all rights to the property yet does not have the money due him at the time? Sounds risky to me. Any NY lawyers, legal assistants care to comment?
Hmmm, why is the stockmarket running up like it is right now? Did they just decide that the bottom was finally called? The subprime mess is behind us? …and if it IS behind us, what is it doing back there? What are it’s intentions?
I’m worried.
Roidy
England’s Gold Reserves look a little “funny”…
http://ukpress.google.com/article/ALeqM5jE63_izoY3Zxg57jBEDeelpieuFw
Jan 06 726
Feb 06 687
Mar 06 790
Apr 06 638
May 06 764
Jun 06 797
Jul 06 851
Aug 06 1019
Sep 06 1114
Oct 06 1238
Nov 06 1493
Dec 06 1407
Jan 07 1624
Feb 07 1577
Mar 07 1720
Apr 07 1709
May 07 2007
Jun 07 2325
Jul 07 2501
Aug 07 3248
Sep 07 2834
Maricopa County (Phoenix Metro) Notice of Trustee’s Sales above.