Bits Bucket And Craigslist Finds For October 4, 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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Attempt at re-inflation of the housing bubble….
Can the tax cheating, US Treasury robbing slave masters of Wall Street and the Carlyle Group pull it off? Clearly, they are trying.
How about a link to show us what you’re talking about. Thanks.
Sheesh, Blano, how many links do you want? It’s just a rhetorical question, based on the many, many links posted on the blog over many, many months. At least, that’s what I got out of the post.
Lets just Move-On………..
Sheesh palm, I was just curious!! And only on my first cup of coffee. If he was referring to an article, I wanted to read it. Step away from the keyboard, young man.
Who you callin’ “young”, whippersnapper? (LOL, just joshin’ wit’ ya, Blano) I can kind of understand exeter’s frustration, it sort of builds up watching all the financial machinations going on and sooner or later, it has to grind to a halt and events have to take their course. Like exeter, I just want to see things correct and not postponed by boneheaded moves on Wall Street and in Washington.
Lol, thanks for the chuckle. I’m with you there on getting the correction over with. I’m a typical consumer in some ways, I want what I want NOW. OTOH, dragging it out allows me to get back in a position to take advantage of the situation down the road.
I’ve wondered too if the PTB could pull off getting away with hiding all the losses. The odds might be small, but IMHO it can’t be ruled out.
My two cents (for what it’s worth) …
I don’t want to see a quick correction; I want to see this fiasco of a bubble deflate over time in an orderly fashion.
A quick correction suggests a crash; a crash will end in chaos, never a good thing.
From butterfly ballots at the start of the century to the butterfly effect, now…
http://en.wikipedia.org/wiki/Butterfly_effect
“…a crash will end in chaos, never a good thing.”
What do you think the milky way is floating around in?…cosmic stability?
“What do you think the milky way is floating around in? … cosmic stability?”
Uh, well, I kinda do. There is ORDER to the universe. Motions of all these moving astronomical objects can be predicted with great accuracy.
Less so as pertaining to human behaviour.
I spend a lot of time in the wilderness, watching your Mother, Nature.
There are no animal or insect slackers in her realm…
Life is a 24/7 struggle for the next meal
Who says you can’t have orderly chaos?
Discordia! All Hail Eris!
Jeez Banos you step in it frequently here. It wasn’t even a rhetorical question. A Master of The Obvious can see the hedgies are attempting to keep this sinking ship afloat and you need a link?
Boy, houses really got expensive during 1998 - 2006, didn’t they? Discuss….
LOL
I especially like the comment ” step away from the keyboard”….!
Step in it frequently?? I doubt that. Again, I was curious if you were referring to something specific. That’s all. Lighten up a bit.
I’m somewhat aware of what’s going on and freely admit to not being the sharpest pencil in the HBB box but I’m here to learn and the snide commentary is unnecessary IMHO.
Holding ones nose so high in the air is very unbecoming. Sounds like a George Soros fan.
Sounds like you’re jealous of George Soros.
(Hey, if I could have done what he did to the Pound and the BoE, I would have done so–gleefully.)
exeter…
Wouldn’t that be “Los Banos”?
cuarto de baño…..
OK ex, I think you stepped over a line there. It so happens I agree with your social/political/economic viewpoints and not Blano’s, but I have to say he is one of the most civil posters here. Who else thanks an entire region of the country for posting?!? This virtual community is a lot more pleasant than most real ones, so let’s keep it that way.
DP
You’re right DP. My apologies to you Blano.
Can the feds create a “permanently high plateau”? No. They can do a bit of idiotic stuff with taxpayer dollars, but they can’t repeal the laws of economics.
” they can’t repeal the laws of economics.”
Oh, but they’re sure trying. And in the process, making things worse, IMHO.
That’s true, without a doubt. Anything they do is virtually guaranteed to make the coming recession worse than it would be otherwise. Let’s just hope they don’t maneuver us into a depression.
I just hope all this gaming isn’t used as an excuse to institute the Amero.
By the way, MSM now talking about Ron Paul and the money he’s raising. That’s how they’re keeping score, LMAO! How much money the candidates are raising, not how many people approve of them. I guess it’s a matter of who can buy an election, not who the people want. Paul’s five mill is peanuts compared to Hillary and Bama, but they were shocked he’s doing better than McCain.
In every Republican debate I find myself in agreement with Ron Paul on most issues - and I’m a Democrat! I think part of the MSM’s attention to $, as opposed to what the people want, is partially affected by this administration’s bs line that they don’t pay attention to polls.
In the bike-riding, super cruchy granolaland of Davis, CA, there are handmade Ron Paul support posters appearing.
I $hit ye nay
As far as I have been able to tell, he is the only candidate that has publically come out as the anti-bailout fiscal conservative. Hell, I’m a die-hard New Deal Dem and I’m reviewing his platform as an option- go figure.
I smell a trend in the making if the other candidates are smart enough to just on it.
S.Cal resident and Independent leaning dem, I agree with ya, Ron Paul is making waves. And if the pols and MSM would get off their high horse and act like real people, there might come a balance to life…or not.
I urge anyone who is a bike-riding, super cruchy granolaland loving DEM, green, left wing, right wing, wing nut, you name it persausion to register as a Republican for the primaries in your state in order to vote for Ron Paul.
You can vote for Mickey mouse in the general election, but for all of our sakes, get him on the republican ticket.
For anyone out there interested in the genesis of the current credit crisis, here is a primer on a book that explains the scheme in detail. A lot of the readers already understand it but I thought I’d post for those who are just now having their eyes opened to it.
http://www.financialsense.com/fsu/editorials/2007/1003.html
excellent - a must read
Funny how Greenspan is saying his administration could lower rates without inflation because of a secular trend in deflation due to globalization but now the FED is dealing with inflation and can’t be so quick to lower rates. HAHA greenspan left Ben Bernake between a rock and a hard spot.
They are busy trying to save the credit creating banking sector and the financial markets. Housing is lower down on the list below the US dollar.
–
Whatever “it” is, they have been successfully doing it for a very long time. Can’t bet against the trend. Only a revolution, or a civil war could arrest and reverse the trend.
Jas
“It” was achieved by preventing asset bubbles, providing social insurance but not propping up bad actors directly. Over time, though, they got into the habit of propping up bad actors (to save “jobs”, which is a canard because the layoffs always happen anyway) and, worse, allowed a couple of terrible bubbles to occur, first in tech stocks, then in housing. Now we’re dining on the consequences.
Jas,
I’m predicting we get a Rodney King type reaction in ‘09 or maybe late ‘08 depending on the catalyst. The tinder has been began slowly building up and is waiting for the right spark.
Jas: Have you read “Shock Doctrine” (yet)? If it gets a decent audience midst the brainwashed, might start a decent conversation…
Carlyle Group is too smart to fight the inevitable — instead, they’ll figure out a way to ride the wave of destruction and profit from it.
(Unless they’re already heavily invested in MBS or some related instruments. In that case, they will try to figure out a way to help make their exit less painful)
Dems Split…
http://www.nytimes.com/2007/10/04/business/04housing.html?_r=1&ref=business&oref=slogin
But they focused on only two fairly narrow proposals: providing more money to groups that help homeowners renegotiate their loans; and temporarily allowing Fannie Mae and Freddie Mac, the huge government-sponsored mortgage financiers, to hold more mortgages in their own investment portfolios.
Come on now, can you actually remember anything “temporary” that came out of Washington?
Second, who are these “groups” that are going to get my tax dollars to help FB’s? Who runs them, who owns them, are they public or private, and what are the oversight parameters? This smells like lobbyists to me.
Moreover, am I going to get any of this cash that’s floating around? Honest, middle class tax payer, current on my mortgage.. I deserve it!
Both the Democrats and Republicans are scrambling furiously to keep Wall Street bubbleworld churning.
I can’t see anything in either that will stop prices from falling.
Ben, you have been the most optimistic on this blog that there will be no major bailout. I have hoped, when reading your posts, that you are right. But I’ve been skeptical, not trusting any elected official. Reading that article made me feel better, giving me hope that you are right. If all these bailout proposals do fail then I will gladly send you a cake with purple frosting that reads, “You Were Right”. That would be the sweetest cake ever.
I don’t have a crystal ball that tells me what will happen. I just can’t see how a major living expense can be artificially expanded indefinitely.
I agree with this. It’s not that bailouts won’t be attempted or aren’t being attempted, it’s just that they won’t do any good. Prices are falling and they are gonna fall further.
ALL of the proposals will only make a difference at the margins. There are many, many FBs who simply can’t afford to pay the price that they have agreed to. Even an inflationary wage/price spiral won’t do much simply because it won’t be quick enough to help the many people who’s mortgages reset or recast in the next two years.
“…major living expense…expanded indefinitely…”
Housing is not an expense, it’s an asset
I have one of those cheap Chinese crystal balls, and it’s only good at predicting events a week in advance…
only if…you are buying it.
palmetto, bailouts will “not do any good” for pricing, but I for one do not wish for the government to use my taxes to come to that conclusion. It’s just money wasted.
Unless of course, you’re trying to buy votes, in which case it’s tax money well spent (for them.)
Remember the monkeys humping the football? So it goes with all these bailout proposals.
“Second, who are these “groups” that are going to get my tax dollars to help FB’s? ”
DING DING DING! But let me add a little something:
“Who runs them, who owns them, are they public or private, what are the oversight parameters — and how much of that taxpayer money are they intending to skim off in the form of fees?
None of these bankers make their millions on the actual returns. This was about fees. It was always about fees. Realtors, mortgage brokers, lawyers, hedgie managers, and MBS bundlers on the way up, BK consultants and lawyers on the way down… all of them. Vultures fighting for a piece of the carcass. But this carcass is all bone and no meat.
“Second, who are these “groups” that are going to get my tax dollars to help FB’s? ”
I understand Haliburton just opened a division to save FB that are in trouble. Fits nicely with all their other “no bid” contracts.
There is a bill floating around (I think in the House) to allow adjustment of mtgs. in a BK case. That would be an interesting revenue generator because I anticipate that attorney’s fees would come out of the new loan. Borrower would get a better(?) mtg. as well. Problem will be that they had to file BK in the first place so redoing their mtg. won’t change the fact that the debtor is insolvent.
Are they going to leave the income cap in? My last look at BK guidelines said you have to make under a certain amount to retain the house while dumping the debt?
I hope you’re right Ben but failed attempts at reflating will prolong the pain for those who want to enter and exit the market.
“who are these “groups” that are going to get my tax dollars to help FB’s?”
Why they’ll be “public interest groups” of course, silly! The fact that all of them are run by Democrat activists is merely coincidental. Oh, and don’t expect much accountibility for the money they are given to “counsel” FBs……
Its an election year in 08, right?! Between working on the election (in their “spare” time of course) and HELPING tons and tons of FBs, no one can possibly expect these “non-profits” to keep track of every dime, do they?
But private money from the wealthy elite masquarading as a public interest group is acceptable…… More moral hazardry from apologists?
You’ve just described MoveOn.ass to a tee.
Actually I was referring to Carlyle Groups funding of “non-profit” groups who in term buy DC lobbyists, hence the reason I mentioned it in the very first post of todays Bits Bucket.
“…no one can possibly expect these “non-profits” to keep track of every dime, do they”
Yes, nothing like the x trillion dimes that are accounted for in plain detail by the likes of “little” no bid contracts of say…Halliburton?
Clear something up for me, did Haliburton NOT do very specialized work, of various kinds, on a massive scale, for the government prior to this administration?
And, given that sufficient power that now resides with a party who LOVES to investigate “wrong doing”, where’s the trial of Halliburton stand today? Been two years in power and nary a peep of dismay by House or Senate “leadership” or am I missing something?
Too many targets - not enough arrows
We need a Mortgage Czar.
I nominate Ivan the Terrible. He’d know what to do with the Wall Street Pig Men.
We go looking for the perfect tsar and we always end up with Rasputin.
Either that or Rip Van Winkle
OT: whatever happened to Ivan Boesky???
My vote goes to Vlad the Impaler.
So we have a Drug Czar, A War Czar and now a Mortgage Czar. Who need democracy? Let all the Czars put their pointy heads together and fail collectively.
impale with a Joshua tree…
Yucca brevifolia the Impaler
Can’t we just let the Drug Czar handle the home loan Sit-U-ation? I’snt it about the national addiction of the “ownership society” and feeling really really good inside?
I want Don Rickles for Czar
From the article:
Instead, they called on Mr. Bush to name a special adviser who would try to persuade mortgage lenders and loan-servicing companies to modify the terms of subprime loans, which will carry interest rates as high as 12 or 13 percent.
Which does exactly nothing to help FBs, since by definition they took out such enormous loans that they could never pay them back even at the ridiculously low interest rates of a few years ago. The problem isn’t the interest, it’s the size of the principal…
Many Congressmen as well as MSM reporters who quote them appear clueless about the nature of the problem (”It’s the principle, stupid!”).
Well if they went to zero percent, they may have a chance. The chance of a zero percent loan over 30 yrs? riiiiiight.
How much does that special advisor make, who pays him, and where is that additional money to do so coming from?
The special advisor will make enough to justify his or her continuing existence, the government (taxpayers) will pay for her or him and the money will once again come from the government (taxpayers).
Yesterday when I compared us to Soviet Russia, little did I know that CONgress wanted a Mortgage Czar, the very same day…
Irony is so cheap, nowadays~
Nazdrovia!
Rivers cresting over flood stage here this AM. Weird, weird, weird.
That’s what happens when you plow up orange trees and fields and pave them over with zero-lot-line McCrap dwellings that are all roof and driveway and no yard, not to mention strip malls and parking lots. Nothing to suck up the water, it all goes to the sewers and the rivers.
Exactly, oxide. I was commenting on that yesterday. After all, we only had a moderately heavy rain the other day, on top of a somewhat dry summer here in West Central FLA. Rivers around here normally only flood during a more or less extended period of heavy rain or tropical systems, which we haven’t had. One evening of moderate heavy storms and PRESTO! Get out the rafts. This summer of lighter precipitation has masked the effects of all the development.
I remember the first time I saw a zero lined lot house in Carlsbad, CA in the early nineties. It struck me as maddness (later I realized that they are just condos disguised as houses). Having a 12000 sq foot lot I just can’t imaging living in such close quarters.
“They took paradise and put up a parking lot”
Your comparison sucked. How does having a tsar make us like Soviet Russia? Soviet Russia killed the tsar, and his family.
You need a new history book. I recommend anything written by Richard Pipes and “The Decline and Fall of the Soviet Empire” by Fred Coleman.
Czars tend to be associated with things Russian, don’t they?
But not Soviet.
What so upset you about the Russian gent from yesterday’s thread, that went through the breakdown of the Soviet Union, and described what happened, and his feelings about the comparisons between us and them?
I recall a libe from Dr. Zhivago (the movie) where a soldier, upon hearing that the Tsar has been executed, asks if Lenin is the new Tsar. He is told that there won’t be any more Tsar, but we all know that one tyranny was replaced with another.
Richard Pipes - as in father of Daniel? Perhaps knowledgeble ref Soviet era, but as an early neo-nut, I’d take his every utterance with more than just a grain of salt…
Sorry this is OT, but need to post. As a way to invest in foreign I applied for an account with Everbank, which was recommended by some folks on HBB (I did some other due diligence also). However they cashed my check two days ago and I have yet received any account information.
Please allay my fears and tell me this is not a scam outfit. So far I do not like the way they do business. What are others’ experiences with them?
“invest in foreign currencies” I meant to say.
My parents and sister have had accounts with them for over two years now, and have been very happy with them. I am opening one on the first of the month. I have yet to read or hear anything negative about their operation. I was impressed with them backing out early on the lions share of the buy out of NetBank. Anyway get in touch with them ASAP and let them know how you feel. I’m sorry it has gotten off on the wrong foot.
Putting your money in Everbank is a bad move. On Squawk Box today they were saying that the dollar should rally big. Are they ever wrong on Squawk Box?
Thanks for the info wmbz (and de below). Hopefully I’ll hear something today or tomorrow.
“impressed with them backing out early on the lions share of the buy out of NetBank.”
but they already did buy at least $700 million of Netbank’s mortgages.. on the first of this month.
http://www.everbank.com/004Press20071001.aspx?LinkID=Column
They are about twice as large as Netbank was..
I won’t comment further.. except that after a few blatantly stupid errors by my banks.. these banks being big, fat major ones.. i sympathize with anyone who might be worried about wtf is going on over there??
But how much did they actually PAY for those mortgages?? That’s what I’d like to know.
The $700M increased the bank’s size by 15% .. So, they paid $700 million.
The question would be.. hmmmm.. the question is how much of a discount did they get, if any, on the paper?
but nobody wants to publicize that.. Everbank, being private, probably has even less incentive to do so.
According to the FDIC, ING Bank “acquired $1.4 billion in (insured) deposits and 104,000 new customers of NetBank for $14 million.” That fire-sale price amounts to about one cent per dollar of deposits.
An additional $109 million of uninsured NetBank deposits are worth 50 cents on the dollar now, and the FDIC will issue receiver certificates for the balance for payment at a later date.
The bank also had $744 million in brokered deposits with an undisclosed amount of uninsured balances. FDIC will deal separately with the deposit brokers who had raised that money.
http://www.marketwatch.com/news/story/banks-collapse-leaves-rubble-uninsured/story.aspx?guid=%7B8805FE9F-5F65-4E5F-8808-F656660FF778%7D
It takes a few days to set up the account. Even ACH takes like 5 days to post to my account at E-Loan.
Are you sure you didn’t accidentally write the check out to Neverbank, or Ever-yank?
LOL
I have had accounts with them since 2000 or so. They are about the best business I deal with on a regular basis. Nothing to worry about.
My parents have had a Euro account there for a couple of years. They send regular statements and such.
Perhaps they are a little slow in processing — it’s possible they are dealing with a larger number of customer enquiries/transactions lately, given the state of the world.
You should have sent in a resume with your check.
They will be in dire need of new hires. Especially after the next 50 point rate cut.
I think they are in North Carolina.
Mine have been very good. Bought $A and $NZ CDs a few years back, rolled the CDs over a few times, sold when the USD began to recover. They handled things very reputably.
As I remember it does take a little time to get things set up. You’re faced with a delay for account opening plus mail. I have no doubt that after BBs latest move they are somewhat swamped.
Should be - reply to packman
Senate, House Dems call for mortgage czar
Democrats say they will offer a plan for increased funding for foreclosure prevention, and will seek to temporarily lift limits on the portfolios of government-sponsored Fannie Mae and Freddie Mac, which could help the housing market if they were allowed to handle more expensive mortgages.
A House Republican leadership aide scoffed at the salvo from across the aisle. “They control the Congress, yet we’ve seen very little in the way solutions from Democrats,” the aide said. “They seem to forget that they are in the majority now. They have a responsibility for leading, and their ‘blame the president for everything’ message is getting more than just a little tired.”
http://www.politico.com/news/stories/1007/6150.html
This will work just as well as the Drug Czar.
If I didn’t believe this was just all pre-election posturing and windbaggery, I’d be upset. Those Senators and congresscritters know no “Mortgage Czar” ever created can legislate or regulate greed out of the citizenry.
I can imagine, however, that their office phones are ringing off the hook with calls from really FBs begging them to do something.
Hmmmm, if it’s a political move (and I tend to agree with you), then there must be an awful lot of FBs.
I nominate myself.
Heck, I could not be worse than who will end up with the job
I second your nomination.
However if it comes to a runoff between you and Vlad, I still have to go with the Impaler.
If it were a vote between me and Vlad, I would probably vote for Vlad too.
Vote for Vlad and your wildest dreams will come true.
How about:
“Vote for Vlad - when you’re tired of the lesser of 2 evils.”
Man from Vlad
Democrats say they will offer a plan for increased funding for foreclosure prevention. Why? Will somebody please tell me WHY these FB’s should not be foreclosed on? And not some sob story about the single mother with three kids etc. How many of these FB’s were TRULY defrauded? How many of those FB’s truly deserve to stay in their homes, which they never should have gotten “into” in the first place? How many of them actually have 3% equity, as Fannie requires?
Show me somebody who really deserves to be helped out, and I’ll think about it. Yeah, how bout they get to do no-recourse jingle mail, and spend the next seven years renting and repairing credit.
I think it was here that someone posted an article suggesting that FBs should be “bailed out” by putting the lenders on the hook for lending against collateral that was subject to depreciation. It wouldn’t forgive the mortgage, but it would render the principal in excess of the current value of the house an unsecured loan and thus, not as subject to foreclosure because of its reduced status among the FB’s other creditors. Was that ever mentioned here?
Article in WSJ today about the futures contracts for home prices.
Miami contracts expect a 27.9% drop by 2011. All metro areas show a 10.2% drop. However, when you factor in inflation out to 2011, the 10 (and 27.9) become a FAR larger number, more like 50% off in Miami, and mid 30s for the 10 metros surveyed.
Oh, and on closer inspection, these numbers are % down from mid 2007 numbers, not from peak.
If they are correct (and I certainly believe these contracts much more then the NAR!), then we can just all go to sleep and wait for ‘11. Our predictions will have all come true!
CME futures market to MSM-quoted REIC ‘expert’ bottom-callers:
NO BOTTOM UNTIL 2011 OR LATER.
Bwahaha…
You think they are going to get the message (NAR and other shills)?
I have my doubts.
But with the CME pointing to a 20+% drop in home prices, NO MATTER WHAT THE TIMEFRAME, how in the heck are the RE agents in S. FL getting anyone to step up to the chopping block? It’s just so obvious right now that this market is in a freefall; especially when you compound it with data like this; showing that no bottoms are expected for YEARS, not months…
It’s like there is a whole stack of stupid people the NAR can go tap whenever the bubble runs out of steam. Where do they find these suckers?
The NAR faces a severe shortage of buyers with buckets of money and boxes of stupid…
I would give my left n*t to hear DL, or the new guy (who I don’t hate as much as DL, so I haven’t bothered to learn his name) say that on national television. I think I might die from the laughing fits that would ensue; but darn, it would be so funny it would be almost worth it.
NAR RELEASE:
No, interest rates are not the problem. Taxes are not the problem. Incomes are not the problem. The problem is, we ran out of buyers with buckets of money and boxes of stupid. There appears to be a severe shortage; perhaps globally. However, we expect an upswing in money buckets and stupiditiy early next year, so nothing to worry about!!
Post did not show up.. Apologize if duplicate.
I would give my left n*t to hear DL, or the new guy (who I don’t hate as much as DL, so I haven’t bothered to learn his name) say that on national television. I think I might die from the laughing fits that would ensue; but darn, it would be so funny it would be almost worth it.
NAR RELEASE:
No, interest rates are not the problem. Taxes are not the problem. Incomes are not the problem. The problem is, we ran out of buyers with buckets of money and boxes of stupid. There appears to be a severe shortage; perhaps globally. However, we expect an upswing in money buckets and stupiditiy early next year, so nothing to worry about!!
Nobody is reporting any “boxes of stupid” shortages…
‘“boxes of stupid” shortages…’
The shortage is in the combination of boxes of stupid with buckets of money.
Here is the link to the full article with accompanying chart showing anticipated price declines in major U.S. cities. Since the CME contracts have a five-year term, 2011 should be interpreted as a lower bound on the anticipated bottom as implicitly predicted by CME futures.
Not only are futures traders typically better informed than your average MSM-quoted REIC ‘expert’ (Lereah, Snaith, Yun, Watts, LAY, etc), but they are putting their money where their mouths are, unlike the MSM-quoted ‘experts’ who are instead putting their mouths where the money is.
It’s different here. The psychology of traders.
Notice that the mostly Chicago based CME traders expect the smallest drop in Chicago house prices for the cities with contracts?
“…Not only are futures traders typically better informed than your average MSM-quoted REIC ‘expert’ (Lereah, Snaith, Yun, Watts, LAY, etc), but they are putting their money where their mouths are, unlike the MSM-quoted ‘experts’ who are instead putting their mouths where the money is….”
LOL. PB, Most traders are functional morons - including me. What a good trader has is the ability to be right. Whether it is instinct, self preservation or real information, traders have one edge and that is the “bid” or “offer” on any given trade. It does not surprise me that traders would suck up any contracts offered 4 yrs out at a 20% discount to todays prices.
Taking an example of somebody on this blog looking to buy a house in Miami in 2011 with a current market value of 1.5M being able to buy it 4 years from now at a 27% discount not including inflation (Newsweek print ed: 5% Oct 6, 2007) now a HBBer can buy the future contracts and lock in a price for said house. So we know that traders are willing to buy in Florida at a significant discount in present dollars.
Jay_H makes an incredible and true point! We could have the worst drought in history in the farm fields, but if it is raining on LaSalle St - grain prices will drop. There is a tremendous disconnect between the trading floors and reality.
Home-Price Outlook Takes Another Shot
Trading on CME Indicates a Decline Into Late 2011
By JAMES R. HAGERTY
October 4, 2007; Page D6
The outlook for house prices is getting even gloomier as traders on the Chicago Mercantile Exchange bet on steep price declines and the number of homes for sale grows.
Traders on the CME expect home prices in 10 major cities to drop an average of about 10% from mid-2007 to November 2011, according to an analysis by Tradition Financial Services Inc., New York, of prices for housing futures traded on the exchange.
The contracts have been trading since May 2006 but last month were adapted so that traders could bet on prices as long as 60 months into the future. The trading is based on expected movements in the S&P/Case-Shiller house price indexes.
http://online.wsj.com/article/SB119146645724948646.html?mod=hpp_us_whats_news
Don’t miss clicking on the interactive inventory growth chart, which shows the inventory crash continues unabated into Fall 2007. (One misleading detail: If memory serves, the inventory crash dates back to early 2004; the chart only shows it beginning in early 2006.)
The LA inventory crash shows up stupendously!
?? por que ??
if douchebank is writing off 3 billion and total assets are X with a return of 2% on assets being “good times”
isn’t this a disaster ?
A 2% return on bank assets is truly good. Many good banks average between 1.25 and 1.75%.
This is why the Fed discount rate cut was so important to banks, the margin is so small that the cut kept the banks from going into default.
A Fly on Bernanke’s Wall
http://www.stockmania.com/2007_10_04_archive.html
Good one~
Cagey B is at or near the breaking point. I think he’s an honest man way in over his head and surely he must realize that a ton of bricks are about to be dumped on him, being the fall guy and all.
He could have turned down the job when it was offered to him. Surely he knew what was waiting down the road.
Flies are attracted to bulls–t.
Pigs too!
A little justice in the mortgage fraud arena:
Two brothers admitted Wednesday that they bilked mortgage lenders through an elaborate fraud scheme that authorities maintained was the largest of its kind in western New York history.
They were also both ordered to pay restitution of more than $15 million.
The Amicos were convicted in 2003 of running a conspiracy that defrauded mortgage lenders of $58.5 million on homes built in Monroe, Ontario and Wayne counties from 1994 to 2000. Prosecutors called it the largest case of mortgage fraud ever prosecuted in western New York.
http://tinyurl.com/29qqmc
I hope we see lots, lots more of this, bizarro. Thanks for posting.
There is certainly more, since this involves 1994 to 2000 fraud and the 2000 and beyond fraud was even bigger since virtually all lending standards were removed.
WTF is with the 17 year sentences?
The last con man mentioned on here got 28 years-and he stole a lot less.
But if you got this scale of fraud in and around Rochester NY-think of what it must be in the big city megalopolis’s with all the professional big time racketeers and mobsters.
No wonder no MBS holder wants his portfolio marked to market.
There ain’t nothin’ there.
BoE and ECB leave rates unchanged.
Which hurt the dollar and moved gold up in USD denominated terms, yippee!!!!
Yaye! Go US multinationals, go!
(only US stocks I still own … I’m willing to by US stock market again, when the price is right, amigos.)
I feel we are fast approaching the point where high up officialdom starts blaming one another, quite publicly…
And we’ve all got ringside seats, to watch the spectacle~
I agree. The interests of all the players cannot all continue to be served as this catastrophe unravels. The forces behind the scenes are going to want action and/or answers. Eventually, like too many accessories in a murder, someone’s going to crack. I cannot even imagine how all of these people (and they really are just people) can live with themselves day-to-day knowing they are destroying this country.
The SDCIA people are contemplating doing a Casey Serin.
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=2195684
Well, we know how well it worked for him.
i need me a line of credit.. or a line of coke.. whatever.
LONDON (Reuters) - Investment bank Citigroup … has offered to provide funding to potential buyers of stricken British bank Northern Rock … as part of its advisory role, according to people familiar with the matter.
http://www.reuters.com/article/ousiv/idUSWLB285420071004
How long before the Spanish and Irish start howling? I know the French are, and they aren’t howling for a rate cut because of housing.
One Spanish devloper is feeling the pain. It’s spreading.
Llanera said it faced “extreme difficulties” as a result of reliance on short-term borrowing. Credit costs have shot up since the collapse of the market for commercial paper and CDOs….
Telegraph: http://tinyurl.com/2oc62j
President “Bobby”: Mr. Gardner, do you agree with Ben, or do you think that we can stimulate growth through temporary incentives?
[Long pause]
Chance the Gardener: As long as the roots are not severed, all is well. And all will be well in the garden.
Heat turned up on Countrywide executives. Ordered to reveal options data by court. From LaTimes:
Goldberg concluded that there was a “statistically significant result suggesting that some type of option manipulation may have occurred” at Countrywide.
Goldberg said he was not sure exactly how the stock options were manipulated but said there was only a 1 in 978 chance that the 11 stock grants he examined would prove to be as lucrative as they turned out to be merely by chance — a result “akin to flipping a coin and always seeing heads.”
http://tinyurl.com/2s2dd7
NEW YORK, Oct 3 (Reuters) - H&R Block Inc … the largest U.S. tax preparer, said on Wednesday bank lines at its Option One Mortgage Corp lending unit were terminated or reduced….
http://tinyurl.com/2n469l
Seems like Cerberus would see the writing on the wall and just say forget the whole thing.
Same thing I’m thinking about LoneStar’s purchase of LEND…
You say eether and I say eyether,
You say neether and I say nyther;
Eether, eyether, neether, nyther,
Let’s call the whole thing off!
Heads are going to roll at Merrill Lynch:
http://tinyurl.com/2fs9qh
Wake me up when Bear Stearns executives start jumping out of windows.
Spoke too soon, they laid off 300 today. Yippers. Though that isn’t exactly executive suicide level failure.
Yet.
Interesting. They borrowed against those lines when the CP market dried up. No funding from anywhere now. Too bad, so sad.
Washington Post had a “chat” yester day aimed at first time home buyers. Really to let some women who wrote a book promote it, so the answers are totally predictable. But the questions are revealling and scarey. People really don’t get it yet. Some are worried that their friends and family consider them a failure for not owning yet. One wanted to know if it was time to buy since she had just started a job at $34K per year.
http://www.washingtonpost.com/wp-dyn/content/discussion/2007/09/27/DI2007092701421.html
BUT, oneperson had an AG story.
“Leesburg, Va.: A few years ago I had the honor of meeting Alan Greenspan. He expressed his concern of the “train wreck” ready to happen regarding the various types of interest only mortgages that even experienced homeowners were jumping into. The train wreck is exemplified in the spike in the number of foreclosures recorded. Close to five percent of the homes in my neighborhood are for sale due to foreclosure.”
Kind of interesting.
“People really don’t get it yet. Some are worried that their friends and family consider them a failure for not owning yet. One wanted to know if it was time to buy since she had just started a job at $34K per year.”
This is another sign we are nowhere near the bottom yet.
W. Post today reports DC area has lowest unemployment rate in the nation - 3% in August. Yet, both foreclosures and inventory are spiking. What, pray tell, is going to happen if the job market softens, even a little bit?
You mean when WalMart, Target and the other big box marts start their mass lay offs?
Kohls just opened a store in our town. There was already a Kohl’s in nearby Ft. Collins. While the new store in Loveland will generate some incremental new sales, there is no doubt that there will be some major cannibalization from the Ft Collins store (They also opened a new store in Cheyenne as well).
So Kohl’s has tripled its fixed costs in the region. WIll it also triple its sales? I doubt it.
Reminds me of Boston Chicken. Keep throwing up storefronts as fast as you can, pull in all the suckers with your great growth story, and cash out. Probably no way to avoid people using this model as long as there is always a supply of GFs out there trying to cash in on a “sure thing” 5 years too late. You can make money off the GFs a lot faster than you can make money actually selling a product at a profit. You just have to know when to get out.
Yes, and don’t forget we’re about to have two Super Wal-marts within spitting distance of each other.
You mean the new one on the north side of Loveland? Its been open for a couple of weeks I believe. Since I don’t go to either one I don’t know how that’s affected the old store
I think they opened that one in the county so they don’t have to comply with Fort Collins “big box” lot and building requirements.
Its in Loveland city limits. City Council is gloating over the 500K in sales tax revenue that they will snag from south Fort Collins.
Could a house price crash of 50% be a possibility?
House prices could fall by up to 50%, research on historical pricing trends has suggested, as a series of market indices showed that residential property continued to slow this summer…
The study, by the Debt Advice Bureau, compared house price growth adjusted for inflation and the historic 2.5% growth trend in GDP from 1952 up to the first half of 2007.
Taking 1952 prices against GDP as a starting point, every time that house prices exceeded the long-term trend by more than 15% the subsequent downturn resulted in house price growth falling to between 62% and 80% of economic growth.
‘A crash of up to 50% in RPI-trend-adjusted terms would mean a fall of at least 30% in nominal prices,’ said Stephen Rose, director of the not-for-profit agency.
http://firstrung.co.uk/articles.asp?pageid=NEWS&articlekey=7718&cat=44-0-0
for Europe I would rephrase the question:
is a correction of -50% in nominal prices a crash or just a minor correction?
In Netherlands a -85% correction is necessary just to get back to the historical trendline. Not sure about the rest of Europe, but in some other countries the required correction is probably in the 70-85% range.
–
“…but in some other countries the required correction is probably in the 70-85% range.”
The US is in that neighborhood.
Jas
slowdown in EU commercial real estate: as a result of the credit turmoil, transactions in commercial real estate in Europe are expected to slow by 15-20% in the third and fourth quarter, quite a change from the record turnover volume in first/second quarter of 2007. A spokesman from the RE sector expects that most of all older properties and RE in secundary/emerging markets will suffer. Commercial RE funds/stocks have record high valuations in Europe; they expect valuations to remain high despite declining profits, because ‘investors are willing to pay more for solid RE investments with reliable rental contracts’.
of course, RE can never go down, and not a word about private RE.
There is a related story in today’s WSJ — about the slowdown in commercial rents. The story mentions that contrary to historical norms U.S. commercial RE has recently traded on anticipation of euphorically unsustainable* future rent growth.
*my description, not the article’s
Rent Growth Slows a Bit In Sluggish Office Market
By Ryan Chittum
Word Count: 543
The pace of rent growth in the nation’s office buildings slowed in the third quarter, and leasing was sluggish as companies tapped the brakes on expansion due to credit-market turmoil and uncertainty about the economy’s direction.
http://online.wsj.com/article/SB119146685863748666.html?mod=hpp_us_whats_news
Pimco spoke with Treasury, Fed as credit froze
Wed Oct 3, 2007 3:19pm EDT
NEW YORK (Reuters) - Bill Gross, manager of the world’s largest bond fund, said he consulted with high-ranking Treasury and Federal Reserve officials around the time the U.S. central bank slashed its discount rate on August 17.
“I and other PIMCO professionals were attempting to describe to high-ranking Treasury and Fed officials the near-frozen commercial-paper markets and the draining confidence of bond and stock investors worldwide,” Gross, the chief investment officer of Pacific Investment Management Co., said in his October investment outlook letter released on Monday.
http://www.reuters.com/article/gc06/idUSN0324109920071003
Investment Outlook
Bill Gross | October 2007
What Do They Know?
If you’re struggling to find something that symbolizes the transition from the old-fashioned markets of yesteryear to the seemingly inexplicable wildness of today’s derivative-driven, conduit-imploding financial complex, you need look no further than the contrast between old television’s Louis Rukeyser and thoroughly modern Jim Cramer. Calm, stately, with deep-throated baritone certainty, Rukeyser was the spokesman for aging boomers who wanted assurance that a nostril-snorting bull market would reign supreme. No less a cheerleader, but with soprano-inflected importuning decibels louder than any rival on the flat screen, Cramer, in recent weeks at least, has been willing to recognize that the momentum could turn in favor of the visiting bears. At a moment of courageous yet seemingly reckless abandon during a week when Treasury, Fed, and White House officials were trying to calm investors with an “all clear” story line, Cramer screamed at the CNBC camera, “They know nothing, they know nothing!” Just who “they” were was left to the imagination, but it was clear that in Cramer’s world Rukeyserian bullishness was not the order of the day.
Indeed, it was not. As Cramer was railing, I and other PIMCO professionals were attempting to describe to high-ranking Treasury and Fed officials the near-frozen commercial-paper markets and the draining confidence of bond and stock investors worldwide. It was Thursday, August 16. Stocks had closed down 210 points and were expected to open hundreds of points lower on Friday. The country’s largest mortgage originator, Countrywide Financial, was rumored to be in liquidation mode (it survived that crisis). This was to be Ben Bernanke’s first test, an opportunity to prove that he and his board of governors knew “something” as opposed to “nothing.” Pass the test he did, cutting the discount rate the next morning and calming markets in ensuing weeks. When Bernanke’s Fed met officially on September 18, it acted again and joined a convoy of global central bankers maneuvering to restore a semblance of normalcy to credit and equity markets. So far, so good.
Yet the validity of Cramer’s rant remains to be disproved.
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2007/IO+October+2007.htm
we all know this cats agenda…
I wonder if BB realized the risk he took when he candidly asked for Bill’s advice?
Together with BoE and ECB decisions, it’s very revealing.
yes, one of the big PIMPS that is being bailed out with savers/taxpayers money.
…This ain’t no cheap hotel!!
KIX fan, woo!
“Bill Gross, manager of the world’s largest bond fund, said he consulted with high-ranking Treasury and Federal Reserve officials around the time the U.S. central bank slashed its discount rate on August 17.”
And therein lies the problem. Like Enron “consulting” with the DOE. Separation of gov and business would be a really, really good idea.
Nonsense.
Do you really think NOT communicating with the BEST, most SUCCESSFUL PEOPLE in a field that you have a gigantic responsibility to UNDERSTAND is a wise policy?
There’s no question that Gross and every other investment or financical “wizard” the Fed might consult with has an “agenda” but, for crying out loud, do you imagine the Fed being so dumb as to NOT realize they’re talking their book? Just because someone is biased doesn’t mean they cannot make important points for someone like the Fed to be aware of or understand better.
Is your idea of better management NOT to listen or survey those you manage or your biggest, most successful clients?
Me, I’d be terrified of a Fed that DOESN’T go out and listen to as many financial industry leaders as possible. Listening at least builds perspective if not enlightenment. Having an academic Fed, whispering among their closeted, “intellectual” selves, isn’t what the “real world” needs, is it?
now if the FED were talking about our Ben about the consequences of their policies, you might have a point
of course we already know that the US Goverment is there for corporate cronies (including the likes of fat cats like Bill Gross) and not for the citizens …
“do you imagine the Fed being so dumb as to NOT realize they’re talking their book?”
Dumb, no. Corrupt, yes. Eff the Fed.
What really chaps my hide about the Fed is that the only thing that makes they paper they print worth anything is the sweat of our collective brows. Yet they not only get to print it (don’t try that at home), they even get to charge us interest on the money which only has value because we work so hard.
–
I am sure that you never heard of the well established concept of Conflicts Of Interests (COI). Wall Street is a cesspool of COI.
Jas
EXACTLY. And some of the COI’s are COI’s. That’s why this is going to get ugly. Eventually, someone is going to get thrown under the bus ’cause us little ol’ consumers out here are all tapped out.
Stop talking about throwing people under buses! Some dumb**** is going to try it one of these days, and it better not be MY bus!
Besides, what happened to the old maiden-in-distress-tied-to-freight-tracks? Freight loads may be down this month but they’re still up strong since 2000, and besides, a coal train has a stopping distance of about 88 bus lengths! (Look it up.) Good luck getting out of the way of that puppy!
By contrast, my first axle is about 5 feet back from the bumper. I had a bike come off my bike rack once (long story) and I was able to stop before I ran over it.
>>Me, I’d be terrified of a Fed that DOESN’T go out and listen to as many financial industry leaders as possible. Listening at least builds perspective if not enlightenment
And in fact that is exactly what they do, since the sole purpose of the Fed is to serve the goals of financial industry leaders. The Fed is a body made up of members that are exactly financial industry leaders.
And therein lies the problem. While the Fed speaks for the financial industry, who speaks for citizens, taxpayers, the aged, and our children? What voices from government rose to present the other side of the story?
Or did all government branches, and all parties, close ranks in their silent acceptance, approval, and complicity?
Palm, the fed gov has gotten so incredibly corrupt from private money over the past few years that they come to believe that stealing is good, poverty is wealth, war is peace and white is black.
DC got a long overdue enema last year. Give it time to work.
I would hardly call D replacing R an enema. It’s kinda like saying “Death has cured you of AIDS”.
You’re right MR but anything is an improvement over the previous Liars Club.
Always room for improvement.
I used to think the Dems would help, but look who’s paying H. Clinton’s bills: Wall street.
The Democrats have been playing Mini Me to the Republicans since 1992. It’s like my grandfather said: not a dime’s worth of difference.
I do think things got worse (a lot worse) with the Shrub administration, due to the combined lack of intelligence, ethics, and intersection with reality. The first term was a horrible disaster for our country which we will spend decades recovering from. Almost anyone else running from the two major parties in 2000 would have been better (except for Buchanan and LaRouche–nutjobs).
That’s what you get when you hire someone who is such a pathological liar that he’s caught in a lie in the interview process (second debate–town meeting style) and just glibly brazens through, and whose resume is one string of failed projects after another, for an executive position.
I’ve been doing some history reading lately. We’ve had some pretty bad presidents: Harding, Buchanan, Grant. We’ve also had liars and cheats: Cleveland, Nixon. But, since the Civil War–IMHO–Bush II takes the cake!
Not arguing with your Liar’s Club comment in the slightest, I would argue that the current batch are an improvement. The current congress hasn’t done anything but fail to pass “non-binding” resolutions and spent even MORE money in the process.
And I swear.. if yet another “ethics” bill comes across that limits the behavior of citizens instead of the slime sitting on the hill I’ll start sympathizing with anarchists. DC really DOES need an enema. Preferably with lots of chili pepper.
I wonder if the Madams and Dommes on the Hill offer chili pepper enemas?
The more badly they behave, the more they need to get spanked.
Being a pro-Domina is very good business in DC, from what I’ve read.
Who else needs to step up take some responsibility for this mess we are in is we the voters.
Here’s your typical loser government to the rescue program from “Mr. Ameriquest” himself, Patrick Duval (D).
Whatta joke!
The loan shark gets $10k for puttin’ some quasi-illiterate divorced woman with 3 kids into a house he knew she couldn’t afford, while the house counselor gets $1500 if he gets a positive “result” from a “throw it against the wall and see if it stick’s” financial work-out.
And even if they succeed…like they’ll ever collect from a fooked up government like the state of Mazz. Hey, “Mr. Work for Nothing
Sucker”…the check’s in the mail.
http://www.boston.com/business/globe/articles/2007/10/04/lenders_pressed_to_pay_for_advisers
hd, I enjoy your posts on Mass, I lived there many moons ago (mid to late 1970s). Ya gotta understand one thing about Deval, he has spent most of his career as a victim’s advocate. Not that victim’s advocates don’t have their place, they do, to a limited extent. But watch out when they get into positions of high power, because then they have a hammer and when you’ve got a hammer, everything looks like a nail.
Expect Deval’s administration to pretty much be about helping victims. It can be a noble cause, but not a good skill set for managing an entire state. A state is far more than the sum total of all the victims living there.
Big P~
The NIMBY socialists are flushin’ New England down the proverbial crapper.
I’m held here by an elderly parent at the moment.
Mazz is a very sick place.
RE: Expect Deval’s administration to pretty much be about helping victims…Mr. Ameriquest sure isn’t gonna help all those poor slobs with a gambling jones. He wants 3 mega-casinos to stop the gambler’s coin from goin’ to CT.
I look for prosititution to be the next legalized vice to fill the Mazz tax coffers. Why let all that sex trade go to Thailand?
And Deval will be doin’ all those hookers a favor by gettin’ them off the street and out of the cold.
It’s weird …
I thought Mitt Romney (gack! can’t stand him so much I feel dirty just typing his name) would be an awful governor, but the worst thing he did (and got away with) IMO was changing the name of the MDC.
Okay, so he did enforce that 1913 anti-miscegenation law to apply it to same-sex couples. BUT, the Catholic AG was rushing to do the same thing. Romney didn’t even think of it, just did a me-too.
Most people I knew thought Duval was going to be great. Finally, a good Democrat in office who wasn’t part of the South Boston machine (which produced such ‘winners’ as the Bulger Bros. Crime Family, Shannon O’Brien, and Steven “What, me pay student loans?” Lynch). Nor would he be one of the incompetent Weld/Republican cronies, such as Paul “Bumbles” Cellucci, Jane “Private Heli” Smith, Joe “Know-Nothing” Malone, or master-of-graft “Trixie” Triscetta who raided the Unclaimed Check Fund under Malone’s nose.
Well, turns out he’s a mortgage industry shill, as smelly as Senator Clinton. Pee-yu!
Obviously the bleeding hearts should have done what they really wanted and voted for Barack Obama as Governor of Massachusetts. (Is it a coincidence that Duval is a Black man from Chicago? I think not!)
Well, at least we never had a Governor Silber.
PS: I voted for Harshbarger back in the day. He was an honest man, so the South Boston Machine made sure to stab him in the back, and we got Cellucci instead.
Minyanville notes the possible false breakdown in the $ that we jumped on here a few days ago. Gotta love those fakeout breakouts (breakdowns). When I cash this trade in, I’ll use the money to buy all that European stuff I wanted
i’d say it’ll be a case of lower highs and lower lows for the USD index with another interest rate cut coming.
Well, I’ll take what it gives me.
Trichet confirms today that he is done raising rates for this year (and maybe forever, who knows …) so yes, the euro will again join the US$ in the race to the fiat paper bottom and the euro might loose a bit vs. the dollar.
Yeah, it’s pretty clear the dollar is at least temporarily bottoming out. Once the ECB, BoE etc. join the parade, the dollar will gain.
gold will gain, the others will loose even more
loose money, like a loose [fill in the blank depending on sexual orientation]
Surfside, FL (near Miami) question
A relative really needs to sell a 2 bd/2 ba house with nice yard 4 blocks from the beach that was bought in 2005. Does anyone know the area? Any advice? Thanks.
Lower the friggin price to at least 15% below recent comps then lower it 5% every two weeks until it starts showing on a regular basis. IMO.
I agree with this advice, and by “comps,” I think you’re talking about recent sales as opposed to prices of homes that have not yet sold.
i don’t know the area, but my advice would be to avoid the St. Joseph statuette upside down burial thing..
maybe one other thing.. pray, accept the first offer, and continue praying.
Beware the banker’s pretended candor.
HEARD ON THE STREET
Banks’ Candor Makes Street Suspicious
Is Spate of Write-Downs A Sign of Transparency Or ‘Big Bath’ Strategy?
By DAVID REILLY and EDWARD TAYLOR
October 4, 2007; Page C1
In the world of banking, honesty can be a tough sell.
In recent days, as some of the world’s largest banks have come clean about billions of dollars in losses related to this summer’s market mayhem, their stock prices have bounced on the belief the worst may be over.
At the same time, some investors are wondering whether banks are being so conservative with their accounting that they will quietly book profits down the road as the securities they still hold rebound in value. Fans of accounting scandals know this as filling the cookie jar. Later, the cookie jar is emptied, giving earnings a boost when needed most.
http://online.wsj.com/article/SB119140136552647562.html?mod=hpp_us_whats_news
Do you agree with the argument losses are actually smaller than reported?
I suspect they are larger than reported. But I am a bear.
I do too. Thanks for the post.
Did I hear correctly that Fannie Mae’s accounting troubles were over declaring TOO LITTLE profits (trying to even out and “hit targets” reliably?
Once opened, Pandora’s Box may prove impossible to shut again.
Democrats Propose Mortgage Aid
By Damian Paletta and Henry J. Pulizzi
Word Count: 520
WASHINGTON — Expressing concern that turmoil in the mortgage markets will get worse, the chairman of a House committee overseeing the banking industry said Fannie Mae and Freddie Mac should be allowed to do more now to ease the credit crunch.
House Financial Services Committee Chairman Barney Frank (D., Mass.) said he would support a temporary increase in the portfolios held by the two mortgage giants. Just two weeks ago he said such a change should come only as part of broader regulatory reform for the government-sponsored enterprises.
But Mr. Frank said any change must be limited and temporary…
http://online.wsj.com/article/SB119143335150147818.html?mod=hpp_us_whats_news
Barney Spank knows that if they pass these new laws, they will never be temporary. They will be permanent.
Yeah, temporary like the income tax, which was only meant to finance a short war. Except it was never repealed and clearly for good reason, because the gov MUST have ongoing wars. Imagine if the income tax had been repealed and they had to keep bringing it back every time the gov wanted to “do a war”. LMAO! People might object!!!
because the gov MUST have ongoing wars
Which is why I always advise young people against signing up with the military. I remind them that it has little to do with national security or patriotism, and that they will end up being cannon fodder defending the global interests of the wealthy.
Colorado, I agree. And the young don’t get until they hear the truth from someone older.
“…why I always advise young people against signing up with the military”
The “New” American Reality Mantra:
“Get a “college degree”…or…”die”
Or learn a trade that cannot be offshored, and that requires enough training and skills so that it cannot be “onshored” by illiterate illegals.
http://tinyurl.com/2gl4mx
Opinion article entitled “The Credit Crunch” by Jerry Bowyer posted on Townhall.com
He apparently missed the memo that the credit crunch is over.
Jerry Bowyer is an idiot. He was on Neil Covuto the other day and said that, “the subprime thing was incredibly overblown.” Of course he was talking about it in reference to its effect on the market, and since the stock market seems to be on some sort of psychotic autopilot, I guess I would have to say that so far, he’s right on that account. It would seem to me, however that eventually, perhaps, the subprime mortgage mess may effect the stock market. Or maybe not.
http://www.foxnews.com/yourworld/index.html#
see “Wallstreet Beware”
Jobless claims hit 4 month high, stock futures point to a higher open.
Why?
Because the FED might cut rates. Stocks are being detached from fundamentals in much the same way that housing was. Who cares about the economy? It’s all about the ratecut.
“Because the FED might cut rates.”
Also because the credit crunch is officially over now.
36 minutes ago
Credit Solution ‘Hopes’ Boosting Stocks
Posted By:Patti Domm
Stocks are striking a slightly positive tone as investors increasingly believe the credit crunch is being worked out. Tomorrow’s jobs report for September remains a top focus.
http://www.cnbc.com/id/21129024
If the credit crunch is officially over then Ben can raise rates back to 5.25%.
Actually Tom, I would prefer higher.
In any case, you are doing an excellent job as our Shadow Fed Chair.
In contrast…
ASIA MARKETS
Hong Kong leads broad decline in Asia
By V. Phani Kumar
Last Update: 6:55 AM ET Oct 4, 2007
HONG KONG (MarketWatch) — Investors locked in profits on their Asian investments Thursday, with Hong Kong stocks continuing to slide from near-record levels as a local newspaper reported Beijing is set to ban state-owned companies from launching simultaneous initial public offerings in Hong Kong and mainland stock exchanges.
The Hang Seng Index (HK:1804580: news, chart, profile) declined 1.8% to end at 26,973.98, adding to Wednesday’s 2.6% drop. The 43-issue Hang Seng China Enterprises index was hit harder, losing 3.4% at 16,727.05, a day after it tumbled 3.7%.
http://www.marketwatch.com/news/story/hong-kong-leads-broad-decline/story.aspx?guid=%7B456D2EDA%2D9A4B%2D4116%2DB0D6%2D420A925DC62F%7D&dist=TNMostRead
The amount of volume in the HS is huge on these minor drops. If I were still long, I would sell just because of the volume.
A new high set in the morning and ending down on huge volume is not good. Key Reversal?
Hoz
Not only a possible key reversal but also an OUTSIDE down day on big volume.
Plunge protection alert…
http://www.marketwatch.com/tools/marketsummary/
Are the plunge protection team’s resources infinite? Will there be a time when the smoke and mirrors fail? What are/could be the reprocussions? Just curious.
Don’t know about “infinite” but for today, their resources are holding up just fine.
P.S. As long as the Fed’s printing press is in good working order and they are willing to let the dollar take the hit, I see no limit to plunge protection possibilities.
Tom,
as usual, excellent observation. Thanks
NEW YORK, Oct 4 (Reuters) - The U.S. Federal Reserve said on Thursday it was undertaking a 7-day repurchase agreement to add temporary reserves to the banking system.
Federal funds traded in the market at 4.75 percent after the operation was announced, matching the 4.75 percent target rate the Fed sets.
Earlier Thursday, the Fed added $4 billion of temporary reserves to the banking system via a 14-day repurchase agreement, accepting Treasuries as collateral.
*********************
sorry for the missed post yesterday.
“…to add temporary reserves to the banking system…”
Lots of “temporary” bailouts are afoot…
Hey Prof Bear,
I think this might be the solution the US “Shadow Gov’t” has planned for $100,000 / $200,000 / $300,000 “Chunks” that can be distributed by the millions.
The free homestead law has been called the most important act for the welfare of the people ever passed in the United States.
In 1852 a political group, called the Free Soil party, demanded free homesteads for the people. In 1854 the first free homestead bill was introduced in Congress by Congressman Galusha A. Grow of Pennsylvania. The people of the West and poor people everywhere were in favor of the bill; however, there was strong opposition to the bill.
The first Homestead Act required the settler to pay twenty-five cents an acre for his land and was passed in by Congress in 1860; however, the bill was vetoed by President Buchanan.
It was not until May 20, 1862, that the free Homestead Act was finally passed and signed by President Abraham Lincoln. The law took effect on January 1, 1863.
http://www.legendsofamerica.com/AH-Homestead.html
NEW YORK, Oct 4 (Reuters) - The U.S. Federal Reserve on Thursday said it added $24 billion of temporary reserves to the banking system via a 7-day repurchase agreement.
The Fed accepted as collateral $18.32 billion of Treasuries, $5.04 billion of agency debt and $640 million of mortgage backed securities.
Federal funds traded in the market at 4.75 percent after the operation amount was announced, matching the 4.75 percent target rate the Fed sets.
Earlier on Thursday, the Fed added $4 billion of temporary reserves to the banking system via a 14-day repurchase agreement, accepting Treasuries as collateral.
if the 10% rule that was apparently being applied over the past few weeks would indicate bids in the 240 billion range.
Credit crunch, what credit crunch?
I wonder why the banks are submitting treasury and agency debt. How could they be out of GSE MBS already? Are the ones that need the capital just hocked up to the eyeballs now?
been asking myself that question all day, not so much the agency, thats freddya dn fannie…..been goin to windoe for a few days now,
but the TREASURIES? thats interesting.
no mention of bids submitted?
clearly, a 28+ billion dollar day demonstrates the credit crunch has passed.
vozworth
NY Fed website has the numbers:
7 day repo
$94 billion bid, $24 billion accepted
14 day repo
$99.75 billion bid, $4 billion accepted.
NEW YORK, Oct 4 (Reuters) - U.S. commercial paper outstanding rose this week, the first time since July, in the wake of the credit and liquidity problems that has slammed the sector, according to Federal Reserve data released on Thursday.
The latest data showed that the size of the U.S. commercial paper market increased to $1.860 trillion, up $4.5 billion from previous week’s $1.855 trillion.
More anecdotal evidence (to me) of people hurting financially is the local paper story where the Red Wings did not sell out last night for the first time since 1996.
The team owner’s reasons why I thought were out of touch (the lockout and certain opponents); an online poster seemed more in line when he noted that even with $9 seating (maybe that’s for the standing area), by the time you throw in $30 for parking and $50-$100 for food, who can afford that??
Professional sports is a great metaphor for how absurdly wrong the lionization of money has become…
When all field-no hit infielder is pulling down a guaranteed $5 Million a year for 8 years, something is very wrong.
Another bubble about to pop~
Wow. The Detroit area must be in a world of hurt to not sell out Joe Louis for the home owner.
I’m really hoping you’re right about the sports bubble popping. Not sure I see it yet, they’re making way too much off the TV, advertisers, and corps that buy the skyboxes. I long for the days when the parks/stadiums were mostly full of J6P fans. Too damn expensive nowadays for most.
It’d be nice to see people who actually love the game sitting in the stadiums instead of trendy poseurs busy chatting away on their cell phones. Most of these “fans” couldn’t name a single player on a bet.
I couldn’t agree more with you, aladinsane. BTW, huge Bowie fan, here. Anyway, I cannot believe the preferential treatment athletes receive, (starting in middle school, mind you), and how some of these people are virtually unable to do anything else with their lives. There is such hero worship for athletes in this country, they earn more than just about anyone else, and every kid wants to be one. God forbid they should use their minds.
Yeah or a good solid day’s work in a trade or something…
even with $9 seating (maybe that’s for the standing area)
Must be. I once went to an Avalanche game (company outing, it was afreebie). We sat in the nodebleed seats in the Pepsi Center, and the tix cost something like $50 each.
I would never drop that kind of money for a game. Plus we have a perfectly fine minor league hockey team in Loveland, the tix are $15 and parking is $5. The Budweiser center is very nice and seats only 5000 (there are no nosebleed seats). And to top it off, the Eagles won the CHL championship last season.
Anyone other than me aggravated by “Pepsi Center or Budweiser Center or Key Bank Arena” ???
My wife’s favorite Formula 1 driver took an esteem hit when she found out he was making $50M/yr for 5 years. (”He’s not worth $40M/year more than his team mate” )
Story in the Los Angeles Times on loan modifications:
http://tinyurl.com/35myyy
“In recent years, lenders have been reluctant to do such “workouts”: lowering the interest rate or changing other terms so that financially stressed borrowers can pay less and avert foreclosure. Countrywide, for example, says it modified the terms of 14,000 loans last year — about 1 in every 585 of the 8.2 million mortgages for which it was the servicer, or bill collector, at the end of the year. Housing activists say lenders usually make only temporary changes if they make changes at all.”
“Workouts are controversial because they potentially let speculators off the hook for their bad decisions. They also are complicated by the fact that lenders like Countrywide sell most of their loans and can’t modify many of them without permission from the investors.”
“Lenders say they try to prevent foreclosures because seizing and selling a home typically costs them $30,000 to $50,000. Foreclosure sales also depress the value of nearby homes. And a Chicago study backed by the Homeownership Preservation Foundation found that costs to local governments exceeded $30,000 per foreclosure in some cases, owing to the loss of tax revenue, increased policing and higher demand for social services.”
“The Mortgage Bankers Assn. said there were no official statistics on workouts at individual lenders or industrywide. But Moody’s Investors Service said it surveyed 16 firms handling customer service on 80% of existing sub-prime loans. Just 1% of the surveyed borrowers facing an interest rate reset had had their loans modified, the study found.”
“Countrywide said that through August of this year, it had modified about 17,000 loans, up from the 14,000 for all of 2006.”
“Steve Bailey, the company’s senior managing director of loan administration, also reported an increase in repayment plans allowing delinquent borrowers to make up the difference over time. The company worked out fewer than 10,000 such plans in 2006 but expects 15,000 this year, he said.”
Interesting numbers on Countrywide. If that small a percentage of loans is being modified, there’s going to be a flood of foreclosures among Countrywide loans. Too many bad loans with no way out other than foreclosure.
http://www.minyanville.com/articles/banks-Fed+rate+cut-mortgage-ARMs-speculating/index/a/14350
I wish I could say I was surprised.
“…Remember, the Fed is powerless unless it can find people to borrow the credit it wants them to spend. By definition, the last ones willing to take that credit are the most speculative.”
I thought they were called bag holders.
So picking up SKF the other day was the right move? Cool.
Burn, baby, burn.
Just like stock markes, RE is always going up somewhere. The NYTimes this am is pushing Bucharest. Haven’t you always dreamed of living in Romania?
“With high potential yields, Bucharest has become an increasingly popular place for foreigners to invest, and now that Romania is a member of the European Union, the number of those investments is likely to grow.
“Many individuals from places such as Germany, the U.K. and Austria are already here,” Mr. Raftopol said. “The U.S. resident community is pretty small but tends to be made up of people who have quite a commitment to the place.”
Ms. Hawke added: “Buying here is quite different from back home too. One great thing is, you can do it all via a notary, without all the lawyers you need back in the States.”
Watch a movie called “Hostel.” That will cure anyone’s desire to live in Romania.
–
I have known few very competent Romanians. There may be hope for them.
Jas
If you hanker for Eastern Europe, live in Prague (Praha)
–
Yes, Praha is fantastic. But I haven’t yet been to Vienna and Budapest (hopefully, next spring).
Jas
*envious* I went to Praha last spring–it was awesome, and I wish I’d had the time to see more.
Check out Brno, too. Home of the Mendel museum and Spielberg castle.
you would be surprised what is happening there … in the big cities the price level is already equal to the ridiculous levels of the big cities in old Europe. The locals can’t afford those prices for sure, but who cares - as long as the ECB keeps pouring tons of money into former Balkan states home prices will probably go up. It is an easy bet, as long as it lasts. Even in the remote countryside people from UK and Netherlands are buying for ‘investment, sometimes whole villages at the time …’
Last year there were some stories (maybe from Hungary or other Balkan country, not sure) about people who where threatened out of their homes by the mob, and while they were out the home was sold to a wealthy foreign speculator. This was happening on a massive scale. Of course everything goes through a notary, very official, so the original owner has no recourse. Only when the son of a high politician lost his home this way the EU parliament started an investigation; I haven’t heard anything since then.
EU Parliament? You mean that toothless old git is still around?
I was kinda surprised that Ethan Hawke’s mother didn’t live in a bigger/more expensive place. Especially considering she bought before they joined the EU.
Wow, this place is dropping fast. Nice victorian that has been on the market with multiple realtors for months. I believe they started at $102.500, was at $82,500 a couple of days ago, now down to $80K.
http://npdodge.com/idx_home.cfm?mls=07-1900#
That’s $41 per sq ft, about 4 miles from Omaha. Incomes easily support this price, it would have even supported the $102,500, but just another example of the crash in places you’ve never heard of.
unbelievable, in the Netherlands such a place would easily get 800.000 euro’s, even in totally rundown condition …
Wow. I’d put my place on a boat and float it across the Atlantic for that.
How’s that for greed? Of course I hope you all know I’m kidding.
Reflate or die. Gold genie let out of the bottle:
http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=63B83D0C-17A4-1130-F52CA03792FEDA80
San Diego Landslide Threatens Homes
http://www.nytimes.com/2007/10/03/us/03cnd-slide.html?em&ex=1191556800&en=850a7eb3913c2844&ei=5087%0A
The irony here is so amazing you would think this is The Onion and not the NY Times.
They have been advertising this 2 day home auction for the Twin Cities pretty hot and heavy lately. I have heard it advertised both on the radio and television–looks like an Illinois auction this weekend. What fun!
http://www.ushomeauction.com/
This is from Reuters. The item that jumped out at me is:
“At current home prices, about $693 billion in ARMs are “already under water,” according to Stephanie Pomboy, financial economist at MacroMavens in New York.”
URL: http://tinyurl.com/2ar2vp
The quoted item is found on the second page at the top.
Ok, world economy is 50 Trillion or so. $693 Billion is a little less than
1.5% of that which is a very serious problem on a GLOBAL level.
Yet, these are the US estimates for our housing mortgage exposure in ARM’s.
Our economy is $10 Trillion or so. This is over 6% of our economy as an “at risk” asset value.
This would cripple the global economy. At these levels it would destroy the
US economy. 6%- one dollar out of every $20.
The Fed cannot fix this. Congress cannot fix this. It’s just too big and getting worse.
Now, as soon as I find the world numbers for global mortgage exposure…
Roidy
–
“At current home prices, about $693 billion in ARMs are “already under water,” according to Stephanie Pomboy, financial economist at MacroMavens in New York.”
She is a smart cookie. As the water level rises, i.e., home prices in most-mortgaged areas fall, there will be more and more ARMs and non-ARMs would get under the water. A 10% drop in home prices should bring the $ amount to close to $1.5tr.
Remember, prices are determined at the margin. $1.5Tr is enough to sink the carrier ship USE.
Jas
OK, this is bad, but not as bad as you say. The collateral for the ARMS is not worth zero. I figure (that’s a fancy Ph.D. word for guess) the ARMS will go underwater by 50%. So, in the US it’s really one dollar out of every 40, not every 20, or 2.5%.
Take away 2.5% of my assets and income and I’ll hurt, but I’m not crippled. The folks who have everything in those ARMS (mortgage brokers for income, hedge funds for assets) they are crippled. But, the US can survive a 2.5% hit. The US is so freaking rich is could probably survive a 25% hit, but would be dramatically changed place.
It will get dicey. If you are not in the industry, you will be in pain, but you will survive. If you are in the industry, well, you need to find a new industry.
LIL, “The US is so freaking rich is could probably survive a 25% hit, but would be dramatically changed place.”
I am sorry to disagree, we were an incredibly rich country.
Is the US Bankrupt?
Lawrence Kotlikoff
St Louis Federal Reserve
Aug, 2006
caution pdf.
http://tinyurl.com/g9kwc
Sadly the answer is countries can go bankrupt and the US has entered a point where it cannot pay its bills.
As regards Roidy and your calculations of financial impact - you are using different methodologies - however Roidy’s method even in error is closer to financial reality. Roidy’s calculations are low.
A small example is Miami, FL; The individual that purchased in 2005 for 400K and has no problems paying her loan is still losing moneys when a neighbor sells at a discount. Similarly when a person defaults on a loan, the MBS and CDO guaranteed by the mortgage goes into default. This is what is currently happening.
There are this morning (and every morning since July) CDOs available for purchase from over 80% of the long term bond investors - no buyers (More than 65 percent of investors in mortgage-backed securities are struggling to find bids for their holdings, according to a survey of 251 institutions last month by Greenwich Associates, a Greenwich, Connecticut-based consulting firm. Among holders of CDOs, the figure is 80 percent.Bloomberg). The banks are still looking to place $300B in LBO debt - no buyers. Corporate debt defaults are up 300% over July, 2007.
All because of a few subprime/alt a/prime loans defaulting. The total dollar default may be 5% of all subprime/ Alt A. The ripple is a 40% loss in RE value and this collateral supports $5T in debt that has lost 15% since July. The greater the leverage the greater the loss.
There are $120T in derivatives written against the CDO/CLO market. Approximately 9X the est 2007 GDP of $13.76T. That is leverage.
this is quite simply,
the most important comment.
The credit derivative mountian is shaking as violently is I can only imagine.
Earthquake
Tsunami
Fire
Flood
chicken little is watching the sky falling.
one might think it almost impossible to read this blog on a daily basis for a year, or two.
But, people do.
Occasionally, one finds free money here, but tis not about money anymore. The systemic preservation system is, IMHO, failing at the momment, as the rest of the world watches in horror.
The fallout will be from the lost wages and jobs. It may be 2% of the global economy but if there are enough layoffs, its 100% of wages for lot of people. Just job numbers were good when real estate was going gangbusters, the job numbers are now bad. At its peak, real estate made up 35% of job growth.
It will hurt. And, it could hurt a lot. But, there is a lot more to the US economy than speculation. We let a lot of manufacturing move to Asia. But, there is no reason it cannot move back here. Our infrastructure and education are still pretty good. With the right incentives (jobs) then we can start training our own engineers again instead of importing them for cheap.
I like manufacturing and really hope that the US shifts back to manufacturing. I have had the pain during the shift away from manufacturing, so I have little or no sympathy for others caught up in economic shifts.
Slim here with an update on my friend and the Team National MLM meeting. I first posted about this in yesterday’s Bits Bucket.
Sorry to say, but my friend went to the meeting, fell for the sales pitch, and paid $2,000 for a lifetime membership. And she’s 86 years old.
There’s something very wrong about this whole thing. So wrong that I’ve reported it to the Arizona Attorney General’s Office.
I also have a message in with the officers of my neighborhood association. Reason: One of the people who took my friend to this meeting has a house for sale in this neighborhood. And his girlfriend is the listing agent. She was driving the car that took my friend to the aforementioned meeting.
I also have a call in to a friend who runs Gov. Napolitano’s southern Arizona office. She may know of resources beyond the state Attorney General.
Thank you for your support, HBB. You have no idea how much it means to me right now.
You know, years ago, probably 15 or so, my ex-husband’s family tried to get us to join Amway under them. We refused, but two of the five brothers did join up. One is an orthodontist, the other worked for his father’s business. They both were convinced if they followed the plan and did what they were told, they would go diamond or ruby or whatever it is. Fast forward to today. Guess what these guys are doing. That’s right. One of them is an orthodontist (fixes my kids teeth for free) and the other works for his dad’s company. And they worked it! If anyone should have been able to retire by now, it’s them. And we told them year after year, it’s a waste of time, but they wouldn’t listen. If your friend won’t listen to you, there is nothing you can do. Those MLM’s aren’t illegal.
“And they worked it! If anyone should have been able to retire by now, it’s them. And we told them year after year, it’s a waste of time, but they wouldn’t listen. If your friend won’t listen to you, there is nothing you can do. Those MLM’s aren’t illegal. ”
Oh man, yes, MLM’s…boy do they proliferate during tough times.
Total scams.
Thoughts to ponder…
(1.) Anyone who exerts the sufficient time and effort to be successful at MLM would be just as–if not more–successful at any other comparable and most likely–more stable career. “Hey Dummy, take that MLM start-up money and get some training in something “viable” and stable. Sheesh!!
(2.) LM’s make huge $$ off of initial costs from new reps for “start-up inventory.” That’s the rub. Huge profits recruiting new “rubes” and their start-up fees. Wash, rinse, repeat.
(3.) Many MLM’s continuously modify or change their product names or packaging–so reps have to keep buying new “stock” which keeps cash flowing into the parent company. Mary Kay is notorious for this. I used to shake my head in disbelief–watching my ex girlfriend continuously buying new stock from Mary Kay to keep up–while her “old/outdated” stock went unsold and had to be discounted at a loss. What a scam!!
DOC
Did she write a check - couldn’t she put a stop on it right away?
I think she wrote a check, but I wasn’t at the meeting. I was invited, but something smelled fishy, so I decided not to attend.
Another neighbor who did attend — but didn’t join Team National — said that the whole thing sounded too good to be true.
As somebody in the other thread had mentioned I’d think about trying to get in touch with one of her children or grandchildren. Preferably an intimidating male.
Out two grand is a black-eye, she will probably be okay, lesson learned. If they are able to drain her on a regular basis for 2k that could severely impact her ability to meet the bills. How do these people sleep at night?
Spoke with real estate agent regarding the condition of the market. I was informed that in North Seattle area some builders are selling their new construction homes less than their cost to build, and others are offering to pay 6 months of buyers mortgage to make the deal. Also, the agent thinks that condos are being overbuilt in the Seattle area. Overall market conditions: slowing.
WHAT!!! I thought Seattle was different…
Completely off topic.
YABBA DABBA DOO!
DPBM is bringing up the treasure. I new the day was coming and it’s much sweeter than I expected. Each .001 is a cool 10K to me. Life is good.
Oh, and my TOL and CFC shorts are looking pretty nice as well.
Time to turn Fan and Fred into the world’s largest subprime bagholders?
Democrats Want Fannie, Freddie to Buy Subprime Loans (Update3)
By Alison Vekshin and James Tyson
Oct. 3 (Bloomberg) — Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies, would be allowed to expand their $1.5 trillion mortgage portfolio to buy subprime loans under a Democratic plan to help struggling borrowers.
Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi and other leading Democrats also called on President George W. Bush to increase funding for foreclosure prevention and appoint a coordinator to oversee the administration’s response to the mortgage-market turmoil in the plan they unveiled today in Washington.
“Our country faces a challenge that threatens the economic security and the dream of homeownership of many of America’s working families,” Pelosi, of California, said at a news conference.
http://www.bloomberg.com/apps/news?pid=20601087&sid=anVeZurq4vZw&refer=home
I doubt the following news will thwart D-ratic efforts to get Fan & Fred to eat bad subprime debt, as their concerns are (1) creating the appearance they are doing something, so they can blame R-cans for not doing anything; (2) paving the way for future kickbacks, er, I mean, campaign contributions from the REIC constituents (lenders + builders + GSEs) who would be the actual beneficiaries of the bailout. Owners of homes they cannot afford would remain hosed.
Analysts Doubt Impact of Raising Caps
By ALAN ZIBEL – 20 hours ago
WASHINGTON (AP) — Efforts in Congress to let mortgage companies Fannie Mae and Freddie Mac refinance more at-risk loans could have a key flaw: many of those loans were made with such loose standards that borrowers are likely to default anyway, analysts said.
Top Democrats in the House and Senate on Wednesday urged the White House to do more to help borrowers struggling to repay loans resetting at higher rates. They advocated further raising the caps that limit how much money the two government-sponsored mortgage companies can invest in home loans and securities backed by them.
http://ap.google.com/article/ALeqM5jOTSKaXVi2zR8y32lb6K-bDfv4hwD8S20B1G0
“Buy or take over private loan. must sell quickly. these are two lots that I have split from one 10.6 acre lot. I can’t hold on anymore so if someone wants to step in and take over this can be a great investment when the market picks up. One lot appraised for 400,000 in may and the other lot has two barns, a modular home, well and electricity. Both ready to be built on. We also put in an 18′ paved road. Located just outside of Lincoln, on Hardscrabble Road (off Hungry Hallow). No agents please I can’t afford you
Hurry, this will probably be out of my control early next week. Please respond by email with ph# if you are interested.”
Worst sales pitch, ever.
on Hardscrabble Road (off Hungry Hallow)
Hmm, they named that right.
The Economist magazine weighs its opposition against former Treasury Secretary Summers’ opinion on a role for GSEs to bail out the U.S. subprime mortgage mess.
EXPANDING FNM AND FRE AS THE D-RATS PROPOSE WOULD INFLICT UNBRIDLED MORAL HAZARD AND (MOST LIKELY) A FUTURE TAXPAYER-FUNDED BAILOUT ON THE UNSUSPECTING U.S. CITIZENRY.
America’s housing giants
Don’t free Fannie and Freddie
Oct 4th 2007
From The Economist print edition
Letting them grow is no solution and could even be dangerous
…
The dangers of privilege
Moreover, even if they grow no more, the mortgage giants pose a clear systemic threat. Their portfolios of retained mortgages and mortgage-backed securities add up to no less than $1.4 trillion. It is bad enough that this is concentrated in two institutions. Worse, they lack discipline because of the implicit guarantee. No matter how much risk they take or how they manage it, they can borrow at rock-bottom interest rates. If they got into trouble, banks as well as taxpayers would be on the hook. Banks may hold as much GSE debt as they want. Many have amounts that exceed their regulatory capital.
http://www.economist.com/opinion/displaystory.cfm?story_id=9905545
Another version of moral hazard: Taxpayer-guaranteed 100% financed subprime loans…
“An expansion of the Federal Housing Administration, which guarantees mortgages to iffy borrowers, is on the cards.”
p bear, im new to this so bear with me, can the president veto their efforts? or can they just do it without any oposition?
The CIC can veto, but there is an override thresshold of 2/3 majority in both the House and the Senate. Not sure how the votes line up on this…
http://en.wikipedia.org/wiki/Veto#United_States
thank you, this was very enlightening.
I think it’s instructive that almost everything being proposed is with guarantees, not actual cash bailouts. Sure there are a few ideas kicking around to spend a few hundred million or even a few billion, but that’s chicken feed at the Federal level and compared to the magnitude of the problem.
Giving loan guarantees is one way to make intervention appear painless and cost-free. Of course our government doesn’t have enough money to bail this thing out. It would be larger than the defense budget or Social Security. So Washington finds another way to push the costs off into the future. Just stretch the government’s credit a bit further.
“Giving loan guarantees is one way to make intervention appear painless and cost-free.”
It also puts the taxpayer on the hook and relieves the lenders who made crazy loans of taking the hit when Jose 6Pack figures out he can’t afford to pay off a $500,000 loan on $30,000/year income.
Democrats Split on Ways to Ease Mortgage Crunch
By EDMUND L. ANDREWS
Published: October 4, 2007
WASHINGTON, Oct. 3 — Democratic leaders in Congress remain divided about how to address the growing crisis in housing and home foreclosures involving borrowers who took out subprime mortgages.
The House speaker, Nancy Pelosi, left, and Harry Reid, the Senate majority leader, before a news conference on Wednesday outlining a plan to help low-income families keep their homes.
At a news conference on Wednesday, House and Senate Democrats outlined a plan to help low- and middle-income families keep their homes.
But they focused on only two fairly narrow proposals: providing more money to groups that help homeowners renegotiate their loans; and temporarily allowing Fannie Mae and Freddie Mac, the huge government-sponsored mortgage financiers, to hold more mortgages in their own investment portfolios.
“The subprime crisis demands action, and we are working to protect families who have lost their home or are in danger of foreclosure,” the House speaker, Representative Nancy Pelosi of California, said.
While the House has already passed several bills aimed at the mortgage problem, Senate Democrats have been bogged down by disagreements and other difficulties in lining up enough votes to block any Republican filibuster.
White House officials said President Bush put forward a plan in August to expand the Federal Housing Administration’s mortgage insurance program and proposed a way to strengthen the regulation of Fannie Mae and Freddie Mac.
“We don’t see the need for more press conferences,” a spokesman for Mr. Bush, Tony Fratto, said. “We see the need for them to take advantage of the opportunities before them.”
http://www.nytimes.com/2007/10/04/business/04housing.html
well, they obviously are not so confused as a tax code change just took care of the foreclosure issue from a FEDERAL INCOME perspective.
oh yeah, countrywide choppin heads, 14k. stick that in your jobs number in the morning.
by income I mean:
foreclosured housing consumer paying debt forgiveness tax.
however, the banks get to keep writing it down against earnings going forward…..banks are poor, dontcha know.
Went down to Best Buy at lunch to buy more RAM for a computer. Flat panel LCD and PLASMA HDTV’s were on sale anywhere from $699 for a 32 inch Phillips, to $1999 for a 60 inch. There were tons of 42 inch HDTV’s ranging in price, they were all over the place 1049, 1299, 1399, 1499 etc etc etc.
The worst is behind us they said, now this:
Oct. 4 (Bloomberg) — Subprime mortgage bonds created in the first half of 2007 contain loans that are going delinquent at the fastest rate ever, according to Moody’s Investors Service.
…
“It is shocking what you see,” said Kyle Bass of Hayman Advisors LP, a Dallas-based hedge fund that reported a 400 percent return on its bet the U.S. housing market would fall. “Anything securitized in 2007 has got to have the worst collateral performance of any trust I’ve seen in my life.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGNw1wX9WAl8&refer=home
That’s exactly why a high foreclosure rate will persist for years. The easy money loose lending persisted till just a couple months ago.
From Bloomberg:
U.S. commercial paper debt rose $4.5 billion in the period ended yesterday to a seasonally adjusted $1.86 trillion, ending the biggest decline in at least seven years, according to the Federal Reserve in Washington. Asset-backed commercial paper fell $6.1 billion, a smaller decline than in the prior week.
…
Yields on overnight asset-backed commercial paper fell 2 basis points to 5.22 percent today and are down from 6.18 percent on Aug. 31, in part because of the Fed cut.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aYYndEwKvsNs&refer=home
http://www.youtube.com/watch?v=tkuW8bCjC6c