Bits Bucket And Craigslist Finds For October 13, 2007
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Bill Moyers Journal had an interesting segment last night about eerie parallels between the conditions that preceded the 1929 crash and the conditions that we have now. Guests were William Kuttner and Bill Donaldson, former SEC chairman. Both were in agreement that the markets are pretty much out of control at this time and that hedge funds need regulation. “Managed” capitalism was the term that was used. Subprime was briefly mentioned.
gov management created subprime 1997 and 2003 acts
USA hasn’t been capitalist since 1913
http://tinyurl.com/255gto
Picked this up from CR, if anyone has the full article please post.
I agree its eerie, the big market players banded together when the markets were roiling in late 1929 to provide “Organized support” so that market pricing would be pegged at what they, and not the market, thought was reasonable. Obviously it failed.
Now we have the banks in the MBS based SIV/CDO markets attempting to support the value of these illiquid products of financial alchemy. Sorry, the market forces are speaking. Just go to CR and look at the ABX charts and you’ll see that we are at the threshold of yet another sub-prime credit crunch spasm. We’ve had two so far this year, FEB & JUL. How many more can the system take and who will be the big mortgage market player this time?
I predict CFC, as their “protect our home” bracelets are now worth 10x the value of their stock (including the value of shipping handling & tax;)!! http://tinyurl.com/28rzbf
joe, in the WSJ clip, some other schmoe from Goldman Sachs is mentioned. LOL! I’m sick to pukepoint of GS. What it looks like to me is, plans are being worked out to save Goldman Sachs and its cronies.
They must think we are stupid enough to believe this is LTCM all over again. This is so much bigger that it boggles the mind.
If you recall, Paulson waited to put this plan out there. Why? Because GS was the only bank to short mortgages. They had to wait for that to come to fruition. Once they won that bet, they went long mortgages and oh look, you have Paulson wanting to keep homeonwers in their homes “and paying their mortgages.”
How nice.
“Paulson waited to put this plan out there… Because GS was the only bank to short mortgages.”
Sounds like another conspiracy theory to me. Certainly the Secretary of the Treasury would not make such a brazen move, with an obvious ulterior motive of enriching his former (and likely future) employer?
If you recall, Angelo Mozillo wouldn’t sell his stock in Countrywide knowing bad news was about to come out. [sarcasm off]
It is posted below together with a couple other links.
one key difference between now and 1929 — Ben isn’t shackled by the gold standard this time. The presses are already running at full tilt (M3 up 15%).
And no helicopters are needed…
A mouse clique will suffice
From The Big Picture
Some spending figures from Rome:
Dinner for two last night in Roma? $320 (U.S.)
Price of refueling an empty tank in my auto on Thursday? $175 (U.S.)
Hotel per night? $850 (U.S.)
Bellini? $24 (U.S.)
Dry Cleaning of shirt I poured Chianti on? $20 (U.S.)
Two days in Roma? Priceless!
Doug is the 20th person who has related the same details to me . . .
The creaming of our Dollar doesn’t effect 85% of our countrymen that have never ventured overseas, as they don’t have passports…
Wait until inflation arrives at the gas pumps, then they’ll know.
“Wait until inflation arrives at the gas pumps, then they’ll know.”
Er, a few years ago I filled my gas tank for $10 or so; now it costs $33. How much longer do you expect we will have to wait for this gas pump inflation of which you speak to arrive?
–
Cant’t post the whole article, but glad to post some excerpts…
Big Banks Push $100 Billion Plan To Avert Crunch
Fund Seeks to Prevent Mortgage-Debt Selloff; Advice From Treasury
By CARRICK MOLLENKAMP, IAN MCDONALD and DEBORAH SOLOMON
October 13, 2007; Page A1
In a far-reaching response to the global credit crisis, Citigroup Inc. and other big banks are discussing a plan to pool together and financially back as much as $100 billion in shaky mortgage securities and other investments.
The banks met three weeks ago in Washington at the Treasury Department, which convened the talks and is playing a central advisory role, people familiar with the situation said. The meeting was hosted by Treasury’s undersecretary for domestic finance, Robert Steel, a former Goldman Sachs Group Inc. official and the top domestic finance adviser to Treasury Secretary Henry Paulson. The Federal Reserve has been kept informed but has left the active role to the Treasury.
The new fund is designed to stave off what Citigroup and others see as a threat to the financial markets world-wide: the danger that dozens of huge bank-affiliated funds will be forced to unload billions of dollars in mortgage-backed securities and other assets, driving down their prices in a fire sale. That could force big write-offs by banks, brokerages and hedge funds that own similar investments and would have to mark them down to the new, lower market prices.
The ultimate fear: If banks need to write down more assets or are forced to take assets onto their books, that could set off a broader credit crunch and hurt the economy. It could make it tough for homeowners and businesses to get loans. Efforts so far by central banks to alleviate the credit crunch that has been roiling markets since the summer haven’t fully calmed investors, leading to the extraordinary move to bring together the banks.
…
Citigroup has nearly $100 billion in seven affiliated structured investment vehicles, or SIVs. Globally, SIVs had $400 billion in assets as of Aug. 28, according to Moody’s.
Such vehicles are formally independent of the banks that create them. They issue their own short-term debt, usually at relatively low interest rates reflecting their high credit rating. The vehicles use the money to buy higher-yielding longer-term assets such as securities tied to mortgages or receivables from midsize businesses seeking to raise cash.
…
Because SIVs are off the balance sheet, it is difficult for investors to size up the financial risks they pose. Off-balance-sheet liabilities played a major role in the 2001 collapse of Enron Corp., and the makers of accounting rules have generally sought to get affiliated entities back on the balance sheets of the companies creating them.
And, if you look at the Ebay listing, you can buy it with no payments until 2008! Let’s see, get a loan to buy an overpriced bracelet that reflects rampant desperation at Countrywide, a company that gives loans to buy overpriced… no, too weird even to contemplate. Coffee, I need more coffee…
What would the Tai-Pan do when competitors bought up and called its loans:
a) Issue “Protect our Noble House” bracelets to all employees to keep them from whining
b) Borrow money from gangsters
c) B above plus pull out the fighting sticks
“gov management created subprime”
I think it would be an interesting study to find the correlation between high cost of living areas and concentration of federal money (government, contractor, or GE/Boeing/private company receiving federal money jobs).
Similarly, I believe it would be quite revealing to compare the penetration of subprime lending (a government housing “affordability” program) to the lack of affordability. Obviously, the availability of easy money to buy unaffordable houses would tend to support unaffordable prices.
–
“gov management created subprime 1997 and 2003 acts”
Our govt’s primary job, economically, is to help capitalists as much as it can without creating riots or a revolution.
“USA hasn’t been capitalist since 1913″
You mean since the banksters got control of the money and the economy? Banksters realized that Congress would give them the power if they could scare people. And they did it with the Panic of 1907. They showed the USG who is really in-charge of the economy. Banks have people’s money and thus must be protected.
Jas
Looks as though the scare cycle is repeating with a 100-year lag?
So, along those lines, I was wondering what some of the posters here would do if they knew for a fact that bank runs and/or depression was just around the corner. How could someone really prepare? (In a practical way) I think one of our Vermont posters laid out what they’ve already done, but what about someone who has money in the bank and doesn’t want to see it disappear? What to do?
I guess what I’m asking is, what are the choices for an average slob like me? Start buying whatever scrap gold I can and stash it or withdraw all cash from the bank and stuff it under a mattress? Because if TSHTF, it looks like parking your cash anywhere other than under one’s own control would be useless. I don’t even think a safe deposit box at a bank would be safe.
I’d like to know as well. I’ve finally hit my stride with savings and earnings and I, well, you know, would hate to lose it.
Good point, Muggy, and that’s my mindset as well. After all, here we are talking about savers being punished and of course, a depression would be the final move in that little (ahem) game, so at this point, I consider depression a definite possibility. There are other factors that I add to this, but I won’t get into them right now.
Anyway, it is great to pat ourselves on the back for saving and investing conservatively, but what good is it when the markets are so screwed up and so rabid that the money can disappear in a blink of an eye?
Catch the next flight to Zurich, open an account, make a deposit, convert your cash to Swiss Francs and you should be in good shape
WOS
war on savers
continues
almost as good as WOD and WOP and all the rest of the gov savior machines
Serious or sarcastic? Or partially both? If serious, are you saying to stay in Zurich, then?
Serious. Have not done it yet but i think this is the best option
Are there no swiss banks that do business remotely - e.g. via internet and mail?
While that’s a good point and one I considered, packman, what happens if international communications are disrupted? Could happen, under an arbitrary decree of some sort.
“If serious, are you saying to stay in Zurich, then?”
Palmetto - I spent some time in Switzerland and those folks are not interested in any of us trying to put down any sort of roots — unless you are as rich as someone like Shania Twain and cut a deal with your favorite canton about the tax you’ll pay yearly. Heck, even the French are “guest workers” there and have to be out by sundown, so to speak.
I think the Swiss are the shrewdest people in the world — by remaining “neutral” they don’t have to support a large army or enforce embargoes or borrow money so they can give it as foreign aid — they just sit back and collect outrageous rents from every international do-good organization in the world and run their famous banking system. Slick.
Well, then, if ‘international communications’ are disrupted, how easy is it gonna be to fly BACK to Zurich to get your gold OUT?
Buy a farm in the woods. That way you are away from Armageddon, you have wood (fire), you can grow vegetables, and also raise chickens and such. Do that for oh, 5-10 years… maybe longer, then come out and see how the world has changed. We will probably end up with a different government we have now because of all the knee jerk reactions, class warfare, and the fight between the rich and the poor.
But you better be in good shape physically. It’s very hard work. Just hauling wood every day to keep warm is a PITA. your whole life revolves around surviving. I just moved to a small Mormon town (they have 1 year foodstuff/family) next to a river (water) with a major train route going through (love the sound of trains). Also an ag town, nice productive farms that grow organic produce. Personally, I’m not ready for a depression, but I bet my neighbors are. Might have to join the church (not) if things get bad.
Think what you will of the Mormons, but the reason they keep a year’s worth of food is well founded, historically.
Starving will do that to you.
If you want to farm in the woods, you better make sure you have water. If TSHTF and you depend on a river, prepare for all kinds of conflicts with upstream and downstream neighbors on water rights.
If you depend upon irrigation from afar (Calif central valley, Great Plains) your issues are even worse.
Your best bet is the Eastern states where farms rely on rainwater. This means Illinois, Ohio, Pennsylvania, W Virginia… ie, the rustbelt. Which is one big reason people moved there in the first place.
Otherwise raising your own crops in what will quickly become a dustbowl is a nice fantasy.
As a kid it was my job to split the wood. My dad would bring home the rounds (bigger pieces). Used to get this stuff called madrone. Good burning hardwood, but twisted, knotty, and hard to chop. No power log splitter either. Just an axe, splitting mall, and a wedge.
Used to get $10 a cord. Oh, and a warm roof over my head.
Hi, losty. I grew up in a small Mormon town–in Utah–and you are right on. They are very prepared for that sort of stuff. I am not a big fan of Mormons, and I will not get into that, other than to say that the 13 year old girl brides rather bug me, but Mormons are supposed to keep a years supply of food and necessities stored on hand, and I think that’s smart. I do it.
The area where I live now is pretty self-reliant too, since it’s on a peninsula and the power goes out for a few days every rainy season. Emergency crews can’t get always get in, unless you’ve got a boat you can’t reach town. (I do.) Also, hermits live out here, and hermits are self reliant.
I get the benefits of self reliant community, natural resources,etc without having to spend my life reading the Book of Mormon.
“I grew up in a small Mormon town–in Utah–and you are right on.”
How did I already know this before you announced it?
OT - I’ve been here two days and already had one set of nearby ranchers come to check out my car (an old Toyota Landcruiser, built for this kind of country). Very nice people. Very friendly. I grew up with Mormons (small town in Colo) and they’re generally good people, except the religion is a bit too patriarchial and whacky for my tastes (don’t mean to offend anyone, just my opinion). Out here, if you’re a backslid Mormon (i.e., you smoke, drink, etc.), they call you a Jack Mormon. When anyone out here asks me my religion, I just patiently explain I’m a Jack Buddhist - they’re not even sure what that is. LOL
OK, back on topic (sort of, but this is housing related). The house I’m renting has carpet, so just bought a Dyson vacuum. Anybody familiar with these (not too late to return, expensive, good inet ratings)…
“Jack Buddhist”
That’s what I am! I have to remember that one the next time I meet up with some Mormon missionaries in a dark alley.
13 year old brides? Did olympiagal grow up in colorado city?
I must have somehow missed that part of the program growing up. I will say that as far as polygamy is concerned I’m glad it was around until 1890, because I’m descended from more than one plural marriage way back when.
Lost in utah, you are doing it right in my opinion, be friendly, help people out when you can, and politely say no when invited to church. The hard part is keeping your cool when you are asked for the 20th time, in the same week.
The house I’m renting is close to the LDS Stakehouse (no, not a restaurant). So I can watch who goes in and know who’s who - LOL.
‘a year’s worth of food”
I’m just curious, is this all canned stuff? like peas, tuna?
I live in an apt. and have cases of dog food stored under the bed, but what kind of food do you buy that lasts you for a year? Is there some website? Thanks.
http://lds.about.com/od/preparednessfoodstorage/Food_Storage_and_Emergency_Preparedness.htm
Spike, I dunno, I’m too lazy to worry about such things, but at one time in the past someone on this blog mentioned a Mormon website where you could learn about/buy such. I do know they religiously rotate their foodstuffs. My house in moab had a pantry the size of a bedroom.
Moab! I loooove Moab! I did, anyway. It got discovered, and then got built up, and it got pretty crappy.
the scenary’s still nice
Hi Lost in Utah: last post lost in cyberspace
Or it could be that I included a link to josephlied dot com
re: Dyson vacuum. I used to have one. It was too heavy and it didn’t pick up the dog hair. I traded it in for an Oreck, which was expensive but it works better than the Dyson ever did. Friend just bought a reconditioned Oreck for $89 after borrowing mine.
thaks, Magic kat
about swiss accounts: the first thing a swiss banker asks a potential client if he/she is an american citizen or resident (apparently, your gov. gave a huge headache to the swiss after 9/11). also, you can’t just have a savings account — it must be an investment account with min. deposit of 250K. then they charge fees that only true millionaires can stomach. but there are a lot of pros, naturally.
not true..about the swiss bank account.. it can be open for as little as 50k… fees are not high.. great bank UBS.. they have two types over there.. numbered accounts and can’t invest in the us markets or traditonal and can invest anywere..
Where I was going to high school (in california) Mormon girls weren’t allowed to date until 16… otoh they were usually expected to date heavily in college and get married there. Mormon men are expected to marry or go on mission by 21 or so.
Hmm.. well, it wasn’t me that laid out what I’ve done. LOL!
My personal inclination is to do a Montana homestead thing and keep the powder dry. Ironically, VT during the last depression was so broke it hardly noticed what was happening around it. Thus, the solid votes for republicans when everyone else was voting democrat in the 30’s. I doubt it will happen that way this time around.
Anyway, land is so expensive at this point I can’t justify buying it so I can build my personal fortress in the country with woodstove, livestock, and farm.
Some more practical ideas from someone forced to live in a surban apartment: Put your money in bank that you’ve actually researched. Have some gold or PM hedges. Be debt free. Move closer to work so that you aren’t as dependant on gasoline. Learn how to live without disposable things like paper towels and microwave dinners. Learn real skills like how to fix a facuet, paint, cook, or sew. Invest in friendships with good people who aren’t focused on money. Be involved in local politics.
The thing is that if we are right, there’s no escaping a depression. It’s a hugh economic tsunami and we’re at the time when the water has drawn back. Most of us here, I think, will end up on high ground but I don’t see how I’m going to avoid getting my feet wet and some of my stuff wiped out in the process. I think I need to just be grateful that I was warned in time to get out of the way.
Vermonter, weren’t you the one who posted about having a bit of property that was fixed up to sustain a downturn and having some tech work, etc? I’m really fuzzy on this, but I do seem to recall you giving some very practical advice, just as you are doing right now.
Well, anyway, along the lines of what you are saying, it looks like the best choices are either living close in or in to an urban area where production is still occurring, or living in a rural town or village where people pull together and have some natural resources (river, lakes, farmland, animals) to sustain them. Suburbs are toast in a depression, IMHO.
There are ton of posters here, so I can’t blame you on the fuzziness.
I do some tech work and had a house that I was fixing up in the country. However, the house required too much work and we were worried about the length of my husband’s commute. His job is 40 minutes away from our old house. Thanks to primarily to this blog, we realized we had a once in a lifetime shot to sell our house at a premimum and wipe out our remaining debt. We’re now 10 minutes from his work in a setting that’s actually probably more urbanish than suburbanish.
I agree that the suburbs are toast, which wouldn’t break my heart. I hate to see farms of houses where perfectly good wilderness and/or farms used to be. Cities don’t bother me, either, although I’m not the biggest fan of living in one.
Vermonter…
Good tips~
It is a time to learn how to grow…
The friends I associate myself with, barely make $20k a year, but live like kings and queens of the mountains, as it is their realm.
They’ll be changed the least of most everybody, in the country.
As you see, the price for admission to wilderness is free, but once you cross that line, financial wealth is meaningless.
My dad wrote a book about growing up in the Depression on a ranch in NW Colorado. They were self-sufficient and it was still a very hard time. Times were hard for those in town who weren’t self-sufficient.
Those now living in mountains will be among the first affected. Because nobody survives the mountains year-round in the 21st century without outside dependence.
THey cannot depend on game or trapping, since the game will soon be gone because of others with the same mind. Likewise with fishing. Likewise with easy fuel (firewood).
The Indians didn’t winter in the mountains. The mountain men did not. Lewis and Clark did not.
You can’t well raise year-round subsistence crops in the mountains, and if you do how do you store them all winter long? And how do you farm land of any size without animals, and how do you feed and warm them all winter?
My dad’s family were almost totally self-sufficient, and the weather was much colder then (think 50 below). They had draft horses and grew their own hay, barley, and dryland wheat (and stored it in haystacks and silos through the winter). There was a community coal mine up the road (free) where you could back your wagon in and fill it with coal (they did use dynamite, so they had to buy that). They had milk cows and chickens and turkeys and raised cattle and sheep (think wool). My gma canned her own garden veggies, had a huge garden. Fruit was in short supply, but they did grow apples and berries. They didn’t even have a car, rode horses to town (this in the Depression), where they traded food for medical and stuff they couldn’t make. It was a full-time job. My dad missed that lifestyle until his dying days (he bcame an engineer, he could literally fix anything, he invented many things and made his own electronic and music equipment).It’s been done for many years, there are still ranching families in the mtns of Colo who are pretty self-sufficient (my family still has several large ranches near Steamboat Springs). They didn’t trap, they might shoot a deer for winter food, but usually they didn’t even do that (my dad hated hunting, he bequeathed a large sum to his local humane society when he died). They actually lived wuite well, though it was a lot of hard work.
We gave this a lot of thought in the 70s, when civilization was about to collapse.
..in the early 60’s as well.. one could almost taste it..
Odd. I guess I don’t think of the topic as about civilization collapsing - civilization (for the most part) marched on in the 30’s. Economic problems, of course, tended to make people more prone riots and disorder but I don’t recall a collapse by any means.
It’s really hard to avoid the current parallels to the 20’s and I’d like to avoid as much of discomfort of the last depression as possible.
LOL. Did any of you take to the hills in advance of Y2K?
*sigh* Exactly my point. I’m *not* living in the hills in a cabin. Palmetto asked what to do on a practical level and I made some suggested what you might do without a fortress in the hills if you were worried about it - which seemed good advice at any point in time.
Throwing out “well, we were worried about the collapse of civilization in the 60’s and 70’s” seems like a great excuse to completely ignore some possible dangers on the horizon and taking some *moderated* measures against them.
Personally I took out a little bit of cash for Y2K ($40) and my parents had a special New’s Year’s party. That was about right.
Right now most of my cash is still in dollars in a bank paying interest while living a modest life in a small apartment. I’m hoping that’s about right, too.
History is complete with tales of those that took no heed.
One day, we’ll get electricity and running water here.
..seems like a great excuse to completely ignore some possible dangers..
How can you fault anyone for mentioning historical periods or events when the premise of this thread hinges on a historical event?
LOL - what a great thread. Somewhere along the line it seems like we here: protection from economic depression=self-sufficiency=substance farming=nutball hermits/hippies.
I personally would like a homestead because I like living in the country. Self-sufficiency, if it indeed would protect from a depression, has nothing to do with where you live. One of the reasons we sold our old house in the country is because it provided only the illusion of independence. If we lost power, we lost water and heat. Our future home in the country will be much better built with off-grid features. (And no, that still won’t make us isolated from the 21st century..)
To me, self-sufficiency is attenable in degrees by being prepared as best you can against reasonable issues and tackling life with open mind and a willingness to try. What’s wrong with having a year’s worth of food, or trying to figure out if you can make it without the electric company? Seems pretty smart to me.
Who will make in an economic depression? Someone who already knows how to save, is content with cheap entertainment and their own cooking? Or those who have to have their SUV’s and McMansions with air conditioning and can’t imagine how happiness exists without them? A mind prone to self-sufficient thinking might fair much better in a depression, regardless of their experience chopping wood.
Two factors haven’t been addressed, in particular here in California…
People used to a soft lifestyle of plenty of everything, will rather suddenly, in a slow train wreck fashion…
Going on right now, and over the course of the winter, run out of both money and water.
I think they’ll go more than a little crazy.
I wouldn’t want to be anywhere near them.
“…run out of both money and water.”
Some may run out of money, but none will run out of water. If things got really desperate, the State of CA could make a real decision that keeping the water flowing to SoCal is more important than saving a near-extinct species of fish, and take action.
The danger in being an endangered species
Oct 12, 2007 10:34 AM, By Harry Cline
Farm Press Editorial Staff
It is dangerous being a threatened or endangered species in California.
Just look at how free-range environmentalists, the judicial system and state bureaucrats are protecting the lowly, near-extinct Delta smelt/minnow. Radical environmentalists are suing to keep a few tiny minnows from going through the Delta pumps moving water south to 25 million Californians and 3 million acres of farmland.
…
The smelt loss at the pumps is only 1 percent. The other 99 percent are meeting their demise in the Delta, and environmentalists want the pumps shut down. It is dangerous being an endangered minnow protected by environmentalists and the courts.
People are no better off than minnows when the judicial system says the economic impact on humans through enforcement of the Endangered Species Act (ESA) is irrelevant. Endangered species are more important than people, according to the ESA and the judge.
Right on Blue Skye. All this talk of “buying a farm in the country” is utter rubbish yet I see it and hear it ALOT. It’s like a deja vu moment circa 1974 hippy/communist movement type tripe. Has anyone here actually “farmed”? I jerked cows and bailed hay in my youth and I can tell you it’s nothing like you’ve idealized in your mind. There is little “self-sufficiency” to it as you are dependent on outside suppliers and they cost money. There are feed costs, equipment costs, vet costs, taxes, fuel costs, repairs to equipment and structures etc. If you don’t believe me, volunteer your labor to stack bales on a wagon during first cut and you’ll find out. Now if you’re talking about growing a vegatable patch and a half dozen hens, that can be done in the suburbs. We do it and even let the hens free range but farming should not be used in the same sentence as “self sufficiency”.
Thanks, exeter, and right on. Farming is not like on ‘Little House on the Prairie’, with Michael Landon as Pa, and darling little braided Melissa Gilbert skipping around being perky. I was a farm girl. Milked cows and goats and all that crap ranch stuff and it is HARD.
Beef would be one of the first things to go - its too dependant on outside influences, like feed etc..plus few have the ability to butcher and store that amount of meat. And, you need a lot of room to raise cows - they’re big beasts that eat a lot and need a big range.
Much better to downsize to sheep, or goats - they can eat almost anything, and their smaller size makes them easier to feed, handle and butcher. Plus, with sheep, you get the added benefit of the wool, and milk, if you venture into dairy production.
And a built-in lawnmower for those big suburban lawns
The Navajo and other tribes successfully raised sheep for hundreds of years. Sheep aren’t indigenous to the US, but they survive well in harsh desert conditions, and thier byproducts (as mentioned above) make them worth the bother.
save yourself a lot of trouble and go vegetarian. Corn, beans, rice, a crust of hard bread, and a good glass of 1787 Chateau d’Yquem…
‘…and thou, beside me singing in the wilderness’.
Yeah, yeah. You and Omar Khayyam.
Hey, how about marshmellows? You forgot to add those.
are you sure they’re vegetarian???
“save yourself a lot of trouble and go vegetarian. Corn, beans, rice, a crust of hard bread, and a good glass of 1787 Chateau d’Yquem…”
Oh yeah, I think if the SRHTF then you’ll see a lot less meat consumption - still, if you want milk, cheese and wool etc, you will still have to raise some livestock.
Its really hard to be totally vegan and not have health problems, especially in stressful situations like having to be self-sufficient…
Even the Indians - an overwhelmingly vegetarian country - supplement thier diet with dairy and the occasional egg.
I bought a farm when I was raising kids and working as an engineer. I raised beef and bees. There is something better than raising beef and that is having neighbors who do. My neighbors are Menonites and we get along really well.
The most profitable activity on a farm is the kitchen garden.
The best preparation IMO is first to enjoy life, second to be ready for change. Plan A, plan B, plan C. Don’t commit to the consequences of what “might” happen. Just be prepared.
I’d hold junk silver for everyday life and get my hands on an old copy of The Whole Earth Catalog. For the assets, haven’t decided. I’m in HKD, hard-asset positions on the Hong Kong Stock Exchange.
Real Goods has a lot of off the grid type stuff.
I’m thinking it would be a good time to get another graduate degree. I plan to work hard and save up as much money as I can, so when Armaggedon strikes I can live off my war chest and attend school full-time. Since I will be offering cash for my purchases, I expect to get big discounts…
hope it works out better than my MBA- when you’re over 50 no one gives a shht
Once you are over 40 Corporate America considers your “best used by date” to have expired.
so f*** em - they can kiss my arse.
Was driving into the beautiful tourist town of Moab, Utah the other day (my old residence for 7 years) and heard this on the community radio:
“Welcome to Moab, where corporate wage-slaves come to renew their enthusiasm for life.”
Good plan. Worked well for me during the last crash.
1. If you have a good job then keep it. If offered early retirement, don’t take it. A job means future income - a future dollar stream - something that may be hard to come across in the days ahead.
2. Get out of debt and stay out of debt.
3. Keep your dollars safe and liquid. Keep some of them in cash stuffed deep into your mattress for there may be a time of bank runs and runs on bank ATM machines and ready cash may be difficult to get.
4. Keep a stash of canned goods, dry grains, and other food that can be stored for long period of time.
5. Simplify your life. Get rid of the clutter, the toys, the stuff that costs a lot to store and maintain but returns little value.
One more …
6. Always be broke. Don’t disclose to anyone that you are doing okay financially. Learn to moan and groan along with the best of them.
Regarding #1. Be careful about turning down the Early Retirement offer. You might find yourself laid off a few months later anyway.
Good question palmetto.
I am/would be looking at the two lowest tiers in Maslow’s need hierarchy.
http://en.wikipedia.org/wiki/Maslow’s_hierarchy_of_needs
But more importantly one should assess their skills and determine what they can and cannot do for themselves. Then decide now how to fill the gaps. If TSHTF skills will be valuable.
In terms of cash/PMs/investments/retirement/money in the bank, that is a tough one especially for the 401k monies which are kind of locked in with the penalties. It’s a fine line because “knowing” is not always fact based and could lead to loss for premature actions. But let’s assume that it is a certainty and we know it is hitting the fan, then I’d try to get as much out and into my hands as either cash of PMs quickly as I could.
But I believe that stuff will be less valuable than ability because stuff of all kinds can be taken away from you by force, coercion, inflation, etc. While an ability to adapt and fend for oneself cannot.
That said, your question makes me want to research how folks did survive and even prosper during the Great Depression. Might be useful if we end up in a Greater Depression.
From Wikipedia:
http://en.wikipedia.org/wiki/The_Great_Depression#Literature
“Secretary of the Treasury Andrew Mellon advised President Hoover that shock treatment would be the best response: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate…. That will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.”[13] Hoover rejected this advice, not believing government should directly aid the people, but insisted instead on “voluntary cooperation” between business and government.”
Wow! Talk about parallels! Time to get the beans and rice in bulk.
useful WHEN we end up in a Greater Depression.
I knew that one was coming back at me, LOL.
Sorry if this is double post …
From Wikipedia …
http://tinyurl.com/ytz2n8
“Secretary of the Treasury Andrew Mellon advised President Hoover that shock treatment would be the best response: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate…. That will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.”[13] Hoover rejected this advice, not believing government should directly aid the people, but insisted instead on “voluntary cooperation” between business and government.”
How is that for a parallel? Time to get the bulk rice and beans.
“So, along those lines, I was wondering what some of the posters here would do if they knew for a fact that bank runs and/or depression was just around the corner.”
There has never been a better time (since 1929) to be the son of a Rich Dad.
I’m digging out my copy of Rule by Secrecy and popping some corn. What a nice long rainy weekend this will be.
1929 Redux: Heading for a Crash?
The following is Robert Kuttner’s testimony before the House Financial Services Committee on October 2.
http://tinyurl.com/ytgs7g
Widely-anticipated disasters seldom come to pass. But I guess all the “Goldilocks economy” propaganda would make a crash at this point seem like a lightning bolt out of the blue, similar to the sudden collective perception that the subprime crisis is shockingly large and persistent, as it was supposedly all contained earlier in 2007.
That is one big problem with econoganda — expectations shocks are a b!tch when mass consensus suddenly apprehends underlying fundamental reality.
the deepening chill of the winter of 1929-1930…..
That gentlmens testimony regarding the current bubble crisis is precisely why I am so uncomfortable at the present.
Here’s a nice cautionary tale, of an toddler stock market…
After it hit it’s first bump in the road, financially.
4 years later, 2 out of 3 wheels were still missing, on it’s tricycle.
“On October 19 Wall St markets began their dramatic plunge. The panic spread to New Zealand the following day - October 20, now dubbed Black Tuesday. Nowhere did the crash hit harder than New Zealand.”
“By late 1988 business commentators in Australia, the US and UK were describing the crash as a “correction” - their markets had recovered.”
“But in 1991 New Zealand’s bourse was worth just $14 billion, down from $45.5 billion before the crash.”
http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10469625
Then again, New Zealand had gone up very quickly and there were a LOT of corporate shenanigans in the runup. They had just gone from a hyper-regulated financial environment to complete open slather, and the corporate cowboys were in full cry while the easy money lasted.
In fact, some of the recent news on the hedgies’ ABS buyback provisions gives me a distinct sense of deja-vu. Private buyback contracts (for shares, immortalised by Trevor Sykes in the phrase “Land of the Long White Put-Option”) were a big, big factor in the NZ meltdown.
The idea that bankruptcy judges may be allowed to re-write mortgages (what they call cramming in the business) fascinates me. As I understand the BK laws, these judges can already do that with credit cards, but not with car loans. In other words, if the debt is unsecured, it can be re-written, but not if the debt is secured.
So, by allowing mortgages to be re-written (including the balance owed), BK law will be saying what we here have always known…which is that today’s mortgages (in many, if not most cases) are unsecured, speculative loans.
[also, it will be fun to see the expressions on the faces of some of those paper-holders]
I see this get batted around on the internet, but having taken some business law classes, I just can’t see how it is possible.
Right, you’d have to have the noteholder’s consent.
The sad thing is, in some cases it may be in their interest. But with a million noteholders each with 10 cents worth of an indivdual mortgage, there is no way to organize consent.
Imagine the servicer put a revision up to a vote of the noteholders, that the note can be written down to the current value of the home at current fixed interest rates under specified conditions. Would the vote have to be unanimous? And what about entities that hold notes on behalf of others — pension and bond mutual funds?
“having taken some business law classes, I just can’t see how it is possible.”
How it becomes possible is when the law in the US becomes arbitrary and not uniformly applied, and I say this without sarcasm. I’ve been following some of this phenomenon recently. The recent case being heard by the Supreme Court regarding the Mexican nationals Texas may seem disrelated to issues of housing and debt, but it is an interesting case to follow. Who will win? The administration, siding with the International Courts? Or Texas and the Supreme Court? The Supreme Court is very interested in this, after an attempt was made to shunt them to the side. In the absence of firm agreement on legal principles, business or otherwise, judges, politicians, corporations, etc. start arbitrarily deciding what is the law. This bust of this bubble will become a huge exercise in business case law, IMHO.
when law becomes arbitrary.. arbitrary.. rule of law.
That’s a foundation one can certainly build something on.
I agree Ben. Having a third party (judge) arbitrarily change the terms of what had been “secured loans” (if only in theory) into “credit card loans” would absolutely crash the housing market, as interest rates for new loans would now have to price-in this risk, and most likely the interest rates would virtually double overnight.
But it’s just fun watching these people (i.e., the lenders) squirm more and more after letting their greed take over common sense.
Can’t our Congress rewrite our laws to suit their political ends?
Google “cramdown” and see how it is used in Chapter 11 cases. That will help you understand the concepts. It was done in Chapter 13 (consumer) cases in the early 90s. I’ve been out of active work in that area since 1995 so things may have changed since then.
Thanks TX. Your post on Gardenweb yesterday was legendary.
For those who may have missed the discussion yesterday, here’s a teaser from the beginning (in reference to a proposed sellers’ boycott of the housing market):
“Your little rant is the equivalent of a baby holding its breath until it turns blue.”
http://ths.gardenweb.com/forums/load/realestate/msg1022510631214.html?16
(search for “txc”)
“Try kickboxing”.
That is funny as heck. The Chick was the first one on that board to shove it down those whiners’ throats. “We’re not going to give it away” was the message they were trying to send.
Do people think their houses are so special that we are all dying to move into them? Hold it forever. Good for you, you bunch of jerks. You don’t want to sell for less than you think it’s worth. We’ll check back on you in 2015.
classic
Its interesting to see all of the opinions outside this blog. Basically they are in the “hold em” phase and going to ride this down. I tell people imagine its a stock and the company has huge liabilities. Its heading for the bottom and may get de-listed. You are making the decision to ride it out.
Housing stock is pretty close to stocks.
Of course they will try to hold. They are being led to believe that this downturn will only last a short while. I tried to hold a property I bought in ‘89. I held and held till I finally had to dump it in ‘94. Doh! Just before the market turned up again! Damn! That hurt!
GotRocks,
Cramming down refers to secured debt. If you owe more on a car than the judge thinks it is worth, he reduces the debt to the present value. The bank eats the rest, treating it as unsecured debt. That’s cramming down.
Thanks for the definition. I have no background in this area, but the effects would be wild if done.
Absolutely. How could mortgage rates below drop below double digits if it became unsecured debt for all practical purposes? Good luck pushing on that string?
Interesting, when you consider that much is decided on the basis of legal precedent. Well, that could be one way the MBS/CDO instruments are made to be seen as investments that just are not practical or viable. The judge ends up “marking to market”, LOL!
Today’s mortgages are basically unsecured. House bought for $400k with mortgage for $425k, current market value $200k. About $225k is unsecured.
So when or if the property ever goes back up in value the lender regains the loan amount right? They should do this with stocks too… to protect the consumer if their investment ever looses money. Great Idea!
So when homes appreciate the lenders are allowed to do a “cramup” and raise the loan amount when they are the ones taking the risk if the property goes down in value right? just asking….
Why doesn’t the government just guarantee that homes will go up in value and if they don’t they will pay you the difference to be “fair” I’m sure Hillary is already thinking about adding that to the list of free things to give people as birthrights….lol
you know risk free investing is a great Presidential Campaign speach…..give me a break
We are one of those buyers sitting on the sidelines. We occassionally jump in with what we feel are more than fair offers. Most recent was a Wachovia short sale.
The guy has several mortgages from Wachovia. The 3800 sq foot house on not the best lot in Lakewood Ranch, started two years ago at $849k. Went down to $749k and sat there for a year. Six months ago, lowered to $700k. Sat there and two months ago lowered to $679k. Finally with foreclosure around the corner they lowered to $649k. Apparently, pay off is around $689k. They had two offers for the short sale. Ours was $625k don’t know the what the offer was. This was still more than a fair offer in this market! We were going into it knowing full well that it could be worth less for a very long time.
Wachovia has an appraisal done. This was a complete joke. Here in Lakewood Ranch(Bradenton, Florida), we’re averaging maybe one sale a month. There was some movement as the builders dumped houses a few months ago. Houses are either sitting, renting out or taken off the market. With the exception of great deals in the country club and smaller homes, nothing is selling.
The appraisal came in at $725k.Wachovia won’t budge! I’d love to know where this appraiser came from. The house hasn’t sold for over a year close to that price! What is going on! Isn’t Wachovia just as much to blame as the ignorant people that borrowed the money??? Shouldn’t they pay the price as well???
What angers me is that the house will now go into foreclosure and sit with nobody taking care of the house. The pool will be neglected, yard neglected and of course who knows what people that are angry over losing their home will do to the house once it’s in foreclosure! Rather than take a small loss and guaruntee the sale they’d rather sit on it and risk losing even more money in the long run. The banks can’t really believe the market here is going to rebound soon, can they????
What are they waiting for. This was the third short sale we’ve attempted. They all seem willing to sit it out. Wachovia seems to be the most unrealistic. My question is what is it they are waiting for? Taking a $65k loss now seems like better business than taking a $100k loss later? Is there some sort of bailout they are waiting for? Which it seems this is the case since they don’t seem concerned with what happens to the neighborhoods they over lended in.
I will never bank at Wachovia even if they are rated number one in customer satifaction! They could care less about ruining neighborhoods! They helped aid in this mess! Shouldn’t they help clean it up????
It’s simple.
They’ve got a gajillion houses, and selling one or 2 or 50 or 500 isn’t going to do anything but lower the beloved comps (gambling double-entendre alert) on the green felted casinos, they’ve sunk too much of their money into. Those homes you’ve been looking at.
They are doing you a huge favor, not accepting said offers from you~
Patience Rules
Thank your lucky stars, frustrated floridian. You’ll be able to get the house of your dreams in Lakewood Ranch for $300,000, and soon. I’m not kidding.
Yeah, I agree with Palmetto that in today’s market, even $600K is very high for a house that size, unless it is top-grade finish by a master custom builder and on a good, large lot. From your description, FF, it sounds like a corner lot or in a bottleneck area relative to school hours. A bad lot location will bite you big-time when you go to sell, IMO.
And watch out for “waterfront” property. Unless a “lake” has a name on a map, it isn’t a real lake and almost certainly is just the retention pond the developer was required to include. Finally, Lakewood Ranch has grown so much during the bubble that I think you’d want to hang around in the evening to see how many houses are sprouting additional occupants these days — how many junkers and pocket rockets are parking in front or on the grass. Even gated communities won’t be immune to that, IMO, unless they’re among the few that have 24/7 guards and correspondingly high HOA fees.
You miss the point. Wachovia can still keep the house at $725 on their books, even if the loan is non-performing. Once they sell to you, then it’s a $100k haircut which shows up in their stock price. This is at least partly why they won’t budge.
I believe that these lenders know they blew it with these loans, and I also believe that many are actually insolvent now, but can use accounting rules (such as above) to allow them to try to weather the storm (i.e., money shifting). While we all know that this storm will not blow over quickly (especially in places like Florida), they really have no choice…if they mark-to-market their outstanding loans, they’re done…so if that miracle happens (bailout, instant recovery, etc., it can only help them if they’re still around)
On the short sale the bank realizes, and recognizes a loss. Taking the property through foreclosure the bank won’t recognize a loss because of the property’s appraised value. The bankers will sit on this non-earning asset for a long time based on the idea that the small, continuing, cash loss from carrying the property is better, in the short term, than a large, non-cash loss from a proper loss reserve. Remember, Wachovia is publicly-held and the top executives make the real money on their stock options.
In effect, the people who run the bank have adopted a strategy which in the long term harms the bank, but in the short term props up the stock’s value. This is typical for a publicly-held corporation.
Agreed, this is also why the banks gave out loans in the first place, it looked good on paper, so their stock prices went up, and everyone got bonuses. On paper these loans looked great, lots of loans, lots of refinancing, lots of increase in property value, it was all good, even the long term of the Adjustable Rate looked good on paper since it meant profits would go up, that is until people could not pay for the loans.
There ia a repo I’ve been looking at in SFV in LA. Asking 509k. Owned by Countrywide. The realtor said that we are the only people even remotely interested in the property and pleeese make a low offer so he can convince Countrywide to lower the price. So far-they won’t budge. Very sticky prices– they are definately holding out….waiting for something.(probably a GF)
they r waiting for the fed funds rate to be 1% again.The fed is going to crap in its pants soon and drop the ffr back to 1%
Heads up! The dude that called the 1987 crash is calling for another one plus a depression. Its a twofer!
“Now, Mr. Prechter is suggesting that the country is facing not just a market crash, but also a depression. On every measure, he says, the market is more overvalued than it was in 1987 before the reversal. The price-to-book ratio of the S.&. P 500-stock index today is 4.04, compared with 1.73 in 1987. And measures of the bullishness of Wall Street traders confirm Mr. Prechter’s assessment of the overvaluation.
To be sure, the one feature of every long-running bull market is the small clutch of market pessimists whose clamor that the end is nigh seems to rise in pitch with each successive peak.
But Mr. Prechter’s gloominess may resonate, especially in light of Mr. Jones’s high regard for him. “Prechter is the best because he is the ultimate market opportunist,” Mr. Jones said in the book “Market Wizards,” a collection of interviews with successful traders compiled by Jack D. Schwager.”
NYT
http://tinyurl.com/24yhcd
Prechter!
stealin’ my thunder again, monkeyboy?
regards…
dr. emelio lizard
Paul Tudor Jones, LMAO! Seen his “mansion” in Greenwich, Ct? It’s the ultimate Mc$hitbox mansion, LOL! No wonder these guys have such a bug in their posteriors about money. If value were measured in taste, aesthetics and humanity, they’d be bankrupt.
One thing these chaps never seem to learn is the value of humility. They get their money and then seem to think they have to shove it up everyone’s arse. It never dawns on them that it isn’t so much that people resent them for their money, but what they do with their money and how they treat others.
If it’s October, it must be time to dust Prechter off
Usually, the market is tanking when they bring him out of the crypt though . . .
Is he known for routinely calling a crash?
The topic of a depression would, in normal times (whatever that is), be considered very tinfoil. But now it seems like a lot of us are very seriously considering it, we’re holding our breath and hanging onto forecasts from those few savants we respect (like Shiller) and actively considering what to do. That alone, from such an informed and intelligent bunch (Ben’s blog) should make one sit up and take note of how strong a possibility a depression is.
Yes! sir Prechter “called” the ‘87 meltdown. At the time, he also predicted a depression after the fall.
Ron Paul also called the 87 melt down in 1983 in a debat on gold back currency with some one from the Federal Reserve… I was shocked when I watched the old video and he said… “the coming down turn of 86 or 87″ 3-4 years before it happened.
Oct. 13 (Bloomberg) — Citigroup Inc. and JPMorgan Chase & Co. are leading a group of banks that are in talks with the U.S. Treasury about a plan to revive the asset-backed commercial paper market.
Discussions over the past two weeks addressed structured investment vehicles…. Under one plan being considered by the banks, lenders would establish a fund of as much as $100 billion to buy assets from the SIVs….
Policy makers are concerned that investors remain reluctant to acquire the paper even if the loans that back them are sound, said the official, who declined to be identified. Setting up a fund would allow SIVs, which own $320 billion of assets, to avoid having to sell their holdings at fire-sale prices and further roil the credit markets.
http://www.bloomberg.com/apps/news?pid=20601087&sid=al1pBplw2gaU&refer=home
And, from the WSJ article referenced above by joe:
The ultimate fear: If banks need to write down more assets or are forced to take assets onto their books, that could set off a broader credit crunch and hurt the economy. It could make it tough for homeowners and businesses to get loans. Efforts so far by central banks to alleviate the credit crunch that has been roiling markets since the summer haven’t fully calmed investors, leading to the extraordinary move to bring together the banks.
…
The new fund represents a way for Citigroup and other banks to “outlast the current market conditions that are so dry right now,” says Jaime Peters, an analyst at Morningstar Inc.
…
The Citigroup plan would create a “superconduit,” a fund backed by some of the world’s biggest banks that would issue short-term debt and serve as a buyer of assets currently held by SIVs affiliated with the participating banks.
Pushing this mess one step closer to the taxpayers seems like the objective of this Super Conduit.
When the SHTF the banks will all cry out that they proceeded with this structure as advised by the US Treasury so it’s now the Treasury’s responsibility to bail out this Monster.
What a scam.
If it’s ’super endorsed’ by a ’super guarantor’ like Treasury, it will be ’super terrific.’
“The Citigroup plan would create a “superconduit,” a fund backed by some of the world’s biggest banks that would issue short-term debt and serve as a buyer of assets currently held by SIVs affiliated with the participating banks.”
Yeah, right, what a load of sh_t. Basically the govt will create money out of thin air to pay the banks back, and the war on savers will continue. What’s another couple of hundred billion thrown onto the bonfire? It’s fascinating to watch the govt purposely drive the dollar to it’s intrinsic value, which is zero.
What I find as scary is the boyz @ the banks are coyly admitting there are HUGE problems remaining. They have not written off their losses and as the article points out they CAN’T! CITI is afu’d. Concerns are about pricing the JUNK. The tentative plan could be vaporized by the issues of how do you value a thinly traded CDO? I don’t wear a tin foil hat here, but the thought of DEPRESSION are stirring.
The new plan would be challenging to pull off. Bank-affiliated SIVs selling assets into the superconduit will have to agree on how to price those assets. Some SIVs may value the securities differently. There have been several meetings since the initial Sunday meeting, both at Treasury and in New York.”
Most foreign banks bought this debt. They are still paying. Why would they want to buy more? Especially now that the US dollar has accelerated in losing value?
The superconduit would include foreign paper. According to the Journal:
The Financial Services Authority, the United Kingdom’s markets regulator, has suggested that U.K. banks consider participating in the plan, a person familiar with the situation said. HSBC Holdings PLC, the largest U.K. bank, has an affiliate SIV called Cullinan Finance Ltd. with $35 billion in senior debt….
Global musical chairs. When the music stops, somebody’s gonna be short a chair. Cripes, even the Chinese print Yuan to buy USDs. They aren’t stupid.
This fiat money printing war is what I have called “beggar thy neighbor’s currency.”
a plan to revive the asset-backed commercial paper market.
I would think that as long as ANY notion of a bailout, revision of loan terms, foreclosure moratoriums is on being disussed/pushed that the credit markets will remain somewhat locked up. I can’t see investors rushing tp buy paper, as long as there is doubt about the contractual terms of the agreements.
Any thoughts on that?
According to the Journal:
Because the superconduit would be backed by the big banks themselves, it’s expected this would reassure investors and make them more willing to buy its short-term debt, or commercial paper.
How is this different from the present situation? Doesn’t each bank guarantee its conduit?
I suppose risk is spread further somewhat but at the end of the day the same banks are guaranteeing the same sh!t and nothing has changed. Seems like a re-branding scheme but surely the boyz in the debt market are smart enough not to fall for this unless a new guarantor is introduced i.e. The Treasury.
The Super Conduit looks like a new GSE since Plan A which was to roll the cr@p into Fannie and Freddie backfired.
Looks like Conduit Squared to me.
“…unless a new guarantor is introduced i.e. The Treasury.”
Your point gets to my question: How will the big Wall Street banks pass the liability for their mess on to Main Street?
“Looks like Conduit Squared to me.”
Was thinking the same thing.
According to the Journal Citigroup has 100 billion in SIVs. This downgrade to SELL might be unrelated but you never know.
NEW YORK, Oct 12 (Reuters) - Citigroup Inc … was downgraded on Friday to “sell” from “buy” by Deutsche Bank Securities Inc analyst Michael Mayo, who said the largest U.S. bank needs changes in its most senior management after performance fell repeatedly short of peers.
http://tinyurl.com/28dr3s
NEW YORK/WASHINGTON, Oct 13 (Reuters) - Major banks including Citigroup Inc are looking at setting up a roughly $80 billion fund to buy ailing mortgage securities and other assets, in a bid to prevent the credit crunch from further hurting the global economy, sources familiar with the matter said.
Help!..the value of my asset-backed commercial paper is leaking like a sieve…
The big question, IMO: How will the Wall Street banks pass the bill for the mess they created on to Main Street? My cursory reading of the details of this $100b pool plan has not uncovered the mechanism by which Main Street America gets to collectively pick up the tab for last year’s mammoth Wall Street bonuses.
Sorry I have not been around much lately. Did I miss anything good?
nah, everything’s contained…
Gary Watts is at it again. In today’s OC Register the Meister of myth says, “The numbers for September and October may be our darkest hour, and then things are going to improve.” I’ve been looking for the online article to link to for too long - man the Register is tanking featurewise - but I am looking at the printed words on my desk as I type.
That was one of the “eerie parallels” brought up by the two guests on Moyers last night, the cheerleading that preceded the 29 crash and the cheerleading happening now.
Are the cheerleaders simply blind or are they intentionally deceiving others so that they can exit the game? I have a sense that it is a combination of the two. Shills like Watts, who are higher in the REIC hierarchy, stand to profit in at least two ways. They can unload what they have to the GFs they continue to deceive into buying and they can continue to collect fees as long as the music keep playing. Those lower on the totem pole look to those above for any hope that this is temporary and if they can hold on just a wee bit longer they will make it out of the forest and the sun will shine on them again.
But this week we saw that even the associations admit that this is not a temporary thing and this makes Watts’ position more suspect.
I think it is an emotional thing. Those who are owners or rely on higher prices for their income are emotionally attached to prices being high. Those who either see the charade for what it is or simply want prices to be lower are also emotionally attached to downward movement. Although, IMHO, the latter group’s emotions are more closely coupled to the numbers at this point.
I think I have read hear that in manias such as this that such pre-crash cheerleading is part of the madness. The cheerleaders cannot perceive the reality before them. So, as a parallel it bolsters the bearish position.
Ever since “entertainment tonight” hit the airwaves in 1981, the adoration of people not worth idolizing, has been perfected.
The parallel is bogus, unless cheerleading is some how an unusual feature of the markets now (and was also so in 1929). So long as I have been old enough to pay attention, Wall Street’s cheerleaders have been urging me to buy stock (remember the old “Merle is bubblish on America” ads?).
By contrast, ubiquitous billboards advertising homebuilder and mortgage lending companies were an anomaly of the early 2000s. The first time I attended a home SD Padre’s game (SU 2005), homebuilder bill boards lined the walls of PetCo park. This season, they were all gone from view, along with myriad home lender billboards (New Century, Accredited Home Lenders, etc etc etc).
watts is our hero- hope the interview included” his in the bag for 06 !!!!!
Not a word about it. But he did acknowledge that his 2007 outlook was too optimistic.
“The numbers for September and October may be our darkest hour,…”
Gag me with a spoon. So far as I know, OC (median) prices just started registering declines this month, while other areas (San Diego) have registered them for months on end now. What imaginative reasoning does Watts use to (implicitly) call a bottom for OC at this very moment?
This guy is going to keep on making predictions, and when one of them eventually turns out to be correct, that is the only one he will ever mention again going forward.
“The numbers for September and October may be our darkest hour, and then things are going to improve.”
If we take this comment quite literally, Gary ‘In the Bag’ Watts is predicting an increase in sales and/or prices in The OC for the ice cold holiday season sales season?
CLICK!
http://www.pbs.org/moyers/journal/10122007/watch.html
1929 and now - sec ex-ceo one of the two guests thanks palmetto
Despite record highs on Wall Street this week, investors and economists are not worry free. Many point to similarities between today’s market and the conditions preceding the Stock Market crash of ‘29.
In testimony before the House Committee on Financial Services last week, veteran economic journalist Robert Kuttner talked about these parallels:
“Your predecessors, over at the Senate Banking Committee, in the celebrated Pecora Hearings of 1933 and 1934, laid the groundwork for the modern edifice of financial regulation. I suspect that they would be appalled at the parallels between the systemic risks of the 1920s and many of the modern practices that have been permitted to seep back in to our financial markets.”
And former SEC Chairman, William H. Donaldson has too drawn this connection, worried about the recent trend away from market regulation, which he explains to Bill Moyers just leads to further corruption:
“Markets don’t regulate themselves, cleary, anymore than you can have an intersection and no stop signs and red light.”
(the above is a quote from awaiting wipeout’s link)
“Despite record highs on Wall Street this week, investors and economists are not worry free. Many point to similarities between today’s market and the conditions preceding the Stock Market crash of ‘29.”
The average stock price trend inflation rate appears to have reached a permanently high plateau.
http://tinyurl.com/2ug88h
Washington Post
The O.C. Mortgage Bust
IRVINE, Calif. — After more than two decades in the mortgage business, Tony Ventimiglio got his big break in 2001 when he accepted a managerial job with a lender here in the heart of Orange County for $225,000 a year — more than double what he had made in each of the previous four years.
Ventimiglio nearly doubled his salary again two years later, this time at the now-defunct Homefield Financial, where he supervised 100 workers, including salespeople who routinely made $25,000 a month in commission.
Workers leave bankrupt American Home Mortgage Investment in New York, which, like other lenders, was hit when the housing market soured.
Workers leave bankrupt American Home Mortgage Investment in New York, which, like other lenders, was hit when the housing market soured.
“When I started working there in 2003, I was embarrassed because I was driving a Cadillac and the young office clerks were all driving Mercedes and BMWs,” said Ventimiglio, 49. “There were a lot of people who knew nothing about mortgages. They were simply in the right place at the right time.”
“Many people who took these jobs already had more than one career and exhibited an ability to be flexible,” said Diane Swonk, chief economist at the financial services firm Mesirow Financial. “They changed professions to cash in on the housing boom, and they will change professions again because of the housing bust.”
________________________________________________
Thanks for the article.
Swonk - what a total joke! She has been wrong so many times. Why the hell does she get interviewed?
She is interviewed because she has an official sounding title and so the reporter can claim that he/she is using “legitimate sources” in case anyone complains about the story.
If you look, most “news stories” are nothing but press releases from various institutions, most are put together from various institutions, some are direct copying of just one press release.
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Didn’t she write a book by title an economist with a heart or something to that effect? A pretty “I care” face to entice certain segment of viewers on the financial TV? Whatever it takes for propaganda to succeed.
Jas
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“If the industry’s numbers fall back to 2002 levels, when home sales were similar to what they are today, 137,000 jobs would vanish, rivaling the 146,000 jobs lost in the airline industry in the four years following the Sept. 11, 2001, terrorist attacks, said Mark Zandi, chief economist at Moody’s Economy.com.”
God forbid we go back to 1991 levels and less than 100,000 jobs would be left (80%+ decline).
The total housing related jobs will decline by 8M+! before any kind of bottom is reached. No depression?
Jas
Couple of interesting items from today’s Washington Post — Orange County mortgage companies going under (nothing new to most folks here) and a Reston, Va. builder has 78 of 81 sales cancelled (now THAT seems pretty amazing)
The good times are over for the get-rich-quick industry that grew up in Orange County and thrived in the first half of the decade, when interest rates hit record lows and home prices surged. Four of the six largest and boldest lenders of risky mortgages were based in this Southern California county back then, and all cashed in on what seemed an insatiable appetite for home loans.
When the housing market soured, those lenders and dozens of others nationwide shut down or scaled back, leaving workers like Ventimiglio in the lurch and contributing to an abrupt drop in mortgage-related jobs. The sector has lost at least 76,000 jobs nationwide since peaking at 500,000 a year ago, according to federal data released this month. And more cuts have been announced.
http://www.washingtonpost.com/wp-dyn/content/article/2007/10/12/AR2007101202261.html
Comstock Homebuilding Cos. of Reston yesterday reported that even though it sold 81 houses in the third quarter, 78 sales were canceled, a net of just three sales in three months and a striking reminder of the building industry’s deepening troubles.
http://www.washingtonpost.com/wp-dyn/content/article/2007/10/12/AR2007101202273.html
Wow! Cancellation rate of 96%
And I guess the DOC booked all of them as new home sales?
Double-wow!
“The most dramatic rise was among condominiums, where the cancellation rate jumped to nearly 124 percent from 13.5 percent a year earlier, which means there were more cancellations of previous sales than there were new sales.”
We might see a resurrection of people walking the streets with sandwich boards, selling condos.
Or to put it another way — on average, every condo contract is cancelled at least once.
Let’s get this straight: The lending industry did create products for Latino buyers (specifically low doc, no doc, etc), and the state of California is suffering the consequences.
Mortgage crisis has hit Latinos especially hard
By Lori Weisberg
STAFF WRITER
October 13, 2007
California’s growing Latino population has been hit especially hard by the meltdown in the real estate market and many now are paying the price for purchasing homes with subprime mortgages that should never have been approved.
That was the conclusion reached yesterday by financing experts who addressed a homeownership conference held in Coronado that was sponsored by California’s Latino legislators.
Hispanic borrowers were especially vulnerable to unscrupulous mortgage brokers who in many cases did not verify applicants’ incomes. They had little knowledge of the home-buying process, and many were Spanish speakers unable to decipher documents that are unintelligible to people proficient in English, panelists said.
“Subprime lenders are absolutely irresponsible in the way they lent money to prospective home buyers, but there are a lot of good folks who are capable of being good homeowners and are not being served by the finance industry,” said Gary Acosta, co-founder of the National Association of Hispanic Real Estate Professionals, an organization founded in San Diego.
“We are not consumers of credit, we do earn income in a nontraditional fashion, and yes, we’re willing to do just about anything to achieve homeownership and sometimes that means taking a loan that isn’t the best choice,” Acosta said. “But if we don’t create products for Latino buyers, the state will suffer the consequences.”
http://www.signonsandiego.com/uniontrib/20071013/news_1b13latino.html
“we do earn income in a nontraditional fashion”
Really? You mean entering the country illegally, working jobs using forged docs and then evading taxes by taking cash under the table.
Then obtaining mortgages by lying about the amount of untaxed income you receive?
Is that what you mean to say? Let me help you explain yourself, since English is not your first language.
I guess they can also walk away from their mortgage obligations in a nontraditional fashion, by returning to their home country once it becomes apparent there is no way to keep making crushing monthly payments after a reset.
Buttonwood
It’s a Wonderful Mess
Oct 11th 2007
From The Economist print edition
The costs of clearing up the subprime crisis
IN THE old days, when a borrower had problems making the payments on a loan, he would seek the advice of his neighbourhood bank. If the manager was a kindly soul (think of James Stewart in the film “It’s a Wonderful Life”) and the borrower had a plausible story to tell, the terms could probably be rearranged.
But that was before loans were repackaged, securitised and placed in the portfolios of investors everywhere from Atlanta to Zurich. As a result, clearing up the subprime mortgage crisis could be even messier than many people expect.
Inevitably, many lenders will foreclose on the homeowner. According to a website called http://www.foreclosures.com, that happened to 731,000 Americans between January and September. But foreclosure is time-consuming and expensive, taking 18 months on average and costing an estimated 20-25% of the loan balance. The departing householder might also trash the property.
So it might make sense to modify the terms of the loan; better that the homeowner makes some payment and keeps his home. Even this strategy, however, has its pitfalls.
http://economist.com/finance/displaystory.cfm?story_id=9957947
This year’s crisis: Subprime…
Next year’s crisis: Syndicated covenant-lite loans…
Debt
Switching off the lites
Oct 11th 2007
From The Economist print edition
The balance of power in credit markets is finally shifting
WHEN a handful of big Wall Street banks reluctantly funded part of a $26 billion takeover of First Data, a transaction-processing firm, in early autumn, there was jubilation among those eager for any sign that the chaos in financial markets was abating. It did not mean debt would flow freely again, though. Indeed, it marked the first, feeble sign that creditors were regaining the upper hand after years of bowing and scraping to borrowers.
At the end of weeks of wrangling over the terms of the loan, the banks finally managed to squeeze from Kohlberg Kravis Roberts (KKR), a private-equity group buying First Data, a concession helping them make sure that the debt would be repaid.
http://economist.com/finance/displaystory.cfm?story_id=9953358
Next year’s crisis: Syndicated covenant-lite loans…
The wise guys got a little syndicated loan thing going, threw in a vaguely religious word and a vaguely diet word, to throw the dogs off their tracks, next year.
Restrictive covenants should go hand in hand with a transaction structured with the proper amount of leverage. But, if there is too much leverage to begin with the covenants are just putting lipstick on a pig.
Here’s one thing I haven’t heard being discussed much online. What about the USA’s net worth? This is affected by RE, believe it or not. Currently our national assets are worth maybe around $44 - 45 trillion. Our total national debt is maybe $46 trillion as of now. I found out that we went “upside down” back in November of last year. Isn’t it a matter of time before this could be an even bigger problem than the housing bubble? Why doesn’t anyone discuss this???
“Why doesn’t anyone discuss this???”
I believe it’s because it would be subject to more opinions than can be processed in a way that could result in anything close to a useful conclusion. Start, for example, by trying to value all the real estate that is taxpayer-owned (if not always accessible to them). Then think about the minerals and hydrocarbons underneath. An acre is worth $x only when you aren’t trying to sell every single acre. The latter will not happen, of course, but it gives you an idea of the scale of thinking that would be required, ultimately no avail. Even Argentina didn’t liquidate the nation when its currency became worthless.
define “national debt”.
I saw Watts speak yesterday. It was laughable. One bottom line comment…”We are in the 25th month of the average 27 month downturn”. He expects us to be at the bottom in the next few months and we will look back at fall 2007 as the time that we should have bought.
So even by his convoluted logic there is a chance that the actual length of this downturn could be 54 months.
There are several egregious logical fallacies in Mr. Watts’ thinking:
1) Assuming that all downturns follow the average duration.
2) Assuming the current downturns (which by all indications is the worst in history) is average.
3) Assuming the expected remaining duration can be obtained by subtracting the duration to date from the (unconditional) average duration of a downturn.
I suppose since my dad has outlived the average U.S. male life expectancy, Gary Watts would predict him to be dead by tomorrow?
One more thing: The average real estate bust lasts 4 years or so (that would be 48 months, not 27 months)…
See pp. 65-66 of this report for the evidence.
http://www.imf.org/external/pubs/ft/weo/2003/01/pdf/chapter2.pdf
Watts is a salesman. He is an incredible cheerleader. He can put a twist on any statistic to skew the information towards his bias. I found so many half truths in his speech. In addition, whenever he needed positive percentages, he’d use a nation stat rather than a CA stat. An example of how he misinforms is his Apple story. He claimed that we need to look for electronic sales as our leading indicator of where our economy is headed. He said when the flat panel TVs aren’t selling and the cell phones are doing poorly, we need to be cautious. Then he spoke of Apple’s Iphone success when they were released this past summer. He said people continue spending. While people did line up to buy the Iphone, he failed to tell the group that a few months later Apple had to drop the price and refund and rebate many on prior purchases. He was so cavalier when answering pointed questions. Several times, he’d read a question from the group from a piece of paper and wad it up, throw it on the ground and dismiss the question as if he already addressed it. He allowed very little time for questions. It’s amazing how the sheeple in the room widely accept his egotistical attitude. Well…enough of my opinion. Here’s the meat of his presentation:
*Watt’s claims we are in the 25th month of the current housing downturn and historical downturns average 27 months, so we may be near the end.
*Financial crisis last 6 months, so the credit crunch will be over soon.
*Government won’t allow housing fall, so they will continue with subsidies.
*On 11/17, the FHA limits will be increased to 650K. (This comment was made with his flippant wadding up of questions, so I am not sure how accurate this prediction is.)
*He continually speaks of the wealth in OC and how foreigners continue to flock here throwing their wealth around with no regard to housing prices. “They don’t care about cycles.”
*He blames the media for buyers sitting on the sidelines. He encouraged the agents in the room to properly inform their buyers of the healthy economy. He said if their seller doesn’t have to sell, they should take their home off the market. If their buyers are on the fence, sell them. They are no longer taking orders and have to be salespeople again.
While I didn’t agree with a lot of what he said and his tactics to convey information, I do agree with government intervention we will get some relief. Raising the FHA limit to 650K is a huge jump. Will that happen in November like he stated? Time will tell.
Hilarious..
“Sellers - Keep Your Power & $, Refuse to Sell for Lower Price !
I am sure this will bring on quite a few comments. But I feel the same about the fuel prices. If I could afford not to drive I wouldn’t do it.
I have a novel idea. What if everyone who has their house on the market who doesn’t actually need to sell right now, refuses to sell it for a lower price. Either the buyers take it at their price or leave it. Let the buyers buy all the excess spec homes, foreclosures, or the fixer uppers for lower prices. So what if those houses aren’t quite as appealing as the ones where the sellers won’t sell for less, let the real estate agents market those homes. Let the buyers buy the houses that are available for less even if they are less desireable.
Then when all those lower priced houses are sold or there is so little inventory of houses, the sellers who can wait it out, can then put their houses on the market for what they feel their house should sell for according to what the market should bring compared to all the sales that have gone before; not what the market had declined to, or what people are saying the market is going to decline to in the future.
Some people’s houses have appreciated in value because the market has gone up and others have appreciated in value because they have done inmprovements to them. We are one of the latter. We didn’t just buy a house and wait for it to appreciate and are then trying to sell it. We have worked on it for three years making many improvements and updates with the sweat of our brow. We don’t feel we should have to lower our price to below what we have put into our house and don’t feel anyone else should either. We also don’t feel we should have to pay for anyone else’s closing costs; no one has ever paid for our closing costs. Now if I could afford to, I would be glad to pay for someone else’s closing costs just to be altruistic, but I am not in that position.
After reading many of the post here about sellers being advised to be ready to pay for the buyers closing costs and any repairs and lower their prices even more - that isn’t right in my book. We have never bought a house where we were given these concessions and frankly I think that is absurd. I really feel bad for those who must sell because they have been transferred or who have circumstances in their life where they need to sell and are forced to “eat crow” while doing it.
I know some will say I am going through the anger stage and anger is correct. Much of the hoopla about all these price reductions that are needed is perpetuated by the media, bankers, real estate agents, and all the hype about how the “market” is going down and you better sell now for whatever you can get or be prepared to just sit on it for years or really loose your “…”.
No wonder buyers are hestitant to buy houses or are backing out of sales. Can you blame them - they are waiting for a $5 hamburger to go for 50 cents and who can blame them. As most home buyers, they work hard for their money and are just hoping for a once-in-a-lifetime deal for their family. But I also bet some of those buyers are buying houses strictly on price and later on down the road they are going to wish they had bought one of the houses that might have been priced a little higher but had more ammenities, more square footage, more land, better roof, paint, etc. It will cost them in the long run, they just don’t know it now.
Sellers take back your power and hold your ground!
http://ths.gardenweb.com/forums/load/realestate/msg1022510631214.html?34
Avenge me House, Avenge Me!
I think there will be a time when the group-think will be that houses are only just a hedge against “throwing away money” in rent. The money you recoup when you sell the house may or may not be adjusted for inflation’s toll. In other words, like cars or any other commodity, you will feel you got use out of the item for sale and the market will dictate the going rate for the item (house). The days of everybody making windfall money on the sale of a house are blasted out of the water until further notice.
I think hyperinflation is the next scenario followed by a deep recession/depression. As Jim Rogers called him, “the fool” is going to lower rates again later this month if there is another credit crisis once October foreclosures set in.
getcha popcorn ready..
What if the “fool” only adjusts the Fed rate to what the free market 10 year Tbill is selling for. What would your prediction be then?
Saw a T-shirt today that made me laugh:
“January 20 2009: The End of an Error”
Since we’ve been talking about crazy house prices in the Chicago area, I thought you’d like to see this flip in my town. They were actually trying to get $685,000 for this a couple of months ago. It is also on a busy 4 lane street.
http://tinyurl.com/2chpwp