Bits Bucket And Craigslist Finds For October 15, 2007
Please post off-topic ideas, links and Craigslist finds here.
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interesting tactic..
“$350370 Interested Buyer, 2 Story, 4BR-2BTH, Basement Home
I’m looking to purchase a two story, 4BR, 2BTH, Basement, two car garage, and decent backyard home in Arlington Heights or Mount Prospect (350k-375k). If you have something worth my while please send me some pictures or details via email, I can close in 30 days and very interested in purchasing before the end of the year.
FYI pool would close the deal,
send details and pictures via email, thanks.
http://chicago.craigslist.org/nwc/rfs/449142117.html
The reverse auctions begin.
Fire purchase auctions
I’m thinking of doing the same thing when I try to buy my little farmette in DeLand, though I was just thinking I’d e-mail a bunch of realtors. Right now suitable land is priced as though they’re still expecting speculation. I’ll probably have to wait four or five years to do this.
I think putting out some promotion for whatever it is you are looking for is a great idea. Emailing realtors is fine, but ads on Craigslist and other sites helps a lot. Plus getting the word out with the local folks. You won’t have to wait four or five years, Kay. I haven’t been following land in DeLand, but I’ve seen housing prices dropping there. I remember talking to a realtor about property in that area, just past the peak of the boom. When I told her my pricing parameters, she snorted at me and said “You’ll never find anything in DeLand at that price.” Wish I could remember her name and contact information, because I’d send her three recent listings.
That just shows how stoopid they are. They should want prices to come down so they can start selling some houses.
I’ve thought about placing a similar CL ad. It might not be that useful to write to realtors since they will not present it to their sellers if they don’t like it.
If some good comes from this bubble it will be increasing awareness of the uselessness of realtors.
catherine, you are right. That’s why they call these things manias, people truly do go mad, at least on the subject of the mania.
we could start calling realtors maniacs…
“I think putting out some promotion for whatever it is you are looking for is a great idea.”
Someone could score big time by creating a web site to aggregate this kind of bid (I suggest housebid.com as a domain name, if it is not yet claimed).
BRILLIANT!!!
I think just about anybody on this site that’s considering a house purchase would want to frame out what is sane to them (ie, 2.5x income, appreciation with inflation)
Though it might not take off in all areas of the country right away, it will eventually. At some point the sellers need to find those buyers……
not sure if the info would be useful if the bids/asks weren’t binding in any way.
“…not sure if the info would be useful if the bids/asks weren’t binding in any way.”
Not necessary. The idea is to offer sellers with homes they would really like to unload but which they are afraid to put on the MLS (like banks and lenders sitting on piles of REO) a less obtrusive way to discover and contact potential buyers, and to conversely let buyers advertise what kind of home they are looking to buy at what price without having to do lots of leg work. In other words, this is another way to use the internet to cut Realtwhores out of the deal. I hope someone creates such a site within the next month.
PB,
I hope you do it!
After all the time you’ve spent here, it would be great to see you profit in some way (though I’m sure you’ve already done well with trades).
If you need any help, let me know. We’re also in NCSD.
Wow! Thanks, Palmetto. I needed a little encouragement. What I want is so simple. Just a few acres with a teeny little house on enough land for a big garden, a few fruit trees and some chickens. Most ads I’ve seen boast “close to upscale housing” and want a million dollars. Right!
Kay, I don’t know if you’re tied to DeLand, but right now, you probably could see some properties like that up in Ocala, Brooksville area and even East Pasco.
Oh, forgot, try Palatka area. You can get what you want there right now, I’m serious. Plus, the insurance there is not like the rest of Florida, it is pretty cheap.
“What I want is so simple. Just a few acres with a teeny little house on enough land for a big garden, a few fruit trees and some chickens.” KayLaw, yours is an honorable and ancient desire.
“This used to be among my prayers — a piece of land not so very large, which would contain a garden, and near the house a spring of ever-flowing water, and beyond these a bit of wood.”
– Horace (65-8BC) –
Kay and others looking for a place with some land. Before you buy GET TO KNOW THE FOLKS NEXT TO YOUR LAND!!! I mean Really find out as much as you can. After buying my little place then the country it has turen out to be the WORST MISTAKE EVER!! Not because of the price (it will be paid off in 2012 bought in 2000) or location but the folks next to me. They have really made it hard to enjoy living here. This bubble has me locked in for now. I do know I will be able to rent this place out or sell and move after 2012 but more likley later. Just letting others know “a littel place in the sticks” can have some major problems that have nothing to to with RE.
fly to pa, why don’t you tell us the story behind your warning? sounds interesting!
Rednecks, whitetrash, korrupt kounty kode kompliance, barking dog collections, dead car collections, generators, go-kart tracks, unauthorized building, dumping, hunting, drug manufacture…all this and I’m on 70 acres backing a national forest! Be sure to buy up ALL the land around you…at least a section. (640 acres.) And even THAT will be impacted by the acoustics. This is one case in which a home owner’s association might actually be a good thing.
Everything ahansen said!!! Plus No respect for proprety lines and burning the household trash (all of it). The need to YELL, SCREAM as much and loud as a person can at eveything no matter what day or time it is. You cant leave anything out or unlocked it will be gone. A township that dosen’t give a hoot so long as you pay the taxes and you don’t complain to much. Yes a owner’s association might be OK if you could find enough like minded people to run it. Oh wait that would be the same people that run the township forgetaboutit! they already showed me how they think. Remeber YOU will be the outsider in the country even of you have lived in the country you whole life you did’nt live in this counrty so your wrong no matter what.
ahansen I think we have Clones living next to us. Same problems differnt places same people.
I am not saying you will always have these problems in every place but they are more common than anyone would think. Before you plunk down the cash see if you can rent it for 2 months even staying in an RV for a week would give you a better idea of what you might be facing if you buy.
Damn straight, flatopa. Don’t you at least feel a little bit better knowing there’s someone out there who knows what you’re dealing with?
Now I do. THANKS!!!
PS. Hang in there. Mother Nature will get them in the end…literally as well as figuratively.
ahansen I find it shocking that we do not know each other but have come across the same troubles. You are right I don’t feel so alone after reading your post. I do feel the ones causing the problems will get whats coming to them, just hope I can see it.
As of this year I have spent over $2000 just trying to get a property line and ownership of whats on or near the line figured out. The lawyer burned though that cash in less that 2 weeks and wants 3500 more to continue. I have been acused of stalking (like to see them prove that one!) tampering or destorying a fence (guy wont acknowlage I had a survey done and WILL NOT put the fence on his land stakes are gone law says I have to PROVE butt boy removed them before they can do anything) Will cost me another 1500 to get that same line redone thats on top of the 2000 plus the 1500 I orginaly spent the first time. Then the law / townships says I can not interfre with butt boys fenc construction even IF he has know Idea who’s land its on!
Sorry I am not made of money so I am throwing in the towel on this place. All I have to show for this is depression and a big bill. My heath and mind is not worth it even though I will never be the same as before.
My one hope is all the butt boys HELOC themselves out of there land, sure have seen a lot of new tucks and toys the past few years and none of them work a 8 hour a day job. Maybe this bubble is good for something after all.
Har, har. They built a lot of dull, oversized spec houses on ugly property in Deland. I have a friend who bought from a flopped flipper. She overpaid too, but there was no telling her that.
(She’s an engineer, and that pretty much explains it.)
..
You won’t have to wait very long for land prices, especially in DeLand, to go lower.
Many of the developers have already walked away from options on land here in FL and are actively seeking to unload all their positions in this mess.
If I were to want a home here in FL in the next 2-3 years, and HAD to have it, I would:
1) Buy the appropriately zoned and priced parcel. Remember, that for a farmette you want to live “out in the county” and away from cookie-cutter developments anyway. There is still alot of this type of property available here….prices will moderate on these types of property first.
2) Build to suit on your property. Material prices have come way down and the contractors are hungry for work.
In this market you could probably build a beautiful “farmette” type of property underneath all the “fluff, puffery and speculation” for a reasonable price. You could probably get decent quality construction as well, since the “rush to build” is dead and over….There are a lot of good contractors down here that still have to eat and pay bills….In the end it would really depend on the price you pay for the homesite; and property prices will be the first to fall. Labor and materials are already available for a much lower price than in 2003-2006.
Thanks, everyone. I am tied to DeLand because we want to retire near family. I’m not in a rush but have been reading Financial Armageddon and considering what I would do with my saved money should we experience severe inflation. I would happily pay for properly-zoned land then build later - if the price was right.
So your saying prices of land in DeLand won’t fall because its different there. Got it.
why pay an extra 6% ? craigslist and other mediums should do it
Schooks, That’s exactly the area I’m looking at. Anything under $350 is pretty much a teardown. Good luck in your search. I’d love to see you get a taker on that offer… bring down those comps!
Hey Kim.. that actually wasn’t my ad.. saw it on craigslist. We’re considering lowballing a house in Palatine next month.. will see. We’re renting in Arl. Hts right now.
hopefully your efforts will not go in vain and you will soon find your dream house and help bring down the comps in NW subs
Or you could put fliers under the doors. Thats what my next-door neighbors on Long Island did in the mid 90’s, when they set their hearts on our neighborhood and didn’t want to go through a real estate agent. As a result they got the house next door for “a song” (as my mother put it) directly from the elderly couple who had been living there for decades. Even though this was before the days of Craigslist, perhaps the people from whom you can still get a deal are those who don’t use the Internet.
Good luck with that. Arl. Hts. is very expensive. Prices haven’t dropped that much. My law firm is based in Arl. Hts. and some lawyers in my firm can’t even afford to live there.
what area do you practice in?
The firm is general practice but it casts a very wide net. We do foreclosures, personal injury, criminal, lots of real estate, general litigation, some corporate and we even have a 1st amendment rights department… In my time here we’ve probably handled every type of case under the sun except some of the very specialized biglaw stuff like M&A, structured finance and securitization, etc. As a smaller firm we generallly have smaller clients but business is good this year.
Yeah, haven’t dropped much.. but .. haven’t sold much either. A lot of houses just sitting.. waiting for that fantasy buyer they always dreamed uhh, deserved, uhh..
I’m hearing lots of homebuilder ads on the radio now. The ads are full of cliche’s — now’s a great time to buy, lots of choice, extolling how “condos are right for everyone” etc. One HB offers a 4.5%(?) 30-year fixed, IF you have 5% down and IF you use their financing company and IF IF you close during a one-week window.
Actually 4.5% or so sounds like a good interest rate, so I guess it just proves how few people have 5% to put down, and how desperately the HB’s need cash. But I don’t like that time pressure. Close in a week? That’s not even time for an inspection. And I wouldn’t buy that slap up graph paper stuff anyway.
Plus I wouldn’t use a homebuilders financer for anything.
Can you tell me why not? I’m not being sarcastic; I just want to know. I grew up thinking you went to a bank for a mortgage, not to some middleman entity, so I know to be suspicious. What tricks to HB’s pull?
The interest rate differential between the HB’s below market rate and the real market rate should/will be capitalized into the purchase price.
A buyer should run a comparison of the overall cost between purchasing and financing with the builder against purchasing and financing with third party financing. Theoretically the builder should give the buyer using third party financing a lower sales price.
In theory you are correct. However, in practice, that is probably not the case.
Think about a car sales, where there are often below market interest rates. Think about how you should negotiate a deal. My father always told me, negotiate the deal on the car (or house) first, then talk about financing. Anyone who did otherwise in either transaction is likely going to be taken for a ride.
So, negotiate the home price as a cash buyer. Then tell them you would like to apply for their financing. NEVER apply first; you put yourself in a weak situation from the start…
So, yes, I agree, the price should be lower for outside financing. But, in practice, I doubt it is (at least for a savvy buyer).
The interesting thing is… What are they doing with those loans? They certainly cannot sell them on the MBS market (even with interest rates very low, they have a terrible rate of return with a 4% interest rate); and probably cannot afford to hold them all either (for the same reason).
What happens to these below market loans (0% car loans, 4% home loans and their ilk)?
“What happens to these below market loans (0% car loans, 4% home loans and their ilk)?”
They are probably sold off at a heavy discount. Most anything can be sold if it is priced right.
I wouldn’t take any of their offers such as 6 months HOA fees or 6 months taxes. Once you settle on the house they will welch on these offers. Or so I have heard from a few different people.
Not if it’s in the contract they won’t. Never beleive anything ANYONE says in a business trasaction. But, with a well written contract, you can take concessions like this; just make sure that the penelty for renigging on the kickback is MORE painful then paying it out. For example, they get the house back if they don’t pay your HOA, and owe you the full amount of the purchase price back; plus interest, plus moving expenses.
That said, anyone taking ANY concession in FL is crazy… Crazy like a fox… In FL, taxes are based on the SALE price of the home (at least for residents they are).. Do you want to pay RE tax on your 6 month HOA? I sure as he** don’t! In FL, the ONLY driver for anyone should be to get a lower price recorded with the clerk. The concessions should run in the other direction; briefcases of cash should be brought to close to have the seller lower the price… Again, ANYTHING to get that sale price lower!
And yet, people were taking Hummers as concessions left and right.. The stupidity is without bounds.
Since there was an article yesterday about the Orlando area and how they’re hurting across all different economic areas and Celebration was mentioned. I thought I would show you a condo that was listed on zip realty and why stupid people can’t sell. Anyway it’s now a short sale, but don’t you just love the price increase in July. Hey, if you can’t sell reducing it, raise it.
Price Reduced: 06/13/07 — $259,000 to $239,000
Price Reduced: 06/27/07 — $239,000 to $229,000
Price Reduced: 07/14/07 — $229,000 to $199,000
Price Increased: 07/30/07 — $199,000 to $249,000
Price Reduced: 09/27/07 — $249,000 to $199,000
Good one, Ghostwriter. Looks to me as if they discovered the incremental decreases were not a good gambit, so they’re going for the big cut to make it look better.
As a complete side note - Michael I don’t think you’re using the term “crazy like a fox” right.
When the builder I’m with right now began advertising on radio and TV I knew they were much worse off than they were admitting, with no clue as to how to right the ship. Trying to push $400k product the same way car salesmen push $10k vehicles isn’t a winning strategy….
I’ll bet it’s a 30 year fixed mortgage at something like 6.5% or thereabouts, with an into rate of 4.5% for two or three years. Seems more responsible than an ARM, at least - but dig into the details. The 5% you put down is used by the builder to fund that 2-3 year “buy down” — so, this ends up being pretty just like 100% financing, except that the buyer actually pre-pays interest.
Listen for the name of development/developer next time, and let some of the detectives here dig into it.
Banks plan credit-market ’superfund’
WASHINGTON (MarketWatch) — Major banks, including Citigroup Inc., J.P. Morgan Chase & Co. and Bank of America Corp., have reportedly agreed to create a “superfund” of up to $100 billion to clean up the credit markets.
An announcement could come as early as Monday morning, The Wall Street Journal reported in its online edition.
The talks between the banks were initiated by the Treasury Department, which is playing a key advisory role.
The aim of creating such a fund reportedly would be to avert a massive sale of assets held by so-called structured investment vehicles, or SIVs.
Policymakers and others fear a fire sale of such illiquid assets could spark a broader credit crunch that would dent the economy.
Let’s fog a mirror
http://www.marketwatch.com/news/story/banks-plan-100-billion-credit-market/story.aspx?guid=%7BC608EA98%2D9B6A%2D4C5B%2DB782%2DDB3B58BD594C%7D&dist=morenews_ts
Yep, there ya go, luvs, jigger the markets some more and everything will be just fine. Interesting that the Treasury Department aka Goldman Sachs is playing an “advisory role”. Ah, what does it matter anyway? It is all thin air anyhow. Maybe we should get together our own “thin air” fund here at the blog and offer to help bail out the banks.
I’ll put in half a billion, since that’s all the thin air I can muster up this morning. Anyone else?
I prefer to call their offerings…
“Packaged Air”
Packaged Air. Exactly. Well, how much are you going put in? LOL, I wish there was some place we could write cueball Hank and pledge some of our air.
They can’t have any of my air. They have already taken too much of it and I flatly refuse to hand it over without a fight.
This super-siv has so many holes investors are going to see right through it. In short, Citigroup is leading the setup of a fund to buy paper from itself. It has 1/4 of all the sivs. Anyone care to guess how much it is going to pay itself for the crap paper, face value or market value?
Could someone in plain english explain what an SIV is and how this whole superfund thing works. Why is this important? Thanks.
This is instructive:
http://www.minyanville.com/articles/TGT-SEC-Fed-credit-debt/index/a/13898
In my reading of the article, the most basic explanation I can come up with is:
The superfund is a bailout for the banks that are holding/made bad loans.
A SIV is a special entity a bank creates. The bank then sells payments from assets (credit cards, mortgages, and so on) to the entity freeing up the bank’s money or reserves to make more loans. The entity/siv funds itself by borrowing short term money from money market investors in the commercial paper market.
Recently, as awareness grew some of these entities/sivs bought mortgages that were souring, short term investors stopped loaning them money. Every 60 days, or some other agreed period less than 270 days, a short term loan ends and the siv has to borrow new money. As a result, the sponsoring banks have to decide whether to let the sivs/entities fail or take them back onto their balance sheets.
The super-siv is a scheme to keep these entities/sivs off banks’ balance sheets while maintaing their artificial face values. Any attempt to sell their underlying assets will result in enormous writedowns. If banks’ were forced to take the sivs onto their balance sheets, it would restrain their ability to make loans, damage their profitability, and in some instances, threaten their survivability.
Isn’t this basically what Enron did?
A more accurate name would be: super-SHIV.
Does anybody have the list of banks participating in this SIV? I would like to avoid them all. These might good short candidates, do you think?
Thanks - it is very weird to me that a bank can turn a set of debt payments (mortgage, car loan, etc..) into a fixed asset. It seems like if you don’t get the return on the loans that you expected, a person could be in real trouble. Hence the need for a superfund. My background is engineering - so all this is new to me.
that has been one of the core problems of the whole housing crisis - mortgages turned into financial products to be sold, flaky mortgages repackaged and re-rated, chopped up and sold again and again, getting a little bit more leveraged as they go along. this generated easy money for lenders to use for more mortgages, so you get a kind of feedback loop going.
the problem is we are talking about so much money here, so dubiously leveraged, that $100 billion just isn’t going to get it done. not by a long shot. the world of derivatives and other more exotic MBS “products” has exposed a lot of otherwise solid looking institutions to an abyss of risk. if you are leveraged at 5 or 10 times your investment and things are going well, lots of money is made. but leverage is a real bitch on the downside - if you only had 10% of the money (or less) to cover the actual loss, i’m sure you could see what the problem is. and this practice of using leverage has been rampant for years.
Forgive me for sounding naive, but I’m starting to think that all these MBS and SIV and discount window products are just fancy high-tech ways to transfer your credit card balance to a new card. Sure, you don’t have to pay your CC bill for a month, but it has to be paid eventually.
Or maybe they are setting up themselves as the new CC company so they can transfer the balance to themselves and then pretend to pay it (taking a little bonus skim in the process.)
And think of the losers you’ve met in life, whose entire financial stratagem has been, to push their debt from one credit card to another, taking advantage of their Quixote-like perceived way of “beating” the man.
I knew a couple of people like this.
quixotic
shoulda called it quix
That sounds like a new loan product - quixotic mortgages.
“The super-siv is a scheme to keep these entities/sivs off banks’ balance sheets while maintaing their artificial face values.”
So they are creating a fund of $80 billion to “insure” a trillion dollars’ worth of ABCP? After the investors buy the ABCP from he SIV, do they receive payments from the FB’s that originally took out the mortgages? Have they been receiving those payments? Will the $80 billion fund buy back the securities at face value, or is it intended to just keep the suckers buying the ABCP because “there’s a fund to cover any losses”? This is still confusing me.
Yeah, I saw that too, but the earlier report stated an $80 mil fund. $80 or $100 mil, it won’t make a difference, as it’s just a drop in the bucket of the trillions mortgage market. It’s just too big for them to manipulate away.
But I appreciate them trying. They will at least delay the day of reconning slightly, and my cash reserves are building month to month. So the longer before the collapse, the better prepared I’ll be. I certainly never intend to have a mortgage again for any home I live in (although I may consider mortgaging 50% of the cost of rental properties if I can find some steals).
First it was $100bn, now $75bn. Oh well, what’s $25bn between friends?
Banks agree $75bn mortgage debt fund
By Gillian Tett in London, Krishna Guha in Washington, and David Wighton in New York
Published: October 14 2007 21:01 | Last updated: October 14 2007 21:01
Citigroup, Bank of America and JPMorgan on Monday announced plans for a fund to buy mortgage-linked securities in an attempt to allay fears of a downward price-spiral that would hit the balance sheets of big banks.
http://www.ft.com/cms/s/0/4550b8c6-7a8d-11dc-9bee-0000779fd2ac.html
Would the precedence of mark-to-market write-downs be a potential Achilles’ heal?
“MLEC is likely to be unpopular with some banks which have already started trading in distressed subprime securities at knockdown prices.”
I suppose these folks believe in curing hangovers by having a drink the morning after, and rabies by the hair of the dog that bit them?
I think they mean “Superfund.” I can see the ads now, “Countrywide, it’s The Love Canal of the banking industry.” Perhaps they should google words before they start using them all willy-nilly.
No one seems to be hitting on the main issue… they’re doing this to hide losses off balance sheet… this would NEVER accomplish its true purpose, providing liquidity, in the stated format. You could simply hold it on your books. You only transfer off books in order to record the transfer at historical value (which may not be market value, may be mark to model or such). Then, each year as expected, the asset drops a few billion and you don’t have to record the hit as against income. As long as EVERYONE is doing it (Citi, BoA, JPM, etc), then its “ok.” This sickens me… if the losses go away long enough, who knows (they hope), maybe itll just bubble back up again and eventually they can sell off their toxic waste to some sucker, and then they can allow normalcy to return.
I was just going to mention this point. Having this scheme is a way to legitimize bogus asset prices. All they need are a few purchases of worthless crap at “X” price to say “all our worthless crap is valued at “X”.
This is normal Wall Street B.S.
why did they announce it ?
this is stinky
It is inauspicious to include the term “Enhance” as part of the acronym for the new toxic subprime debt Superfund. Hasn’t the Treasury Dept heard about the fate of Bear Stearns’ unfortunately named High-Grade Structured Credit Strategies Enhanced Leveraged Fund?
October 13, 2007
Citigroup’s (C) Insane To Plan To Improve Balance Sheet
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. So says The Wall Street Journal.
The paper adds: 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 funds with illiquid or devalued securities affiliated with the participating 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.
Perhaps it is not clear on the face of it how perverse this program really is. The banks plan to roll-off their worst assets and then make short-term loans to support them within the market, hoping that their value will eventually rise. That may look good, at least for a brief time.
However, if the valuation of mortgage-backed instruments drops, as many press and pundits predict, the final result will be to flush more money into a dying sector of the market.
http://www.247wallst.com/2007/10/citigroups-c-in.html
The conduit model has failed and they are going to bail it out with -
A REALLY BIG CONDUIT!
Interesting that it’s being dubbed ‘Superfund’ like the environmental fund that was supposed to clean up messes but has mainly served to ensure that no one ever touches the land again. Hmmm.
“Some Northwest Airlines pilots were looking for ways to make up for the steep pay cuts they were facing in 2005 when they learned of a “foreclosure rescue” plan promising them extra cash while helping struggling people hang onto their homes.
Two years later, the pilots’ credit ratings and their finances are in ruin. Several have been sued by some of the homeowners they tried to help.
The pilots and some of the original homeowners now say in state and federal lawsuits that the Beliveaus’ foreclosure venture was nothing more than a well-disguised equity stripping scheme. The targets were unsophisticated, desperate homeowners on the one side and Northwest employees trying to cope with pay cuts of nearly 40 percent on the other, they contend.
Conradi recalled how excited she was to invest in the foreclosure rescue program. “We all thought, ‘Wow, this is great! I’m helping someone and I’m helping make up for my massive pay cut at the same time.’” Now, she said, “We’re all just kind of mortified.”"
Full story at
http://www.startribune.com/10241/story/1483146.html
Everyone knows someone who can make them a fast buck. Too bad everyone isn’t smart enough to know most of them are scams.
Evidently even a 40% paycut didn’t stop these airline employees from scraping together enough money to chase the elusive dream.
A fool and their money are soon parted….
Apparently the crooks have now become so sophisticated they can steal from both sides at the same time.
“Apparently the crooks have now become so sophisticated they can steal from both sides at the same time.”
Nothing new on that. The big players on Wall Street figured out how to do that a long time ago.
A friend’s brother is a long haul international pilot for United, and his life savings in United Stock has made him a sophisticated pauper, with no money, aside from his wages as a pilot.
And from what I have heard the “golden” days at United are over. I know a guy who was a pilot there and was laid off after 9/11. He came out of the air force and went back to have a job. Last year United called him back, but at much lower pay (plus no more pension) than he was getting before. So low in fact, that he told me that he is far better off staying in the air force (his current job does not involve flying). I think the fact that he is a few years away from his 20 year milestone (with its 50% pension) might also have weighed heavily in his decision.
Yep, UAL folks lost their pensions and many lost their ESOP as well. I left in 1999 to finish my undergrad and never looked back - even aviation jobs have been ruined.
And my friend’s brother is an “elite” pilot.
ha
Sorry if this has already been posted. I just don’t know what to make of it, except that the sheeple are clueless…
http://www.cnbc.com/id/21268631
Surprise! Americans Plan To Spend More This Holiday
Forget the credit crunch, housing recession and slowing economy. Americans plan to open their wallets this holiday season, though maybe not on those cheap Chinese toys.
CNBC’s quarterly “Wealth in America Report” finds that American plan to spend an average of $839 on Christmas gifts, up 17% from November 2006.
Spending plans surged in every region of the country–for white collar and blue-collar workers and for nearly every age group.
The survey of more than 800 Americans, conducted Oct. 4 through 6, helps allay fears that the summer credit squeeze and rising foreclosures could cause consumers to pull back on their spending.
In fact, the survey found that 74% of Americans have had no trouble getting a loan and 90% of homeowners think the value of their real estate will either stay the same or increase over the next year.
Funnny and the local newspaper is saying the opposite….I think it depends where you are located in the country as to how your holiday $hopping will go this year…
http://www.sun-sentinel.com/business/sfl-holidays1015,0,4150657.story
Hey was away in PA this week…my God..every highway entrance/exit has at least 10-15 builder signs sticking in the ground advertising their homesites….couldn’t tell the entrance/exit sign to the highway from the ads…
I am not pulling any money out of my pocket this year to put into someone else’s pocket. Real inflation running between 9-11%. Cd’s paying 5%, that is going backwards.
Spending money this year would be like digging a deeper hole.
Retailers will have to be satisfied with my shampoo purchase.
No deodorant? Come on, the holidays are about being nice to your neighbors.
I am not pulling any money out of my pocket this year to put into someone else’s pocket. Real inflation running between 9-11%.
The price of goods, in particular quality Japanese and Chinese items, hasn’t gone up yet. One way to fight inflation is buy assets that hold value.
Predicting what will hold value is the tough part.
Gold is doing well, I’m happy.
Quality Chinese items? I recently bought automatic led nightlights. Had to buy eight to get two that would work.
Six went back to the store. I’ll give you one guess where they were made.
On the other hand I have several Made in the USA items going strong for years.
I am at a point in my life that I like having less clutter. I have gotten rid of half of what I used to own. When I do buy a home again–I only need half as much and less to clean around– it’s perfect.
Just read a similar article about those energy-saving fluorescent light bulbs they keep forcing on us. They save energy and money over the long haul, but they cost much more up front. They are still worth buying, IF you keep them for the full five years. Trouble is, when the bulbs went from Made in USA to Made in China, too many of those light bulbs are failing after six months, negating any savings and putting mercury into landfills.
Will we ever make “stuff” again, in this country?
I’ve been wondering what the chance of resurrecting industry in the country is too, Aladinsane.
Why am I afraid it’ll take a major war as a catalyst?
Trouble is, when the bulbs went from Made in USA to Made in China, too many of those light bulbs are failing after six months, negating any savings and putting mercury into landfills.
I have noticed this as well. Older fluroescents still going strong, newer ones dropping like flies.
Switch to LED Leflectors.
Better lighting, last a lot longer and more attractive.
From what I have been reading we should all be using LEDs instead of fluorescents in just a few years. As Hoz mentioned, they should last forever, and are substantially more efficient than fluorescents as well.
“The price of goods, in particular quality Japanese and Chinese items, hasn’t gone up yet.”
While I prefer not to buy Chinese junk at all, it appears to be getting dangerous as well. I’m not too concerned with lead paint, but they are deliberately engineering plastics as fillers to mimic the chemical composition of the food it’s mixed in with. I’m sure this has been going on since we began trading with them decades ago, but what do you want to bet it becomes more prevalent and insideous as the Chinese realize our government is ripping them off with worthless dollars.
Even if the price of Chinese goods drops to zero, it may eventually be worth you life to stear clear of their products.
insideous=insidious
the communists are going to win after all - not through military might but through food poisoning
Ordering stuff direct from Japan works very well. If you’re a hobbyist in particular, there’s some really good online stores in English and the shipping is fast and reliable. One way you can still stretch a buck.
Surveys are not news, although journals like to pretend they are. Instead, they are contrived mechanisms that journals can use to fill space and at the same time promote a specific point of view, in hopes of influencing customers of their advertisers.
I am not necessarily saying the results are cooked (but why not?). I’m saying that results that support a certain point of view are promoted, while results that counter that point of view sort of never appear.
Consequently, publication of a ’survey’ reporting that a majority of people are doing such-and-such is intended to influence the readership to do the same.
The results are probably not cooked. Some cooking is in the questions (political surverys are notorious for this) but the real cooking is in the sampling. I looked at the .pdf of the survey. Those 800 people seem to skew towards white, wealthy, conservative, and older . (But I’m not familiar with overall demographics, so don’t kill me.)
And they start asking about politics — at the end of a financial survey! Even the CNBC article muses weather the spending data will “help” the Republican Party. That should raise a red flag right there. I tried to look up the poll company but couldn’t find much about them.
9 out of 10 people surveyed coming out of Lord & Taylor carrying large bags said they are spendig more over the holidays this year…..
My x-mas gifts are mainly purchased already. I selectively look all year for something good - and at a great deal.
I’ve boycotted Christms for at least 10 years. I hate the commercialism. Instead, I buy things during the year for people I care about and say Merry Christmas then, whether it’s July or whenever. My family/friends enjoy it, and they know I’m not going to be around for Christmas, so no problems. Instead, I go for a nice hike with my dogs and think of everyone torturing themselves overeating.
I have had some thoughts recently about how to determine when we have reached true market value on real estate as this pop shall take years to correct.
It is common to see many posts on this blog claiming 20%, 50%, or 60% off will return us to market value. Thus, the only thing that we can be certain of is the difficulty in calling market bottom.
One thing I like to do is calculate the value of homes as just keeping up with inflation. Here is how I do it.
1. Find a sale price at any time before the year 2000 of a house.
2. Then use the sale price in an inflation calculator to determine what the present value would be if the house only increased at the rate of inflation.
I live in Florida and I have found that nearly all real estate that I run through the inflation calculator is more than double its inflation only value.
This has also raised some questions such as:
1. Why would houses necessarily increase at the rate of inflation? Over time, houses rot and should devalue to some extent like automobiles.
2. Just as a huge credit glut drove prices to the stratosphere, a credit crunch could drive prices below market value. The pendulum may swing both ways.
Anyway, please feel free to point out any of the fallacies in my logic.
You miss the value of the property - location, location, location. There is a finite amount of land in desirable areas.
Remember, the crunch is in the subprime market. If you remove the subprime mortgages from the bankruptcy data, the data looks normal.
Go ahead, start hurling the dishes at me.
There is a finite amount of land in desirable areas.
LOL. There is a finite amount of qualified buyers and too many “special” places on earth.
The property boom was fueled by promise of rapid appreciation, which became a self-fullfilling prophecy. Now perception had changed, and prices are falling. Why waste your money on a depreciating asset?
That’s a load of hooey. Please don’t start with the shortage of land stuff that was put down years ago. And it’s contained to subprime? Just keep those fingers in your ears and say lalalalalalalala..
Even if certain big cities might have limited building area, one of the last places with a land shortage is the US and A.
For me at least the “shortage of land” fallacy was put to rest by an offhand comment from a woman visiting from Japan who said while being driven cross country that “no one could ever invade America….it’s too big!!”
“Please don’t start with the shortage of land stuff” Ben, would you accept shortage of water? New Mexico is trying to steal water from Michigan’s Great Lakes, and the gov of Michigan is screaming NO!..This should stop the building in the boondocks.., and with a rising population, will put upward pressure on exisitng housing.
‘with a rising population, will put upward pressure on exisitng housing.’
Sure. This reminds me of the heavy bubble days, when everything was twisted into an excuse for ridiculous house prices. Boomers, Immigration. If people can’t afford to buy, what does water have to do with it?
I wouldn’t believe a single thing that Bill Richardson (Gov of NM) says especially, especially regarding water. The northern part of the state of NM is experiencing a drought of sorts, nothing serious, but I bet he wants housing development growth to continue outside of ABQ.
In August, he was in Texas drumming up money for his campaign for US Pres.
The southern part of NM is just fine and in fact, is contractually exporting water to Texas (which is probably humiliating to the @sshats in Santa Fe who look down upon the southern part of the State - as though Santa Fe (a sanctuary city for illegals) is any big deal - NOT)
~Misstrial
Last time I was in North Jersey I got to see them making land. The bubble blasters were blowing the tops off of the hills and bubble dozing it into the valley. Do they need more shopping that badly in Jersey?
“There is a finite amount of land in desirable areas.”
Well, I guess you didn’t see the 60 Minutes story on Dubai last night. They’re making more land over there, LMAO! In the shape of palm trees and maps of the world.
And there’s no speculative real estate bubble on million dollar plus homes in Dubai.
Free camel with every purchase!
The whole “subprime” focus by the MSM, the financial industry, and government authorities is a red herring as every financial product remotely related to housing is misspriced due to overvaluation of the underlying asset.
Testify, brothah! Even people with regular old mortgages (you remember those, don’t you?) are really bummed out when they see homes around them going for $100,000-$150,000 less than they paid. If those folks go through a rough patch and have difficulty paying their mortgages, I’ll bet we see them shrugging and walking away, too.
For example…
We just sold my mother’s house. It would have sold for **at least** $525K at the peak. Our price? $380K.
In one fell swoop, we obliterated the comps in that neighborhood. As the end of our escrow period neared, two other homes which were formerly listed for $450K+ — and had been on the market much longer than ours — had lowered their prices (bottom of range) to $380K.
All those “truly qualified” owners with their 30-yr, fully-amortizing FRMs just wet their pants.
There are plenty of sellers out there like we were. We had to sell four properties since the beginning of August. Two are already closed, another this Friday (keeping fingers crossed), and another closes in November. There is absolutely NO lack of demand for RE once the sellers find the MARKET PRICE!!!!
The assumption that the problem is contained in the subprime market is wrong. I read a post a while back that made a great analogy of subprime and prime, “If you kill the plankton, then you kill the whales.”
If you remove the subprime data, as you are suggesting, we wouldn’t have had a bubble to begin with.
So move to Dubai. But there aren’t jobs there. Thanks for making my point. I don’t think the RE market has hit the bottom, but the sky isn’t falling. I am debt free, have a home in one of the thousands of local areas hit by the crunch, and working - just like the vast majority of people in this country. Waiting for $500k house to sell for $100k is truly sticking your fingers in your ears and singing “lalalalalala… I’m not listening”.
You hope, anyway.
“Waiting for $500k house to sell for $100k is truly sticking your fingers in your ears and singing “lalalalalala… I’m not listening”.
Sheesh. Tell it to the Resolution Trust Corporation.
I’m in for the long haul. If you need to check your investments more than once a year, it is too high of a risk for me. You can’t discount centuries of RE data - real estate will remain a great investment.
Gennaker,
I’m not waiting for anything. I rent a ‘$600k’ house for less than a thousand a month. As my friend used to say on Austin TV. Konk! See ya troll.
Come on Ben - we need some entertainment on a Monday.
When you hear, “I’m in it for the long haul” you know you’ve got someone who knows they’re hosed and bluffing.
“If you need to check your investments more than once a year, it is too high of a risk for me.”
Buy and hold. Sounds like an amateur investment strategy to me…
Not sure but this sounds tongue-in-cheek. If so then it’s foolish. While buy-and-hold and in general long term investing is a good strategy - the best strategy is due diligence - i.e. investigate your investments. This includes revisiting your existing investments occasionally - at least once a year. What looked like a good long-term investment last year may have since soured, due to market conditions, management changes or corruption, etc. etc.
It could be that Gennaker was referring to long term bonds or treasuries - those you can get away with not revisiting much - but generally you don’t use the term “buy and hold” with those type of investments.
The ostrich approach to investment. You can’t see the train coming cause you’re head’s downunder.
Ahhh, centuries of data…. that would be shiller who says real estate goes up by about inflation + 1% per year over the looooonnnngggg term. So you agree gennaker that home prices need to fall by 50% to come back in line with long term real estate prices. This BS the NAR puts out that real estate has gone up by 6 or 7% per year for the last 30 years includes the bubble don’t you know…
The problem is that no one has any skin in the game. Here’s reasons why beyond the sub prime mess that this house tsumani is going to be bigger than anyone could ever imagine
1) Who cares about walking away if you haven’t invested any of your hard earned cash in the house.
2) 30 year mortgages were bad enough, now there’s 40 and 50.
3) Buying a house that takes 2 incomes to qualify for the payment is insanity. That’s why when most divorce neither one can keep the house, because it’s not sustainable on one income. One gets sick and you’re living on street or begging relatives to help out financially.
4) ARM’s that you only qualify for the 1st month’s payment.
We could all go on and on about the irresponsible people who are living in this country today. We all know them, are related to them, or have read about them here. This is the biggest “me” society I have ever seen in years. This country is going to take a fall, the likes that none of us have ever seen before, no matter how old. It’s downright scary.
“We could all go on and on about the “”irresponsible”"people who are living in this country today”
Can we start with the resident at 1600 Pennsylvania Ave, Washington, DC??
Subprime is just the weak spot where the illness showed up first.
OT: I visited a nice little 6 br foreclosure yesterday. It had lots of picturesque land, 5 large garage bays, was about 4000 sq feet, cut outs in the massive living room floor w/stone drainage and faucets for live trees to grow next to the all-glass back wall. The nicest part was the “owned by Fannie Mae” notices posted at every entry. Fannie’s wishing price is $362k which probably sounds like a steal to the CA, NYC types. But this home needed some major updating and maintenance. And currently, in this area, you can buy new for that price or not much more. This 30-40 year old former stunner is going to sit and deteriorate.
Bank REO’s in our local McMansion development here in Benicia, CA are coming onto the market at $200 sq/ft. Asked our Realtor why we should pay $300 sq/ft for a 25 year old house that needs updating when the 1 year old homes are going for $200 sq/ft. She stated that pricing on homes is “subjective” and is “making everyone crazy”. Full Disclosure. We sold in 2005 and we rent thanks to this blog.
You miss the value of the property - location, location, location. There is a finite amount of land in desirable areas.
And that is the qualification: Desireable and limited supply. There is a limited amount of beachfront property in SoCal and its very desireable. There is plenty of space around Fresno, and its not very desireable.
Also worth remember is that as a megalopolis like LA grows yesterdays out in the sticks suburb is todays “centrally” located neighborhood. Case in point, I lived in Fountain Valley in the 60’s. My dad worked in Downey and people thought that we lived in the sticks. Today FV is in the heart of OC, and is not considered to be the “sticks” any more. That is why the house that my parents bought in 1963 (they sold it in the 70’s when they left SoCal) for $22,000 probably fetched 700K or more at the peak of the bubble(and probably 500K now). I have been back to the old hood, and while it hasn’t gone ghetto, it didn’t look all that great either. Yet that 40+ year old, 1400 sq ft house costs a lot more than my much newer 3000 sq ft (plus 1000 sq ft basement) house in flyoever country. And even after the bubble dust has settled it will still cost more. So location does matter, at least for some people. The big question is as SoCal continues its descent into 3rd worldom, will it remain “more valuable”?
“I have been back to the old hood, and while it hasn’t gone ghetto, it didn’t look all that great either.”
I lived in FV/HB for a year. I thought it was the best neighborhood in the area- better than Westmonster, Garden Grove, Costa Mesa, Orange… HB was nicer, but way more expensive.
Japan said the same thing. And 15 years later, with the same finite amount of land, real estate prices kept dropping.
If something is radically overpriced, it will fall. Everything else is noise.
I’m not saying that the Fountain Valley house isn’t due for a downward price correction. After all I do think that 500K is too much for that shack. It will come down, but so will my flyover country house. Barring California being annexed by Mexico, I don’t see the FV house costing less than my flyover country house. Do I think its worth more? Of course not, which is why I don’t live in SoCal. But millions of people disagree with me.
“You miss the value of the property - location, location, location”
Value is an arbitrary judgment.
If you are referring to price as equal to value then an 80% drop in price is possible and in some areas likely.
If referring to value as equal to expected utility then find a use for the 17M “buggy whips” created but unsold to prevent the 80% drop in price.
Location for some (e.g. the ocean in Malibu) is desirable, but for others living in the outback (e.g. the upper peninsula) far from the maddening crowds is desirable.
The only measure of value is worth. Is property an hours drive from work of value if it costs time and moneys to get to work? What is time worth? I have never heard of a dying person say, “Gee, I wish I worked more.”
Location for some (e.g. the ocean in Malibu) is desirable, but for others living in the outback (e.g. the upper peninsula) far from the maddening crowds is desirable.
And some people actually like to live in Victorville. But far more would rather live in Malibu, which is why it costs more to live in Malibu than in Victorville.
And always has cost more than Victorville…
It will always be more than Victorville (barring major mudslides, fires, rising crime in Malibu, etc.), even when both are down 50%.
Price, price, price…
I believe that houses do increase at the rate of inflation. The “rot” factor you mention can be factored in with the maintenance costs. And that brings up another point: to determine the correct rate of increase, one should also factor in expenses like taxes and maintenance.
Houses rot - but will be OK long-term with proper maintenance, if built well.
That said, the crap they put up recently WILL rot - and fast.
I agree here. It would seem that modern construction costs would be quite a lot cheaper also. The profit margins for home builders in the last 10 years must have been huge.
Profit for homebuilders…..35% during the boom 2005,2006.
Oil hits a new all-time high, Gold over $760, dollar down, Treasury forces big banks to bail out Citi at gunpoint:
http://www.forbes.com/markets/feeds/afx/2007/10/15/afx4219158.html
Market rallies.
See yesterday’s “Market Cheat Sheet”
This kind of disconnect between markets and reality can’t last long. The stock market looks like a bubble at this point.
Bernankes B-52 bombers are doing their job … paving the road to Weimar; but don’t worry, everything is contained as long as you look in the right direction.
Black Gold, Texas Tea @ $85 and the Turks are fiesty
Whooooaaaaa Dooogggiiieeee
I posted this earlier, but I think it’s appropriate here as well:
“A recent study by the Canadian bank CIBC indicates that the rapid consumption of oil in the oil producing countries themselves will reduce exports and raise the price of oil to $100 per barrel. The study titled “Oil for $100 in 2008” indicates that the daily consumption of oil by OPEC oil producers, in addition to other large exporters, such Russia and Mexico, has exceeded 12 million b/d. The study added that if the level of consumption by these countries continues at this rate their export capacity will be cast in doubt.”
I was flipping through the tv channels the other day and saw the Qatar prime minister being interviewed (I think it was PBS) who said he expected oil to be $185/barrel by 2009. Wow.
When bush took office, oil was $22/barrel.
Anyone see the 60 Minutes report on Dubai last night? If that isn’t a bubble, I don’t know what is. I especially enjoyed the clip where Steve Croft was walking down a silent street lined on both sides with McMansions, the Sheik by his side. Not a soul around, no cars, nothing. Really eerie. Could have been a recent Toll Brothers development here in Florida.
I’m telling you, if we ever get alternative energy up and running, you can kiss it Goodbai.
I didn’t see 60 mins but I’m glad you did. This also happened globally during the last oil boom. Anyone with oil built like the boom was never going to end. When prices finally dropped, there were many unfinished and unfunded projects across the globe. In the end, the people suffer but the leaders remain insulated from the fallout.
Nothing lasts forever. Timing is everything.
I think you are very wrong regarding the alternative energy: The Dubai sheiks are far more clever than the Washington gang, and they have been planning for a future without oil revenue years ago. The RE boom in Dubai is just a small part of the game plan; as long as the world economy keeps functioning more or less, I think they will do well.
Also, keep in mind that those Palmisland mansions are very cheap for most EU buyers, and up to now prices are still going up and there are plenty of buyers. When the EU bubble pops (or the US goes to war with Iran) that may change, but the situation is very different from the US housing market. If the bubble pops, the citizens of Dubai get to choose from some very nice and relatively cheap vacation properties. And rest assured, many of them can pay cash.
Dubai is on the downslope of oil production and is diversifying into banking, tourism, etc. It’s a smart move on their part but I don’t know if it will work. The other model is Saudi, which is to siphon the oil money to Europe and America, building palaces for the royals.
“I think you are very wrong regarding the alternative energy: The Dubai sheiks are far more clever than the Washington gang,”
Uh, I don’t recall saying that Washington is any more clever than Dubai sheiks. I don’t see where I said that at all. I’m just saying Dubai is in a bubble big time. People may be buying those mansions, but they’re sure not living in them, at least not from what I saw on the program. But I didn’t see any “For Sale” signs, either. Not sure if Dubai allows that sort of thing.
However, I take your point that those mansions will end up being occupied by Dubai citizens at the end of the game. Makes sense, because Dubai looks like a very elaborate bubble trap to me.
I agree the Palm Island RE is a bubble, but the BIG difference with the US is that it is foreigners that are buying (mostly from EU and some from Oz/NZ) and relatively little locals. You could see the For Sale adds on many international RE websites (loads of them) and I know for sure that most of the Palm Island stuff is sold (a big chunck was already sold and resold before they started building the homes). Probably 90% or more is for ‘investment’ and not for vacation or living there. Just like in Europe, investors don’t care as long as prices are going up, and they sure are - and with the current B-52 guy at the helm I don’t see a remote chance that these prices are going to turn down.
The Dubai sheiks are far more clever than the Washington gang, and they have been planning for a future without oil revenue years ago.
I remember during the first Gulf War, after Saddam had invaded Kuwait and the government fled, the Gross National Product of Kuwait went down only 50%.
Today, Kuwait could probably maximize their money by buying another less desirable country without oil assets and renting Kuwait out to the US or China.
i caught about 5 minutes of it while surfing..
saw an island get dredged up from nowhere.. 100s of ugly McMansions built side by side.. heard that all were sold to investors within a week for a million.. and then that all were resold within a month for $5 million each..
I smiled, and changed the channel.
actually a lot of what was built there looks quite good to me, far better than most of the ugly US mansions and there are some really good international architects working there. From what I heard, most prices doubled by the time homes were finished (certainly not x5), not unlike what happens in some parts of Europe with new homes (e.g. Spanish costas, Adriatic coast, Turkey).
It’s easy to laugh about it now. The palm island project sold out in less than a week, and houses that initially went for $1 million are being resold by original investors and real estate speculators for five times that. But the day 60 Minutes went ashore, a month after the official opening, the island was a ghost town.
http://www.cbsnews.com/stories/2007/10/12/60minutes/main3361753_page3.shtml
‘Goodbai’. Haw! Funny!
Kathy Shadewald worries about the strangers prowling, at all hours around the luxurious but vacant home next to hers. Are they prospective bidders in the upcoming auction? Or prospective burglars looking for copper-rich plumbing to strip and sell for scrap?
To get the answer to this question, and more, read Las Vega’s foreclosure woes in the second of the Las Vegas Rewiew Journal’s three part series on the state of the housing market:
http://www.lvrj.com/business/
Wasn’t it Moody’s who said they couldn’t have predicted the amount of fraud taking place during this bubble?
http://www.lvrj.com/business/10545752.html
“Joseph Waltuch, the new commissioner heading that division, said he intends to make full use of the state’s new mortgage fraud law enacted by the 2007 Legislature. It makes mortgage fraud a class C felony punishable by one to 10 years in prison, and multiple mortgage fraud a class B felony with the potential of 20 years.”
Lock them up. I like this.
Tangelo Faces Probe
http://www.stockmania.com/index.php?showimage=68
lol
A few years ago I was talking with a finance type about a “special mortgage product” that his company had marketed. It was an ARM that could be used to include cars, furniture, etc. He had used it to buy a house and a new BMW. I remember being horrified - I didn’t let on how much to him - about paying 30 years to buy a car. I asked him about that and he replied that he was adjusting the monthly payments to reflect the durability of the car. I doubted that at the time, but again kept my mouth shut. I asked him about rates adjustments and he blew that off. Rates are going to be just fine he said. I clearly remember his remark,” It’s a good product.”
I wonder how he is doing now? I might call him.
Roidy
give him our best…
Yes, call. And then tell us the funny funny story.
Banks may pool billions to avoid securities sell-off
By Eric Dash
Sunday, October 14, 2007
NEW YORK: Several of the world’s biggest banks are in talks to put up about $75 billion in a backup fund that could be used to buy risky mortgage securities and other assets, a move designed to ease pressure on a crucial part of the credit markets that threatens the broader economy.
Citigroup, Bank of America and JPMorgan Chase, along with several other financial institutions, have been meeting to come up with a plan to create a fund that could prevent a sharp sell-off in securities owned by bank-affiliated investment vehicles.
The meetings, which began three weeks ago, have been orchestrated by senior officials at the Treasury Department, and the discussions have intensified in the last few days.
A broad framework for an agreement could be reached as early as Monday, according to people with knowledge of the discussions, but many important details still need to be hammered out. Another round of discussions was taking place over the weekend, and it was still possible that the parties would not reach an agreement.
“Treasury is very serious about getting some solution in place to take away the fear hanging over the markets,” said Alex Roever, a credit analyst at JPMorgan Chase who has been following the discussions but is not involved in them. “It is a very challenging thing to do. There are so many parties involved and they all don’t agree.”
http://www.iht.com/bin/printfriendly.php?id=7880418
The only thing the Treasury should be involved in is an auction of the top bunks at the Big House. Paulson better get your bid in!
“Treasury is very serious about getting some solution in place to take away the fear hanging over the markets,”
I don’t think Treasury has any business being involved. Of course, if you change “Treasury” to “Goldman Sachs”, then it makes sense.
Goldman Sachs was (is?) supposedly short all this garbage. The banks banding together to try to temporarily fix the price of these things long enough to dump them on some sucker does not surprise me. Goldman (and others) being willing to lose some of the profit on their winning bets DOES surprise me.
If you have read “When Genius Failed” you might remember that part of the problem LTCM faced when they were blowing up was that the people looking at their books and ostensibly deciding whether to “rescue” them were passing their positions on to their own trader’s, who would then bet against them and put them even further in the hole. These guys are merciless, they see blood in the water and they do not throw out a life preserver, they start circling.
So… the question is… what’s in this for them?
“So… the question is… what’s in this for them?”
Wow, GREAT question. I don’t know all the twisted ins and outs of what goes on at the top, but what immediately came to mind in answer to your question is: a get out of jail free card, which is probably the card the Paulson put on the table.
What it could be is that, the Fed will buy the CDO paper bought by the Fund in REPO agreements that they will keep rolling over and over for 10 years. After 10 years by underreporting inflation by around 5-7% each year they would have essentially walked away from the losses by printing more money.
“…by underreporting inflation by around 5-7% each year…”
I had similar thoughts (though you have explained it in much greater detail than I could) — that the Fed’s general game plan is to keep the toxic debt from going into fire-sale liquidation indefinitely, while using inflation to cut it down to size. The big problem with this game plan is that it really does nothing to prevent further amassing of bad debt going forward, and in fact it rather encourages the practice, by effectively demonstrating that banks which make stupid financial decisions will never have to pay the full price thereof.
In 1929 this was called “organized support.”
Notice how all the participants listed above have the distinction of being recipients of 23a exclusion letters which were handed out like Chitlits by the Fed in the past month or so?
Advice to Bush: don’t brag about a falling budget deficit if in fact the federal budget deficit, adjusted for the point in the economic cycle, is high. The deficit may soar before you leave office.
http://www.bloomberg.com/apps/news?pid=20601087&sid=arpmHEUoY9Ko&refer=home#
Interesting to see corporate income tax revenues collapse. Remember at the end of the dot.com bubble, profits reported for tax purposes were falling but those reported to investors were rising. It turned out they were lying to the SEC a lot more than they were lying to the IRS.
“Advice to Bush: don’t brag about a falling budget deficit if in fact the federal budget deficit, adjusted for the point in the economic cycle, is high.”
LMAO, since when does shrub take any advice except from the voices talking in his head? The guy crashed at least two, maybe three companies before getting involved in politics, that oughta have given us a little preview of things to come. However, I have found shrub’s pronouncements to be extraordinarily accurate predictors, if I just factor in the belief that whatever he says, the opposite is true.
Have you been able to profit at all from this “contrarian” point of view??
Sure. When he started talking about an “ownership” society, I put the house up for sale. That was long before I ever knew about this blog.
“The pitcher winds up… and let’s go with an off-speed pitch right down the middle… and WHOOAAA Ortiz really got a hold of THAT one! It’ll be next year before that one comes down!”
I haven’t read the article, but I’m surprise we’re collecting ANY taxes on corporate income. With smaller companies doing Subchapter S or LLCs, and most big boys offshoring corporate “headquarters” to Grand Cayman or Dubai, the companies paying federal taxes are fools. And I don’t have a problem with that. I just don’t want their lobbyists and their soft money in my decision for my government. No representation without taxation.
When companies put their headquarters in a different place, they still pay taxes on their American income. They just don’t pay it on world income. That is the reason for companies moving overseas. Most countries don’t tax their companies on worldwide income, wheras the US does.
Still looking for a partner for that 72,000 sq feet corporate building…
I only need a few hundred feet, does somebody else need 71,800 feet?
From Bloomberg regarding Citigroup’s losses and writedowns in today’s earnings release:
Prince, 57, said when the losses were announced that they were an “aberration” and that profit would “return to a normal earnings environment” in the fourth quarter. Citigroup is part of a group of banks that agreed to set up a fund of about $80 billion to revive the market for asset-backed commercial paper, or loans that mature in 270 days or less.
“This was a disappointing quarter, even in the context of the dislocations in the subprime mortgage and credit markets,” Prince said in today’s statement. “We are focusing closely on improving those areas where we performed below expectation.”
How? By ‘fixing’ the price of worthless securities? This is not free market capitalism. Where is the shame? Where is the outrage?
http://www.bloomberg.com/apps/news?pid=20601087&sid=awg0rO78BewU&refer=home
“Where is the shame? Where is the outrage?”
Reasonable shareholders are not believing the story. Citi is down 12% on the year and going lower.
The losses are so staggering for the banks (not just Citigroup). I calculated in August the total losses are $350B, I have not seen any financial statements that make this number smaller.
Countries that require full disclosure include Japan. Nomura Securities posted their report today. From their report. “Nomura Holdings Inc., Japan’s largest securities company, will post its first quarterly pretax loss in more than four years after losing 73 billion yen ($620 million) on U.S. home loans….Tokyo-based Nomura sold $1.7 billion of U.S. subprime mortgages at a loss in the past six months as delinquencies on home loans rose to a five-year high, crimping demand for securities linked to such credits. Koga, 57, said he’d slash his own pay by 30 percent…” Nomura sold its entire holdings at a 40% discount to face. That is the market price.
The Federal Reserve has a responsibility to the economic well being of society. If this attempt can restore some semblance of well being to the commercial paper market then it is good for the society.
The problem is the losses unaccounted for are still greater than $240B with only $80B being used to support the losses. This rhymes with the Japanese banks in the ’90s carrying dead loans on the books for 15years of misery.
“…Koga, 57, said he’d slash his own pay by 30 percent…”
I have yet to read that ANY lender (like TANgelo) or hedge fund manager or banker state that they’re cutting their salary or returning massive bonuses.
Thank you for your post, hoz.
~Misstrial
Instead, Tangelo increased the volume of options he had available for sale.
Got a flipper working on the house next door.Old guy lived alone for year and the place turned into a mould factory. Realtwhore picked it up at auction after the province took over, old guy died, left no will ect. I told Realtwhore about the mould, which had been cleaned up by suspect gang of experts, no one spoke english.After he heard that he flipped it in 3 days to present flippers. Curious if flipper 1 told flipper 2 of the mould situation.I’m biding my time until they’re almost done to tell them. Due to grow-op problems in Ontario, houses on the market must be declared contaminated if there has been a mould problem. Comments?
houses on the market must be declared contaminated if there has been a mould problem. Comments?
This is the problem with ever buying a foreclosed house. No disclosure in our state if you haven’t lived there. However here mold was blown out of proportion years ago and they were burning down houses along with possessions. Unless it’s totally out of hand mold can be remediated. Every house in the world has some kind of mold. Mold is the 90’s lead base paint crusade of the 70’s.
I was in this house to check up on it. It was unoccupied for 18 months. The mould was floor to ceiling, wall to wall. The basement was black.
If it were that bad then flipper 1 would not have to tell flipper 2 about it. Flipper 2 would be able to tell immediately.
I once looked at a home that was really moldy… ugly
Is it just the new building materials or something that causes it? I have seen tons and tons of abandoned older homes in NJ and I have never seen mold the likes of which I’ve heard described in many newer homes… we had a huge build in Long Branch apparently ruined because of it but the 20K+ homes around it apparently don’t have any problems.
Lead based paint was outlawed around 1977. Lead inhibits mold and mildew growth. Always use one of the newish add-in mold inhibitors when you paint, at minimum kitchen, bath and laundry. Pricey and not a guarantee.
Add an automatic fan with a moisture detecting module that exhausts to the outside.
or move to Utah, the second dryest state in the union (Nev. is 1st). not much mold here…
“Due to grow-op problems in Ontario, houses on the market must be declared contaminated if there has been a mould problem. Comments?”
Even without the giveaway spelling and mention of your location, it would be obvious that you are from Canada. So civilized, not a care in the world that your soon-to-be-pushed-over-into-bankruptcy flipper/neighbor might have an uzi and go postal on your…erm, how do they spell that, in Canadian?
Anonymous notes and fink-out to the appropriate regulatory board: that’s the American way!
Dancing Bird, this is a riot.
http://birdloversonly.blogspot.com:80/2007/09/may-i-have-this-dance.html
This dancing cockatoo is all over the net.
It is hilarious! And the bird keeps perfect time with the music.
I got it in an email from a friend.
Thanks for posting this. I needed a smile.
Loved it!!
Ha! More fantasy RE stories. Not reality of what is going on here:
http://www.courant.com/business/hc-makeover1014.artoct14,0,7055017.story
BWHAHAHAHA!! Bridgeport…. Where you hear gunfire in the daytime. Night time is a real jungle unless it’s changed since the last time I was there.
Today’s news in Miami, taxes and the future of real estate in South Florida
Rubio’s “bright” idea: “The current plan centers on doubling homestead exemptions and ”portability” so homeowners can carry tax savings to a new home.”
Who is the biggest idiot???
Rubio walks a fine line on tax issue
http://www.miamiherald.com/news/legislature/property_tax/story/271843.html
Real estate experts debate S. Fla. market
http://www.miamiherald.com/548/story/270524.html
I recall reading articles a few years back in DC-area business press about what a genius brilliant company this was - how their internships were coveted, how it was a “hot” place to work, etc. Headline seems more optimistic than the article to me - or did I miss something?
Getting Out of the Mortgage Squeeze; FBR Counts on Diversified Portfolio to Recover From Subprime Slump
Long before the mortgage market fell apart this summer, Friedman Billings Ramsey, Washington’s largest investment bank, saw the trouble ahead.
In early 2005, the company invested an eye-catching half-billion dollars, a third of what it had available, in the subprime mortgage business, even buying a mortgage lender. The company bet big that these high-risk loans to people with poor credit would return impressive profits.
But by the end of the year, FBR realized that it had miscalculated. The Federal Reserve kept raising short-term rates, and the firm suddenly was paying more to borrow money than it received in interest on its loans. Its mortgage portfolio was getting squeezed.
FBR sold some investments to stem the losses but didn’t move aggressively enough. Eventually, 80 percent of its mortgage-related investment would be lost and the company’s stock price would spiral downward. From January 2005 through Friday, the company’s stock lost nearly three-quarters of its value, costing shareholders $2.5 billion.
“It was brutal, extraordinarily difficult. There’s no other way to describe it,” said Eric F. Billings, the company’s chief executive.
http://www.washingtonpost.com/wp-dyn/content/article/2007/10/14/AR2007101401045.html
Thought I’d make some comments with regards to “shortage of land” discussed above, and as a general argument for RE prices.
- It’s true that, for all intents and purposes, they aren’t making any more land. While technically yes they are in Dubai and Hawaii the amount being made is insignificant relative to the general population, and thus has no effect on price. And there’s only a couple of spots where that’s feasible. You couldn’t do what they’re doing in Dubai anywhere in the U.S., at least on the ocean - either the coastal water is too deep, or the areas that aren’t too deep (gulf coast) are hurricane-prone. Also there’s no way environmental laws/groups would allow such a thing.
- That being said - what are the two main attributes of “desirable land”? (aside from resources like oil or gold) A) Water access, and B) views (e.g. mountain). For A) - pretty much any coastal water access land was built up years ago - during the 50’s and 60’s. Thus the supply of buildable land on water was used up long ago. Thus prices on such land have already taken into account the “not making any more” factor for years.
The other kind of water access is lakes. They *are* making more lakes, all the time. Plus there is still a large amount of lakefront property not yet developed. So there’s no “get it now while you can” factor in lake front property.
Same thing for land with a view - there’s tons still available, especially in the west but also even in the east in the Appalachians and foothills.
- Just look at Japan - they have tons *less* land available there than in the U.S., and they’ve had falling and then stagnant prices for 15 years after their last bubble. Once again - the “get it while it’s available” factor was already built in to the price. The “get it while it’s available” factor only applies to places with huge population explosions - like on the order of doubling in just a couple of years - and that’s something that’s extremely rare and unpredictable, and very subject to later implosion or stagnation. California gold rush is one example, and a current example is the Alberta oil field towns.
In short - the “get it while you can - they aren’t making any more land” reason for buying land is bunk - always has been and always will be.
Location, Water, Vocation
You’re forgetting that Louisana, Mississippi, Florida, California and Texas are losing land everyday off their coasts , making NEW coastal properties.
Oct. 15 (Bloomberg) — Nomura Holdings Inc., Japan’s largest securities company, will post its first quarterly pretax loss in more than four years after losing 73 billion yen ($620 million) on U.S. home loans.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aMxaK3inm9i8
Marc Faber on CNBC this morning called the dollar confetti currency, compared it to Zimbabwae. And he’s right.
“… France has been particularly vociferous in advocating action to stem the euro’s rise, with Finance Minister Christine Lagarde, 51, even pushing the European Central Bank to sell the currency. She has also called on Paulson to say “loud and clear” that he still backs a strong dollar.
While Paulson has said repeatedly that a strong dollar is in America’s interest, he says the value of currencies should be set by the market. Under President George W. Bush, the Treasury has never intervened in the currency market, either to buy or sell dollars. …”
Mr. Faber may very well be correct. The world view with regards to the dollar and our governments policies is “watch what the US does, not what it says.”
… and so the only option remaining for the ECB is to massively intervene in the currency markets and keep the euro down.
They are doing quite well if you look at the euro gold price, as usual over the last years, both dollar and euro are declining, although sometimes the dollar declines just a bit faster. Paulson will be very happy with all the French idiots that have been appointed lately in the euro circus. Within a year the ECB will be mostly dancing to the tunes from Paris, which is exactly the same tune as that from Washington. Who would have thought that a few years ago?
–
What determine housing prices in an area?
Incomes of the population is by far the biggest determinant. For example, in Silly.con Valley home prices dropped 10%, 20%, even 40%!, from 2000-01 peaks to 2002-03 lows all the while prices were going up 20-40% in SoCal. Why? The incomes were dependent on the local stock prices. The same thing is happening now in three towns — Cupertino, Mtn. View and Palo Alto due to Google and Apple stock prices. Prices are going down in areas with 80% of the homes, flat in 10%, and still going up, slightly, in 10%. All due to income distribution. People who can only afford to live in low-priced areas don’t have any gains in their income to speak of.
Jas
from everything I have read the wax and wane of home prices in first world (anglosaxon) countries is first of all determined by unemployment; as long as unemployment is low and/or falling, home prices will rise. Obviously this relates to income in some way but if you look at Europe where home prices have surged incredibly while wages were nearly stagnant (certainly in real terms) you can see that income values themselves are hardly relevant.
Of course the absolute value of home prices is related to other factors, some global, some national and some very local (like local wages/ type of jobs). Yes, a small part of the housing market (the type of homes you could never buy based on even a very high double income) depends on the stockmarket but for a whole country that is usually irrelevant, probably less than 1%.
–
My comment was about the long-term, or trend, prices of homes and not what happens during boom and bust. Prices would tend to trend towards incomes. Rents follow incomes more closely than home prices, but long-term they both do.
Jas
This may be a bit OT, but I have 2 credit cards, both which I pay in full each month. I’m thinking of cancelling them and going to cash only. can anyone point out any good reasons I shouldn’t do this? I could use a debit card for purchases, isn’t it just like a credit card (except it comes out of my bank acct)? - I know a few car rental companies won’t take debit cards, but most do. It would free me from any chance of the CC company not getting my payment, ID theft, plus maybe the psychology of cash would make me spend less $$. Thanks for any comments.
Debit cards have risk to you if there is fraud. Your liability with a credit card is like $50. With a debit card you have unlimited risk.
legally, not true, but in practicality, yes. There are very low limits to how much you’re liable for on your debit and ATM cards if you report the fraud/theft in a timely fashion (like 60 days or something.) But in reality the money’s gone from your bank account and your finances will be interrupted considerably for a period of time until you’re done fighting everyone. With the credit card, hell, you just don’t pay the bill. Much easier.
True.
~MIsstrial
I use my debit card “as a Visa”. I sign instead of giving a PIN. I get the full fraud protection of a credit card, but the money is sucked out of my bank account same as if I used it in “debit” mode.
This is the best time to be able to keep plastic! You can still buy real tangible items with the promise to pay in the future. Until you can no longer buy food, clothing and investment opportunities keep ‘em.
–
I have zero debt but I still keep two credit cards. Convenience and one of them pays 1-5% discount on certain purchases including gasoline. The other one pays Reward Points that I have not used thus far. One of my ATM cards is a debit card also and I use it where they don’t take credit cards. I also pay cash for some purchases. Diversify!
Jas
If you don’t have a problem with credit card debt or excess purchases, then using 1 & paying promptly just makes your life easier, & puts the fees off onto the merchants.
If you do have a problem, then cancelling 1 & taping the other to the back of your drawers drawer for emergencies only might work.
Yes, or freeze the card(s) in a block of ice.
~Misstrial
puts the fees off onto the merchants.
Trust me these same merchants add the fees into their prices.
“plus maybe the psychology of cash would make me spend less $$.”
This is true. It’s a fact in financial counselling & planning that you will spend more if you use a debit card. I’ve started using more cash and tried to limit my use of the debit card. It’s hard.
Same here. It would be nice to go to a cash-only, but then I realized that I would either have to walk around with $150 cash for a week (if I’m frugal), or else go to the bank almost every day.
I think you ought to keep one, just in case of emergencies, and just put it away safely.
Also, how else will you buy books on eBay? I get fabulous books all the time, and lots of the sellers don’t want cash.
There are lots of good reasons to keep credit cards handy. Car rental is number one. Rewards points is number two. Emergencies is number three, (as in huge car repair bill, etc…)
I keep one card for:
1. online purchases (can’t use cash and fraud liability is less than on my debit card)
2. emergencies (e.g., attorney bill to complete my divorce)
Fortunately, I bank through Pentagon Fed CU, and to make my payments on the CC, I transfer money directly from my other accounts whenever I want. No missed payments, and I can pay immediately if I want to ensure not getting into overspending.
I remember hearing that canceling the cards can reduce your FICO score, so consider carefully before canceling. If they’re no-fee and cash reward, just keep paying them off every month and take a free ride on the credit company’s back.
hell my credit card payments donate money to Sierra Club. I also use Working Assets for cell phone and another credit card. they give to progressive causes. If you’re on my side of the aisle, nice way to feel a little better about using the cards. Never run debt however.
Has anyone noticed the price of gold recently? It’s on it’s way to$800 an oz. comments?
Personally I think gold may hit $1k/oz. Maybe next year.
Gold has resumed its historic role as reserve currency.
~Misstrial
I like getting a record of where I spent the money each month, to keep track of our spending vs. budget. Put it in a spreadsheet. You don’t get that with cash. Plus, I got in the habit of never carrying more than $20 (mugger money) in NY back in the day.
The only bad news is that since the credit card is automatically deducted from checking every month, I keep more money in checking than I otherwise would, to guarantee coverage.
I recommend getting the no-fee Citibank Dividend Mastercard. USED to be 5% cash back on groceries and gas…now just 2% with some other promotions thrown in. $300 yearly cap.
I like having an arrogant usury company like C pay me $300 a year for using their card. Live richly…indeed.
In addition to that $300, you can shop through their dividend merchant program and get more cash back. Many online retailers participate & you can get up to 7% back in some cases.
Like you, we have that card & get around $400-500 per year…for FREE!!!
Always pay it off once or twice a month on line. Couldn’t be any easier.
–
Market TOP Watch
October 11, 2007; Cassies’ Lunchtime Bits Bucket: http://thehousingbubbleblog.com/?p=3554#comments
2007-10-11 12:07:01 — Jas: “NASTYQ! down 32 points and counting. Today could have been the top.”
2007-10-11 12:28:07 — Comment by Rally Mitigation Team Member Bob: “The lonely and oft-repeated cry of the permabear.”
2007-10-11 12:38:28 — Comment by NYCityBoy: “That is true. One side screams, “the bottom is in” and the other side screams back, “this is the top”.”
Only time will tell, but my call might hold. The sudden reversal had an eerie feeling to it and my comment was a real-time reaction to it. BTW, these were the highs for Dec Futures before my comment:
NDX: 2214.0
SPX: 1586.5
Dow: 14270
When two or more are breached I will post then and my call would be proven wrong. Until then it would stand.
Jas
Your balloon still defaltin’ Jas?
–
I don’t know what you mean, but I have been humbled by markets more than once. I forgot to mention that the first months of quarters tend to be more likely reversal points in the market. So, Oct is more likely to be the top than Nov and Dec.
I also think that the economy is already in recession, which also increases the probability of the TOP. The next recession, whether it is here or not, would be the most significant recession since 1950, both for the economy and the markets.
Jas
so you think the GDP statistics are lies ? I think we may in fact still see a true recession or just muddling thru like 2002 as John Mauldin refers to in his latest newsletter.
–
No, I don’t think that the GDP stats are lies. Remember that we didn’t find out about the 2001 recession until we were out of it already. There are lags in the data and revisions take time. The 2007Q3 GDP, preliminary, wouldn’t be out for two weeks but if it comes above 2% then the likelihood of the recession to begin in Sep’07 would be small. If it is close to 1% then I think that the recession would be dated Aug’07 or Sep’07. The final revision for 2007Q3 wouldn’t be available until the end of this quarter. So, we wouldn’t know if my call of recession comes true.
BTW, in 2001 the stock market had a huge rally after it entered the recession! The reality finally set during the third month of the recession. We could have the repeat of 2001.
Jas
Humble pie is never that tasty.
Dumb money buying calls
http://www.minyanville.com/articles/sentiment-options-call-put-small+traders/index/a/14470
I actually have a few puts up. What a novelty
Nephew’s wife in hawaii sold her medical stock last week, worried the dems will win the election and make big changes - she then bought other stock (not sure what) and watched it immediately lose value. She’s a bit of a pistol, so we are enjoying the schadenfruede (including nephew).
With this in mind I’d be BUYING medical not selling.
OT: Markets down 134 right now.
Repost: For those looking for safety:
Vanguard Treasury MMF, Fund #50.
Liquid.
$3k to get in.
$1.00 for $1.00
No CDOs. No CMOs. No CP. US Treasury only.
I have part of my portfolio in this fund.
~Misstrial
won’t people be fleeing from the dollar soon ? Not sure treasuries are the right investment this time down. I’ve diversified via currencies.
Yep, also the PM thing.
~Misstrial
Misstrial,
Is the MMF insured by the FDIC?
No. Never dropped below 1.00 per share in 20 years of the fund though. Should the fund fail, our government would have to fail and at that time we would have chaos.
~Misstrial
Decided to give it a shot, just posted on Craigslist, will report anything interesting…
“Am looking for a reasonable priced piece of land, prefer W. of Grand Junction (Loma, Mack, Fruita), but would consider Palisade to Rifle. Must be a minimum of 10 acres, have water (or access to water), good views, horse compatible, and have electricity. This is for a private home, not development. I can pay cash. Nothing too far out, please (more than 5 miles from highway). Would also consider E. Utah.
If you haven’t noticed, prices are crashing in real estate across the nation, with Colorado having one of the highest foreclosure rates, so don’t contact me if you’re trying to make a fortune off your property. Prices will continue to fall, so you can price it appropriatally now or watch your property value return to a pre-bubble price. If you’re interested in proof of this, check out thehousingbubbleblog.com
Serious sellers only, please. No realtors under any conditions.”
Ahhh…great ad!
~Misstrial
I love it. But you might have just created more work for Ben when the excluded realtors come and explore this blog.
well, hopefully he’ll get more converts…
I’ve been thinking about making a lowball offer, and notifying the seller that the offer will work like a reverse auction, with my bid being reduced $1000/day. That should help keep them thinking about what is really happening.
LOL
~Misstrial
I’ve gotten into the habit or researching particularly interesting foreclosures in my neighborhood using public records databases and I’m finding an interesting trend. A lot of the nicer places where bought by real estate agents. Its makes sense that since they make up 1 of 50 adults in California, and where the biggest cool aid drinkers they would have over indulged. This one particular gal, her name ins’t important, has had 3 big places (>$2M) go REO in the span of 3 months. I wonder if the commisions were paying the difference between collected rents and interest, taxes, upkeep, etc and have no started to dwindle combined with the realization that she’d be feeding the aligators for a long time before they came up cash flow neutral. Either that or inability to refinance the 2-28’s she had with Countrywide on these 3.
Makes sense that realtors would be the worse off in this bubble pop - they had the easiest access to the cool-aid. In many cases people became realtors *because* they had drunk it.
Kind of like a drug dealer taking his own product. Most don’t because they see how it wrecks the lives of their customers. In the case of realtors though the wrecked lives didn’t happen until it was too late.
I sure hope all these realtors gulped the kool-aid and loaded up to the max with overpriced speculator homes on toxic mortgages. Unfortunately, my gut feeling tells me that most of them were probably buying through companies etc. so they are personally shielded from the bad consequences if anything goes wrong.
some did some did not.. realtor/loan agent 20 years.. with MBA.. sold in 04 because it was more than I could dream of getting… now gold, euro pacific, girard (piggs) make up my holdings.. advice for best property search.. vacant and owner is agent broker.. best deals around and most motivated sellers.. most agents are not that sharp so they sold a ton of homes for clients but purchased a theirs late.. glup glup..
Nomura just left, via the mooring ropes…
“TOKYO — Nomura Holdings Inc., Japan’s largest investment bank by market capitalization, said Monday it would close its New York-based residential mortgage-backed securities business, marking the latest fallout from the meltdown of subprime mortgages in the U.S.”
“Nomura said it would take a loss of $621 million on write-downs of residential mortgages and an additional charge of about $85 million for restructuring the business. That will swing Nomura to a pretax loss of as much as $510 million in the quarter ended Sept. 30, 2007. In the same quarter a year earlier, Nomura posted a net profit of about $2.1 …”
http://online.wsj.com/article/SB119243751907459021.html
What is the deal with first trust deeds? I have noticed they are advertised more and more as an investment product. Are they similar to a lien in terms of the dire financial situation they distill out of?
NOTE: a very brief answer:
A trust deed is a lien - just held by a third party. That there are so many ads for them these days - shows how bad off the housing market is. I can’t think of any reason why someone would go for a trust deed other than they need the money (its easier to foreclose on a trust deed than a mortgage- goes through the courts).
~Misstrial
Headin’ off into the housing abyss…
bye, bye now.
Something weird is going on at the short end of the T-bond yield curve today…
http://www.bloomberg.com/markets/rates/index.html
there are more surprises in the markets today like with the Gold/oil price. I guess the super-bailout superfund has something to do with it, and the brrewing US/Turkey/Iraq/Iran conflict does not help either.
Is is possible the announcement of the toxic subprime Superfund plan could have the unintended consequence of hastening an end to denial about the ongoing nature of the credit crunch? Financial engineering solutions may not be the ticket for dealing with market psychology…
http://www.marketwatch.com/
“This market is characterized by an overwhelming number of synthetic and derivative products that are not adequately understood by people who build them and by people who buy them. Investors in companies dealing in these opaque products probably bear risks that they never knew they were buying into.”
“They didn’t understand or someone was willfully deceiving them. I don’t think either is a very good excuse.”
Arthur Levitt, a former chairman of the Securities and Exchange Commission.
Financial opacity is clearly a root cause of the credit crunch. It also seems clear to me that the Superfund plan does absolutely nothing to eradicate financial opacity, and may in fact worsen the problem.
“Statistics are the triumph of the quantitative method, and the quantitative method is the victory of sterility and death.”
Hilaire Belloc
“Beazer Homes USA Inc., the U.S. homebuilder under investigation by the Securities and Exchange Commission, is asking investors in $1.5 billion of its bonds to approve changes to the debt agreements in exchange for a payment.
The proposed changes would require Beazer to deliver financial reports to investors only after the information is filed with the SEC, the Atlanta-based company said today in a statement distributed by Business Wire.
Some investors filed notices of default after Beazer failed to file its quarterly financial report with regulators. The company asked a federal court to block those claims….”
Bloomberg
http://tinyurl.com/2fdndf
As seen in the Florida thread:
New car sales drop; more buy used in Gainesville
Larry Scott, CEO of Campus USA Credit Union, said his office is writing more used car loans because consumers are facing sticker shock with the price of new cars.
“We are seeing a lot of migration to that one-year-old car with low mileage,” Scott said. “The median incomes in Alachua [County] have not improved drastically, but cars have continued to escalate.”
[...]
Loans are off whenever there is news about state budget cuts, UF budget cuts, property tax changes and rising credit card debt, he said.
“I think we’re having difficulty having disposable income enough to save for major [purchases],” he said.
Bob Miller, general manager of Tomlinson Motor Co., which specializes in one-year-old pickups and SUVs, said sales are off a little this year compared to last. When gas prices are high, he said he is able to offset some of his sales losses by buying hybrids and economy cars.
“Gasoline costs have affected our business more than anything,” he said. “A lot of people are singing the blues right now.”
“We are seeing a lot of migration to that one-year-old car with low mileage,” Scott said.
I see horrible deals on Craigslist in San Antonio. I looked for over 2 months for a decent 1 or 2 year old car with at least some of the warranty left (so under 50K miles).
Way too high. Went out and got a 2008 Scion xB for $16500 - was a much better deal than what idiots want. Financed it for 3 years at Penfed CU for 5.29%, opened a Penfed 3 year CD for 6%.
A modern car is not inexpensive to have worked on… electrical, fuel injection, etc - all very expensive to have serviced. Sorry, but just because you are an idiot who financed it for 72 months… doesn’t mean your car is still worth $12,000 now that it is 5 years old and has 100,000 miles.
After 1 week, very happy with the Scion. I’m a 38 year old adult BTW
I hope you realize that unless you can write off your 5.29% car interest you will be paying 1/3 of your 6% interest in taxes meaning that you are borrowing at 5.29% and earning 4%.
Another bubble takes it on the chin?
“Western art values dived at a Christie’s International London auction last night after two months of financial-market turbulence, while some Chinese paintings quadrupled their top estimates.
Four out of five works by Damien Hirst, the auction world’s most expensive living artist, sold for near or below their low estimates. A picture from Zeng Fanzhi’s “Mask Series” went to a telephone bidder for 700,000 pounds ($1.42 million) before commission, compared with a top estimate of 180,000 pounds.
Contemporary collectors of the U.K.’s Hirst, Germany’s Martin Kippenberger and America’s John Currin were among the losers, as an 11-year price boom slowed. Two Jean-Michel Basquiat paintings with top estimates of 2.5 million pounds each went unsold. The top lot of the week, a Francis Bacon nude, just scraped above its low estimate of 7 million pounds, before commission.
People “used to fight for every piece, no matter how important or unimportant, good or bad it was. Now they are more selective,” said Vladimir Ovcharenko, owner of the Moscow-based Regina gallery. “It all comes from the financial markets.” …”
Bloomberg
http://tinyurl.com/2hrkye
Art collecting used to be a pastime for the cultured. I suspect speculation has invaded it as well. I am sure that the true art collector is relieved to see that those who are just in it to make a quick buck are getting out. Speculators have a way of cheapening everything they touch, quite literally, I am afraid.
The weather is acting up again. In fact, the weather on Wall Street today is just plain nasty!
October 15, 2007 2:16 P.M.ET
BULLETIN
BENCHMARK CRUDE OIL CONTRACT HITS RECORD $86 A BARREL
Citi, oil send Dow below 14K
Stocks fall sharply as Citigroup warns about subprime-loan losses and crude oil futures rise to record highs.
Petrochina stock up $50 in 2 DAYS. I’m loving life.
Back from the abyss…
A sign I spotted there~
Paternity Testing !!!
Fast And Easy !!!
( ) ( ) ( )
Said signage, was planted into the grass, next to a curb, opposite a new car dealer, just before one makes the turn onto Main Street…
Somewhere in California’s Central Valley.
Good grief, these commish sales people never give up, do they.
Selling sub-prime loans one day, paternity testing the next. Will wonders never cease.
~Misstrial
Wanted to add that each Superior Court in CA already maintains an “approved” paternity testing (DNA) provider which is almost always a hospital.
Therefore, unless the paternity testing provider is approved by the court, its test results are not admissible in CA courts to prove parentage.
~Misstrial
Founder of Ameriquest is worth $1.5 b and is the Ambassador to the Netherlands…
http://blogs.abcnews.com/theblotter/2007/10/ameriquest-in-s.html
Wasn’t this the first sub-prime lender to go under? I believe they were under scrutiny for predatory lending at least a few years ago. Anyone else remember?
I sure do. The day the courts decided Ameriquest had to pay fines in exces of 320 million for predatory lending practices, was the day George Bush confirmed this ratbag as Ambassador to the Netherlands. He had been one of Bush’s biggets financial contributors.
Really? Wow, it seems like this should be all over the media - was the guy still running Ameriquest at the time, or had he already reached plausible deniability distance?
rather symbolic isn’t it, that they made this crook ambassador to a country that is maybe number one worldwide when it comes to housing bubbles … at least he understands what all the Dutch politicians are busy with.
Also, despite formal rules preventing him to do so he still seems deeply involved with the company, arranging business deals etc.
Just going from memory here (and a bad one at that), but I think he’s one of the greatest losers on the Forbe’s 400 list (was reading about it the other night). Believe he lost about that, but not sure…
FICO scores.. did some research and TransUnion seems to be best just FYI. Quite pleased at the score I must say.
Suze Orman recs them too
Of the big three, TU is the only one that give the “real” FICO score. The others, Experian & Equifax merely give their own “credit score.”
~Misstrial
Oops. Both my recent long pix (SIRI, JDSU) up on a fugly day. Hmmmm . . . .
New Health Scare: GRANITE COUNTERTOPS!
Paul Harvey is pitching a “radon detector”, and warns that if you have “granite” in your home, you may be at risk for cancer!
Now of course, I’m doubtful of his claim. But when house prices fall to 4x median income and you decide it’s time to buy, insist that the seller remove the granite countertops and replace with Corian.
Its true, though.
IIRC, granite “stores” radioactivity (from uranium/thorium, etc)and releases radioactivity slowly over time. Granite occurs to a great degree in CO (Rockies) which is where there are natural radioactive deposits resulting in radon.
A friend who holds a PhD in BioChem told me to stay away from granite products years ago and I have.
~Misstrial
Subprime Crisis and Deals Drop Could Mean Tough Times for Some Lawyers
Awww…they can just retrain for real estate law & family law. Even BK law. Heck, even criminal defense.
~Misstrial
I myself might end up in one of those categories…
Then I would rec BK law unless you don’t like Federal. Next, RE law/civil lit. Lots of suits against realtors/home inspection svcs - home debtors seeking any way out of the PA.
~Misstrial
I’ve actually been thinking criminal, if for no other reason than that if you’re good, you can get clients that pay cash up front.
–
“The first decline in corporate tax revenue since 2003 increased the shortfall by 12 percent to $162.8 billion for the year ended in September, from $144.8 billion in the 12 months through April.”
Another indication that the economy might be slowing into a recession. What happens to the Scam Market once the earnings decline, YoY, and keep declining?
Jas
-x-x-x-x-x-x-x-x-x-
http://www.bloomberg.com/apps/news?pid=20601103&sid=ac_PajNAGlzc&refer=us
Treasury Sales May Rise 50% as Deficit Suddenly Grows (Update2)
By Elizabeth Stanton
Oct. 15 (Bloomberg) — Sales of Treasuries may increase for the first time since 2004 as the U.S. federal budget deficit expands, jeopardizing the biggest bond rally in five years.
Government auctions of bills, notes and bonds in the fiscal year that started this month may rise more than 50 percent to $220 billion, according to UBS Securities LLC, one of the 21 primary dealers that underwrite Treasury auctions. The first decline in corporate tax revenue since 2003 increased the shortfall by 12 percent to $162.8 billion for the year ended in September, from $144.8 billion in the 12 months through April.
With the Federal Reserve cutting interest rates to keep the economy from falling into recession and inflation slowing, an increase in net sales would mar an otherwise bullish outlook for U.S. government debt, which has returned 4.3 percent this year, Merrill Lynch & Co. index data show. Less than six months ago, Treasury officials credited a shrinking deficit for allowing them to eliminate sales of three-year notes.
“Unless the economy turns on a dime and starts to show strength again, we’re going to be looking at increased Treasury issuance beginning with bills later this year and spreading out across all Treasuries beginning in the first quarter,” said William O’Donnell, head of U.S. government bond strategy at Zurich-based UBS AG’s securities unit in Stamford, Connecticut.
…
We’ve gone past the R word, into Stagflation, after which the next stop will be Hyperinflation…
all on board.
how bout the Chinese just start “rolling” treasuries over, pretty sweet deal….
This long bond rally we’ve been in has the entire yield curve in a a 60bps spread.
Hey Ladies and Gents,
I have recently come back to the board after being away for some time. I have just wrapped production on a major hollywood release due out next month and now have a bit of downtime. I am enjoying a well-deserved day off at home, reading the paper and the hbb.
A few updates from West Hollywood, CA. The major studio visual effects company I work for is about halfway through the process of laying off over half of the company. As the current productions finish, they are sending their workers packing. These layoffs include many ‘old-timers’, here 8-10 years (my company is only about 11 years old). Concurrently, they are off-loading work to their new India studio and getting ready to set up shop in New Mexico. For those of us who are left, they are having small seminars on the future of the company, no doubt to encourage the relocation to New Mexico.
Keep in mind that many of the people let go bought houses or condos during the recent boom. I am seeing much of the relocation, forced selling, and such talked about on this blog, firsthand. Thanks again for helping me through those tough times in 2005, when I was just burning to buy a property. You guys rock!
As for the housing market, signs of the changing winds are very evident here from 90048. For one, the mls inventory is quite high and relatively stagnant. I can’t say that nothing is selling, but it’s on different terms. A house on the corner of our block is a mega flip. They bought the crappiest house on the worst lot in the ‘hood last Jan for $815k. They have completely rebuilt it into the nicest house in the neighborhood now listed for $1.795M, which you can see here :
432 Westmount Dr
Last week, my roomate and I were checking out the house, when we were invited for a tour by one of the flipper partners. This guy was actually very nice and accomodating. He and his partner do commercial RE, after losing $85k on a deal in San Diego, they are now doing residential. They told me how they are bidding $300k-$600k below asking on the properties in the neighborhood and are aware how risky the current market is. He also told me a fact which I already know, that many of the properties in the neighborhood are in payment default and for sale, which makes them ripe for lowball offers.
While we aren’t quite there, the fact that someone in RE game telling me that the ‘lowballing’ offers is working, I know that we have atleast made some progress, even if it isn’t headline news.
With regard to headline news, for those of you who read the pathetic ‘Stuck in a Glut’ article in Sunday’s LA Times RE section, here is the letter to the editor which I just submitted in response :
Your reckless reporting (or lack their of) in the Real Estate section continues as you try to pass blame for the current slump onto builders and banks, for flooding the market with cheap homes in ‘Stuck in a Glut’. I have been appalled in the last few years to read the endless cheerleading and articles supporting the REIC’s mantra of ‘buy now or be priced out forever’, without any balanced reporting or caution about the real cause of the historically unprecedented rise in home valuations - easy credit, liar loans, and fraud. For the past few years, low overnight lending rates, an overly liquid ABS market (packaging any loans they can get their hands on), and fraudulent bond ratings (Moody’s providing AAA ratings on investment pools comprised of toxic mortgages) allowed mortgage brokers to encourage millions of people to lie about their incomes on applications, accept much more mortgage than they could afford, all based on temporary teaser payments. As these temporary financing conditions expire, the chickens are coming home to roost, and the ridiculous party of the past 5 years is heading into its hangover stage, sure to last for quite a few years. You cannot make up for lost time, but try to do your readers a service and not just your advertisers, by reporting on the true cause of the current downturn in the housing market - reckless financing both on part of the lenders and borrowers. It’s not too late to save some of your credibility.
Sincerely,
Prudent Renter
West Hollywood, CA
Do you think that was a decent response? I tried to be as concise as possible, although I probably lack the eloquence of many who post on this blog. Any advice to make my letter better would be appreciated.
Anyway, thanks for reading my random update. It’s good to be back on! It’s better to not be wrapped up in the mess!!!
Welcome back and thanks for the local report in your ‘hood.
waiting_
Isn’t it amazing how the Hollywood strike is happening at Exactly the wrong time?
Nice response to the el lay times, by the way.
Good post & excellent response to the LAT, waiting. Glad to see you back!
Thank Guys, it’s good to be back!
Just called the Police on a Realt-whore.
In my community, it’s against the law to solicit business at a residence if you have a “no soliciting” sign up.
I called the Police, who came and advised her of the law, and took a report.
Now I can go to Small Claims court and collect $500. (I’ve done it before. Easy.)
Check your community for local soliciting laws….
There ya go…making money in a down market! Congrats!
~Misstrial
Holy heck that’s fantastic. And if she doesn’t promptly pay the $500, report the debt to the credit agencies, and report her to the RE licensing agency in your state for violating the law in her business and having bad debts - perhaps you can even get her license revoked!
I’m on it! Nothing’s worse than a kook with some spare time (me!).
Here we go—our first reality show for failed flippers:
http://www.azcentral.com/abgnews/articles/1011abg-foreclosuretv1011.html
But the reporter didn’t get it. They titled the article:
“Local reality show exposes woes of the rich”
Every “rich” person I know, who busted his but to earn some millions, stayed far away from house flipping as a source of income.
It seems the plan by CITI and Pals was able to call more attention to the problems in the commercial and mortgage backed paper market. If things were supposed to be wrapped up in those rough 3 weeks of late August and early September, a seemingly desperate move by the banks may cause some market participants to rethink the “worst is over” mantra. Perhaps the bulls will look in their car mirrors, see the goliath of a true credit crunch, and realize the little sign on the mirror is true:
“WARNING: Objects in Mirror are Closer Than They Appear”
“The U.S. Treasury is involved in the discussions, but taxpayer money is not expected to be used.”
What does “not expected to” mean?
“The government-led discussions are similar to conversations the Federal Reserve Bank of New York conducted in 1998 to help organize the bailout of hedge fund Long-Term Capital Management. Taxpayer funds were not used to bail out Long-Term, either.”
LTCM involved less than $4B, nobody wanted their crap positions ergo the strong arm tactics. The government discussions and the plan proposed are closer to the RTC that has cost tax payers $100B to date and still counting.
“We are coming off the greatest lending bubble … in U.S. history. We will feel its impact for a very long time,” said Robert Arnott, Chairman of Research Affiliates LLC in Pasadena, California, earlier this month.”
All quotes from Reuters news
http://tinyurl.com/2ntuxt
terms appear to be difficated, to use the common vernacular.
***************************
TORONTO, Oct. 15 /CNW Telbec/ - The Pan-Canadian Investors Committee
for Third Party Structured Asset Backed Commercial Paper (ABCP) is
providing the following additional information with regard to the
Montreal Accord’s standstill arrangements, as extended to December
14, 2007. The arrangements include the following key elements:
1. The members of the Investors Committee have agreed to
take no action to enforce any default rights they may have against
the issuer conduits during the extended standstill period.
2. The asset providers which are counterparties of the
Third Party ABCP conduits will not pursue any existing margin calls
or make any further margin calls during the extended standstill
period.
3. The Investors Committee will take steps to encourage
the Third Party ABCP conduits not pursue any existing liquidity calls
during the extended standstill period or make any further liquidity
calls for 150 days after the extended standstill period.
“5.25”
The peak in the 10-year Treasury yield in 2006 was 5.25%.
“45”
$45 is a critical level for crude oil to defend.
“550”
The lower end of the trading range in spot gold is $550.
“80”
A break of 80 would imply a longer-term secular decline for the U.S. Dollar.
****************************
looking back to earlier this year.
if you know and understand the significance fo this reference on this blog:
According to Voltaire, Pangloss was a teacher of “metaphysico-theologico-cosmolonigology
we are getting somewhere