Bits Bucket And Craigslist Finds For October 16, 2007
Please post off-topic ideas, links and Craigslist finds here.
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Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Bernanke has a Warning for Wallstreet.
“We will not bail you out”
http://money.cnn.com/2007/10/15/news/economy/bernanke_speech/index.htm?postversion=2007101522
Too bad he “says” one thing, and does another.
He also made the ridiculous claim that just because the dollar is falling in value does not mean inflation is a problem. Huh? What is the definition of inflation?
How does inflation pay off loans for Wall Street? Income doesn’t increase with the rate of inflation. If it did eveybody would welcome it.
I’m getting tired of reading every day about whether there’s going to be another rate cut. These people are like junkies. Let the market sort these things out!
14,000- we barely knew thee
http://biz.yahoo.com/ap/071016/wall_street.html
I love that phrase. Very happy to see 14 in the rearview mirror.
I do too!
When it gets down around 10,000 then to me something will be different. Until then 100 points up or down, back and forth, doesn’t mean much to me.
Even if we had a 22% one-day drop, we are STILL up there. For 1987 to happen again, I say DOW 9000 would be equivalent - maybe.
Good point. This is starting to filter down to the average person on the street who is not necessarily heavily invested in the market. Someone commented to me yesterday “I don’t know where we got this idea that things have to go up all the time”. In other words, people do feel that it is perfectly reasonable for the market to rise and fall, for the price of things to rise and fall, for housing to rise and fall and what’s all the fuss about if things go down in price?
All I want is a PE of 15 with typical profits, not top of the bubble profits. All I expect is 5% over inflation with a 10-year hold. Can’t get it buying now.
They are now admitting 3Q profits are down, but they project 4Q profits will be up. They can try cutting labor, but then whom are they going to sell to? Customers using borrowed money?
They are now admitting 3Q profits are down, but they project 4Q profits will be up.
My guess: it’s a kitchen sink quarter. When you drop a bomb like that, get everything bad out all at once (and forward load expenses to the extent possible.)
Jobs cut noted everywhere in this AM’s Beantown Globe.
Boston Scientific, AOL, & government of Rhode Island which is the state’s largest employer (snicker) were the one’s making the big story headings.
World economy is redundant and produces too much shit nobody needs.
The the collapse of the consumption binge enabled by the ATM HELOC process is just starting.
Sure the fook glad I’m not holdin’ a $500k mortgage at the moment.
Please. This is so far from being a big bath. They’re not even washing up a bit. They’re all like…what’s that Charlie Brown character?…Pigpen? A bunch of Pigpens. Filthy with write-downs that need to be taken eventually.
Someone commented to me yesterday “I don’t know where we got this idea that things have to go up all the time”.
Easy answer Palmetto. It’s the business types who are not satisfied with standing still. It all has to be up and up and up happy happy joy joy! It’s not enough to make consistent 7% profit margin, no it’s gotta be 9% next year 11% the year after etc. Or even worse, it’s not enough to be 5% MORE than last year, next year it’s got to be 7% MORE than that. In other words, instead of progressing linearly, companies want acceleration in an ever-tightening spiral. Even worse, they come to depend on it! I’ve seen it in everything from increases in real estate values to worker productivity to box office figures for movies. And they can’t seem to understand that there are upper limits to things. What happens if your business model depends on increasing worker productivity each year? Eventually you crash. And we are heading for crashes in a lot of things.
The model used by banks to create money depends on an ever-increasing spiral of things going up. The system would collapse otherwise.
true
Some of BB’s comments yesterday can easily be interpreted as laying a foundation for more rate cuts. How much “help” is possible before markets cease to function entirely?
Fed chief to ‘act as needed’
Market’s recovery likely to take time
By Jeannine Aversa
ASSOCIATED PRESS
October 16, 2007
WASHINGTON – A deepening housing slump probably will be a “significant drag” on economic growth into next year and it will take time for Wall Street to fully recover from a painful credit crisis, Federal Reserve Chairman Ben Bernanke warned yesterday.
Bernanke once again pledged to “act as needed” to help financial markets –
http://www.signonsandiego.com/uniontrib/20071016/news_1b16bernanke.html
THE MORNING BRIEF
By JOSEPH SCHUMAN
Housing Worries Haunt the Fed
October 16, 2007 7:15 a.m.
Federal Reserve Chairman Ben Bernanke yesterday suggested economic uncertainty leaves the Fed waiting for more data but that the prospect of greater fallout from the housing market still has policy makers spooked ahead of their next interest-rate decision on Halloween.
In a model of central-banker understatement, Mr. Bernanke noted to the Economic Club of New York that “the past several months have been an eventful period for the U.S. economy.”
Indeed…
http://online.wsj.com/article/the_morning_brief.html
I will say it again and again, Bernanke has clearly chosen the road to Weimar; no turning back now. This will end in tears and unfortunately other central banks like ECB are following him because they think they have no other choice for getting rid of all the debt. Just look at the currency values priced in gold …
Don’t you love how they consistently use “spooked” when talking about Fed officials?
Wall Street pays off loans? lol
Federal Reserve President William Poole spoke Tuesday before the Industrial Asset Management Council in St. Louis.
The depreciation of the dollar is something that is not explicable. We cannot explain the fluctuations of currencies after they have occurred even with all the data that we can dig out. And therefore, to me, it’s completely unsupported idle speculation not only to make the forecast but to talk about why the dollar has behaved as it has.”
They don’t want to talk about it.
And therefore, to me, it’s completely unsupported idle speculation not only to make the forecast but to talk about why the dollar has behaved as it has.”
If this fellow doesn’t understand why the dollar is going down the tubes he should resign right away. The FED has been devaluing the dollar for years and years.
Oh gawd - this one of Fed presidents???
Okay - it think maybe I should apply to be a reserve President, because I can explain the dollar phenomenon in 3 sentences:
By lowering interest rates, you’ve made everyone around the world think that the Fed will be printing their way of trouble. Thus, people have quite rightly want more dollars in exchange for their money. Raise interest rates and the dollar might at least flat line.
On second thought, Bill is right - dollar movements are totally unpredictable, so it’s probably best to not talk about it.
By lowering interest rates, you’ve made everyone around the world think that the Fed will be printing their way of trouble. Thus, people have quite rightly want more dollars in exchange for their money. Raise interest rates and the dollar might at least flat line.
It is even more simple. Currency traders (via retail brokers) pay interest on leveraged money. Currency brokers offer from 50:1 leverage (Oanda) to as high as 400:1. They have automated systems to close out your positions before you exceed your initial “real funding”. 3% on a currency is a large move… overall things move much smaller than stock market.
When you lower interest rates… currency tranders, and banks, sell that currency as it is lost income to hold it. More sellers = drop in demand = lower price.
If you interest rate is 14% when everyone else is 3%… you are going to attract currency buys (and the increased demand = higher price).
The depreciation of the dollar is something that is not explicable.
Outrageous! The only thing not explicable is how Poole got to be president of anything! How these dolts at the Fed got to be so powerful is beyond belief!
Poole is one of the FED speakers that has rather consistently pushed the inflation route to keep everything ‘just fine’. And obviously his masters are very satisfied with the outcome.
IMHO he was the only dissenter for the last year on keeping rates steady, he has consistently voted for raising rates until this spring.
well maybe you are right and he only got in the spotlight for me when he started saying the stupid things …
He was that one that idiot Cramer wanted to resign because he (Poole) didn’t think the fed should lower the interest rate.
oops … he was the one
Buy gold!
From a chart in Richard Maybury’s Early Warning Report:
Gold up 134% since 2001
Housing up 58%
And the dollar down 22% versus other currencies
“They don’t want to talk about it”
Exactly. They know darn well they’re causing the plummet, but figure with a little misdirection (even us smart people can’t figure it out, so you dumb common folk sure aren’t going to) they can keep the unwashed masses clueless.
I just love how for years, we (us wage earners) have had to stand up to the worn out message of “you have to step up, buckle down and work harder” but the messengers expect to be carried through rough times by us.
Talk about hypocrisy.
exeter, this is what majorly pisses me off, too.
They are called “revolutions” because they keep coming back!
Anger is a gift.
when times get hard, the suits will find out the worker bees sting.
I think that I have said this before: the elites will increasingly oppress and steal from those who actually work until they suddenly find themselves facing a firing squad or a guillotine blade, and only then will they say “I guess we went too far”.
Palm,
Blatant hypocrisy tends to do that to folks.
Excellent point.
Do as I say…not as I do. Yeah, let’s see how long this can keep up.
Oh yes, Pimp Gross is sure that the FED will cut again next month and lower rates to 3.75 (but just to make sure that the FED bailes his underwater bets out, he is going public with the statement). Although Gross is looking more dishonest by the day, this sounds more realistic than the lies that come out of Bernankes mouth.
http://tinyurl.com/2esdk4
Bernanke … “says” one thing, and does another.
He also made the ridiculous claim that just because the dollar is falling in value does not mean inflation is a problem. Huh? What is the definition of inflation
This is a misreading of Bernanke’s words, and sounds like the listener started without the benefit of an open mind. Bernanke qualilfied his remarks at great length including comparisons to historical fluxuations of the dollar and a longwinded admission that detecting bubbles and reacting in a timely and appropriate manner is a pressing unsolved problem for all central bankers. He has been running the show in a transparent manner if nothing else, when he got into office he raised rates until the strain started to show and then eased up only enough. He spoke about how much guess work is involved and how the Fed especially now is watching carefully for signs of inflation that would indicate rates need to be raised again. There are three measures of inflation he made reference to, all of which show a slight recent easing. His explanations for how inflation relate to money supply were much more cogent and believable that those I find here, and also included much better references.
No wonder we get such terrible representation when even reasonable moves generate all this howling and yelling. Reasoned feedback has become rare. Instead people just want to yell about how the government is taking advantage of them.
Ummm…..no.
We’re now howling just for the sake of howling. When the Fed refuses to take into account food, fuel, and housing when they decide whether or not there is inflation, they are:
1. insulting our intelligence.
2. Being incredibly dishonest.
3. Hoping to be able to inflate their way out of the horrid financial mess they have created without actually calling it inflation.
4. Punishing those who work hard and save money by effectively taxing our purchasing power without representation. I seem to recall Americans had an issue with that at one time in our history….
Should be “We’re NOT howling just for the sake of….”
Glad you came out to calm things down a bit Mole.
My concern is that there is a significant difference between what the Fed thinks are metrics and measurements of inflation and how things are down here in the work-a-day world. It is my understanding that the CPI has been tweeked and tuned and noodled with so much that it is now very decoupled from the true cost of living. Now, to Bernanke’s credit I do not believe he had too much to do with that, but I believe he should be aware of it. Thus, for him to cite “the trend component of inflation, such as core inflation, …, aggregate demand, …, still-high levels of resource utilization and elevated prices for oil and other commodities.” while acknowledging “the great difficulty of knowing how financial conditions would evolve or the extent of their effect on the economy” without addressing the apparent decoupling I mentioned above seems misdirected. If one knows that something is hard to measure why not look at how the measurements may be contributing to that uncertainty? I say remove the omissions and abstractions in the CPI and make the tools you use more accurate if you are serious about managing the economy. It does not take a carpenter long to determine that his rule is giving him the wrong measurements when things do not fit.
I do want to note that by adding in the price of oil uncle Ben is taking at least some things outside of the core into account.
City Lights
Published on October 11, 2007
Beyond Our Means
By Don Bauder
It was succor for Wall Street and “Sucker!” to the overall economy, including San Diego and other cities with housing-related economic woes. On September 18, the Federal Reserve prescribed a double dose of sharply lower interest rates that will provide little help to the anemic housing industry, accelerate the plunge of the dollar, bring rising inflation, discourage desperately needed savings, and in other ways harm the long-term interests of the U.S. economy. But the lower rates will buoy Wall Street’s financial-engineering sharks and hence the stock market — and that’s what’s important to the central bank.
http://www.sdreader.com/php/cityshow.php?id=1724
One of the “perks” of Condo ownership…
http://www.boston.com/business/personalfinance/articles/2007/10/16/delinquencies_at_condos_can_cost_neighbors/
Another hit for the banks, the condo fees get a high priority lien.
But the IRS gets top billing in liens. How many of these self-employed, out-of-work people do you think actually paid their quarterlies. I’d bet most of them will be slapped with a big fat IRS lien on their house. That means banks will get even less. Tell me they’re not going to be hurting.
It could be worse. It could be co-ops. There, you have a common mortgage in addition to building operating costs shifted to those still paying as other default.
Took down a lot of people in NYC in the early 1990s.
“When people fall behind, that puts a strain on our budget, and we have to hold off on projects that otherwise we could have gotten done - and that’s not fair for the rest of the owners,” said Jose Feliciano, an association trustee who estimates Dale Village has had at least a 10 percent rise in delinquent fees in the past year, as well as an increase in foreclosures on units.”
Quite a shame that such a talented guitarist has had to resort to managing a condo complex. Times are tough!
Mugsy,
this has to be the funniest post ever…
that did not require a crystal ball. A big duh. Also, this will cost municipalities as well. Another big duh. We ALL pay.
Even though we were not directly participating in this mess, we will ALL get hit. Even if you have $$$ in gold, offshore, whatever. We will ALL pay more for this debacle.
I need more coffee. I can’t be this bitchy to my coworkers. My apologies
/rant off.
“The effect of a unit owner not paying condominium fees is to create a large burden on innocent unit owners,” said attorney Henry A. Goodman, whose Dedham firm, Goodman & Shapiro, also represents condo associations. “No one in a single-family home is obligated to pay his neighbors’ debts,” he added, “and condo owners should not have to pay their neighbors’ debts either.”
Wow, great link. That’s why living in a condo would scare the daylights out of me. I experienced a mild version of this while living in a HOA. I don’t know if the laws in Florida have changed, but it used to be that when a bank took a unit back in foreclosure, it didn’t have to pay any fees at all. So all the other unit owners got stuck with increased fees and a deteriorating unit until it got sold. And when it did, the foreclosure sale of course dragged the comps down for the rest of the units. This sort of thing will mushroom during this bust. One of the owners where I’m living now (I’m renting) is not paying her fees, I heard the manager talking about it. The board has agreed to wait to collect until she sells, since there’s no bank involved. That’s how bad it is, that owner doesn’t even have a mortgage and can’t pay the fees (not a primary residence). Truth is, she probably could, but the money is going elsewhere and the condo is the least of her concerns.
But Palmy, I think 100% of us agree that we should not pay our neighbor’s debts, but we WILL end up doing so even if we don’t want to do so. Increased taxes that towns will need to charge to combat blight, etc. and we are not even talking about a bailout. Effectively, we will be paying for FB’s flat screen TVs.
‘Effectively, we will be paying for FB’s flat screen TVs.’
It never ceases to amaze me, the lengths to which people will stretch to yearn for being taken advantage of in all of this. You might pay for a lot of things with your tax dollars, but TVs aren’t one, IMO. Give yourself a break!
I sort of get MBA’s point, though, if you view condo or HOA fees as a tax, which they are, in a way. In the example I gave, I happen to know the lady has pets that she spends a lot of money on. No, pets are not flat screen TVs, but if she gave away her pets, she could probably afford to pay the condo fees. I probably will get a good flaming from the animal lovers on this board (I’d love to have a dog, BTW, but just now I don’t want the expense or responsibility until I’m settled), but I don’t think it is right that other condo owners are, in effect, subsidizing her pets, at least temporarily. And they’ve been good sports about it.
When the ex and I first moved over here, we stayed with some friends who had purchase a small, five acre ranchette. The wife had “always wanted horses”. They had three horses, two dogs, a cat, etc. While being dunned for credit card payments and complaining about the credit card companies and trying to work out payment plans. I might have felt a little more sympathetic if they had not acquired the horses AFTER building up credit card debt. The expense of keeping the horses was pretty big. And of course, the CC companies do find ways of passing the costs of deadbeats on to those who pay their bills on time.
Good discussion. The same is true of many aspects of society e.g. many people believe we don’t have socialized medicine, when in fact we already do. When you go the emergency room for a broken arm, and it costs a couple grand - a very large chunk of that money goes towards paying for emergency room visits for those that can’t afford emergency room visits. The hospital “eats” the cost - which is another way of saying that they pass it on to others by charging them more for their services than they otherwise would.
Not that I’m advocating otherwise (see thread from yesterday - don’t want to go there) - just saying that that’s the way it is. And very often the reason people can’t afford emergency room visits is because they spend money on things that they can’t afford.
If you say someone’s income/pay is a bucket. They no longer can take from the bucket (it’s empty) because they used it for sh!t (TVs, etc.) then they don’t pay HOA or taxes to municipalities and default - or inadvertantly cause YOUR taxes, fees- whatever - to go up, you have, in effect, subsidized the FBs inefficient use of their income. In other words, YOU PAY, even if it is 3 cents of the TV’s $3000. Now compound that by thousands of FBs. I am PISSED!
When you go the emergency room for a broken arm, and it costs a couple grand - a very large chunk of that money goes towards paying for emergency room visits for those that can’t afford emergency room visits. The hospital “eats” the cost - which is another way of saying that they pass it on to others by charging them more for their services than they otherwise would.
Exactly! Hospitals have found a way to impose non-linear pricing on consumers. This is why I try to negotiate the cost for everything up front. Actually, I think it would be a great coup to pass a law that hospitals have to have a menu of prices publicly displayed, like McDonalds. Then they couldn’t pull this crap.
Everyone remember the video of the bad areas of Detroit a few days ago. Did you see how many of those falling down shacks had dogs in the back yard?
The last time I was in a hosp emergency room, I thought I was in Mexico city. No one spoke english except the nurse. After waiting 2 hours, I was told to go home with an ice pack and call my doctor in the morning because they were too busy to see me. I have blue cross/blue shield, and after receiving a cast on my wrist, my policy cancelled.
O… M…. G….
Palmetto, can you find out if this is still the case? Because, if so, some of these condo communites are going to be just about unsellable at some point in the VERY near future. You look at a building like 610 Clematis (where I fully expect about 30% default rate) and think about the implications of that. HOAs are already SKY HIGH in these inner city communties (they have to be, because of all the security measures needed), think about adding double digit percentages to that amount, while, at the same time, subtracting double digit percentages from the value of the units (through all the foreclosures)..
If this is still the case, at some point (which, I think, is getting near… Less then a year) these units are truly going to be unsellable. Couple that with the unwillingness of lenders to accept FL condos (got to love how they singled out FL) as collateral….
Oh boy, that could get UGLY really quickly!
As another poster is fond of saying:
FL CONDOS FOR EVERYBODY!!
I’ll see if I can find any info. This was in the late 1990s. The one point I’m fuzzy on is whether or not the bank had to pay anything to the association at closing. And also, this was a HOA, not a condo association. I believe the laws are different.
This was my first (and last) experience with a HOA. One of the old timers had to explain to me that the laws of associations heavily favor banks, otherwise banks wouldn’t lend on units in HOAs or condos, for that matter. So everyone had to just suck it up.
There are condo buildings that have not recovered from the last batch of hurricanes. Do some research and you will find that there are complexes around that are essentially doomed because all of the units come with five figure leans for repairs that had to be done and are to some extent ongoing. This mess of condos and HOAs self destructing because they could not get the fees required to function predates the bubble bursting by quite a few years.
I’d be curious to see if that’s the case here in CA as well - if so, you’re going to see skyrocketing HOA fees at places where they were already $500/mo to begin with…
I follow some condo blogs in Seattle…the commenters all sound like baby birds with their mouths open looking to be fed, upset that the bamboo flooring in the model unit didn’t exactly match the countertop. They can’t imagine that they might be able to to upgrade their own unit, or that the bamboo flooring match is nothing (in terms of determining value) compared to the crack house across the street that nobody talks about, or the 37-story building going up across the street that will turn the pool (in Seattle!!!) deck into a wind tunnel, etc., etc. Their naivete is striking.
‘that did not require a crystal ball. A big duh. Also, this will cost municipalities as well. Another big duh. We ALL pay.’
Yep, and unless some helicopter full of jobs and la de la shows up, I am picturing the cost of living ratcheting up in the years to come to a screaming level,too. I can not even look at paper dollars any more and think they represent anything except a way to buy stuff that has no appreciation left. Tell me, what is worth investing in nowadays for the prices being charged?
As I remember during the last downturn in MA the real culprits were not individuals but investor groups that bought up large blocks of condo units. When they declared bankruptcy the back condo fees were never recovered. The remaining legitimate owners who were fully paid up on their HOAs would be sued by the contractors looking to be paid for some major improvements such as roofs or replacing balconies to be paid. So the innocent would still end up with liens on their units to make up the difference and couldn’t sell. That memory inspired me to never own a condo.
Thank you all for giving me yet more reasons to cringe at the word “condo.” Here in central Ohio, there are condos everywhere. And they are not just apartment units, but attached-product “ranch condos” (kinda like one-story row-houses with a garage sticking out front) and even some SFH condos. Apparently, you only own the dwelling, not your front yard, and you have to pay HOA.
It used to be a builder would build the house and then butt out, leaving an actual “town” full of proud owners to personalize what they want. Now the builders or HOA are acting like parents who won’t let go of their kids, making “developments” and instant communities. I wondered why, until I read about this conde fee crap.
Where I live in NE Ohio the builders have to turn ownership of the condo assoc over to the owners after 2/3 of the project is built, or after a certain number of years. They can’t hold onto the assoc and manage it. That said, I think buying a condo now would be a very risky investment. One that could cost you dearly if many default on their mortgages.
I bought my first (and last,) condo in Mammoth Lakes, Ca. in 1972 for $14,000. That winter the plumbing froze and roof fell in. Some wag made up a bumper sticker that read:
“Condo(m). Buy one when you want to get screwed.”
That’s a good one~
(not your late condo, that is)
just imagine how bad it is in some London (UK) subblurbs where some of the condo units have over 90% vacancy rates (most of the units were sold to straw men by clever criminals who took the money and ran). The bad news for the mortgage owners (probably NR, Deutsche Bank etc.) is that most of the remaining owners in the building are very subprime, and with 15x income mortgages there is not much chance of collecting extra repair/maintenance fees.
So these buildings will just fall into disrepair… perhaps the ultimate end of the bubble will end up creating new ghettos… Gotta go find myself a nice abandoned condo to move into…
nhz…
I remember you had quite the squatter population in Holland, once upon a time~
What’s it like now?
squatting (’kraken’) was hot around 1980, just before the last housing crash (-40%). At that time politicians were afraid it would turn into a revolution and used brute force (tanks in the streets of Amsterdam etc.) to keep things in control.
It’s difficult to see what is going on because in my (relatively small) town it is nearly non-existent. A few months ago a squatter who peacefully moved into a long-deserted home was arrested by the police. The next day they found out that squatting was perfectly legal in this case (empty for more than a year and no claims from the owner). I think the squatters are returning but newspapers don’t want to write about it except if things get out of hand (like when they use the military to remove the squatters). The cause is the same as in the seventies: lots of empty homes owned by speculators who are getting rich while destroying the neigborhood, and a shortage of homes for young / low-income people. When people see that government is consistently on the wrong side, they will take the law in their own hands. I have heard about similar problems in some other big EU cities.
I was wondering if those remaining London owners are facing liens on the property too?
I just found that whole situation so unfortunate. The good people (in MA) couldn’t even flee the deteriorating situation. They were trapped until prices started rising again. (This was the story of my Oxford educated co-worker who had never even bounced a check in her entire life.)
Junk mortgages under the microscope
A close-up of one deal shows how subprime mortgages went bad.
http://money.cnn.com/2007/10/15/markets/junk_mortgages.fortune/index.htm
So let’s reduce this macro story to human scale. Meet GSAMP Trust 2006-S3, a $494 million drop in the junk-mortgage bucket, part of the more than half-a-trillion dollars of mortgage-backed securities issued last year. We found this issue by asking mortgage mavens to pick the worst deal they knew of that had been floated by a top-tier firm - and this one’s pretty bad.
It was sold by Goldman Sachs (Charts, Fortune 500) - GSAMP originally stood for Goldman Sachs Alternative Mortgage Products but now has become a name itself, like AT&T and 3M.
http://money.cnn.com/2007/10/15/markets/junk_mortgages.fortune/index.htm
Excellent link! Just excellent. Shows what a bunch of sleazeballs GSC are and where some of these “securities” ended up (hint, maybe in your 401k)
This looks kosher. There is no hanky panky involved here. It’s all good. In any event, it’s a good thing the people at Treasury are working hard to secure our economic future by creating a Super-SIV to disperse this stuff to another galaxy.
La Kosher, no sir.
Goldman (GS), along with Morgan Stanley (MS) and Merrill Lynch (MER) have a trillion dollars in liabilities and only 40 billion dollars in equity. A 25: 1 ratio. A 4% drop in asset values and I believe their equity is wiped out.
If the FED is going to artificially manipulate the markets in the name of stability, why not start by requiring FRE, FNM, GS, MS and MER to have higher debt to equity ratios?
..a trillion each
…and I meant lower debt to equity rations
If the Fed is going to artificially manipulate the markets in the name of stability …
That doesn’t make any sense. The Fed saw a credit crunch and provided some loans. Then the Fed saw recessionary indicators and eased rates. None of this is remotely unusual, and there is absolutely no way the the term “artificially manipulate the markets in the name of stability” fits what has gone on.
Let’s be clear about this. Both the value and the risk for these loan packages that are imploding are an unsolved mystery for everyone. Less value that they were sold for? Almost certainly. More risk than expected? Absolutely! Now put hard numbers on that. The process of marking to market is messy when the products are complex abstractions and very slow when real estate is involved.
I don’t know, all I care about is why oil is breaking new highs every day, and why I cannot go to any country anymore.
Cutting rates in face of the falling currency and the bull markets in commoditties is reckless.
“Both the value and the risk for these loan packages that are imploding are an unsolved mystery for everyone.”
BIG BAD MOLE MAN TROLL ALERT
The process of marking to market is messy when the products are complex abstractions and very slow when real estate is involved.
———————–
Not a problem if there is complete transparency with regard to the collateral and loans backing these products. Time for the IRS to get involved — I believe there’s some sort of computer program where you can get a person’s latest tax return in a few minutes. Couple that with a credit report and you have a good idea regarding what their DTI ratios should be. Next, examine the historical (pre-2001) prices of the collateral (housing).
Voila! You will have a VERY GOOD idea as to the “value” of those investments. Mark them to market, and no bailouts would be necessary.
Why do you think this is such a difficult thing to do????
Fantastic article! One of the best I’ve read yet.
My favorite part about it is that it is talking about a Goldman issued MBS. Goldman has been crowing that they were smart enough to make money from this mess, this article basically says point blank that 1) the only reason they made money was that their product deteriorated so badly beyond projections that their hedges ended up paying off way more than expected and 2) they completely screwed their customers in the process.
This article laid it all out. Kudos to the writer, and I can’t remember the last time I said that.
Fun description of this garbage fund:
“In the spring of 2006, Goldman assembled 8,274 second-mortgage loans originated by Fremont Investment & Loan, Long Beach Mortgage Co., and assorted other players. More than a third of the loans were in California, then a hot market. It was a run-of-the-mill deal, one of the 916 residential mortgage-backed issues totaling $592 billion that were sold last year.
The average equity that the second-mortgage borrowers had in their homes was 0.71%. (No, that’s not a misprint - the average loan-to-value of the issue’s borrowers was 99.29%.)
It gets even hinkier. Some 58% of the loans were no-documentation or low-documentation. This means that although 98% of the borrowers said they were occupying the homes they were borrowing on - “owner-occupied” loans are considered less risky than loans to speculators - no one knows if that was true. And no one knows whether borrowers’ incomes or assets bore any serious relationship to what they told the mortgage lenders.
…
Even though the individual loans in GSAMP looked like financial toxic waste, 68% of the issue, or $336 million, was rated AAA by both agencies - as secure as U.S. Treasury bonds. Another $123 million, 25% of the issue, was rated investment grade, at levels from AA to BBB–.
Thus, a total of 93% was rated investment grade. That’s despite the fact that this issue is backed by second mortgages of dubious quality on homes in which the borrowers (most of whose income and financial assertions weren’t vetted by anyone) had less than 1% equity and on which GSAMP couldn’t effectively foreclose.”
That garbage was easily sold to people whose full time job is creating portfolios of “safe” investments for “conservative” investors.
I knew this was the case already, but it still boggles the mind to see it all laid out like that…
This link has to go into safekeeping along with the reset chart. It will be a nice place to point newbies as to what went on.
Nice link! Thanks for that! And on the CNN/Money/Fortune site, no less. (I didn’t expect that detail from them. Very enlightening.)
It becomes more obvious by the day that kitchen-sink financial reporting has vastly understated subprime losses.
The funny thing is that the article says GS disclosed all of this stuff in the fine print, and the slicksters who invested apparently didn’t bother taking any of it seriously.
The magnitude of this mess is staggering.
If GS took on secondary loans , who knows waht happened!!
The folks at Tickerforum have put together a petition to Congress addressing seven points of financial imprudence which need to be remedied. I urge each of you to read the petition in its entirety and the linked background page and explanation for some of the more technical items of the petition.
One of the points addresses the forbearance of taxes as the result of a short sale. I can understand that many of our hardcore brethren may not agree with the point however tax forbearance for FBs should accelerate home sales thereby reducing housing prices in an environment of bloated inventory and help to distance the American taxpayer from the issue by pushing the loss to the lender where it rightfully belongs.
Politics is the art of the possible and in my opinion the petition addresses items that Congress has the authority and the real possibility to remedy if a critical number of people support this petition.
The petition represents a grass roots counterstrike in the War on Savers against irresponsible financial entities, their supporters in the US government, and monetary policy. Read, sign, and pass on the petition to your family, friends, local newspapers, and favorite blogs. It’s time to act!
http://financialpetition.org/
Signed and confirmed with email.
Thanks for the support Exeter!
Me too!
Will also e-mail to others.
Well, my problem with a tax break for those losing their homes is the ol’ moral hazard argument. These people, will be getting a great deal all th way around; when they are ready to buy again, they can just take another shot with the bank’s money and see what happens.
I want to prevent this from ever happening again; and, as such, don’t want to see the penelties for stupidity removed. However, that said, I do not want to see the homeowers harshly punished for the rest of their lives either. I would propose a work out where the FB’s have the pay the taxes back, but the IRS will give them an interest free payment period over a LONG (think 30 years) period of time. That way they will still have to write a check every month for a small amount, a grim reminder of the consequences of not paying back money that was borrowed. Even a 100K short sale would only have a max tax burden of around 30K. Over 30 years, that 1K a year (again, assuming no interest, which I would support), a very small sum of money…
My idea is not so much to punish the idiots (losing their homes/credit will be effective, I am sure), but to make sure that they don’t forget the lessons of the past. Keep the “housing bust” in the public mind for as long as possible…. That’s the way to prevent this stupidity from happening again.
I’m sympathetic with your position. I’m not averse to a little punishment for the FBs but in our present society I doubt that a public flogging is in the cards.
What I do see as possible by eliminating taxes on the short sales is increased downward pressure on housing prices and putting the loss on the lenders instead of the taxpayers. This is the objective.
Maybe I will be mistaken but I don’t see FBs who participate in this benefit coming back into the market in mass for a long, long time. The days of lettuce and strawberry pickers buying $500,000+ houses is over.
P’cola, Can you more fully develope the mechanism whereby reducing taxes for FBs puts the loss on the lenders instead of taxpayers? First, forgiving the taxes actually hurts taxpayers in so much as one believes in a balance of payment philosophy (Revenue shortfalls made up by increased taxes, which I’m not naive enough to believe having witnessed the huge deficit increases). If a bank 1099’s a FB after a short sale does that somehow reduce a banks loss through some accounting trickery? Just wondering about how you come to that conclusion.
Auger-inn, you are correct that a tax benefit would accrue to the FB on the short sale under the proposal vs. the present tax treatment, which would not be compensated by the Lender.
I guess I need to come down on the side that punishes borrowers a bit more than this proposal calls for. For a person to borrow a 100% LTV and then default with no penalty should not be viewed as a “fair” outcome. It is gambling and losing should have consequences.
That’s understandable.
Thanks for taking the time to read the petition and pity that one point is such a burr for you as I would have expected you to be quite in favor of the other six points which are primarily concerned with Fed monetary policy and fraudalent activity by financial entities.
Oh, sorry p’cola, I wasn’t addressing the other points at all and I support the petition. I was merely speaking to what I view as the weakness in the petition.
You guys forget… None of this is an issue if borrowers have a down payment, as it is their equity that is stripped. I don’t see why borrowers should have to pay tax as if it were income, other than because they get a tax break on the interest. Maybe the rule should be you can only be taxed on income up to the amount of total interest deductions you had taken in the past. Losses happen. Gains happen. Tax the gains, not the losses. As a matter of fact, whatever difference there was in the short sale price from the original price should *already* have been taxed as a capital gain by the previous owner from the previous owners original purchase price.
Huh? Loan forgiveness is always taxable. This would be a big exception if it passes.
“The days of lettuce and strawberry pickers buying $500,000+ houses is over.”
Ah, but the aim of this petition is to let them keep the $700,000 homes they already bought and have a BK judge reduce the mortgage balance! So I end up paying via higher rates so that specuvestors can keep homes they cannot afford. No thanks.
read the petition again…it says nothing of the sort.
The bank will still forclose or allow a short sale, either way the FB doesn’t keep the house
“but to make sure that they don’t forget the lessons of the past”
Great idea, Michael. Too bad it won’t pass the “victim” test….victims have to served first, don’t ya know?
Seriously, probably the best solution, compromise, possible. But I suspect some group will drag out a child who’s family has lost everything and your suggestion will be viewed as “anti-child” so everyone will have to be let off the hook….for “the children”.
Really ,the proposals would be letting the lenders off the hook on the short sale on property taxes as well as the lenders would still be able to take the write off on the short sale and the IRS would not collect the windfall tax from the FB’s . All these proposals end up resulting in less taxes collected by the IRS and City property taxes .These tax games benefit the lenders and FB’s and take the money from the public in the form of less taxes collected from the lenders and FB’s .Does anybody believe that the gov. won’t raise taxes in another form to make up for the shortfall ?
Just like when Bush gave us the tax cuts. Immediately every state in the union raised theirs to make up for the money that was no long coming from Washington. There’s never a tax cut, only a new place to send your check to.
From this petition: “Congress must amend the appropriate sections of US Code and Regulations so that all mortgage debt can be discharged in personal bankruptcy, that all “short sale” differentials are exempt from taxation as “income”, and that all GSE-backed mortgage loans are “non-recourse” loans.”
I couldn’t disagree more - people who borrowed more than they could pay so that they could speculate in home purchases should not be spared taxes on the huge windfall they get from short sales, nor should they be allowed to emerge from bankruptcy keeping the ill-gotten gains of housing they could not afford.
You don’t get to keep the house.
You still go bankrupt (your credit is ruined for 7 years.)
This simply puts ONE small piece of the “bankruptcy reform” and throws it out. In short, the deficiency judgment is dischargable.
That’s all.
You used to be able to discharge all of that in a Chapter 7. The reform made 7s unavailable to a whole lot of people, which means that not only do you go bust, you can’t discharge the deficiency judgment.
Please READ the entire thing including the backstop material (the link is on the petition page); there is no way to “get a free house” out of it. Quite to the contrary - the consumer (who WAS complicit in this) still gets screwed as they still go bankrupt and they still get foreclosed upon.
Two things. First, allowing the speculator to not pay taxes on a huge windfall (having their losses covered by the bank, and ergo by you and me through higher interest rates) is fundamentally giving them a pass and allowing them to evade responsibility.
Second, to Karl and dave super from above, take a look at the text I literally cut and pasted from the petition above. And then take a look at what it says now: “Congress must amend the appropriate sections of US Code and Regulations so that all mortgage deficiency judgments can be discharged in personal bankruptcy, that all “short sale” differentials are exempt from taxation as “income”, and that all GSE-backed mortgage loans are “non-recourse” loans. ”
The text of the petition has actually been altered since I made my objection - it now refers to “mortgage deficiency judgments“, where before it referred to all “mortgage debt.”
One of the proposals already on the table has been allowing bankruptcy judges to reduce the principal owed on a mortgage and otherwise alter its terms in BK, see, e.g., this article on H.R. 3609, and this is a terrible idea that will make mortgages harder to get and more expensive for everyone.
P.S.–> Putting aside the substantive issue, and without trying to be harsh on anyone here, altering the text of petitions after people have already signed them is, um, not ideal as far as credibility goes…
P.P.S.–> And yes, in case my reference to H.R. 3609 was not obvious, that’s exactly what part of this is about - in many cases they would get to keep the house.
and this is a terrible idea that will make mortgages harder to get and more expensive for everyone.
————————–
However…if mortgages are more expensive and harder to get, prices would have to come down to reflect that.
Personally, the #1 thing I’d like to see come out of all this is a VERY tight lending environment.
We get to choose between higher debt levels/higher price (a bubble) or lower debt levels/lower price (a trough = happy days for well-qualified housing bears). I know which one I’d prefer!
Mortgage officer accused of stealing ids…
http://www.nytimes.com/2007/10/16/nyregion/16identity.html
Apply for a mortgage and they steal your identity. Nice.
strange, in the UK if you apply for a mortgage you can get an extra identity (at a charge though…)
Oil to $88 today? No inflation here, move along.
So - how come all of the sudden crude prices have become so disconnected from pump prices? Perhaps a weekend topic?
My tin foil hat theory is that pump prices are being held artificially low to make the economy look stronger than it is. Or perhaps better put the oil companies have now removed or lowered the artificial floor that existed.
Correlary to the theory is that once concession to the recession is made, gas prices will skyrocket.
I was just wondering the same thing!
When it hit $70 a barrel the first time, gas was nearly $4/gal. Perhaps I’m missing something but….
i do believe its being manipulated. go look at a 10 year chart…10-20 a barrell for most of those years than a spike up. maybe we have a hedge that has a short on gas/oil futures kind of like long term capital management hedge on securities during the stock bubble.
It is amazing that this still comes up. The consumer has demanded, in part through local governments, gasoline in a great variety of highly specific formulations. This requires careful use of refining processes at a time when refineries are being shut down, squeezed out, and not replaced. Having some experience with refining processes I am amazed that gasoline has not become even more expensive, especially with the huge amount of damage that Katrina did to the refining and delivery infrastructure. This process has been ongoing for some time, but it is only now that people are starting to notice more.
One theory is that the biodiesel craze is going to eventually result in reconstruction and reregulation of the refining industry to involve more small players to handle the complexities of demand. Oddly enough it may also be easier to regulate a larger number of smaller operators since nowadays refineries get little regulation and actually shutting one down completely could cause major economic repercussions.
What the posters are saying is that the price at the pump has NOT gone up…and wondered why.
If the government has any control over prices at the pump (other than through taxes) and that’s a big IF, gas prices are one of the last places I think the goverment would let correct, even in an acknowledged recession.
Everyone is now “used” to gas in the $2.50 - $3.00 range. However, when gas prices go up signficantly, all the masses talk about is gasoline. (At least, that’s all I hear the local masses talk about.
) If I wanted to maintain control and order, I’d keep gas reasonably cheap so everyone is focused on Brittany Spears. 
However, I’m not so sure that the governement has that much control over prices at the pump. It would be interesting to find out if something has changed in the oil industry to that’s caused the disconnect.
they say it is the lower refinery cost..but who knows.
Well, we haven’t had any refineries blow sky high in recent weeks, and on top of that, the summer driving season is over (hence slightly lower demand). Imports of foreign gasoline are also up. Enjoy this while it lasts!
Ah but Thanksgiving is a mere 5 1/2-6 wks away.
Gas prices are now being kept low to keep j6p from panicking and rioting in the streets. The powers that be are now trying to sell us a new (nu-clear-air) war with Iran. Stay focused. Follow the bouncing ball and sing along!
I have posted this before, but will just re-add my wisdom on gas prices once again.
They are a total non-issue/red herring in my book… Why? Allow me to explain..
I drive A LOT every year, between 20 and 30K miles. Let’s call it 25K so that the math is easier. My car gets about 25/gal, so I burn right around 1000 gallons of gas every year. I would guess that on a per captia basis, that’s VERY high, even on a per capita basis removing kids/retirees (only 18-65), I think that would be VERY high.
So, lets do a little more math here. At 3/gal I spend around $3,000 dollars a year on gas…. If it goes to 5/gal, I will spend an extra 2K a year… Big deal!!!
This is not to point out that I am wealthy and can afford a 2K a month increase in gas bills. It’s to point out, that in the grand scheme of thing, even a 100% overnight rise in gas prices will not have much of an effect on the consumer.
Now, let’s look at all those numbers that “don’t matter”.
Housing in PBC has gone from ~150K a few years ago to ~400K now for a nice home. WTF??? Oh, and your buying that with borrowed money, so that 250K increase is compounded by paying interest on the additional borrowed amount.. Nothing to see here, move along.
Taxes, as they a fully a function of home prices, have also shot up from ~3K to ~8K a year for the same home. Another 4K a year, every single year, out the window.
Insurance is up dramatically as well, but this number is very variable. Let’s call it an additional 3K a year in insurance (which probably is not as good as the insurance you would have had a few years ago, but let’s forget that for now).
So, housing costs can double/triple over a few years and there is no problem? Even though housing (and related expenses) are about 25% of a normal persons expenses??? But, god forbid GAS goes up a dollar or so….
I am not sure I made my point very effectively; feel free to expand upon it as needed. Basically, you telling me something that was taking 20% of my salary to afford can 2-3X in cost and “No problem mon”. But gas, which comprises about 1% of my salary, goes up 10% and it’s f-ing time to panic?
Are these people retarted?
your gas goes up 1% your groceries go up 1% your vacation airfare goes up 1%. That package you want to ship gets hit with a fuel surcharge….ect…think about it.
Michael Fink, you proved your own point. It’s exactly the same psychology as your suggestion on the short sale taxes. FB’s have to write out the check every month, so they have to think about it more often.
Similar for gas. In the grand scheme of things, the gas that people complain about costs no more than a plasma TV, spread over a year. However, people have to get gas about every week or more, and so it’s on their minds almost every day.
“I drive A LOT every year, between 20 and 30K miles. Let’s call it 25K so that the math is easier. My car gets about 25/gal, so I burn right around 1000 gallons of gas every year. I would guess that on a per captia basis, that’s VERY high, even on a per capita basis removing kids/retirees (only 18-65), I think that would be VERY high…
So, lets do a little more math here. At 3/gal I spend around $3,000 dollars a year on gas…. If it goes to 5/gal, I will spend an extra 2K a year… Big deal”
Your figures are right about what the average commuter in SCal/greater LA Metro region would be spending coming from the average suburb out in Santa Clarita, riverside/SanBerdo.palmcaster,outer deserts, ect. Probably more as constant slowdowns, stalls, jams, sigalerts reduce MPG. Plus wear out your car faster.
For outer commuter folks already pressed to the wall by rising costs of foodstuff, dissapearance of MEW, mortgage/CC debt,rising health costs,ect., a rise of gas from $2.50 to over $3.00 and more does hit the pocketbook.
I calculate the average SCal commuter is now shelling out around $100-130 a week or 400-520 a month with the slow gas-robbibg inbound-outbound LA?OC commutes. That is a hit to the pocketbook, thou is can be ‘hidden’ by use of CC’s.
But most people haven’t bought houses in the past six years or if they did, most could cash in on the appreciation from another house. The people savaged from the increase in prices from 150K to 400K are first time buyers. However, everyone buys gas every week so the price of gasoline gets attention from all.
You also forget that minimum wage ranges from $5 o $7 hour for a lot of people. I hadn’t thought of this until someone mentioned it to me. So roughly after taxes, $15 in gas per week is about 8% of this persons after-tax weekly income.
Also agree with the previous post that added fuel costs adds to delivery costs added on to food at the grocers and general merchandise.
So….
Unless you are able to deduct gas as a business expense you need to earn close to $4000 extra per year just to put that $2000 in your tank.
Now look at the effect of fuel increases on everything you have, because every thing you consume got to you on fuel, so those prices went up. And they did not go up by their price, but their price + the tax you paid upon your earnings just to pay the higher price.
Government reports of items going up 2% a year is a lie, even if those prices really went up only 2% a year. Because it ignores the devastating effect upon wages of that very high and ever increasing cost of government. Not 2%, but 4% in order for you to purchase it.
I know Europe and Asia have much higher taxes than does the US. What I don’t understand is why every European and Asian I know are astonished at the high level of US taxes, and claim that the US rate is much higher than their domestic rate, and they get less for it.
Michael Fink,
If you are going to refer to stupid people as retarded you should at least know how to spell it.
The price of gas was $1.31 a gallon when Bush took office so it’s more than doubled since then. I think that’s a big deal. That’s probably because I’m smart enough to realize the price of gas affects more than the cost of filling my gas tank. Virtually everything is trucked in the US. The prices of nearly everything I buy such as milk, toilet paper, laundry detergent are significantly higher (about 20% to 40%) than they were when Bush took office mostly due to gas prices. It cost more to mail a package. This also costs local governments more money for police and fire protection. School districts and local businesses costs have risen due to gas prices.
It’s kinda of funny how Bush apologists like to say gas prices aren’t a problem. Bush thought gas prices were outrageous under Clinton and said that the president ought to get on the phone and jawbone OPEC members to bring down the price. He promised that he would bring down prices. Whatever…I’m p!ssed
Michael Fink: gasoline prices: If people are car pooling, they’re hurting. I don’t see much of it (in Canada). What do you see?
RE: If I wanted to maintain control and order, I’d keep gas reasonably cheap so everyone is focused on Brittany Spears.
Or the Boston Red Sox or Patriots
This demented Boston sports obsession fed by a completely obnoxious television and print media over a gaggle of indulged, and outrageously paid physical freaks a clear indicator of just how brain-dead, our bread and circus culture has become.
My only guess is that we hit the switch over to the dirtier gas but didn’t get the normal discount. Then next spring it will be around 3.75.
What with the ethanol mandates, can we even make the switch to non-oxygenated gasoline anymore when autumn arrives?
I just dont get it either: A barrel of crude is 40 gallons, I think. If one barrel costs $87, that would make the price of crude calculate to $2.10/ gal. Can someone please explain to me how in the hell a gallon of gas can sell at pumps accross america for only $2.80 /gal after refining, taxing, storing, transporting, wholesale markup, reltail markup, etc. The numbers just don’t make any sense at all. I suspect government involvement/ manipulation because whenever numbers make no sense this seems to be the case.
they need to keep heating oil under $3.00 or there will be popsicle people found next Spring.
One barrel (42 gal) of crude oil, when refined, produces about 20 gallons of finished motor gasoline, and 7 gallons of diesel.
http://www.eia.doe.gov/kids/energyfacts/sources/non-renewable/oil.html
For the total: “A 42-U.S. gallon barrel of crude oil provides slightly more than 44 gallons of petroleum products.” There’s jet fuel, LPG, etc. as well.
But yes, the margins do seem slim. That’s a problem for the refiners, or should I say the much-maligned refiners. So where are the people who scream about gasoline prices ratcheting up in step with crude? Those people might be (in a schadenfreude kind of way) enjoying the refiners’ reduced profits, but if profits drop and remain low, there’s even less incentive to build more refining capacity for the future.
Crack spreads are at a five-year low.
Looking at the foreclosure reports I’d say “crack spreads” are at an all time high and increasing!
Didn’t I hear oil company profits were down?
Disconnected? Have you bought diesel lately?
I have wondered the same thing. Could it be because the refineries don’t have to produce the special blended gasoline that they’re required to make in the summer??
Global warming and/or environmental politics aside, come spring refineries suddenly have to come up with multiple blends of reformulated gasoline for different parts of the country. This happens right around the Memorial Day holiday, which to me explains part of the annual spring jump in gas prices. Perhaps at this time of year they can go back to “regular” gas, whatever that is, thus precipitating a drop in prices. Yes?? No?? Maybe??
” how come all of the sudden crude prices have become so disconnected from pump prices? Perhaps a weekend topic?”
Actually I am seeing prices in LA.Long beach Area steadily going up last several weeks, about 10-12 cents. Cureently average is $2.80-2.95 for regular unleaded. We are just under $3.00 a gal here in LA as we speak.
This will absolutely crush the finances of outer suburbanites in such outer areas as Santa Clarita, riverside/SanBerdoo, Palmcaster,ect. These areas already rampant with foreclosures: look for steals on REO’s in early 2008 in the outer Boonies of LA.
Gasoline demand is falling as recessionary forces take hold. Down 0.4% YoY for the latest 4-week period. Supply is relatively static and demand is down, therefore price must fall. Refining margins collapsed at Chevron and Valero. They are getting paid roughly 50% less for that step in the process - so the premium paid over the price of crude has also collapsed. It’s been going on for about 3-4 months now.
In due time (pump prices follow crude prices with a lag).
Turks are using Kurdish terrorism as an excuse to seize Kirkuk oil fields…Who, me worry??
Adjusted for the season, I think gas prices are right about where you’d expect considering oil prices. The price normally would be going down after the end of summer but it is holding steady so far.
Looking back at my records, I paid $1.879 for gas back in January and $3.299 in July. That’s a big seasonal variation.
Shaping up to be an interesting day on Wall Street. Big time warning from Ericsson resulted in a 25% drop in its share price. The big cause of the warning looks to be weak sales in North America and South America followed by Western Europe. A number of other misses and warnings today.
Ericsson’s Statement (warning Pdf!)
http://online.wsj.com/public/resources/documents/ericsson.pdf
Wasn’t there a report issued just last week that said that consumers are expecterd to increase their Christmas shopping by 17% or so? Latest report says about 3.7% i.e. around the rate of official headline inflation. Grinchmas is a coming…
“U.S. shoppers are concerned about a slowing economy and may increase their holiday spending at the slowest pace in at least four years, prompting retailers to lure them with discounts and other promotions, a new survey suggests.
Consumers will probably increase their spending by 3.7% on average to $923.36 each, compared with a 7.2% gain last year, according to the National Retail Federation survey of 7,837 shoppers from Oct. 2 to Oct. 9. NRF, the world’s largest retail trade association, has forecast total holiday spending to increase at its slowest pace in five years to $474.5 billion.”
MarketWatch
http://tinyurl.com/3e4ul9
I know that I am spending next to zero as my gifts are already purchased (i.e., already booked to some other month’s sales)
Wait. you buy gifts? I thought everyone on this board was too frugal and sensible to waste money on gifts.
I DO! But I like to be cheap on my FIXED costs. Leaves me disposable income to do what I want. Don’t worry, I can guarantee that I got a good deal. I never pay more than 50% off retail and am not happy unless I get 70-80% off regularly charged prices.
I like red tags!
I shop at goodwill.
I give gifts when I feel like it…
I’m a human being, not a trained monkey.
p.s.
What’s in your wallet?
This has been great fun, kudos to the ringleader…
Send a few $emollian$, Ben’s way~
prime-8’s, please?
‘I thought everyone on this board was too frugal and sensible to waste money on gifts. ‘ frugal and sensible - yes, stingy - no.
An important distinction, save-a-tree.
Some of the best presents I’ve ever given have come from the thrift store or flea market (I frequent both). It doesn’t have to cost a lot of money to be perfect …
regarding yesterday’s thread in bits bucket, location, location, location, home prices as multiple of incomes or rents, etc.: does anyone have a good history on rents and building prices in Manhattan, say from 1865 through 1932? I have a suspicion that prices demand an increasing multiple of rents as property becomes concentrated in fewer and fewer hands. Maybe Manhattan is a poor study, with the preponderance of multi-unit dwellings, maybe Brooklyn or Queens would be more relevant.
1865 to 1932? What are you a freaking scholar or something?
Armchair answer: Manhattan, Brooklyn and Queens hosted massive immigration during those years. (Did you know, one in four Americans was either born in Brooklyn, or is related to someone who was?). OK, on with the show.
I have has extensive conversations with family members with first-hand experience in all three boroughs for the entire 20th Century. (OK, many of these folks are dead now).
The short answer to your question is no, prices did not “demand an increasing multiple of rent.” Nor is there any reason to believe that property became more concentrated in fewer and fewer hands.
The explanation for the first part is simple arithmetic, which has not changed, ever. Real estate, as an investment, is only worth a multiple of rents minus expenses. No exceptions. Rents and expenses at any given time are relative to prevailing economic circumstances.
In other words, a modest two-bedroom apartment in Brooklyn might have commanded $18 per month in, say, 1922. That is because the typical, second-generation American could make, say $27 per week, without post-secondary (college) education in those days.
I will tell you the story about my dad, in 1933, at age four, who picked the rent money up off the kitchen table and through it out the window onto Kings Highway in Brooklyn. $22, mostly singles, floating down the street. The mailman saw the whole thing, picked up all the bills and brought them to my panicked grandmother.
Ah, the good old days.
All I know is that a estate that was bought for $1M in Greenwich sold for $75K in 1932. NYC did very poorly during the Great Depression.
Jas
Jas - Back to my familly. My great-grandfather was one of several investors who put up the money for an apartment building in Chelsea (just north of Greenwich Village) called London Terrace, in 1928. They broke ground in ‘29 and finished in late 1930, I think.
My great grandad and his buddies lost their shirts. Completely.
That building is still standing and is much sought-after. The neighborhood, in those days, was not ready for an elegant apartment building, however. It was a big risk.
Reminds me of a lot of condo projects in DC today - expensive, fancy shmancy apartments in neighborhoods that just aren’t ready - way too marginal to support the projects.
They are losing their shirts as we type….
The explosive growth of urban areas during this time, in particular San Francisco, was what inspired Henry George to write Progress and Poverty which among other things advocates Land Value Taxation. If you are interested in this time period and this subject then you really should read this book and probably at least a little bit about Henry George who was something of a global sensation at the time.
Dangers of Cloning
http://www.stockmania.com/index.php?showimage=69
Sweet~
My wife and I were watching a little tube and the talking head started babbling about how fox’s biz channel would get this or that financial “personality”, blah, blah, “econ expert” blah, blah.
Not one shred of substance about matters financial was uttered, in a few minutes of wasted time, mine and theirs.
It all comes down to…
30 pieces of silver & 15 minutes of fame (2/1)
“fox business channel”? BWHAHAHAHHAA! Thats gonna be a doozy…..
A friend of mine heard a commercial about it that said “the same quality you expect from Fox” and it also mentioned American Idol. Ha.
Two pumpers for the price of one. What a deal!
Good one!
Where were you 20 years ago? This columnist was still in college in the US, which puts him in the same boat as a majority of market professionals who never experienced first-hand the stark terror of the 22 per cent plunge in the Dow Jones Industrials on October 19, 1987, by far the worst single-day percentage loss in history. The severe market slide that followed the tech boom ended just five years ago, but it was an entirely different experience to Black Monday.
“A bear market is a death by 1000 cuts, but in 1987 it all happened in one day,” Hartford Financial chief investment strategist Quincy Krosby says.
Could it happen again, and if so is there any reason to be particularly wary of this time of year? October has had its share of doozies, but that’s no reason to think a calamity like 1987 is more likely this month than any other. The conventional wisdom on Wall Street holds that we have learned our lessons and a similar event is almost statistically impossible. Given that most of the people saying this weren’t there then, should we be reassured?
It’s well understood that the farther a bad event is in the rear-view mirror and the better times have been recently, the more risks investors are willing to take. Harvard professor Robin Greenwood investigated the tenure of fund managers during the late 1990s tech bubble, and ***it suggests that young managers were less cautious as time wore on***….
This goes on, but that is the jist of the whole issue. YOUNG MANAGERS were less cautious as time wore on (or some just more greedy).
We do no seem to learn. 1987, tech bubble, other assorted doozies. Not one iota of caution or conservative-orientation when it comes to risk. None.
It is like the wild west, and only a few (in power) have guns.
I’ll tell you my story…
My late father oozed stocks and was in the biz a long time, he loved every angle of it, puts, calls, everything~
My mom and he were in Hong Kong, and I got a frantic call from him, asking me what I knew, what was going on? could I relate it to him better than the next to nothing he was getting information-wise, in Kowloon?
I knew just a little more than nothing, and told him it was a bloodbath. I really couldn’t express more than i’d heard on the radio or tv, there being no other sources of information, back then.
HAL, (the internet) lets the information flow like a river, now.
Sorry - but 1987 was not as big event as you make it out to be. Sure it was a huge one-day loss. But it was preceded by huge gains - the “huge drop” only remove about 9-10 month’s worth of gains, and after the drop stock prices were still up about 40% from where they were just 2 years before (DJI after drop was 1739, but was running about 1300 just two years prior). And the subsequent rebound was quick - it was up to it’s previously-bloated level in less than 2 years.
Depends on who you were, I suppose.
Re the 1987 drop: I worked for a company who’s expansion in his market was only just beginning. Really that whole market thing was just something on the news. We still got our Christmas bonuses and cushy raises. Plus it temporarily made MA real estate affordable again.
Not a big event? First of all, it was preceded by significant, orderly declines during the months running up to Black Monday. (This is typical, BTW - orderly declines almost always precede panick). I don’t remember the numbers (someone will chime in I’m sure) but the haircut was closer to 40% than the 22% seen that one day.
It also lead to the unwinding of a real estate boom and a nasty recession that forced George H.W. Bush out of the White House. Remember that?
‘87 was a big deal and triggered other things that caused a lot of pain.
The effect was big, and maybe the psychological effect was bigger.
Take Digital Equipment Corp, the second largest computer company behind IBM, and gaining. Over 120k employees, and the company is on fire, stock approaching $200/share, and very unusual for the time, paid no dividends.
The market bump of 87, and this high tech marvel never recovered. Stock blew off and never again came near its original price. Over the next few years the company sold off various pieces of its business to Oracle, to Compaq, and to other companies.
Now it exists only as a memory, and probably as a case for B-school.
The funny thing about the October ‘87 crash is that in October 2007 it would not really matter whether you bought Dow components or S&P 500 index on 10/16/87 or 10/20/87 - ok, I guess there would be a few hundred points more or less in your cost basis, but either way you’re looking at about a 12000+ point increase.
Moral of the story (for me): Buy and hold good stocks, but not after the age of 40. At that point, put everything into paying off debt, and build cash reserves.
Of course there’s no guarantee that the next 20 years will be like the last - could be more like 1929 - 1949.
Most people are unable to really learn from the mistakes of others. Thus the need to repeat the same mistakes over and over again. This has become especially acute on Wall Street where it has become more and more a young man’s game. The institutional memory that was provided by the old-timers is mostly a thing of the past and so the same old mistakes can be repeated at shorter and shorter intervals. Madness on the scale of the Tech Bubble and the Housing Bubble could never occur as long as the generation that remembered the Depression was still alive and aware. It’s no coincidence that it took 60 years for them to happen.
I saw the youthful insanity first hand during the Tech Bubble. A guy left my firm to join the Munder Net Net Fund in 1999. Thought he’d hit the jackpot. He started buying all kinds of worthless crap paper because “it just keeps going up.” Young men always think they’re immortal. When they really get excited, they think they’re bulletproof too. The Tech Bubble was merely a societywide expression of that phenomenon as older and more cautious managers were weeded out by their relative underperformance during the frenzy.
Bubbles always produce adverse selection as those with the least experience and caution are highly rewarded.
Between the 1930’s and the 1990’s there was plenty of stck speculation. The Nifty Fifty in the early 1970’s were growth stocks which were never expected to go down for the long run. Anyone else remember the phrase ‘One Decision Stocks’?
DR Horton average sold price for 2006 $267k - 2007 $243k - 4th qtr 2006 $239k - 4th Qtr 2007 $204k.
How much longer can the builders keep lowering the price of their homes? Until they are all gone I guess. I cannot see how many builders will avoid bankruptcy.
OT - On Minyanville, they are noting heavy heavy call buying in SIRI, way in excess of the average volume. FWIW for folks who might not be averse to a bit of counter-market speculation.
“Here’s another sign of a stagnant real estate market: Some developers in town are taking their homes off the market and turning them into rentals. Two weeks ago, East Oak Estates in south Redding announced this would be the last weekend some of its homes would be for sale. They were going to start leasing them out.”
“But East Oak developer Karen Margrave said buyers waiting for some colossal closeout sale will be sorely disappointed. She has no plans to sell her homes at below what she paid, nor she says will other builders. So they’re getting into the rental business while waiting it out.”
This was in yesterday’s articles. Am I missing something or does she not get that once she rents them out they will just be another resale on the market, competing with all the other resales, when she does want to sell them. The minute they’re rented, they lose their new home status. Boy she’s one smart developer. No wonder this country is screwed from overbuilding, if this is an example of how smart the developers are.
Good new though for all you renters out there. The more rentals, the lower the prices. I wonder how that will work for her.
So how are they suppose to rent these houses out at a price that will pay for them if people won’t buy them at a price that will pay for them?
Generally people may pay a small premium to buy over what they would pay to rent just so they can own it, I don’t see them paying a premium to rent. Plus you don’t get any loans to rent, so its all up front out of income.
Will they pay (for example) $2,000 in rent, but not pay $2,000 in a mortgage for these places
Excellent catch, Ghostwriter. Her plan is to rent houses to families, then kick them out 6 months from now when the prices go up and she can sell the houses.
Great plan — NOT!
If you expect the market will be up enough in 6 months to put the house back up for sale, then the wear and tear from the renters will more than offset the rent you’ve received from them on a new house.
If, on the other hand, you expect the market will not recover for 6 years, then is it really the rental business that you want to be in? Rentals of new houses almost never pan out financially, even at today’s slightly lower purchase/sales prices, not when you take into account the rent and maintenance.
Sounds like maybe it is just a cash flow problem, gotta get some money rolling in just to keep the firm solvent, to heck with long term viability. Worrisome for them.
Been waiting for these numbers. Triangle area of NC sales down 24%, although prices up 6% YoY. Perhaps not enough desperate sellers yet?
For those not in the know, the triangle area of NC is supposedly the most glorious area to own a home in the country and the most immune to a bubble, according to Money and Fortune magazine.
http://www.bizjournals.com/triangle/stories/2007/10/15/daily6.html
“…although prices up 6% YoY. Perhaps not enough desperate sellers yet?”
Perhaps rampant asset price inflation?
It’s just that those who managed to sell in other bubble areas before things locked up have run to North Carolina. However this is drying up as the big bubble areas have run out of greater fools to buy and so there will be less sellers who can then take their profits to North Carolina and buy
Once North Carolina RE has to rely on the income of North Carolinians then this will put a big crimp on RE there.
I live currently in Asheville NC, another “hot location” basically devoid of jobs not devoted to tourism or healthcare for the retirees…. Ironically I rent in a newly built “investment” — with two more nearly done next door! I’ve been following the attempts to sell units in the building next door and litterally have a front row seat. Construction was at a mad mad pace 2 months ago and its almost come to a halt even though the building is nearly finished.
Personally as a renter I’ve been keeping my eyes open for rents to come down here.. not yet, but since I have a 6mo lease on the place I am in I fully intend on demanding a rent reduction when its up or moving.
In the past I would get pissy about median price going up. The only thing it means is that higher priced stuff is what is selling. No entry level product moving? No marginal buyers. With no marginal buyers entering, the market becomes a static pool of fools selling to each other…. somewhat akin to what they do in the diamond district.
Mortgage bankers say the problem is contained to this decade, with a possible turnaround in 2010.
http://www.msnbc.msn.com/id/21314212/
The fact that big C needs a special fund on which to unload devalued assets instead of just relying on markets like the rest of the world is a sign that some big banks are just too big for their own as well as anyone else’s good. Consequently, a few bad decisions at the top (such as an over-reliance on off-balance-sheet subprime debt) can lead to a too-big-to-bail crisis in the asset markets.
Like obesity in individuals, bank obesity can increase heart attack risk. This is why the markets should be allowed to trim Supersized American banks down to size, and the Fed and Treasury should stay the course on GSE rightsizing.
http://www.youtube.com/watch?v=V168xofxgu0
P.S. Any thoughts on how C’s capital cushion would look if SIV ‘assets’ came back on balance sheet?
Citigroup Model Is Left Shaken By Credit Crunch
By ROBIN SIDEL and JEFFREY MCCRACKEN
October 16, 2007; Page A1
Touted as a diverse financial colossus that could profit in good times and bad, Citigroup Inc. is reeling after two weeks of dreary news — including a 57% profit drop reported yesterday — that show how unprepared the bank was for the recent bust in credit markets.
With businesses struggling from Texas to Tokyo, the banking behemoth’s capital ratio — or cushion against losses — has dwindled to its lowest level in years. Citigroup has halted a program to buy back its own shares. The stock fell 3.4% yesterday.
Citigroup is at the center of an industry plan to rescue a series of bank-affiliated investment funds that invested in mortgage-backed securities and other risky assets. Citigroup once boasted about its big presence in such funds, but now is leading the charge to shore them up by creating a single big fund to buy up their assets.
http://online.wsj.com/article/SB119244482103159018.html?mod=hps_us_pageone
Doesn’t pooling all the devalued toxic subprime debt into a Supersized fund create another GSE-style systemic risk problem? If not, then why not?
And am I correct in assuming “riskiest” is a WSJ code word for “most fire-sale priced”? This appears to be a scheme to defeat the force of the invisible hand.
Call to Brave for $100 Billion Rescue
Banks Seek Investors For Fund to Shore Up Commercial Paper
By CARRICK MOLLENKAMP, DEBORAH SOLOMON and CRAIG KARMIN
October 16, 2007; Page C1
The nation’s biggest banks are attempting to woo investors and other banks to a megafund that will buy troubled assets by promising not to purchase the riskiest securities and forcing sellers to pay a fee to put their assets in the fund.
http://online.wsj.com/article/SB119245287618859154.html?mod=hps_us_at_glance_markets
I think they are just going to collect all the mortgage junk they can find on the planet, wrap it up in a nice SIV superfund, have it rated AAA+ by the usual suspects and sell all of it within a few hours to some EU pension funds and the new Chinese investment fund. I’m sure the pension fund managers are already drooling over their opportunity of a lifetime (especially with the huge below-the-counter commissions they will get from Hank for buying this absolute junk).
PB, There is a reason that C released its financial report first.
There were very few meaningful questions that were asked in the Q&A conference.
Once the rest of the banks release this week, there are going to be a lot of questions that C will not have to answer.
I am waiting for Berkshire Hathaway to file its SEC changes in stock portfolio with the SEC. I will be shocked if it purchased any bank stock in the last quarter and suspect it sold.
Oil prices look more ‘volatile’ by the day. This is the flip side of a declining $US, as oil prices are $US-denominated.
COMMODITIES
Oil Prices Near $88 on Fears
Turkey Could Pursue Kurds in Iraq
Associated Press
October 16, 2007 6:53 a.m.
Oil prices surged more than $1 a barrel to new intraday highs Tuesday on fears Turkey will pursue Kurdish rebels into Iraq and disrupt oil supplies in the region.
A weakening U.S. dollar, low U.S. crude inventories and increased buying by investment funds also supported prices, counterbalancing expectations of higher inventories in the weekly U.S. supply report.
http://online.wsj.com/article/SB119252968587060451.html?mod=hps_us_whats_news
If it walks like a bubble and it quacks like a bubble, then by God, it’s a bubble! And the stock chart accompanying the article suggests this bubble has reached the parabolic blowout phase. In another victory for freedom, the U.S. has successfully exported their bubble markets model to a communist country.
PAGE ONE
10/16/2007
China’s Stock Surge Raises Fundamental Questions
By JAMES T. AREDDY
October 16, 2007; Page A1
WUHAN, China — China is in the throes of a stock-market frenzy that looks increasingly unsustainable. Chinese stocks have nearly sextupled in value in just two years and set yet another record yesterday, when the benchmark Shanghai Composite Index catapulted above 6000 for the first time.
Big unknowns loom over the market, starting with whether China is in a bubble that’s in danger of popping.
http://online.wsj.com/article/SB119245722443459208.html?mod=hps_us_pageone
China’s doing a little international saber rattling. We can’t even honor the Dalai Lama without being threatened and I find that most interesting. Wonder if we’ll have to apologize. Saddest day in our history was when we started trading with China.
http://fe38.news.sp1.yahoo.com/s/ap/20071016/ap_on_re_as/china_us_dalai_lama
RE: Saddest day in our history was when we started trading with China.
You can Roger One, that Good Buddy!
“China’s total import of computers was $40 billion last year, but only 6 percent were imported from the US.
China imported $14 billion of semiconductor devices last year, only 3 percent of which were from the US.
Gu said the bilateral trade imbalance could be addressed by increasing the volume of hi-tech imports from the US.
He said US export control policies against China were harmful for both countries’ hi-tech trade.
“American companies should take some responsibility for China’s hi-tech trade surplus,” said Zhou Zixue, director of the Ministry of Information Industry’s economy operation department.
He said an increasing number of US-based IT companies are setting up manufacturing bases in China.
Processed products transported to other countries or back to the US are included in China’s export volume, but many US companies profit from these products, Zhou said.
He said 75 percent of hi-tech exports in the first six months of this year were created by foreign - mostly US - companies.”
These are the numbers.
The companies are manufacturing in China exporting to the world and the US will not let China import high tech. 75% of the companies are foreign owned most US companies.
http://tinyurl.com/38u44x
Peoples Daily online
“…is fueling expansion of the corporate sector. The boom is helping to create a class of Chinese companies among the most valuable in the world”
Those silly little commies…”they” might have “controlled”… flower carrying students standing in front of a tank…but, wait until they have to deal with “capitalist” investor’s who “suddenly” lose all their family’s money.
There are big differences, not sure how much it matters.
The differences are the Chinese stock market currently has over 100M individual investors. That is an incredible amount of liquidity. There is a little short selling, so on any breaks there are buyers. (kind of like Amazon in the US). There is the Wu put (similar to the Bernanke put, but with real moneys to invest if needed) which is simply stated as the Chinese government will not let the market fall before the Olympics. China’s corporate profit growth is averaging 40%. If Amazon with a P/E ratio of 175 is still trading above 80 with a profit growth of 16%, why not buy anything in China with a P/E of 40 and a profit growth of 40%?
It is important to remember that China’s primary concern is to create 10M jobs every year.
China has the worlds largest bank, the worlds largest oil company, the second most billionaires in the world and about $1.5T in cash.
‘…China has the worlds largest bank, the worlds largest oil company, the second most billionaires in the world and about $1.5T in cash.”
And 1 Billion people…controlled by “threat, chains & muzzle”
You too may be a big hero,
Once you’ve learned to count backwards to zero.
“In German oder English I know how to count down,
Und I’m learning Chinese,” says Wernher von Braun.
“the second most billionaires in the world”
As was pointed out on McLaughlin Report (by Eleanor Clift), those billionaires were created by the US. We have created our own problems with China. But that’s good, since we created them, we can do something about them.
What can we do? Sell them over priced POS RE in the IE?
China learned from Japan’s mistake on revaluing its currency not to trust the US.
Also
“China has a large current account surplus with the US, but a relatively small one overall because it runs deficits especially with countries (which might be called ‘China’s tributaries’) from whom it obtains inputs for the products that it subsequently exports.”
Oct. 16 (Bloomberg) — International investors sold a record amount of U.S. financial assets in August….
Total holdings of equities, notes and bonds fell a net $69.3 billion after an increase of $19.2 billion in July….
Demand for U.S. stocks overseas declined as the deepening housing recession and credit market turmoil threatened investment, hiring and consumer spending.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aa4nqqKqJLpY&refer=home
International investors know to take losses (even if American investors do not).
Unfortunately these numbers reflect August. The key month is September and that data is a month away.
Apropos to the Goldman comments above:
Goldman Sachs (GS) is coming under fire this morning. Based on its recent filing with the US Securities and Exchange Commission, some analysts believe the firm may have inflated profits in the third quarter to the tune of $8.23 billion. Analysts claim almost a third of the bank’s revenue originated from “short” positions on the lowest tier of mortgage derivatives and other forms of highly risky debt that are extremely difficult to price. More than $2.62 billon of declared profits were made entirely on the basis of the bank’s estimate of the underlying value. (
So their “profits” are just paper profits. Since if they are just basing it on estimates of worth they have not actually made the money yet, since you haven’t made any money until you got that money in your hands.
You weren’t a millionaire if you owned Pet.dot.com stock, you were only a millionaire if you sold a million dollars worth of Pet.dot.com stock
How large is the subprime elephant hiding under Goldman’s living room rug?
I think the “elephant” has eating a rather large volume of “moldy” peanuts…and left a rather “slippery” deposit under said “rug”.
Yeah, I am curious to see how this all gets accounted for in the end.
According to the article above, their short positions were hedging their investments in these MBSes. The reason they made money was those “investments” went spectacularly wrong, much worse than expected, and the hedges apparently paid off more than expected (seems dubious to me to some extent, but I’ll roll with it).
Yesterday I asked the question why GS was willing to go along with the super-conduit blah blah bailout fund that is apparently trying to prop up… err, “create a reasonable market” for this paper. Why would they do this if it was costing them money on their short bets?
Possible answer #1: they closed the short hedge positions and are still holding the long ones, so they’re screwed like everyone else unless this happens.
Possible answer #2: they closed enough of the short positions to stay even either way, so they don’t lose whatever happens, and garner goodwill for going along with everyone else and keeping markets going, plus they’ll look less bad for creating the problem and screwing everyone else.
Possible answer #3: their accounting used different pricing for their short positions (mark to market! massive profit!) and their long positions (market to model! things temporarily halted but will recover!) and didn’t really make much at all. This would be really bad, I guess it’s possible.
Possible answer #4: they think the markets are so fundmentally screwed at this point they’re willing to forgo some profit to keep them going and take them for the team. Unlikely…
Possible answer #5: they need to collect on these short bets, if everyone goes under they can’t, so a nice chunk of profit is better than none, plus they could be made to look bad for creating the mess.
I’m sure there’s more possibilities. #2 looks reasonable to me… #5 maybe…
Can any mathematicians in the virtual room detect a slope in the DJIA open today? It appears infinitely negative…
http://www.marketwatch.com/tools/marketsummary/
The silver lining: DJIA declines are typically ‘contained’ to 1%/day nowadays.
Another silver lining: On really rough days, the market often reverses course on absolutely no news and closes the day in rally mode. It’s a headless chicken market, folks!
Bell-weather Intel reports today..NSDQ and tech will rebound tomorrow.
It’s been said before here, but the US markets were very much a headless chicken in the pre-bust fall of 1929 as well.
Per the NY Times, the financial bazzar wasn’t closed down until August 2007, and loans from the first half of this year are going bad at record rates.
http://www.nytimes.com/2007/10/16/business/16lend.html
They picked an appropriate location for the photo that accompanies the story.
(CAPTION) Foreclosure signs, like this one east of San Diego, are becoming more common as data showed a higher default rate on subprime mortgages taken out in 2007 than those in 2005 and 2006.
and Northern Rock (and all their friends) are still selling 125% and 10-15x income loans like nothing happened.
I apologize if this has already been posted. From the Orlando Sentinel:
“Residents leave homes as crews search for explosives”
http://tinyurl.com/2koohq
This is a fairly new community in southeast Orlando. The best part? Lennar is still trying to sell homes there.
Fantastic. Lennar’s argument to existing homeowners is that they did their due diligence and had no idea and that it is the fault of the the entity they purchased the land from, if memory serves.
Now, they can’t make that argument and they’re still trying to sell homes? Someone ought to slap them with a cease and desist.
That just goes to show you how bad business is right now. They’re willing to risk millions of dollars in lawsuits should anyone die just to sell a few more homes.
As if energy prices weren’t high enough, one thing that could make them higher is a very cold winter in the northern hemisphere. And one thing that could cause such a winter in the face of global warming is a major volcano eruption.
http://www.msnbc.msn.com/id/16740387/
only 6 mile evacuation…man if i can see the thing im getting out. 6 or 600 miles.
If it is the yellowstone caldera that blows then even 600 miles won’t be far enough.
no joke. watch the National Geographic special on that one and you will want to move to the Southern Hemisphere!
39B of US stocks sold in August by foreigners; 29B in treasuries
https://image.minyanville.com/assets/FCK_Aug2007/File/Links%20Charts%202/sg2007101634801.gif
Severe Drought Alert for Georgia, Carolinas Issued, per NYTimes this am.
“ATLANTA, Oct. 15 — For the first time in more than 100 years, much of the Southeast has reached the most severe category of drought, climatologists said Monday, creating an emergency so serious that some cities are just months away from running out of water.
In North Carolina, Gov. Michael F. Easley asked residents Monday to stop using water for any purpose “not essential to public health and safety.” He warned that he would soon have to declare a state of emergency if voluntary efforts fell short.”
Some towns were only 3 months away from running out yet conservation efforts are only voluntary? Are they betting on a good hurricane based soaking?
I can’t for the life of me figure out why asking people to practice self control has become as socially unacceptable as asking them to walk off a cliff.
Lemming Meringue Pie?
“I can’t for the life of me figure out why asking people to practice self control has become as socially unacceptable as asking them to walk off a cliff.”
You’re asking people who live by the adage “I’ve got mine, Jack - the hell with you” to show some consideration for the needs of others? What are you, a commie?
“What are you, a commie?”
LOL I’m starting to wonder. Maybe I’m waiting for the return of some of that good ole American 1920s “mutualism”. Even Republicans of that age seemed to understand that unbridled capitalism wasn’t in our best interest. Hence the trust busting.
In the meanwhile, I’m gonna go lie down. I have a headache.
“…some cities are just months away from running out of water.”
Whew! Sounds like they can still get the xmas shopping orgy in ok.
desalinization…thus counteract the effects of global warming…someone take that nobel peace prize from gore..:)
I’ll rent a hundred for my entourage:
http://denver.craigslist.org/apa/450605625.html
I think they meant $850/wk.
I’ll give them a call in May and see if the prices have gone up or down :).
Did any one catch that speech on cnbc seems they cut away after everything that has been said on her for two years was admitted to be true.
Then when he started talking about what the real threat was they cut back to the talking heads. really makes wonder if the tin foil hats arent on to something
So true max4me. I was yelling at the TV because the head were controlling the information so much .
AP
Paulson: Housing Crisis Needs Action
Tuesday October 16, 11:08 am ET
By Martin Crutsinger, AP Economics Writer
Paulson: Aggressive Response Needed for Housing Crisis He Calls ‘Significant Risk’ to Economy
WASHINGTON (AP) — Treasury Secretary Henry Paulson called Tuesday for an aggressive response to deal with an unfolding housing crisis that he said presents a significant risk to the economy.
In the administration’s most detailed reaction to the steepest housing slump in 16 years, Paulson said that government and the financial industry should provide immediate help for homeowners trying to refinance current mortgages before they reset at much higher rates.
He also called for an overhaul of laws and regulations governing mortgage lending to halt abusive practices that contributed to the current crisis.
“Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy,” Paulson said in a speech delivered at Georgetown University’s law school. “The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth.”
So, in other words, let’s keep housing prices artificially high, so that no one can afford to buy a house, unless they take out a toxic mortgage on which they can’t afford the payments after a few months/years.
Yeah, that’ll fix the economy right up. Where did they find this clown, anyway?
Well, it has to be said that technically he’s right. “The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth.” Note he doesn’t say that the problem is that housing prices will fall, he says the problem is how long it will take for them to start growing again. So… since anything done to artificially prop up prices will just prolong that spiral down, and given that housing prices can not go up any further at their absurd levels, he is saying we need to let them crash quickly, get the pain over with, and then have them steadily climb back up at a normal rate.
Makes sense, right?
Oh, that wasn’t what he was saying?
Nevermind.
Was it in August, or September, that Paulson said,”the subprime problem is contained” ?? I remember the quote, but not the exact date.
Here’s a quote from Aug. 1st:
http://www.cnbc.com/id/20042454/
I heard him say that since people are losing their homes to foreclosures they need help [from govt., of course]. Doesn’t the same gang talk about free market and keeping the govt. out?
Jas
“He also called for an overhaul of laws and regulations governing mortgage lending to halt abusive practices that contributed to the current crisis.”
Here is a good place to start…
http://www.hud.gov/offices/cpd/affordablehousing/programs/home/addi/
I’ve got my tin-foil-rally-hat on
The “Subprime” Mentality: A Metaphor For the Whole U.S. Financial Market
If a borrower who is already on financially shaky ground is charged an above market rate, the excess payment that such a borrower has to make means that he becomes an even greater risk than before. In short, the act of subprime lending itself creates the very problem it is supposed to solve. So the random people who could pay were in effect subsidizing the ones that couldn’t, because subprime lending was about finding someone stupid enough to borrow (on such terms), and honest and solvent enough to repay. Barring such rare birds, “subprime products were fit for “only crooks and deadbeats”.
Right, and the lenders don’t have any equity to protect them from these sub-prime borrowers who could never afford higher rates after loan adjustments .Crazy lending ,criminal if you ask me .
As long as the big banks are permitted to keep all the toxic debt hidden off-balance-sheet (Enron style), everything will be just fine.
There’s a poll on Yahoo Finance asking if the gov’t should assist subprime FBs. With just under 500 votes - 85% say No.
but I guess Yahoo Finance is not exactly representative for the easy money / subprime crowd …
“Nearly half of homeowners with adjustable rate mortgages don’t know exactly how they work, according to a national survey released Monday by the AFL-CIO. Three-fourths also couldn’t say what their new monthly mortgage payments will be after an interest rate reset, according to the survey of 500 homeowners who took adjustable-rate mortgages (ARMs) from 2002 to 2006.
Those in the AFL-CIO survey mostly felt their lenders hadn’t been dishonest, Treibitz said. But what they didn’t hear — and didn’t know to ask — was what their new monthly payments would be when their rates go up.
37 percent of those whose ARMs had reset once had interest rates of 8 percent or higher, above the current 6.40 percent average for 30-year fixed-rate mortgages.
The average monthly increase, after the reset, was $291, eating up 10 percent of the after-tax incomes of homeowners who earn $50,000 a year.
The AFL-CIO’s new Save My Home Hotline is: 1-866-490-5361.
The survey’s margin of error was plus or minus 4.4 percentage points.”
Full article at
http://www.startribune.com/535/story/1486722.html
So,the borrowers can refinance the ARM loan is they qualify .All the rest of the borrowers either obtained their original loan by fraud or they will never qualify for a better loan ,(unless the gov. steps in a gives them a loan they don’t deserve .)
“Nearly half of homeowners with adjustable rate mortgages don’t know exactly how they work, according to a national survey released Monday by the AFL-CIO. Three-fourths also couldn’t say what their new monthly mortgage payments will be after an interest rate reset, according to the survey of 500 homeowners who took adjustable-rate mortgages (ARMs) from 2002 to 2006.
How could you be stupid enough not to figure what your payments would be with every reset. I learned multiplication in 3rd grade. It’s not rocket science.
Of course the rate can change monthly if it’s tied to a index that changes ,but one can get a idea by where the index is at for the moment what the rate will be at .
From Jack Crook’s Black Swan Trading
“…Now, its China thats doing all the exporting and currency suppressing for export advantage. So, the question: Will pushing down the dollar IF China doesn’t cooperate only makes this problem worse i.e. the global imbalance problem of exchange reserve accumulation and all the nasty
scenarios that role in along with it? Maybe not if the tradeoff is to make the US better; or at least keep Mr. US Consumer viable.
It does appear that a lower dollar provides some major benefits for the US economy, as we mentioned yesterday. At the core we think is the stock market wealthy effect which gives the Fed cover.
Its multiple-choice time
A) China lets its currency run higher faster (yen follows higher on valuation) and finally some readjustment takes place (and it may not all be pretty); all announced before the G-7 meeting ends.
B) G-7 signals dollar depreciation regardless of any Chinese commitment to stop”manipulating” its currency and let it move up, placing a big pile of global imbalance (as the economists call it) on Europes back!
C) G-7 intervenes to push up the dollar and the yen, effectively pushing the yuan higher alongthe way; throwing Europe a bone that global growth is in trouble if the Euro recovery dies in its tracks.
D) None of the above…”
I vote for “none of the above”
PBS had on Roger Myerson, one of the triumvirate of Nobel prize winners in economics on the newshour, and he talked for like 4 minutes, and said not much, I thought.
I think a few of us have a better grip, on matters economic.
Looks like they are keeping the door open for loan limit increases, or am I reading too much into the “Under no circumstance” sentence?:
“FOR IMMEDIATE RELEASE
October 16, 2007
OFHEO Director James Lockhart announced that, based on provisions in the proposed guidance, the current conforming loan limit will not be reduced for 2008. If the index used to calculate the maximum loan level should increase, the amount of the increase in 2008 would be reduced by the decline calculated in 2006 of 0.16%. Under no circumstance, however, would the maximum loan level for 2008 drop below the 2006 and 2007 limit of $417,000.”
http://www.ofheo.gov/newsroom.aspx?ID=392&q1=1&q2=None
Evidently, under pre-existing regulations the loan limit is affected by housing prices, which are falling. Therefore, the loan limit would be automatically cut, the opposite of what some have proposed.
So new rules will keep the loan limit where it is, even as housing prices fall. Future housing prices increases would not lead to loan limit increases until things are back where they were, relatively speaking.
Interesting.
Citi Puts Lipstick on Asset-Backed Pig
“The downgrades are coming so fast that you could go to the bathroom, come back to your desk and find you’re a junk bond manager,” says Bianco.
From the WSJ: “Citigroup has halted a program to buy back its own shares.”
That is a big deal, and a sign of desperation. Why? The execs have been issuing each other stock options. If they can’t buy back stock, shareholder’s equity gets diluted. They are watering the stock, and devaluing it.
Their choice — no stock options, or hosing their investors.
“Citigroup has halted a program to buy back its own shares.”
Isn’t the Citi Superfund plan closely analogous to a share buyback program? That is, a means for Citi to inflate the value of its toxic subprime debt above what the market says it is for purposes of deceiving investors?
This is a very big deal. I agree.
And now I say, with half a dose of sarcasm, the market will rally tomorrow. Intel showed a profit.
Seriously though I couldn’t believe that of all people and news outlets, CNBC was all over how bad the superfund is yesterday.
I wonder if C is on the brink? It seems as if the superfund may not get funded, especially if the cheerleaders have been booing it since it was announced. I’m also shocked at the admissions of Paulson (who looked visibly upset saying it) and Bernanke that housing will affect future quarters and that they can’t even put a valuation on the problem. That’s really BAD.
I’ve always been scared of the ramifications of this but sometimes something comes along that gives me a new creepy chill down my spine.
“…There are potential instabilities as a result of US sub-prime mortgage crisis. Central banks had to lower interest rates to prevent banking collapse. $US hit record lows. Gold hit highs. Banking and finance sector faces massive losses. Focus remains on US economy - which has been supported by capital exporting countries. But investors are now shunning the $US. Foreign purchases of $US bonds fell 80% in July. Net sales of US Treasuries fell similarly. US will be short of long term debt. Middle Eastern countries with large $US holdings did not follow US Fed’s interest rate cut because of inflation fears. Region may break its currency peg with $US - as may Asia. Euro revaluation against $US is proving painful in Europe. A recession looks increasingly likely in US. Threats to world growth are also threats to Australia’s prosperity. …”
Morning market news Australia
and from Dubai:
“…A further decline in the dollar is likely to adversely affect inflation and exchange rate losses in the UAE and the Gulf region as the Gulf currencies with the exception of the Kuwaiti dinar are pegged to the dollar. The steady decline of the dollar since the beginning of this year has seen the dirham suffering exchange rate losses of 17 per cent and 20 per cent against sterling and the euro respectively….”
and from South Africa (Financial Times)
“…For the first time, emerging markets are a safe haven during a global financial shock emanating from the world’s hegemonic economic power. How times have changed and how, indeed, have the mighty fallen. Ironically, today’s financial strength in emerging economies is a mirror image of US weakness. Charles Dumas of London-based Lombard Street Research brings this point out in an analysis with which I have great sympathy. The global balance of payments sums to zero. If emerging economies have chosen to run huge current account surpluses, partly because they bear deep scars from the financial crises of the 1990s and partly because they wish to conserve revenue from the soaring prices of the commodities many of them export, then someone else must run deficits. In the 2000s, that someone has largely been the US. This has entailed fast growth of domestic debt and debt service, chiefly among households.
Falling house prices and the subprime debacle have now derailed this debt-accumulation machine.
The good news, then, is that what has made the US vulnerable is also precisely what has made it easier for emerging market economies to cope with a US-generated shock. …
Rebalancing towards stronger domestic demand and a smaller current account surplus has long been domestically desirable. In an era of weaker US demand, it has become a global necessity. China is about to have economic leadership thrust upon it. What happens now will depend heavily on how the Asian giant responds to this great challenge.”
Here is a 2-bedroom condo in Bethesda, MD (not exactly a rarity) touted as a bargain at almost a million dollars. On the same craigslist page were 3-4 bedroom SFHs that were also “walk to Metro” at 100-200K less, as well as plenty of “reduced,” “dramatic price improvement,” “new price” ads.
What impact could a natural event like an earthquake, have on a housing bubble?
New Zealand’s bubblicious South Island was hit by 2 earthquakes, one a 6.0 and one a 6.8.
http://www.bloomberg.com/apps/news?pid=20601080&sid=a4mZZqVb7Eio&refer=asia
I was told by a real estate a good time to buy real estate is after an earthquake.
Here is the Washington Post’s Mensa Invitational which once again
asked readers to take any word from the dictionary, alter it by
adding, subtracting, or changing one letter, and supply a new
definition. Here is number 1 winner.
1. Cashtration (n.): The act of buying a house, which renders the
subject financially impotent for an indefinite period of time.
Batten down the hatches.
This is still an excellent read. A good primer on what happened and what consequences may occur.
[Working Draft of] Financial Market Instability: Two Sides of the Story
I partially agree with this observer at the Australian conference.
“…One observer speculated about whether the whole economic system may now be at risk because finance has become a major component of economies of US and others - yet contains fundamental flaws which have been revealed by (but won’t be limited to) sub-prime mortgages. Debts have to be repaid, yet the value of underlying assets is unclear. They have been valued on the basis of models, and could be worth much less if ‘marked to market’. Much financial enterprise has been built on the assumption of capital gains which can only continue as long as there is a constant stream of new money. Australia’s property market seems to be an example, which is exposed to potential for reversal of the ‘carry trade’. Reserve banks have recognised the risks, but have not yet been able to deal with the problem. It might be well beyond their ability to absorb the losses. Their acceptance of low quality assets as security for further advances to banks may be necessary, but puts $US and other currencies (and thus global financial system) at risk. Adjustment will take time, and there is a real risk of a very severe economic impact (brief outline of a personal communication)…”
http://tinyurl.com/36pbco
“…One observer speculated about whether the whole economic system may now be at risk because finance has become a major component of economies of US and others…”
I disagree. The problem is not that finance is a major component of the US economy, but that financial sector influence on government is driving our economic policy.
Cleaning up after credit innovation
Published: October 15 2007 20:36 | Last updated: October 15 2007 20:36
The credit squeeze is not yet over, to judge by the US government’s involvement in an effort to unfreeze the commercial paper market. The Treasury-backed plan involves the pooling of about $75bn of assets from banks’ off-balance sheet investment funds in the hope of soothing investors’ nerves.
This is the biggest US intervention since the Federal Reserve co-ordinated the bail-out of Long-Term Capital Management in 1998. Unlike the Northern Rock rescue, it does not involve any commitment of public funds but it still raises the question of whether the Treasury should have any role at all.
http://www.ft.com/cms/s/f8eb0e76-7b51-11dc-8c53-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Ff8eb0e76-7b51-11dc-8c53-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Doesn’t it all go back to how much the net change in money supply is over time ? Isn’t that the source of all monetary innovation ?
October 16, 2007 1:16 P.M.ET
BULLETIN
Stocks digging
out ofinto a holeStocks pare losses as Treasury Secretary Paulson sees more fallout from housing. Investors also keep a wary eye on crude as prices toy with $88 and a warning from Ericsson.
http://www.marketwatch.com/
P.S. Regardless of what kind of miracle rally on the DJIA materializes later in the day, it was down 88 points when I posted this…
Does anyone else find it completely bizarre that the marketwatch.com headline says stocks are digging out of a hole when the visible evidence to the contrary is screaming out of the chart on the right side of their home page? Propaganda has its limits.
I think they consumed a goblet of Goebbels…
“Think of the press as a great keyboard on which the government can play.”
If foreign investors are leaving the game, who is propping up U.S. markets these days?
Foreign investors slash holdings of US securities
By Michael Mackenzie in New York
Published: October 16 2007 17:07 | Last updated: October 16 2007 17:07
http://www.ft.com/cms/s/1ed4bb86-7bf8-11dc-be7e-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F1ed4bb86-7bf8-11dc-be7e-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
there’s your “false bottom”
I don’t see any losses getting pared. What I see is a market that really wants to sell off to a level below DJIA = 13,900, but somehow cannot penetrate that hard floor. I guess a bottom is in (again).
October 16, 2007 2:47 P.M.ET
BULLETIN
Stocks see crude awakening
Stocks down but paring losses as Treasury’s Paulson sees more housing fallout. Investors also eye rising crude prices.
http://www.marketwatch.com/
Pulte Homes is having a “Monster Sale” this weekend. They have a couple copies of a model I looked at in early 2006 on the sale at $189,990, which is close to $100K off the price when I looked at them. This is in Maricopa, Arizona (south of Phoenix).
Bill
Similar news in Boise last weekend, a local developer of 350-500K homes was knocking 70K off the price of most of them.
Here is a good article on what we spend compared to parents in the 1970’s. Hope you can access it from this. Great comparisons on food, clothes and housing.
http://www.msnbc.msn.com/id/21309318/?GT1=10450
That is good article!
This guy needs to get out and rent himself a copy of the latest James Bond flick (Casino Royale remake)…
PAUL B. FARRELL
New ‘Disaster Capitalism’ economy
Wars, terror, catastrophes are ‘IPOs’ and ‘emerging markets’
By Paul B. Farrell, MarketWatch
Last Update: 7:10 PM ET Oct 15, 2007
ARROYO GRANDE, Calif. (MarketWatch) — Hot tip: Invest in “Disaster Capitalism.” This new investment sector is the core of the emerging “new economy” that generates profits by feeding off other peoples’ misery: Wars, terror attacks, natural catastrophes, poverty, trade sanctions, market crashes and all kinds of economic, financial and political disasters.
In this Orwellian future, everything must be seen with new eyes: “Disasters” are “IPOs,” opportunities to buy into a new “company.” Corporations like Lockheed-Martin are the real “emerging nations” of the world, not some dinky countries. They generate huge profits, grow earnings. And seen through the new rose-colored glasses of “Disaster Capitalism” they are hot investment opportunities.
http://www.marketwatch.com/news/story/war-terror-catastrophe-profiting-disaster/story.aspx?guid=%7B410EDFB9%2D5D49%2D49DB%2DB531%2DC616D45EA497%7D
Think of a German City like Hamburg, Germany- circa 1946, and Gary, Indiana presently…
Is there really any difference?
http://www.forbidden-places.net/urban-exploration-gary-indiana-ghost-town
Wow, that is deeply saddening.
My amateur reading of the T-bond yield curve tea leaves:
– Plunging 2-yr and 3-yr yields portent a recession over the next 2-3 years
– Persistently high l-t yields portend dollar inflation thanks to helicopter drops of liquidity (predictably) used to lean into the recession
http://www.bloomberg.com/markets/rates/index.html
Does anyone else notice Ben’s blog consensus is increasing?
And could someone please disambiguate ‘bailouts’ from ’steps to prop up the market’?
Do our top economic leaders concur that all real estate is not local any more?
Housing now biggest risk to U.S. economy: Paulson
Treasury secretary calls for loan modifications, overhaul of mortgage rules
By Robert Schroeder, MarketWatch
Last Update: 2:52 PM ET Oct 16, 2007
WASHINGTON (MarketWatch) — The U.S. housing crunch appears likely to continue to impact the economy and capital markets “for some time yet,” Treasury Secretary Henry Paulson said Tuesday.
Calling the housing decline “the most significant current risk to our economy,” Paulson outlined several steps to prop up the market going forward, including loan modifications and an overhaul of the mortgage regulatory system.
http://www.marketwatch.com/news/story/housing-now-biggest-risk-us/story.aspx?guid=%7B1E167B2F%2D4E8E%2D432A%2D840C%2D2DD1F8C4612B%7D
This is scary, no exaggeration.
Paulson warns of damage to come
By Eoin Callan and Jeremy Grant in Washington
Published: October 16 2007 19:32 | Last updated: October 16 2007 19:32
The US economy will suffer further damage from the downturn in the American housing market, Hank Paulson, US Treasury secretary, warned on Tuesday.
He said the conduct of some mortgage market participants had been “shameful” and called for nationwide regulation to replace the current fragmented oversight of US home loans.
http://www.ft.com/cms/s/1348d1ca-7c12-11dc-be7e-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F1348d1ca-7c12-11dc-be7e-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
For future reference, how does one qualify as a protected homebuyer?
Paulson Stresses Homebuyer Protections
By Martin Crutsinger | AP
Oct 16, 2007 | Updated: 11:34 a.m. ET Oct 16, 2007
WASHINGTON — Treasury Secretary Henry Paulson called Tuesday for an aggressive response to deal with an unfolding housing crisis that he said presents a significant risk to the economy.
In the administration’s most detailed reaction to the steepest housing slump in 16 years, Paulson said that government and the financial industry should provide immediate help for homeowners trying to refinance current mortgages before they reset at much higher rates.
He also called for an overhaul of laws and regulations governing mortgage lending to halt abusive practices that contributed to the current crisis.
“Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy,” Paulson said in a speech delivered at Georgetown University’s law school. “The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth.”
In his most somber assessment of the crisis to date, Paulson said that the housing correction is “not ending as quickly” as it had appeared it would and that “it now looks like it will continue to adversely impact our economy, our capital markets and many homeowners for some time yet.”
http://www.newsweek.com/id/47852
http://losangeles.craigslist.org/ant/rew/450996938.html
My add to seek a new landlord.
The toxic subprime debt day of reckoning is at hand. Let’s hope the big banks all learn a lesson and the ones that survive avoid subprime like the plague it was going forward.
Banks’ debts threaten growth
By David Wighton in New York
Published: October 16 2007 22:01 | Last updated: October 16 2007 22:01
Big US commercial banks have seen $280bn of new debt come on to their balance sheets since the credit squeeze, threatening to undermine economic growth by inhibiting their ability to make new loans.
The banks have been forced to take on to their books large amounts of commercial paper and leveraged loans after investor demand for such assets dried up in the summer.
http://www.ft.com/cms/s/ad10cc9c-7c1a-11dc-be7e-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fad10cc9c-7c1a-11dc-be7e-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Also Tuesday, Treasury Secretary Henry Paulson echoed Bernanke’s concerns.
“Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy,” he said.
————————————————————————-
Isn’t this the same dingaling who said he wasn’t worried about the housing declines effect on the national economy a few months ago?
An overnight conversion has taken place at the top. BB and HP have got religion now.
Tuesday, October 16, 2007
Changing their subprime tune
Ben Bernanke and Henry Paulson
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke have modified their public statements on the state of the U.S. housing market. Each now says they see a significant risk to the economy. Steve Henn reports.
[Federal Reserve Chairman Ben Bernanke, left, speaks to The Economic Club of New York on Monday evening. Treasury Secretary Henry Paulson speaks at the Georgetown Law Forum today. (Getty Images)]
KAI RYSSDAL: The collective Washington economic wisdom about the housing market so far has been: everything’s gonna be fine. Both Mr. Paulson at Treasury and Mr. Bernanke at the Federal Reserve have said, more than once, that they thought the fallout would be contained. That’s the actual word.
But in a speech last night from the Fed chairman, and another one this morning from the Treasury secretary, we learned that might not be the case — that problems in the U.S. housing market pose a significant risk to the economy. Marketplace’s Steve Henn reports.
http://marketplace.publicradio.org/display/web/2007/10/16/paulson_bernanke/
It’s GS!!!
I know you’re PB now but sometimes it’s nice to see the old handle.
Did you see the visual of Bernanke and Paulson talking? They both looked visibly shaken.
But the market will rally tomorrow b/c of Intel and Yahoo.
Better look out for a rate cut, then.
“Arlington Heights condo only for what we owe!
We are offering our condo for sale only for what we owe on it! In addition, we are aksing for an additional, $5,000.00 This is only to cover our moving and small expenses. Buyer pays closing fees.
TOTAL: $169,000
Sold at this price, with no negitaions, and no realtors please.
Condo next door, sold for 184,900!
This is a STEAL!!!
Wonderful…..
2 BEDROOMS, 1BATH
Hardwood Floors throughout
Plenty of Closet Space
Low Association
Front and Back Entrance
Solid Brick Building
Walking Distacne to Downtown Arlington and Metra
Easy and Quick Sale!
Qualified Buyers: If you are interested, please email and I will send pictures and schedule a showing.
http://chicago.craigslist.org/nwc/rfs/451189591.html
Do you think the seller is being completely honest with us? She hasn’t disclosed that she’s been paying only a fraction of her interest and no principal since she bought the place. Do you think she’s holding out?
Not so sure you can really buy something for “a steal”.
> Plenty of Closet Space
> Front and Back Entrance
What are the main requirements of meth labs anyway?
partick of patrick.net is on Nightline tonight!?! A good anti realestate blog