Bits Bucket And Craigslist Finds For October 25, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Roots…
http://www.marketwatch.com/news/story/roots-credit-crisis-found-feds/story.aspx?guid=%7B7920B361%2D26CD%2D4241%2D9797%2D72E182F13FE6%7D
The Maestro was indeed a minimalist.
“bulletin
ORDERS FOR DURABLE GOODS FALL FOR SECOND MONTH IN A ROW
CAPITOL REPORT
Roots of credit crisis laid at Fed’s door
Regulatory minimalism allowed risky practices to flourish, expert says”
“Everybody was talking about the wonders of all the CDOs and the new innovations,” says Stacey Nutt, the president of ClariVest Asset Management LLC in San Diego. They’re discovering that these instruments have instead spread risk to parts of the financial system, such as hedge funds and foreign investors, that aren’t regulated. “You end up with more risk than you had 15 years ago,” Mr. Nutt says. “It’s a very scary situation.”
http://online.wsj.com/article/SB119326927053270580.html?mod=hps_us_whats_news
“Mr. Ricciardi, 38 years old, has remained a booster of the CDO market. At a meeting this spring — before the summer meltdown but amid cracks in the market — he exhorted salesmen, traders and bankers at the small firm he had joined to push investors to buy more CDOs, according to people who were there. “These are the trades that make people famous,” he told his troops at the firm, Cohen & Co., say attendees.”
What passes for the highest levels of financial acumen in this country, is truly frightening…
Cohen & Co. sounds like a bucket shop.
These are the trades that make people famous,”
Wow. Just wow.
Sounds like real life Gordon Gekko.
Nick Leeson is a famous trader. He single handedly brought down the bank of Barings-
http://www.cfo.com/articles.cfm/4007454
“He was in frequent contact with rating firms like Moody’s Investors Service and Standard & Poor’s, say former analysts, pushing to get the best possible ratings on securities issued by his group. A former managing director at one rating firm says Mr. Ricciardi sometimes personally lobbied senior rating executives for better ratings, but rarely got his way.”
Rarely got his way? Looks like he got his way most of the time, considering the ridiculous ratings that were issued.
Great article, IMHO. An excellent analysis of how the market got to where it is. Duped by an enthusiastic snake oil salesman with a bag of tricks. Didn’t know Wharton was a school for magicians. Hogwort’s would have done a better job educating this guy.
“Duped by an enthusiastic snake oil salesman with a bag of tricks” How about Uncle Sam’s Bag of Tricks…Not just 1 month but now the last 3 months. WOW!
New Home Figures revised downward for June, July, Aug
“The large revisions highlight the low confidence that government statisticians have in the monthly report and the frequent large revisions it undergoes.”
Longer trends do a better job of showing the reality of the housing market than volatile monthly numbers.
Sales of new homes are down 23.3% in the past year.
The sales figures do not account for canceled sales contracts, which have surged in recent months, especially since the seizing up of some mortgage markets. Many buyers are unable to find financing at the rate they want.
Merrill, which continued to expand its CDO business aggressively after Mr. Ricciardi left, now is the biggest casualty of the downturn after underwriting many troubled CDOs in the past year. In a conference call with investors yesterday, Merrill CEO Stan O’Neal acknowledged that the firm had fumbled the CDO business: “The bottom line is, we got it wrong by being overexposed to subprime.” Mr. O’Neal added that Merrill had misjudged the risk of many CDOs. “It turned out that both our assessment of the potential risk and mitigation strategies were inadequate,” he said.
Is this the same as saying we did not know we were in the toxic sludge business? And, we are just as surprised as everyone else that these things were hazardous.
That’s hard to believe when you fight your way to the number one spot. They were knee deep in toxic waste. How could they not know? I suspect when the ABCP market turned, they got caught with buckets full of sludge and that’s the real surprise.
To the Wall Street Crooks: For the LAST time, it is NOT just about Subprime!! NOBODY can safely “buy” a house at 5x to 10x their income with little to no money down and be expected to actually make all the payments at the real rate!! I don’t care what your credit is - if you make $50K a year and “buy” a $500K house with no money down, you’re doomed!
Oct. 25 (Bloomberg) — Merrill Lynch & Co., the largest brokerage firm, may have to write down another $4 billion in the fourth quarter as the value of subprime assets continues to drop, according to CIBC World Markets.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aIMr2oAfkofI&refer=home
So WTF is going on with all the forumula’s devised by all the 9-figure heavyweight financial hot-shots?
Off by $3/4 BILLION????
Guess nobody had an alogarithm to compensate for the massive fraud and corruption which has transpired.
http://www.nytimes.com/2007/10/25/business/25mortgage.html?ei=5065&en=f638df42cc20fb59&ex=1193889600&partner=MYWAY&pagewanted=print
F#$k, no kidding. I’m actually quite sick of the way credentials are handled in society. The whole academic elite thing.
I’m sure there are very good ivy league schools out there, but the idea that somehow the same knowledge is better or more legitimate if obtained from a particular group of schools is nonsense and needs to stop.
The people on this blog predicted most of this mess WAY ahead of time and I’m willing to bet that few if any of us are ivy-leaguers.
I’m not just picking on the ivy league mentality either. There are TONs of other examples of mis-perception of authority in our culture.
Like how about the notion that only the wealthy are worthy pf being leaders in this democratic republic of ours? Seriously - when’s the last time a poor or even middle class person was president? Wouldn’t someone like that be a better representative of the average American?
Sometimes I think the homeless guy walking around claiming to be the president would make a better ACTUAL president……
I definitely don’t think we would end up worse off if he were.
As someone who has one of those Ivy League degrees, I have to say that… I’m inclined to agree with you. Many of my former classmates get much more respect than they deserve. It’s just a piece of paper. Education is great, and power to those who have learned from their Ivy League experiences. But–surprise, surprise–some people just muddle through. I’ve met idiots who went to top schools, and I’ve met brilliant people who never finished high school. My father, for instance, is one of the latter. People want to take the easy route, and looking for credentials as opposed to getting to know someone is the easy route.
At least Mr. O’Neal has a secure job. He owns the Board of Directors.
“For the time being, its seems as though Merrill’s board is supporting Mr. O’Neal — although given the decline of almost 6 percent in the stock yesterday and the growing criticism over his management style and decision making, that support may not be infinite.
Mr. O’Neal has turned over virtually the entire board. Only two directors, Aulana L. Peters and Joseph W. Prueher, were there when he joined the board….”
NYT
After reading the many post about the market around here, I started trying to learn a bit about technical analysis. Not to trade per se, just for understanding. Does this look like the start of a head and shoulders pattern?
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=INDU&time=7&freq=1&comp=&compidx=aaaaa%7E0&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtstyle=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.asp
I see what you’re looking at but the head on that pattern would be around Dow 17000. Don’t even go there! There was a reverse HS in the August period, you can see that worked out.
Besides, we have Motorola doing it’s thing as usual today. You can always count on them to pour cold water on a tech rally.
“Dow 17000. Don’t even go there!”
Geez, let’s hope it doesn’t. I’m hoping 14,000 stays in the rearview.
But Motorola is up! I am dumbfounded.
–
What part of “better than expected” don’t you get? Wall Street estimates get beaten all the time!
Jas
This looks like one to my untrained eye.
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=INDU&time=20&freq=1&comp=&compidx=aaaaa%7E0&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtstyle=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.asp
Not to be the party pooper, but here’s a view of technical analsyis that’s shared by most economists and analysts worth their salt: It’s a fantasy. It’s astrology. It’s tarot card reading. Technical analysis is interesting in analyzing past performance but its ability to be “predictive” is nothing more than reading tea leaves.
Read the classic “A random walk down Wall Street”, of the more recent “Fooled by Randomness” by the Lebanese mathematician Nassim Taleb.
There has never ever been a scientific proof that shows that technical analysis beats a random throwing of darts at a dartboard.
Save your energy for macroeconomic analysis, geopolitical analysis, strategic analysis and behavioral analysis. Those fields are well respected. Chartists sell snake oil to the masses.
When you criticize astrology, you’ll get a certain number of people who like to point out inane things like “but your body is mostly water”, as I’m sure will happen now with this provable statement about chartists.
But that’s why chartists are still around. Because there’s always another person waiting to be dazzled by fibonacci, bollinger and trend lines.
“But that’s why chartists are still around.”
Think survivorship bias.
LOL, I am not a chartist, but I am familiar with the techniques. It is somewhat foolish to trade short term against chartist. The patterns that have been seen decade after decade become self fulfilling events. Is it the mass psychology of investors or the charts themselves that cause investors to think in mass? I do not know nor do I care, but before every trade I look at the charts.
Yeah, I laughed at that one too. If I had a nickel for every time I’ve heard that . . .
The next step is to not only recognize the chart patterns but fade them. Then fade the fade . . . it just goes on and on.
I’d be a beach bum without charts. Totally rendered ineffective.
Perhaps it is due to my academic, but I am personally quite persuaded by arguments made in A Random Walk on Wall Street (Burton Malkiel) and Fooled by Randomness (N Taleb) that (1) chartism does not work any better than throwing darts, and (2) survivorship bias helps support the belief among successful chartists that their methods do work.
I would also guess that failed chartists are far less likely to loudly announce the effectiveness of their methods.
The patterns that have been seen decade after decade become self fulfilling events.
Does anyone care to quantify the return on these self-fulfilling events?
You can use tech analysis and make money: You’ve proven correlation. bfd.
Now prove causation. Show us the Warren Buffet of TA.
Jeff Cooper. He’s on Minyanville now.
Richard Dennis
Also I do not discount technical analysis, the Federal Reserve did three studies on technical analysis and there results suggest that there is validity to the methods.
Support for Resistance: Technical Analysis and Intraday Exchange Rates
Federal Reserve Bank of NY
“New York Fed senior economist Carol Osler concludes that “support” and “resistance” levels, technical trading signals intended to indicate where exchange rate trends are likely to stop, are effective.”
http://tinyurl.com/ywgxyn
Or maybe Dan Sullivan?
also from the Federal Reserve:
“There is now a considerable amount of evidence to suggest that technical trading rules
can earn economically significant excess returns in the foreign exchange market (Dooley and
Shafer, 1984; Levich and Thomas, 1993; Neely, Weller and Dittmar, 1997 (henceforth NWD);
Neely and Weller, 1999; Sweeney, 1986). But the reasons for the existence of these excess
returns are still not well understood….”
caution pdf.
St Louis Federal Reserve
http://tinyurl.com/yvp9ng
My understanding is that it is taught in some MBA programs now, and it should be.
Richard Dennis: From the article ref’d in wikipedia: http://www.streetstories.com/rd_finan_trader.html
“But eventually, The Prince of the Pit was dethroned. In 1988, Dennis was forced to close up shot after racking up tens of millions of dollars in losses for both his and his customers’ accounts.” What a surprise! He had a statistical variation in his favor, and then he had statistical variation not in his favor.
Almost… as… if… it was statistical variation!
Fed paper:
TA = genetic programming? Did you read that paper?
And testing a theory on data that you used to produce the theory? That’s just bad science.
Dan Sullivan
Who?
Here’s a test: If the first entry in a google search is not your person, then it’s not a Warren Buffet equivalent.
Then if you can retire at the age of 38 with $200MM. Mr. Dennis made a lot of turtles very wealthy.
Cool
Paul Tudor Jones, $17B Technical Analysis Trader still active
as well as
John W. Henry
Larry Hite
Ed Seykota
William Eckhardt
Victor Sperandeo
Michael Marcus
The preponderance of evidence shows every major trading house uses technical analysis. As I have said I do not use technical analysis, but it is silly to discount as a valid trading tool.
Then if you can retire at the age of 38 with $200MM.
But he didn’t retire, and his statistical streak came to an end.
Quick check, Paul Tudor is not worth $17B. $2.5 B, much from $750 commissions last year on a $17B fund.
I don’t have time to debunk all of these. Is there no obvious Warren Buffet?
The preponderance of evidence shows every major trading house uses technical analysis.
And yet somehow, they have a statistical distribution of returns among them. Almost… as… if… they were engaging in random behavior.
Jeff Cooper
Sorry tx, only saw yours pop up afterwards. See my comments regarding google.
“And testing a theory on data that you used to produce the theory? That’s just bad science.”
AKA econometrics
“And yet somehow, they have a statistical distribution of returns among them. Almost… as… if… they were engaging in random behavior.”
LOL. What statistical distributions show is consistent winners. Whether by astute investment from fundamentals such as Berkshire Hathaway or by technical analysis such as Mr. Paul Tudor Jones. Good traders win. Bad traders lose.
Good traders have discipline. Every good trader has an exit strategy. To ignore technical indicators for a fundamental trader is as risky as ignoring fundamentals would be to a technical trader.
There is no “random walk” that will yield a Mr. Warren Buffett. There is no “Random Walk” that yields a Mr. Dennis or Mr. Jones. (Mr. Dennis retired from active trading in 1988 and took $200MM+ with him).
if the FED says that statistical analysis works, that’s the best proof for me that it is totally useless (just like all the other FED-crap).
regarding the TA pros: it is very similar to a state lottery winner teaching you how to win the lottery. I believe though that it has a limited ’self-fulfilling prophecy’ effect, and that a few traders can always beat the market for some time - but not forever. Just like in the casino, if they get out at the right time (after striking luck) they can ‘win’.
(Mr. Dennis retired from active trading in 1988 and took $200MM+ with him).
Nope, he was shut down in 88. He was back at it in the 90s, but made a much smaller splash.
Umm, rereading most the above, I should apologize for the tone.
Not that any of you have a thin skin, but for the record:
I have a lot of respect for the posters above.
So regard the discussion as me disagreeing + not having a lot of time today + too much coffee.
JP
I’ll have to mention that to Mr. Dennis the next time I am in Chicago. He’ll laugh.
Easing up on the coffee JP does not give us as much fun. LOL
It is infinitely better than drinking California cool-aid.
“Is there no obvoius Warren Buffett?”
Ed Seykota comes close to being a TA Buffett equiv.
He, like Buffett knows who he is (and who he isn’t) and understands and accepts the boundaries of what he can do and what he can’t.
Easing up on the coffee JP does not give us as much fun. LOL
Like I said, I doubt that you (or anyone else in the thread) was suffering from thin-skin disease.
Thanks for making it a pleasure to spar.
“…the Federal Reserve did three studies on technical analysis and there results suggest that there is validity to the methods…”
Did they properly account for survivorship bias?
I have a tendency to agree, but this is where it ends. There are many hedge funds and traders that no longer look at all the areas you mentioned. Instead they have computer programs that use modeling to determine their trades. This fact causes chartist to become more relevant in short-term trading (i.e. day-trading).
Soho,
Taleb’s concept of the Black Swan is meaningless without the underlying concept that most events are rythmic.
…or fractal.
“but your body is mostly water”,
So are feces.
I can’t remember the last time there was so much aftermarket activity, with precious metals…
Mellow Yellow’s up $5, before the opening bell
Weak economy = another FED cut = lower dollar = buy Gold as a dollar hedge , or silver.
Dutch housing bubble update:
The Dutch Kadaster (official registry for all home sales transactions) for the first time reports a significant decline in Dutch home prices and number of transactions. Home prices declined 2% from the previous month, but are still up 4.6% compared to one year earlier. The number of sales declined 26% from previous month and 15% from a year ago. These latest numbers are for September but records are lagging so they actually show the situation of 2-3 months earlier (june-july); because of this these numbers do not yet reflect the sudden dive in Dutch consumer confidence from end of September. We will see - home sales tend to pick up again towards the end of the end of the year, so the trend should be clear within some months. The end of the Dutch bubble has been called too often to get enthusiastic this time …
The number of homes for sale in my area has increased about 50% compared to one year ago. I’m seeing more examples of homes with high wish prices that after lingering on the market for years are now for rent at 3-4% (yearly rent) of the official wish price. On the other side, every day brings new examples of idiotic wish prices. The average Dutch home price is just above 250K euro (8.5x median income), but in my remote part of the country it is very difficult to find anything decent for that (asking) price and below 200K one can only hope to find ‘POS’ properties or homes that need a complete overturn.
nhz, where do you live?
I have fond memories of Hengelo (sp?) spending some time at Signaal, I’d take the train from Amsterdam out across the countryside. It was so flat it made Nebraska seem like hill country.
On one trip I met a lady returning from one of the Baltic countries. She and her husband wrote a newspaper in Wisconsin in their native language, and she had taken advantage of the then recent fall of the iron curtain to visit her old home. Took three suitcases, came back with nothing - she left everything there with family.
I’m from Zeeland (Old Zealand, together with New Zealand on the other side of the globe one of the housing bubble strongholds - maybe just because everything happens a bit later here …).
Small world. I have a customer in Terneuzen.
Als dat zo door gaat komt de leeuw in z’n hempie te staan………
Welke regio woon je?
in de regio van de leeuw die worstelt om boven water te blijven
Interesting update, it seems like the mortgage freeze up extended past the US borders in August? (sorry, I don’t know the mortgage food chain outside the US.)
yeah, maybe … we are getting similar signals in the last weeks from Spain, Ireland and New Zealand, to name a few. All of them point to a potential bubble top and start of the great long slide downwards, but it is too early to tell for sure.
nhz,
One of my closest friends here in Virginia is from the Netherlands (she married an American). She was enraptured by large new homes here and traded up with her husband in 2005 to granite and stainless. The houses in her neighborhood are now selling for $150K less (25%) than they paid. It’s upsetting to her as she’s so frugal and careful with money. They at least sold their old house for a lot, too, and are frugal in other ways so it’s not a complete hardship, just annoying for her personally.
at least she got a lot more home (and scenery I guess) for here money than in the Netherlands …
Over here $ 600K (EUR 420K) buys an average (dull) home on a small lot in one of the more remote (lower income) areas.
Yes, she loves her house (it *is* a nice one), and her relatives are envious.
I always appreciate your posts, nhz. Thanks.
Ditto to that, nhz!
Let’s hope this is the final and true popping of the global credit/housing bubble!!!
Housing Prices
http://www.stockmania.com/index.php?showimage=77
Good one…
That the first sheeple i’ve ever seen on a beach~
Yeah, I am sure it is tough getting the sand out of their wool.
What’s wrong with these two headlines (top headline and 4th headline in a grouping of headlines).
“Motorola 3Q Profit Plunges, Sales Off- AP”
“Stock Futures Up, Motorola Outlook Helps- AP”
Bonus headline:
“Comcast 3Q Profit Falls, Revenue Rises- AP”
Yeah, that’s all good news. Bulls on the rise.
On Bizarro Wall Street…
Bad news is good news
we have been in an alternate reality for at least 5 years and it has been swirling faster lately
They are starting to price in another 50 basis point rate cut.
Since the last one solved all the problems, right?
50 basis point cut? Hmm, buying CFC on the drop tomorrow starts to sound better and better.
every dollar dive (like today) means that nominal prices of US stocks will go up a bit to compensate.
So great, let’s print some more dollars to prop up the Dow; rest assured, Hank and B-52 Ben are working on it.
Since the last one solved all the problems, right?
And we’re going to do it again and again until we get it right!
They are starting to price in another 50 basis point rate cut.
All this talk about a rate cut being priced in is crap. Last time, a rate cut was priced in and then when the cut happened, the market had a huge rally.
That was because the 1/2 pt cut was “larger than expected” (even though I personally expected it). Look for the Fed to make many ambiguous and misleading comments in the days leading up to the next FOMC meeting in order to obtain a similar expectations shock this time (whatever they do).
Bonus headline #2
“AP - Orders for Big-Ticket Goods Fall Again”
Article states that the September drop in orders was ‘unexpected’.
Bloomberg is tying the drop in Durable Goods to Slump in Military Equipment.
Oct. 25 (Bloomberg) — Orders for U.S.-made durable goods unexpectedly fell in September, restrained by a slump in demand for military equipment that overshadowed increases in business investment.
The 1.7 percent drop followed a 5.3 percent decrease in the prior month, Commerce Department figures showed today. Excluding a 39 percent decline in defense equipment, orders rose 0.7 percent.
It’s time to start another war.
On to Caracas and GLORY!
Today marks the 24th Anniversary of our invasion of Grenada…
The root cause of our current generational habit of messing with other countries~
Yeah things worked out horribly in Grenada.
Operation “Urgent Fury”
ha
http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/HousingHorrorCouldHangAroundForYears.aspx
Article draws a comparison between now and the savings and loan fiasco in the ’80s in Texas. Pretty good read (nothing that hasn’t been said here years ago though), although I did find this puzzling:
“The Texas template tells us we could be in for a 14% to 25% decline and an eight-year to 14-year wait for recovery. That’s real history. It’s not hyperventilation from the Chicken Little chorus.”
So I guess that those of us who’ve been saying this for years are a bunch of chicken littles? Well since I’m debt free and not stuck for life in some overpriced McMansion I guess I’m living proof that sometimes it pays to be a little chicken.
“The Texas template tells us we could be in for a 14% to 25% decline and an eight-year to 14-year wait for recovery. That’s real history. It’s not hyperventilation from the Chicken Little chorus.”
That is a nice example of how the straw man argument can be used to claim the mantle of your opponent’s correct prediction.
http://en.wikipedia.org/wiki/Straw_man
The sky isn’t falling; it’s just getting a lot lower in elevation.
The ground is rising!
You are growing!
The universe is shrinking!
Who’s Torching California?
http://www.cashill.com/california/whos_torching_california.htm
On the web site of the Earth Liberation Front (ELF), for instance, the reader is cautioned that those who have “committed arson” under the banner of ELF are driven only “by their personal conscience” and are not acting under orders from a hierarchy.
These groups have been resisting housing development all over the state through a variety of means, legal and otherwise, and this resistance has helped push housing prices through the roof.
If, in metro Kansas City, a family of medium income can afford to buy 87 percent of the homes on the market, a comparable family in greater Los Angeles can afford to buy only 2 percent of the homes, down from 40 percent just a decade ago.
dude…
You need to come to el lay in the midst of a 95 degree day, with 66 mile an hour Santa Ana’s rippling through the air, to get a better appreciation of Mother Nature’s power.
a family of medium income
You mean median, right?
5 years fed time- hope they get aids
bet lots FB’s are hoping the flames get close-
what happens w insurance vs “market value” etc ????????
‘what happens w insurance vs “market value”’
That’s what I am wondering. If an insurance company has to replace a Rancho Santa Fe home whose market value is off by, say, 10% from the peak, how can the insurer establish this if no homes in the hood are selling? And who decides on the appraisal for determining the claims payment?
In lieu of rebuilding homes, why not just have burned out homeowners have their pick of the litter? (did I just compare homes to dogs?)
How many houses are for sale in SD?
50,000 or so, 1/2 of which are empty.
“50,000 or so”
How do you come up with this figure? There are only 20,375 showing up on ziprealty.com’s inventory of SFRs + condos. Are you saying there are another 29,625 or so new SFRs + new condos + Craig’s listings + E-bay auctions plus FSBO + … ?
My bad, I mixed up another FB metropolis with Tijuana-adjacent.
So, that leaves 18,000+ unsold homes, after subtracting the 2,000 or so burned down…
The unsold houses will become victims of the Copper trade, or squatterville, if left unoccupied.
IMHO Prof G.S. Bear, Mssr. Aladin Sane is correct. There are “50,000 or so” houses and condos for sale in San Diego. They are just not listed on the MLS - yet. Supposing there are 8 house for sale on your 12 house block, what is the point in listing your house? But if one house sells, then a new listing takes its place. I hypothesize that over 50% of all homes sold from 2004 - 2006 are available. I have no facts to support this hypothesis.
“I hypothesize that over 50% of all homes sold from 2004 - 2006 are available. I have no facts to support this hypothesis.”
Hoz — That is my kind of hypothesis: A wild-@$$ed hunch which is probably on target
P.S. I live in one of those “available” homes, in the sense that it has been invester-owned since 2004 after 24-or-so previous years of existence as an owner-occupied home. Once it is obvious that real estate is not going up this time, even over the long run, I expect this home to go from effectively available to actively on the MLS.
Insurance is for replacement cost of the structure and landscaping. It has nothing to do with market value (which includes land). The problem for most people is that they don’t increase their coverage as construction costs rise. Additionally, if coverage is below a certain percent of the replacement cost then co-insurance kicks in and the insurer pays at less than the face amount of the policy.
Also, the lender will demand that the owner/borrower rebuild. If not, the lender will get the insurance proceeds and foreclose for the balance due.
So an owner with a mortgage is pretty much forced to rebuild to avoid foreclosure. The owner may even have to get a 2nd mortgage loan if the insurance coverage is inadequate; a big problem if no equity.
“Insurance is for replacement cost of the structure and landscaping.”
That pretty much answer my question. Thanks.
Any chance the homebuilders could make a couple bucks rebuilding torched houses? Insurance companies are probably the only ‘forced’ buyers in this market.
Finally, a whole new paradigm.
“Also, the lender will demand that the owner/borrower rebuild. If not, the lender will get the insurance proceeds and foreclose for the balance due.”
As a general rule, yes. But I’m wondering, these days, if the lender might not wish to get the insurance proceeds after all and let the homeowner walk away. If lenders need the money right now, it might be a point very much open to negotiation. Especially if the insurance proceeds are more than what the lender could get if he had to take the house back in foreclosure.
homebuilders could make a couple bucks ??
Not likely but all those guys standing in front of Home Depot will get plenty of work….
And insurance pays to replace what was there - if it’s an older house, they don’t pay to bring up to today’s code. Live in mountains until last year and learned the ins and outs of it.
I’ve had a rental property burn before. The tenant had a candle lit by the window and a gust of wind blew the drapes onto the flame. He “put” the small blaze out himself and went back to sleep. You know the rest of the story. The renter had no insurance and so was liable for all the damages. The next day I examined the property and thought to myself .. hey no big deal…some repairs, paint and cleaning…maybe $7000. The Allstate estimator came by and pointed out the brown nail stains showing through the sheetrock that indicated high temperatures. The repairs required the total teardown to studs to replace all insulation, doors, windows, kitchen, bath and electric and prime coating of the interior structure to cover the smoke odor. Cost of the repairs by the Allstate contractor was 30% more than the original coat of the SFR that was purchased in 1989 and fully paid off. Allstate could cut me a check immediately and I could use my own workers, which would have allowed me to pocket a profit by being the general contractor. I elected to go with the Allstate contractor to avoid the hassle. Allstate covered everything..even the rent. 3 months later I had the nicest SFR in the neighborhood. It sold at full listing after one day on the MLS. Allstate sued my renter…and that’s another story.
Mom called yesterday to tell me that my cousin “lost it all” in RB. Looks like I’ll be getting a front row seat to the Ins. replacement costs vs. mark to market showdown at Thanksgiving.
My sister still hasn’t been back to her house in RB, but all is ok.
It’s gotta be eerie, having houses burned to a crisp across the street from you, when yours is totally intact.
Well this wasn’t my favorite cousin and she bought after the Cedar fire because they HAD to have a bigger house. Never seen the place but apparently it was right on the brushline. As kids, we had to help clear around the groves. Her childhood house was right in the shadow of saddleback which was big time fire country. She knew flipping knew better.
Let’s just say my shins will no doubt be bruised by the end of the night as one of my aunts kicks me. I’m the slacker of the family that stayed in college too long. She married her boss, the broker, slime personified. They named their first born Tiffany. You see where this is going? The responsible side of the family (Mr. gwynster, my mom and the other aunt) will no doubt cheer me on. The wild card is my one male cousin who graduated from NW (Kellogg grad).
ELF eco-terrorists and their pals, even if they’re Americans, should be treated no different than Al-Qaeda….skip the trials and put a bullet through their head, or ship them off to Club Gitmo hoping they’ll never be seen again.
The disciples of Chuck Norris & co. are up early today…
What about financial terrorists, would you do the same to financial terrorists? You know, like the heavies who travel the world on the US taxpayer dime, advising countries like China and India on how to undermine the US? Or da gangsta Boyz on da Street and bankers who are killing off the financial health of millions in this country? What about the developers who knowingly built over bombing ranges and sneer at the homeowners they sold to? Could you call them eco-terrorists? I would. Can they go to gitmo, too?
what about all the front soldiers in the War on Savers and foreign dollar holders (and effectively also all the other real US oil wars) that were working in the WTC? Financial terrorists? For someone from Europe that is a valid comparison …
To say none of those types you mention occupy offices in London, Paris etc. defies all logic. Financial shenanigans occur all over the world. And anybody who claims our wars are over oil is just plain delusional. Sadly, too many people are.
And with all due respect, the last people that ought to whine about anything US related are a bunch of Europeans that we have to periodically bail out.
“And anybody who claims our wars are over oil is just plain delusional.”
Well then the guy that you apparently worship at the altar, GW Bush is just plain delusional. He in publicly admitted the iraq debacle is about oil.
Next?
bail out, LOL! It’s the Europeans and Asians that are bailing out the US this time; apparently despite your presence on the blog you haven’t yet noticed the precarious financial situation of the US. When all this money goes back to the rightful owners, the days of the mighty US Empire and its military machine will be over VERY soon.
Sorry, not worshiping that guy. Hate to bust that bubble, but oh well.
Nhz, I don’t necessarily disagree with you on your point. And that’s because of what I’ve learned on this blog. However the death of the US Empire/military may be a bit prematurely exaggerated. Who would you prefer then, the Chinese?? One things for sure, if/when the Red hordes come knocking on Europe’s door, we all know who you’ll come crying to. And I bet it won’t be the French.
We don’t have a lot of hard right righties on here, it’s a logic thing. They wouldn’t understand.
zingggg!
“We don’t have a lot of hard right righties on here.”
I think you are confused. It is not “hard righties” who are war mongers. Rather RINO’s aka GW & co and Democrats like Hillary. Maybe you have noticed that the democatically controlled congress has done NOTHING about the war in IRAQ nor the “war on terrorist”?
Blano: I don’t think the Chinese will roll over Europe or even the Arab states, for that matter. They have wised up and found a more effective way to get what they want. Look at how they work in Africa: a lot of negative things can be said about it, but certainly not that they kill over 1 million foreign citizens along the way and use all kinds of torture and blackmail at the highest levels to get what they want. Most of the African countries where China is present are doing a lot better now than in previous centuries (and not just the people at the top, also the normal citizens) when they were working with certain EU countries or the US.
Maybe it’s not well known in the US, but in the rest of the world there is just ONE nation that ranks lonely at the top of most aggressive nations, nations seen as a threat to world peace, and that is the USA (far, far above Russia, China, Iran, North Korea etc.).
Most of my countrymen and women have never been anywhere outside of our country, and wouldn’t have a clue what that other 95% of the population of the world thinks of us…
It’s not a pretty story, as nhz relates.
It’s common for other 1st worlders in their late teens-early 20’s, to take a year off and travel around the world, and see how the other half lives.
I wish more young people in our country would get a chance to see this big beautiful world, and not be so xenophobic about others.
I wish more young people in our country would get a chance to see this big beautiful world, and not be so xenophobic about others.
Most definitely.
European culture is fading itself out of the world history it largely created through lowest-low fertility rates among the indigenous populations. If the trends don’t change markedly, “Old Europe” (Old-aged Europe) will become irrelevant through societal upheaval or those societies physically replaced by cultural enemies in decades, not centuries.
Yeah, send Mozillo there. Great idea.
‘What about the developers who knowingly built over bombing ranges and sneer at the homeowners they sold to? Could you call them eco-terrorists? I would.’
Me too.
And I have posted in the past about situations I see often, such as developers who want to somehow obtain permits to build a house on some steep unstable slope in known landslide hazard zones with tricky soils. They KNOW it’s potentially dangerous. They’re not building a house for THEIR kids–they want to build it and sell it to some poor idjit from California.
Could you call that developer an ‘eco-terrorist’? And demand a bullet?
Nah, I wouldn’t equate them the same, since there’s no body count to go along with the financial shenanigans.
I agree some of the people you mention could use a good comeuppance though, in some way.
Blano?
Blano Stalin? Blano Pinochet? Blano Tse Tung? Blano Chauchescu?
Is that you?
Maybe we could just poison their granola.
So you propose to destroy the Constitution in pursuit of some alleged criminals based on a suggestion from some website, ignoring evidence gathering, or even a trial?
Smells like Stalinism to me. Get a grip on yourself.
Smells like the current administration to me.
Didn’t say that at all, spike. Just voicing a concept long overdue.
Blano…
this is the “concept” you posted…”skip the trials and put a bullet through their head”…those are your words.
My post in reply stands in full.
Spike… his established modus operandi is to say something outlandishly absurd and then backpedal from it.
Liberalism on the rise. After 20 years of right wing nuts, looks like we’ve got some left wing nuts.
A balanced tool box is essential for the home handyman.
RE: A balanced tool box is essential for the home handyman
No balanced tool box here in Mazz.
The constituents here keeping re-electing drunk drivers who drown women.
Yeah, right. And FOX is saying it’s the terrorists, based on a 4 year old memo.
Fires occur naturally as part of the eco-system. I would hold off blaming anyone until there are actual arrests. The idiots in homescare security are calling them “eco-terrorists”, but they haven’t killed or hurt anyone. That’s not terrorism.
In the United Blame Game State of America…
Never look for the real cause of problems, when you can blame it on the boogeyman of your choosing.
The real cause is of course, the drought.
The drought was caused by the terrorists. Didn’t you get the memo?
Well, doesn’t Bush now have the right to declare any US citizen a terrorist and imprison without trial? Who needs Habeau Corpus anyway? Be sure to thank your representatives, whenever you communicate with them, for doing away with this outdated concept.
“homescare security”
cynical girl has it right. whatever happened to all the color-coded fear-mongering? oh, yeah, disappeared as soon as they bagged the election. Mencken was right…a large number of our citizens have no allegiance to the constitution or to the bill of rights.
LOL, auger, shrub must be positively priapic over Cali right now. I didn’t even think of the “eco-terrorist” angle, but no doubt he did. Gawdamighty, can you see it all now? Some Blackwater dude lights a match (because Blackwater does have a “base” in the area) KABOOM! Area goes up in smoke and flames. FBI catches some fellow in the forest lighting a fire (supposedly). It’s the eco-terrorists! Sheesh, now the US can invade on of its own states, Cali. And hand out lucrative private security contracts to Blackwater. Meanwhile, Mexico starts making incursions into the area and working with the eco-terrorists. We can accuse Mexico of having nuclear capabilities. The possiblities are endless.
And it was only a drought.
You joke, but there are certainly minds in the administration who could cook up a scenario like that.
Regardless, some security and infrastructure contracts will probably go to cronies like Blackwater. The CA National Guard and the Army Corps of Engineers are conveniently deployed elsewhere.
Outsource.
Privatize.
Monetize.
(Also, “priapic”: good choice of terms.)
“You joke, but there are certainly minds in the administration who could cook up a scenario like that.”
Maybe I’m only half joking. It sure is handy-dandy that Blackwater has a base in the area. Only now, the stories are coming out about Blackwater and Katrina. I’ll bet you money Blackwater’s very active in the area right now.
Nah, we need those Mexicans for cheap labor.
No, he doesn’t. He doesn’t even have the right to imprison non-citizens caught on US soil without a trial.
No, he doesn’t. He doesn’t even have the right to imprison non-citizens caught on US soil without a trial.
Oh yes, yes he does — according to our enlightened administration.
Theoretically, any one of us could be declared an “unlawful enemy combatant,” at which point we (according to BushCo, not the US Constitution) no longer have the right of habeas corpus, nor do we have the right (again, according to The Smirking Boy Who Would Be King) to a trial in front of a jury of our peers. It seems we would not be protected by the Geneva Convention, either.
Awesome, huh?
Blano;
Why of course it must be those damn tree huggers! I mean, just because all of Southern California is dry as tinder box from drought, has been overbuilt, overdeveloped and and overun by a stupid and greedy species (a sub group of Homo Sapiens known as FB’s) couldn’t possibly have anything to do with the fires currently buring up the place.
Get a grip, fool.
SubKommander Dred
Not trying to place the blame on anyone right now. Still, it’s undeniable that terrorism of this type does go on here on occasion, and should be dealt with accordingly.
Try to get a grip on the concept, before name calling, which is all too typical sadly with the left.
which is all too typical sadly with the left.
Laugh.
I don’t think the left has the market cornered on namecalling — or maybe you haven’t heard the noted comedians Limbaugh, Malkin and O’Reilly.
In the 15 or so wildfires that have ravaged hundreds of square miles in Southern California in the past few days, chaparral has been the primary fuel. Whipped by strong winds, the fire has spread across this vegetation, consuming some 1,500 homes along the way.
http://blogs.wsj.com/fires/
LMAO. I heard about FauxNoise blaming the terrrists. I think that outfit sinks to a new low on a daily basis. Whats scary is there are dumb-asses who actually watch and believe that garbage.
Exeter, since I don’t watch TV you can’t blame my point of view on Fox. Try to at least avoid the name calling when you disagree, unlike most on the left.
I wasn’t specifically blaming anybody at this point. The undeniable fact remains that this kind of stuff does occur and that said responsible parties should be dealt with no differently than Muslim terrorists. Property terrorists are no different than Al-Qaeda.
You know Blano…. We’ve lost count how many times you something incredibly foolish here. And I’ll wager that you backpedalled then, just like you’re doing now. Then you cried “name calling”…. just like you’re doing now. But I have a bulletin for you…… I wasn’t talking to you, nor did I refer to you or say anything disparaging about you. Countless longtime posters here asked you to get a grip and you still stubbornly keep your foot in your mouth.
Denial….. It’s not a river in Egypt.
hear, hear…
If you weren’t talking to me, fair enough. I’ll backpedal on that, but not the rest. I think though that “dumb ass” falls under name calling. Feel free to disagree.
And so what if about posters talk about said grip…the same can go both ways. You and others obviously spout off about things I disagree about, yet I’ve never told anyone to get a grip. I will always defend your right to free speech no matter how outrageous I think it might be. I don’t ask for anything different.
Backpedal, duck, weave, backpedal.
Keep going Blano.
Arsonists should be burned at the stake in the town square..
my 2 cents.
oh yeah. i forgot.. Anyone who defends ELF should be subjected to a lobotomy… another 2 cents wasted..
Imaginary Elves…
“oh yeah. i forgot.. Anyone who defends ELF should be subjected to a lobotomy… another 2 cents wasted.. ”
Too late for that dude.
Well…I watch FauxNoise sometimes, too. I don’t get mad or disappointed, though. It’s like watching chickens play chess. It’s just for entertainment and because I enjoy a good laugh.
Olympiagal, you come up with some funny comments… I’m still chuckling about the dead rising comment re: remote control fireplaces.
“These groups have been resisting housing development all over the state through a variety of means, legal and otherwise, and this resistance has helped push housing prices through the roof.”
If environmental groups such as ELF have opposed massive new Housing tract developments throughout CA they and all the other eco-environ groups are a complete joke! THE IE region of Scal has been completely inundated by development run amok: vast former pastures, old rustic ranchettes, dairy fields, shady citrus groves have been bulldozed and turned into vast oceans of spankin-new mcstucco tracts.
This is just the IE: i am sure same has happened all over the Central valley, CA desert regions, and up in Santa Clarita. This first decade of the 21st century should be marked on the pages of Scal history as the decade which saw the IE completely plowed and paved over into mind-numbing endless vistas of empty shopping centers, home tracts, sprawling industrial acreages, ect.
I used to be an avid environmentalist and Sierra Clubber but have seen that these groups are completely hollow
and powerless especially on the immigration issue, which IMO has contributed greatly to the decline of CA as an enviromentally friendly state.
I’ve noticed the same thing.
The problem is, big business has the big bucks and big business wants cheap subdivisions and cheap (illegal) workers.
“The problem is, big business has the big bucks and big business wants cheap subdivisions and cheap (illegal) workers. ”
The big bad homedevelopers, HB’ers, have been calling the shots in the IE. There never was any pretense in ecological prevervation out in the IE-it was all about throwing up big subdivisions as fast and cheaply as possible and cashing in on the RE bubble mania.
Lots of cheaply-built subdivisions out there will be abandoned or half- built and leave a mess for the Jackals to denude the developments of any metal valuables. Good opportunities for scavengers and dealers in scrap metals and woods.
The OC santiagp fire may have been started by eco-terrorists or maybe just some demented sicko individual(s). Lots of loonys all over Scal foaming with rage or just looking to trash and burn. I always hear about schools getting vandalized and looted, and one sees freeway signs and retainer walls all over LA metro region spray painted with graffiti. Even get occasional sickos throwing stuff or shooting at motorists on the freeways.
This Santiago Arson job really does look like whoever did this was purposeful, methodlcal, and knew exactly how to torch at the right time and the right places.
Probably should rule out ELF or other enviro-wackos as they would not deliberately torch forests and the OC wildlands unless they were plain nuts. Could be an outraged Fb’er or someone who has a real problem with authority-an anti-Gov’t type.
Pete…. it’s just gotta be them thar turrists……
http://www.Predictify.com
Check out that website. It asks you to predict the future and you get paid when you’re right! We all can make money : )
In the long run, we are all dead.
In lieu of payment to me~
Please send Ben a donation, for all his work.
http://www.minyanville.com/articles/index.php?a=14619
it couldn’t hurt…
Per the NY Times, the loss in real estate wealth may be $2 billion to $5 billion, depending on how far prices fall.
(My back of the estimate calculation, with affordability restored but no overshoot, is $5 billion in real dollars, though some of that may be the effect of inflation on flat prices.)
The mortgage default losses are estimated at $400 billion for investors and financial firms, more than the inflation-adjusted $240 billion for the S&Ls (which was also real estate driven, but with more of a commercial component).
With regard to commercial real estate, adjusted for inflation retail, office and industrial rents remain vastly lower, adjusted for inflation, than they were in the 1980s. Development activity has never approached the level of that era in many markets. NYC had virtually no new office development in the 1990s boom.
“…the loss in real estate wealth may be $2 billion to $5 billion,…”
What loss in real estate wealth? All real estate is local, you know.
The figure in today’s NYTs that jumped out at me is a potential loss of $400bn…
‘At this juncture, economists say the troubles in the mortgage market could, all told, cost financial firms and investors up to $400 billion.’
http://www.nytimes.com/2007/10/25/business/25mortgage.html?_r=1&hp&oref=slogin
“Every time economists and Wall Street executives think they have acknowledged the full extent of the losses from the meltdown in real estate mortgages, more bad news turns up.”
That’s kitsch-and-sink reporting for you…
OK, here is the direct quote I think you meant to take from that article:
“The loss in total real estate wealth is expected to range from $2 trillion to $4 trillion, depending on how far home prices fall, according to several economists.”
I believe that incorrectly refers to the national U.S. real estate market. All real estate is local, you know.
A Trillion Dollars isn’t what it used to be.
(with apologies to Nelson Bunker Hunt)
Optimistic economists.
A mere loss of 2-4Trillion is about half of what I expect. It is also only 1/3rd of what is possible 10 - 12 trillion. California is such a large part of the real estate economy that a 40% drop in California prices (80% probability) puts $4 trillion in the rear view mirror.
http://www.nytimes.com/2007/10/25/business/25mortgage.html?hp
Be sure to click on the sidebar, captioned “Worse than expected.” I personally think this should be the new moniker for the housing bubble.
“Worse than expected.”
In regards to the effects on… people or houses or both?
U.S. economy
Durables drop is worse than expected
Demand for defense goods fall and drags down durables data for September to a fall of 1.7%.
http://www.marketwatch.com/
Of course, many people who bought their houses several years ago are still ahead financially, because the sharp run-up in home values is still far greater than the expected decline.
Sez who?
Sez people who “know” real estate always goes up, in the long run.
Well, it IS true to a point. Worst case scenario, if real prices next year fall back to 1994 then technically the guy who bought in 2000 has lost money. BUT that guy will be 8 years closer to his goal of zero housing expenses (excluding prop taxes, insurance, maint etc still far less than rent.) And this unwinding will take more than one year, and real prices will not drop as far as some here predict.
Wall Street hates financial products that reek of honesty, and especially ones that preclude them from getting their usual extraction of 30 pieces of Silver, out of.
Check out this full court press article that shows just how afraid the powers that be, really are~
http://www.bloomberg.com/apps/news?pid=20601039&sid=a5TPikM1zf1Y&refer=home
My take on mellow yellow is that it moves inversely to perceived US political, economic, and moral strength i.e. when those three items are hitting on all cylinders Gold is sent to the penalty box for a “time out” and when those three items are in decline Gold shines.
Test
Wall Street hates financial products that reek of honesty, and especially ones that preclude them from getting their usual extraction of 30 pieces of Silver, out of.
Check out this full court press article that shows just how afraid the powers that be, really are~
http://www.bloomberg.com/apps/news?pid=20601039&sid=a5TPikM1zf1Y&refer=home
“Here’s why. Gold reached a record high of $850 an ounce in January 1980. If since then the spot price of bullion kept pace with U.S. inflation as measured by the consumer-price index, gold would now be selling for $2,119.84. Instead, it stood at $732.05 in London trading yesterday, only about a third of what it should be if it were truly an effective inflation hedge.”
In fact, as I understand it, gold SHOULD be selling for $2,119, but the system has been gamed so that gold is artificially held down and this does not happen.
I also note the constant quoting of Goldman Sachs in this article.
This brings us back to an ongoing debate: do you bet on the rational choice (gold undervalued), or do you accept the gamesmanship and shift your assets according to the thumb-on-the-scale “rules” of the market? And at what point does the gamesmanship angle become untenable?
I think there is a strategy involving eggs and baskets. A portion of your investments should be based upon sound economic principles, because sooner or later they always come back to bite the powers that be. In the short term you can invest money that you don’t mind losing with the “thumb-on-the-scale rules”.
ET, you’ve just verbalized my constant dilemma. If you accept the gamesmanship, which I think many do, sooner or later, the gamers lift their thumbs from the scale and then what?
God hit that price at the height of the last stagflation event, we are just getting warmed up for this time around. Gold isn’t so much a hedge against inflation, but a hedge against economic collapse (inflation/deflation). In other words gold can always be trusted while financial institutions and governments cannot. The less trust in the system there is the higher gold goes.
“In fact, as I understand it, gold SHOULD be selling for $2,119″
I am sure it would if Everyone understood things exactly as you do. If gold SHOULD have been at $850 back then, it could have stayed there for more than a moment. We believed in 1980 that gold Should be a lot higher than even $850. I held all the way down, lol.
Some of my portfolio dates back to 1904. My grandfmother put it in my hand when I was a teenager. Her mother put it in her hand when she left Scotland saying “As long as you keep this you will never be broke.” Now I will never be broke as long as I keep it, that I trust. I don’t trust what the price in dollars tomorrow Should be though. That’s pure speculation.
You do know that gold, at 850 was jacked up along with silver at about $50 by the Hunt brothers’ scheme, no?
In 78 it was only about $200 and fell back to $300 by 82.
Go to: http://data.bls.gov/cgi-bin/cpicalc.pl
Plug in $300 and you get $648 in today’s dollars.
Was $300 valid in 82? $200? Who knows. Go back to 1929 when gold was $20.67…..today’s equivalent purchasing amount?
$252
wow. thanks for that info.
http://www.minyanville.com/articles/index.php?a=14619
Great stuff here…
“Hey, capital, cesspool, casino, it’s as easy as A-B-C to make money. Let’s keep this thing simple, folks: Everyone knows all you have to do to make money in America is buy bottle rockets in front of earnings and buy every plunge and you will be rewarded and be able to retire by the age of forty. It’s our birthright.”
The bulls are desperate. They are throwing elbows and hitting below the belt. The rumor was similar to Tyson’s ear biting. The bulls are on the ropes. Their knees are about to give. The only thing saving them is BB’s rate cut bell. Between every meeting they grow weaker and weaker and more dependent on the bell. Unless BB practices voodoo, the fight is not going to last much longer.
with Illuminati chief Hank at the front you can be sure there will be a lot of financial Voodoo before this crazy market is finally done.
heh - posted same link!
Doesn’t WB understand the main purpose of the toxic subprime debt Superfund is to avoid market devalued assets to market?
Buffett cautious on $75bn superfund
By Anna Fifield in Daegu, South Korea
Published: October 25 2007 10:48 | Last updated: October 25 2007 10:48
The US banks creating a $75bn-plus “super fund” to buy the assets of troubled investment vehicles should sell a portion of the fund into the open market to help determine the actual value of the underlying assets, Warren Buffett said on Thursday.
http://www.ft.com/cms/s/a70778e4-82d9-11dc-b042-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fa70778e4-82d9-11dc-b042-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
“marking devalued assets” (time to go drink some coffee…)
“should sell a portion of the fund into the open market to help determine the actual value of the underlying assets”
That would put a snag in the plan to hide the value.
Precisely. Opacity good. Transparency bad.
“should sell a portion of the fund into the open market to help determine the actual de-value of the underlying assets”
There was a great article about this yesterday. The basic premise is that if a SIV is sponsored by a single bank and that bank has an implicit duty to back it then the write downs should show up on the banks balance sheet. If several banks create a superfund and none of them have an implicit promise to back it. Then they don’t need to put the losses on their books.
The second advantage is that they keep the SIV from dumping assets.
I will buy a 1% stake for a $100. That values the whole pile at $10,000.
Are traders pricing in another “surprise” 1/2 pt FFR cut?
INDICATIONS
U.S. stock futures steer higher as earnings flood in
By Steve Goldstein, MarketWatch
Last Update: 8:38 AM ET Oct 25, 2007
LONDON (MarketWatch) — U.S. stock futures edged higher on Thursday, with a set of generally positive earnings reports offsetting a surprise decline in durable-goods orders.
http://www.marketwatch.com/News/Story/Story.aspx?column=Indications
A little plunge protection, please…
http://www.marketwatch.com/tools/marketsummary/
The plunge protection levee is broken. Look out below!
I guess plunge protection was shifted into overdrive on the drop in new home sales (see my grade school arithmetic below).
ECONOMIC REPORT
When will housing hit bottom?
Analysis: Fundamentals are bad, and there’s the credit squeeze on top of that
By Rex Nutting, MarketWatch
Last Update: 4:12 PM ET Oct 24, 2007
WASHINGTON (MarketWatch) — The housing market is just getting worse. Home resales tumbled 8% in September to the lowest levels in this decade, prompting the obvious question: When will it all end?
The honest answer is no one knows. Optimists have been saying for more than a year that the worst is behind us, while the pessimists have been saying recovery is still a year, or years, away.
http://www.marketwatch.com/news/story/housing-hit-bottom/story.aspx?guid=%7B0311E781%2D648B%2D4EE5%2D96AF%2DD35180E12295%7D
I foresee no bottom until after 2010, and I am an optimist.
3 years of FED ratecuts to come then, everyone of them cheered by the Wall Street pundits; what do you think … do we get DOW 35.000 before 2010?
depends on the euphoria trickling out of the bubble.
Sure by then, the US dollar may be 1:1 with the Yen.
I’m no economic genius, and it just doesn’t seem that complicated. There are huge numbers of mortgage rate adjustments looming, along with the attendant defaults. You simply cannot talk about any “secondary infection” being cured yet. Moreover, the financial houses have clearly not revealed (and may not yet even know) the full extent of their losses.
The problem with comparing this to the late ’80s housing bubble is that the current run-up was so much greater and involved so many financial actors worldwide. I personally believe it will take several years longer for this thing to play out than it did last time, and indeed I don’t see how it could be otherwise.
And the illegals kick San Diego evacuees while they are down…words can not describe my anger level when I read this sht.
“However, six people were caught stealing relief supplies yesterday from Qualcomm Stadium. An evacuee reported seeing them load two pickups and a car with cots and other items, leave and then return.
One in the group said they were being paid to take items of value, police Sgt. Jesse Ceseña said. The six, suspected of being illegal immigrants, were turned over to U.S. Border Patrol agents who were at the stadium to assist with relief efforts.”
“…One in the group said they were being paid to take items of value”
Let’s see: Casey Trump Jr. or OJ?…must be Casey Trump Jr… OJ has an “image” problem that’s consuming much of his retirement $$$$$$$$$$$$$$$
Blano, here is a job for you. But no bullets please, just public spanking.
Public spanking? How about we remove the invaders?
Trying to find a rental house in NJ, so this involves talking to the realtors…Yikes! You wouldn’t believe the crapola that’s still coming out of their mouths. The broker who has the listing for one rental we were interested in looking said “If you can afford this rent, you can afford to buy…blah blah blah Let me show you some great home for sale…blah blah.” If I were the owner, I would be LIVID that *my* RE agent was saying this to pontential tenants. Another one tried to pull the old “There’s another offer” routine. We were trying to set up a time to look at a house. She told us that we should see the place that day and not the following because there was another offer she planned to “present to the owner in Korea by email.” What a dumb dumb. That actually turned us off. Who wants to deal with a landlord in another country? If she had kept her mouth shut, we might have seen the home, fallen in love with it and been able to overlook the foreign LL. Did she really think we were going to get into a competitive bidding war on an already overpriced rental that’s been languishing on the market for MONTHS??? Guess what? Weeks later it’s STILL on the market. She really blew it.
“If you can afford this rent, you can afford to buy.”
The “great time to buy” NAR ads on the radio say “why rent when for the same cost you can own?”
It would be a great time to buy if for the same money (based on total ownership costs including ongoing reinvestment) you could purchase a similar dwelling in a similar location that doesn’t exceed your needs with a 30-year self-amortizing loan. Is that the case? Not in the NY area, and this is the worst renters market in the United States.
Same with the Bay Area. The rents here are insane right now, but still far less than half the cost to buy.
“If you can afford this rent, you can afford to buy…blah blah blah Let me show you some great home for sale…blah blah.” If I were the owner, I would be LIVID that *my* RE agent was saying this to pontential tenants.”
Wow. And they wonder why their profession is held in such disgust by so many…
Oct. 25 (Bloomberg) — The collapse of confidence in Merrill Lynch & Co. after the world’s biggest brokerage lost six times more than it forecast earlier this month helps explain why Treasury Secretary Henry Paulson’s attempt to rescue SIVs is troubled.
Merrill Chief Executive Officer Stan O’Neal told shareholders yesterday that the New York-based firm had a loss of $2.24 billion, the biggest in its 93-year history, after reducing the value of mortgages and asset-backed bonds. Those are the same hard-to-trade securities owned by structured investment vehicles, or SIVs, that Paulson is attempting to keep afloat with a new $80 billion fund.
http://www.bloomberg.com/apps/news?pid=20601010&sid=a7Qdq8YCQ2nU&refer=news
“Fitch Ratings says the value of SIVs, which own more than $320 billion of bonds, fell to 73 percent as of Sept. 28 from 100 percent in July.”
Ouch!!
Let’s see 23% of $320 billion is $73.6 billion. I don’t think we have seen anywhere near these type of “SIV only” losses posted up to date.
Buehler? Buehler?
Speaking of Ben Stein
Watch this YouTube clip of Ben and Peter Schiff back on 8/17 (may have been noted before). Ben is pumping ML at $76/share and Peter’s saying it’s toxic. Cavuto and the others are all making fun of Peter. Ben Stein is totally condescending.
ML is around $60 today.
http://tinyurl.com/2edehd
Something about Fox vs. the “Reality-Based Community” comes to mind.
The man was a speechwriter for Nixon, for God’s sakes, what do you expect.
Gotta love poor Peter, always having to deal with the condescending bulls — and he takes it well.
He deserves a ton of respect for always putting himself out there on behalf of us bears.
Merrill Lynch claimed 8 of the 73.6 billion. Where is the rest of them?
P’cola and Abuyer,
You are only including the SIVs. The total loss (IMHC) is closer to 350B (some street calculations place the loss at $600B). Of the total loss, 65B has been recognized. The difference is the vast number of Mark to Fantasy calculations employed by banks as well as the shift from trading position to investment positions. This is just the beginning. These problems will be with the banks and investment houses for years.
The thing I have to keep emphasizing is that these “SIV”s are all over general purpose money market funds. The MM funds lend YOUR money out, short term, to fund these pieces of dogsh_t. The “SIV” then takes this money, leverages it to the moon, and buys long term toxic sludge, hoping to make a bundle on the interest rate differences.
Guess who’s going to take the losses if this continues, it just might be the MM funds.
NEW YORK, Oct 25 (Reuters) - The U.S. Federal Reserve said on Thursday it added $19.0 billion of temporary reserves to the banking system through a 7-day repurchase agreement.
Federal funds were trading steady at 4.75 percent in the market after the operation amount was announced, matching the 4.75 percent target rate the Fed sets.
The Fed said collateral accepted in the operation was $8.615 billion in Treasury debt, $3.73 billion in agency debt and $6.655 billion in mortgage-backed securities.
A total of $59.15 billion in bids were submitted for the operation.
Earlier, the Fed added $6.0 billion in temporary reserves via a 14-day repo. The latest repurchase operation brought the total Fed injection for the day to $25 billion.
********************************
still watching…nothings changed
rollovers
never ending “rollover” is monetization.
this activity must stop at some point, but the notion that its only temporary rollovers is precisely whats causing the problem.
When the verbage changes to something like, super rollover credit enhanced market operations….. we are on our way to a brighter future.
Voz, The Federal Reserve does not call it monetization. The correct term is “Evergreen”. LOL
A non callable loan arrangement.
“Revolving line of credit with no Clean-Up Requirement requiring the borrower to pay off the outstanding balance periodically. Evergreen loans are generally made for specific terms, for example three years, and may be renewed or cancelled at the end of that period. This is also a de facto condition of short-term loans that are constantly renewed without a reduction in loan principal.”
Yummy…. Me want moooore…. Got a rate cut?
CIBC is predicting that ML will have to writedown another 4 Billion of securities in the fourth quarter. That’s gonna leave a mark!
‘Tis a mere flesh wound.
“That’s gonna leave a mark!”
A skidmark in somebodie’s undies–that’s for sure.
With Buyers Sidelined, Home Prices Slide
Tighter Credit, Anticipation of Further Declines Add
To Worst Glut Since Late ’80s; the Foreclosure ‘Fear Factor’
By JAMES R. HAGERTY
October 25, 2007; Page D1
So many houses. So few buyers.
Home builders are slashing prices, often by more than 10%. Some people who list their homes on Craigslist.org admit they are “desperate” to sell. Inventories of unsold homes are at the highest level in nearly two decades, providing plenty of choices.
[Where Housing Is Headed] WHERE HOUSING IS HEADED
A look at fundamental indicators in 28 major real-estate markets.
Yet a severe tightening of credit by mortgage lenders is keeping many buyers out of the market, while the huge supplies of homes for sale have persuaded others that they can wait for further price cuts.
http://online.wsj.com/article/SB119326355265670448.html?mod=hpp_us_whats_news
There is no mention under the list of “fundamental factors” about the recent occurrence of wild fires in SD, LA and The O.C. Are the Santa Ana fires likely to stimulate or dampen demand for SoCal housing?
http://online.wsj.com/public/resources/documents/info-houseIndicatorQ307-sort.html
“severe tightening of credit by mortgage lenders”
This is always presented as an anomoly, when in fact it is really just a return to traditional prudent standards (and we aren’t even there yet). But we never heard about the “severe loosening” on the way up did we?
How to tell the truth with statistics:
Originally reported new home sales for August = 795,000 per annum
Reported new home sales for September = 770,000 per annum
Drop in new home sales = 25,000 per annum
Percentage drop in new home sales = 3.1 percent
My impression is that comparing current new home sales to revised August new home sales is an apples-to-oranges comparison, as August sales are adjusted downwards to reflect order cancellations, while newly-released September new home sales are not.
bulletin
U.S. NEW-HOME SALES RISE IN SEPTEMBER; AUGUST FIGURES REVISED LOWER
ECONOMIC REPORT
New-home sales rise 4.8% in September
Previous months’ data revised sharply lower
By Rex Nutting, MarketWatch
Last Update: 10:00 AM ET Oct 25, 2007
WASHINGTON (MarketWatch) - Sales of new homes rebounded in September from summer sales levels that were much weaker than previously reported, the Commerce Department reported Thursday.
Sales increased 4.8% to a seasonally adjusted annual rate of 770,000 from a revised 735,000 in August. Previously, August’s sales had been reported at a 795,000 pace.
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BE81C81DA%2D0444%2D4D83%2DB34E%2D2AEB0D62C920%7D&siteid=mktw
P.S. I predict that October new home sales will drop further, both due to seasonal decline plus the disruption of fire storms in a major swath of the U.S. housing market (SoCal = LA + SD + The O.C. + Santa Barbara).
Why would a drop in new home sales drive up U.S. stocks?
Latest news|More
10:18 U.S. stocks gain on monthly rebound in sales of new homes
When facts don’t work create fiction. These numbers are fiction. Look at last month’s revision. What’s more, cancellations are probably through the roof.
Moreover, to claim the credit crunch was positive for Sept. new home sales is simply ridiculous. Look at the builder writedowns and price cuts.
“Look at last month’s revision.”
Look at my post above, which explains the real arithmetic of declining new home sales.
They’ve been doing that forever.
“They’ve been doing that forever.”
How long can sheep stay dumb?
“U.S. stocks gain on monthly rebound in sales of new homes”
Professor, the word “on” does not translate to “because”. It is newsspeak for “these two seemingly unrelated events occured”.
Rhetorical question: Why are bovine brains so easily fooled?
October 25, 2007 10:32 A.M.ET
BULLETIN
U.S. STOCK INDEXES REBOUND FROM MORNING DECLINES AFTER NEW-HOME-SALES REPORT
http://www.marketwatch.com/
New home sales rose 4.8% last month, lifted by demand in the West, recovering a bit from an August plunge that was even worse than previously reported. Durable-goods orders fell 1.7% as military demand decreased. 10:13 a.m.
http://online.wsj.com/public/us
The PPT did a heck of a job protecting the DJIA again today — right back up to opening bell levels by the day’s close, after a typical midday selloff.
U.S. MARKETS
Blue chips almost erase losses
Markets buffeted by data, oil and earnings, but Dow climbs back from 100-point deficit to end 3.3 down. Nasdaq gives up 24 points.
•Crude oil closes at record, above $90 a barrel
FINANCIALS
AIG may take $9.8 billion subprime hit
But losses, while big, should be manageable, says analyst estimated giant insurer’s subprime exposure.
http://www.marketwatch.com
–
New Home Sales report…
The most important data point is 185K Completed New Homes for sale. This is the highest ever. The previous cycle high was 125K. This is not the total inventory of New Homes Completed for sale but those that were never sold.
Jas
“Shack” O’Neal gets a rather well deserved pounding from the WSJ
http://online.wsj.com/article/SB119327415211070744.html?mod=mkts_main_featured_stories_hs
Three-Ingredient Recipe for Recession
October 25, 2007; Page A2
When we look back next year at this time, it will be clear what caused the recession of 2007-08.
It was basically a triple whammy: Housing prices kept falling, oil prices kept rising and both lenders and borrowers grew more cautious after five years of incaution. The combination was simply too much even for the impressively resilient U.S. economy. The Federal Reserve saw it coming, but couldn’t move swiftly enough. Still, Fed Chairman Ben Bernanke’s interest-rate cuts helped keep the recession as short and mild as those of 1990-91 and 2001.
http://online.wsj.com/article/SB119326874299370575.html?mod=googlenews_wsj
“Still, Fed Chairman Ben Bernanke’s interest-rate cuts helped keep the recession as short and mild as those of 1990-91 and 2001.”
Rate cuts lose their effect when they are widely anticipated, as they are already priced in when they occur.
I’d say the real story that isn’t being written is the one about the crisis in derivatives. This is what’s causing many of the problems in the credit markets. The Fed can continue to try and pooh pooh this away but there isn’t enough money in circulation to solve the derivatives crisis.
It’s getting pretty dreary when the spin is sad.
Posted last night on the California comments (well after my stupor)
“Comment by cfoofmofo
2007-10-24 21:19:02
Hoz,
Zapp Packaging is not closing down. It is being merged and moved into Orange County Container Corp because what they produce is primarily consumed by the OCC Group.
We were able to reduce redundent admin functions. No sense in having two separate corporate entities with duplicate functions.”
The information that I posted on California layoffs is what the company filed as a “Mass Action Layoff” per laws. (One of the reasons I wait until I can find local confirmation in MSM.) My apologies to cfoofmofo et al.
Here is an interesting debate. My impression, after my drive home from work yesterday through the areas described below, is that they were primarily saved by the wind direction (same as my neighborhood). But I am not sure — the one area of severe fire devastation which I saw is on a hillside just above the Ralph’s Ranch McMansion tract home development — many, many new houses which appear to have successfully dodged the fire. But again, I am not sure whether this was due to “shelter in place” construction, or the luck of the wind direction. It is hard to infer much from a time series data sample with only one observation.
Exclusive homes emerge unscathed as fire-protection concept is tested
By Lori Weisberg, Roger Showley and Emmet Pierce
STAFF WRITERS
October 25, 2007
A disputed land-use strategy designed to protect new developments from devastation in the county’s exurban, fire-prone areas appears to have passed its first and most critical test this week.
As the Witch Creek fire raced through some of San Diego County’s priciest neighborhoods and crept to the edge of others north and east of Rancho Santa Fe, not a single home in the five subdivisions that have implemented the strategy was lost, fire authorities said.
The communities, which together cover hundreds of acres, are The Bridges, The Crosby, Cielo, Santa Fe Valley and 4S Ranch.
Officials with the Rancho Santa Fe Fire Protection District credit the lack of property damage to a defensive program called “shelter in place.” It is a wildfire protection plan that imposes construction and landscaping standards intended to be so stringent – including mandatory interior fire sprinklers and broad swaths of protective landscaping – that homeowners can remain sheltered in their houses if they cannot evacuate.
The five communities, all within the Rancho Santa Fe fire district, are the only ones in the county where the plan has been adopted.
Critics remain skeptical and insist that the county’s continued willingness to permit development in outlying areas with little infrastructure puts people at risk no matter how strict the regulations are.
“Shelter in place doesn’t change the fact you’re building in a danger zone,” said anti-sprawl activist Duncan McFetridge, president of Save Our Forest and Ranchlands.
http://www.signonsandiego.com/uniontrib/20071025/news_1n25stay.html
P.S. One undesirable outcome of the ‘passage of the first and most critical test’ of this concept: You can bet that developers will use this fallacious inference from a sample of size one to push hard for lots more development in the path of future wild fires. The chances that the shelter-in-place strategy will put more future new home buyers at risk just skyrocketed.
There is just one little problem with what these critics are saying, which is that almost all of the American Southwest is a fire hazard zone.
Building patterns are to blame, critics say
Home development in fire-prone areas ‘a national problem’
By Mike Lee
STAFF WRITER
October 25, 2007
It’s time to rethink where homes are built in San Diego County, several scientists, environmentalists and politicians said yesterday as wildfires continued to carve up the region.
Advertisement
They question whether houses should be built in fire-prone areas, especially those far from established communities along the edge of the backcountry. When blazes spread in places such as Jamul, Escondido and eastern Chula Vista, homes on the urban-wildland border often are among the most at risk.
There are many fire risk factors, including how close homes are to canyons and whether they are in the direct path of Santa Ana winds.
“What we do is basically put subdivisions right in the middle of a fuel tank,” said Steven Erie, professor of political science at the University of California San Diego.
http://www.signonsandiego.com/uniontrib/20071025/news_1n25build.html
There is just one little problem with what these critics are saying, which is that almost all of the American Southwest is a fire hazard zone.
Why is that a problem?
The Southwest is incredibly overbuilt, and only a small percentage of that development was made with geographic-specific decision making — whether it’s fire-prone topography, site-specific issues, erosion issues, or water usage issues, the planning was typically poor or a mere afterthought, especially in the run-and-gun developments at the height of the boom.
The Southwest could use smarter planning and lower densities. Hopefully the wildfires will spur more thoughtful development or reconstruction (whether in San Diego County or elsewhere) … though I’m not holding my breath.
Nice post, ET.
Hopefully the wildfires will spur more thoughtful development or reconstruction (whether in San Diego County or elsewhere) … though I’m not holding my breath.
If not the insurance companies will. After the claims are paid, any guess as to how many areas will be dropped from their coverage.
Oh, those whores/developers will say anything. ANYTHING. Creative lies just fall right out of their evil little noggins, like candy party sprinkles. ‘Shelter in place’, my *ss.
I bet they just wanted a good reason why they shouldn’t have to put any trees back or make sure any stay up. That costs them time and money, you know. So, hey, the new subdivision site is SUPPOSED to be scraped clean of every scrap of vegetation and then graded completely flat as a pancake. That keeps the icky fires away!
“New single-family home sales rose to an annual rate of 770,000 from a revised rate of 735,000 in August, the Commerce Department said. Analysts polled by Reuters were expecting September sales to fall to an annual rate of 780,000 from the August previously reported rate of 795,000.”
Just like with the monthly employment report, constant revisions to previously released figures make one question the integrity of any of the data. Then the MSM spins it. Even if the revised figures are accurate, analysts were expecting 780,000, or 10,000 more than the 770,000 reported. And, what happened to the 60,000 new houses that were previously reported as sold in August (795k vs. revised 735k)?
“And, what happened to the 60,000 new houses that were previously reported as sold in August”
They might represent canceled orders.
Or sales that couldn’t get finance.
Note that the 60,000 is an annualised number (and Seasonally Adjusted), so in actuality we’re talking about a 5,000 change.
“5,000 change”
… before taking measurement error under consideration.
“…constant revisions to previously released figures make one question the integrity of any of the data”
Quote from Prof Bear as applies to you query:
“Precisely. Opacity good. Transparency bad.”
More Metro news
FEMA says it’s better prepared
By Dana Wilkie
COPLEY NEWS SERVICE
October 25, 2007
WASHINGTON – By designating San Diego and six other fire-ravaged counties major disaster areas yesterday, President Bush trained a spotlight on his Federal Emergency Management Agency, which is intent on proving it has learned some hard lessons from its slow response and poor coordination after Hurricane Katrina.
http://www.signonsandiego.com/news/metro/20071025-9999-1n25fema.html
Any comparisons of the SoCal fire damage toll to Katrina are slightly suspect. Nonetheless, I expect as many politicians as possible to play up the severity of the disaster in order to prove how effective their relief efforts were once the smoke clears from the SoCal economy.
Fires’ Cost to Insurers Is in Range of $1 Billion
By JOSEPH B. TREASTER
Published: October 25, 2007
As bad as the California fires look on television and as horrible as they are for families with homes in their path, the wildfires are doing much less damage than Hurricane Katrina two years ago, and they are going to cost only a fraction of the $41.1 billion that insurance companies paid out for the hurricane.
http://www.nytimes.com/2007/10/25/us/25insure.html?ref=business
Comparing wild fires to flood events is apples-oranges, except they’re not even in the same league.
The only major similarity I can think of is that many San Diego home owners are clearly under water (but for reasons having nothing to do with the recent fire event).
Okay, everybody, the first-ever HBB meetup in Tucson is now being planned. We’re going to be gathering at a centrally located eatery/drinkery selected by Arizona Slim, who knows all the great places to eat and drink around here.
We’ll also have a very special guest, Tango In Uniform. He’s the guy who makes those dead-on, deadpan-funny videos about the housing market in Billings, Montana. Get up to speed at:
http://www.topoimagery.com/billings/
One final detail: When’s this meetup going to happen? We’re aiming for the Nov. 5-8 period, and it’s all dependent on when Tango will be here. So, once Tango knows for sure, I’ll let all of you know!
Report back on your HBB meetup & take pictures. Would love to come, but it’s too far away.
There’s being an optimist, and then there’s this:
“Sales of new U.S. homes unexpectedly rose in September after figures for previous months were revised down.” - Bloomberg
I know I’m taking it out of context, but it’s still funny.
Buying into that story is not being an optimist. That is being a dumb sheep.
lowe-red ex-pec-ta-tions
The housing market situation is bah-ah-ah-ah-d.
http://republicans.waysandmeans.house.gov/News/PRArticle.aspx?NewsID=133
At a bipartisan Ways and Means caucus last night, Chairman Rangel outlined his long-awaited “Mother of All Tax Hikes” legislation. The basics of the package are simple: This is the largest individual income tax increase in history.
Good! A tax hike will drive home prices down dollar for dollar. Last time I checked, this country was nearing $9T in hock.
It was under $6T when the current admin assumed budget authority six years ago.
That’s an average underpayment of taxes of $5,000/yr for every working household.
Now, I’d prefer we cut spending $300B/yr or so — I have some ideas where to cut, but every $1B in spending cuts will throw 10,000-20,000+ people out of work somewhere.
I’m glad to see someone has the spine to actually raise revenue and pay the bills.
Where to cut?
Cut the Navy’s budget in half. We need 10 aircraft carrier battle groups so that there are always 3 parked in the oceans of the world? I don’t think so!!!
Cut anything involving missle shield tech from the DoD budget. 20 years of hundreds of billions a year in spending, with NO HOPE of making a workable anti-ballistic missle system.
(My dad worked in that area for over a decade. Whatever they could come up with for tracking warheads could be defeated with MUCH cheaper retrofit of enemy tech.
First they tracked the tail fire of the missles as they launched into orbit. But then the Russians added small manouvering rockets to the missles that would move them slightly once in space. Enough that we couldn’t hit them.
Okay, we’ll track them on radar from space. Well, for multiple re-entery missles, the casing blows off, then the warheads come out. When we came up with tech to track the missles on radar, they modified their missles so that the casing would blow off as soon as the warhead reached space. Now it is nearly impossible to tell whcih blip is the main missle with the warheads, and which of the dozen blips are just shield casings.
Okay, we’ll track velocity change. The pieces leaving a central area are the shiledings.
Well, all the Russians would have to do is attach variaous lengths of string to the pieces of shielding so that when they reach a distaces of 50-100 feet from the main missle, they stop moving outwards. Now we have a field of blips, all moving just a little, with no way of knowing which is the real missle and which are the bits of shielding.
Not to mention throwing some chaf into the warheads to create an even bigger field of debris.
It will never work. The anti-missle crap is just a way to funnel tens of billion a year to defense contractors so that the politicians will ahve someone to make campaign contributions and so that retitred generals and admirals will have a place to work when they retire from active duty)
Trim Social Security through means testing. If you have above medain national income from other sources, then you lose $.10 of your social security for each extra dollar you have in other income above national median.
Tort reform to make malpractice much harder to prove. (like 2/3rds of jury 66% convinced instead of 51% of jury 51% convinced.) That could cut 15-20% from our medical expenses (mal practice insurance) slicing upto $100 billion from the budget of Medicare, VA and DoD.
Just a start.
It wouldn’t be so bad if EVERYONE’s taxes went up a few percent. But half of all American wage-earners already pay little or no taxes.
These tax hikes will affect the most productive people in the United States! Raising the top rate to 44%, uncapping the Social Security limit, etc.
The Super-Rich don’t have to worry. They don’t pay these taxes either. (Why do you think Steve Jobs takes a $1/year salary? It’s so he doesn’t have to pay Social Security tax!)
But the hardest working professionals, Doctors, Engineers, small businessmen, will be screwed.
I am all for uncapping the Social Security limit because they haven’t used the surplus for social security at all. The SS surplus has been nothing more than a 15% income tax on the middle class (those making 97k are hit the worst) while the super rich pay 1% (because 15% of 97K is 1.5% or less of 1M).
This will only further enhance illegal workers advantage.
It’s immoral that Bill Gates pays into social security the same amount I do.
But STEVE JOBS doesn’t! He pays ZERO because his salary is $1.
Social Security is a wage slave tax. Deal with it, or if you don’t like it, start up your own version of MS or AAPL.
I have my own company. And I pay nearly 14% social security tax.
I’m not saying the SS tax is fair, but I think anyone that proposes a tax change that only affects OTHER people is fundamentally immoral. And nobody has proposed uncapping SS *and* lowering the rate, which would at least make some sense.
Also, most families making below $97K are more “takers” than “givers”. A family of 4 with 2 child deductions and a mortgage deduction probably isn’t paying $28K in federal income taxes alone (not counting state, local, and payroll taxes.)
Yet if you take our national budget and divide it by our total population, the tax burden comes to about 7K a person (after factoring in revenue raised from corporate taxes.)
People making less than 97K are already “lucky duckies.” At least, they have no right to complain about taxes.
Hey reuven,
unless they’re single, have no kids, and rent. Then they ain’t such lucky duckies.
Raise the cap on Social Security…and tax the hedge fund guys at the same rate as any other small business service provider…to wit, the $15 dollar an hour cleaning lady.
And the 2 and 20 hedge fund manager. Each provides a service. The hedgie is paying capital gains rate on OPM.
Not fair.
The Social Security cap is FAIR because soclal security is capped! Bill Gates collects the same amount as a person who made only 100K and paid in for 20 years did.
Also, the lowest income people can collect the most from it!
Your typical “single mom” can go to the SS office and say “Boo Hoo! I’m depressed” and start collecting Social Security Disability insurance, even though she might have been earning 12K/year bagging groceries. Let’s see Bill Gates try to get away with that one!
STRESS MESS IN U.S. 48% CAN’T SLEEP
We’re also worrying about making the rent. More than half of people polled say paying the landlord or making the monthly mortgage causes great stress.
http://www.nypost.com/seven/10252007/news/nationalnews/stress_mess_in_u_s_.htm
That is a hidden cost of overpriced housing. Thank you, Alan Greenspan. Thank you, Fed.
caffeinated kool-aid?
We’re also worrying about making the rent. More than half of people polled say paying the landlord or making the monthly mortgage causes great stress.
I’m telling you the stocks to invest in for the future are cigarettes, alcohol, sleep aids, antidepressants, pepto bismol and aspirin.
Small price to pay for the pride of ownership
I’d suggest snuggling up in bed with the owners manual for your stainless steel dishwasher.
Is that fun?! I haven’t tried that one.
You know, I’ve learned a lot of interesting things from you, tx.
Be sure and let me know when you spot Ms. Bigspending Fakeknockers there in Seattle. You know, the one Suze Ormand dispatched up your way
Felice
Two new indicators the Long Island housing market is toast:
1. My wife who really wants to buy a house said “if we are stuck on Long Island another year, let’s rent a nicer place.” RENT!!
2. The September median price for Suffolk County was published (Long Island, New York). Not only is it lower than last year, it is lower than two years ago!
Thats REAL progress. When the boroughs sink, watch the equity bandits disappear and their destinations crash. It’s great news.
Roubini says “I told you so”…
http://www.rgemonitor.com/blog/roubini/222636
“This analyst still holds the view that the US will experience a hard landing that is already in the making and that could formally be in full swing by the beginning of 2008.”
Watch the bulls all say, ‘We warned you there would be a hard landing,’ come early 2008.
CFC tanking–awesome! Glad I held on a bit longer.
Got energy price volatility? $100/barrel crude is on the way.
BULLETIN>> CRUDE HITS RECORD HIGH OF $90.60 ON MIDEAST TENSIONS, SUPPLY DROP
http://www.marketwatch.com/tools/marketsummary/
Does anyone have that bar graph with all of the adjustable mortgages and the dates they reset? I really regret not saving that! I have the map or misery with the payment option ARMS.
OT on Fundamental Indexing–I listened the other day to Rob Arnott of Research Affiliates. His brain-child is the idea of Fundamental Indexing.
Here’s the gist. If you have an index fund, don’t weigh your stock holdings based on market capitalization, weigh them based on their fundamentals (revenues, book value, cash flow, dividends). With market-cap weighting, you tend to buy more overvalued stuff, and less undervalued stuff. With fundamental indexing, you might have exposure to the same stocks, but less exposure to overvalued stuff, and more exposure to undervalued stuff.
He claims that indexing this way would have beat traditional indices by 2%+ annually over the past 45 years.
FTSE has created a number of indices based on this fundamental weighing approach (RAFI, or Research Affiliates Fundamental Index indices), and there are now some new ETFs from PowerShares that track the FTSE RAFI indices.
Rob Arnott gets paid a fair bit for his idea (so he’s not entirely unbiased), but he claims also to be personally invested heavily in the strategy.
I don’t trade stocks, since I don’t have the time (or frankly know-how to do so), but believe the way for me to go would be through various index funds.
Anyone have a take on the Fundamental Index approach? It fundamentally (no pun intended) makes sense to me, but I want to see if I’m missing some logic. I recognize that it doesn’t take into account projected growth, but at the same time, you won’t be overpaying for dogs by virtue of their inclusion in the S&P and overvaluation based on reputation.
I respect the groups general brainpower here, all thoughts are welcome.
There have always been “value funds” which prune the broad index to include only those with the best value (some combination of earnings-per-share and book-to-market). And sometimes they beat the market and sometimes they don’t.
This just seems like a variation on it.
I’d say, in general, you may survive a bearish market better in a fund like this, but you may also miss out on run-ups in bullish market.
I agree that a “value fund” is the best proxy, but that is still prone to people’s opinions, and eliminates growth stocks altogether. His approach doesn’t eliminate growth stocks as part of the portfolio, but buys less of them.
I see the real value in this approach that it systematically forces the sale of A PORTION of one stock holding as it runs up in price absent a commensurate increase in the company’s fundamentals, and systematically forces the purchase of more of a stock holding as that price drops for any reason not tied to a decline in that stock’s fundamentals.
This is the exact opposite of the cap-weighted approach, where you systematically buy more of a stock as it gets more expensive (regardless of fundamentals), and reduce your holdings as the stock gets cheaper (regardless of fundamentals).
I tend to believe that market psychology plays a significant role in stock valuations, which is why we overshoot the top and overshoot bottoms. This approach takes advantage of the overshooting, the cap-weighting is hurt by overshooting.
I’m not completely sold, but I’m getting there. Since his approach is systematic, you can actually run the clock backwards to see how he would have done historically.
Here’s a link to some Schwab offerings in this space, they say that they would have beaten the market by 3-4% consistently over the past 15 years, which included the tech run-up…
http://www.schwab.com/public/schwab/research_strategies/mutual_funds/funds/fundamental_index_funds?cmsid=P-1798301&lvl1=research_strategies&lvl2=mutual_funds
Again, this is a valuable discussion, as this guy’s idea is only a couple of years old.
There are a lot of good funds. Your investment objectives should be the determining factor.
A Fund that I like (they fit my personal investment style, they are not in the US) are
http://www.sprott.com/
Sprott Asset Management
Their funds have the potential for tremendous volatility and are not suitable for all investors. I do recommend that all investors look at the funds history as well as the reports (market comments) at the bottom of the page.
Thanks Hoz. I’ll take a look at Sprott.
The bulk of my investments will likely go into my core business as I find good investments there, so any investing in public markets are likely a place holder until I find the next deal, or a place to put IRA money. With that in mind, I’m interested in something that is unlikely to go down in value but can be a good hedge against currency fluctuations and inflation.
My boss/partner puts it as “going long capitalism”. The best way to do so, if you could, would be to own a tiny part of every company worldwide, rebalanced from time to time based on some weighting scheme. I do think this idea of Fundamental Indexing has some merit over cap weighting, especially given my investment objective (good growth, not too much risk), and with PowerShares RAFI suite, I think I can construct such a portfolio (by buying different proportions of the ETFs) that I’ve found. In doing so, I can control exposure to different countries, large, medium, and small companies, and as I see fit, overweight countries that have experienced faster growth in the recent past (and thus getting a little “juice” to a more pure approach).
I don’t think this approach would do any worse than a traditional Indexing approach, and has a good shot at doing better.
Maybe the SIV Superfund could some how make use of price information from the ABX indexes in trying to assess the value of illiquid sump-prime assets? 18 cents on the dollar admittedly does sound quite a bit like a fire sale price.
Subprime anxiety hits top index
By Ben White and Michael Mackenzie in New York
Published: October 25 2007 23:09 | Last updated: October 26 2007 02:22
Subprime mortgage anxiety continued to spread on Thursday as a leading derivatives index hit a new low and fears grew that Merrill Lynch and other banks could be forced into even bigger asset writedowns.
Trading in the riskiest slice of the ABX index of bonds backed by home loans made in the second half of last year hit a new low of 18 cents.
http://www.ft.com/cms/s/0d06f0d6-8346-11dc-b042-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F0d06f0d6-8346-11dc-b042-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
http://www.markit.com/information/products/abx.html
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