Bits Bucket And Craigslist Finds For November 11, 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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Here’s a couple of links before I go run:
http://www.newyorker.com/talk/financial/2007/11/12/071112ta_talk_surowiecki
http://www.morganstanley.com/views/gef/index.html#anchor5776
“But behind that simple truth is a more surprising one: the financial whizzes made bad decisions in part because that’s what they were paid to do.”
Surowiecki is one of my favorite Wall Street writers, and I totally agree with him on this point (see the Economist article on “Capital punishment” below for a humorous British take on the “punishment” exacted on bankers who lost multiple-$bns for their companies in short order).
But the Banking Executives took those risks because they wanted to make short term number and bonuses even if they knew long term it meant death. They might have been even banking on a “Government” bailout.
Apparently their gamble still has a chance of paying off. Hopefully a few more heads will roll before Congress and BB can pass the tab for Wall Street banker’s bad gambling debt on to the backs of U.S. taxpayers.
The propaganda campaign is in full swing in the MSM. What’s in it for a homeowner who will never in his lifetime be able to pay off a $500,000+ mortgage to see the GSE cap raised to $1m?
Raising the roof
Struggling homeowners, prospective buyers hope cap onconforming mortgage loans will be lifted
By James Giannini
COPLEY NEWS SERVICE
November 11, 2007
Miguel Albarran’s adjustable mortgage is a ticking time bomb.
Each time it goes up, he feels the pressure build on his family budget. The payment is set to rise again in December, this time by $1,100 a month, putting a potentially unbearable strain on his family of five in Vista.
Many homeowners across the nation share Albarran’s problem, but higher home prices locally and the current cap on conforming mortgage loans make the situation more difficult in San Diego County.
Some in Congress believe they can ease the strain by raising the maximum amount that can be borrowed for a conforming mortgage with standard interest rates. They face an uphill battle, but help could be on the way.
Federal Reserve Board Chairman Ben Bernanke suggested Thursday that Congress allow mortgage buyers Fannie Mae and Freddie Mac to buy and hold mortgages worth as much as $1 million, shattering the current loan limit of $417,000.
http://www.signonsandiego.com/uniontrib/20071111/news_lz1b11roof.html
I think I’m missing something here. Two years ago they bought a house for say $700k. The ARM starts up, payments increase but the house is now worth maybe $550k. How does raising the cap to $1mil help? Or is the idea to loan the original $700k on the house getting a new mortgage at the $700k but with a reduced rate. What bank would or could go along with this? Or does the gov’t cough up the $150k loss?
‘How does raising the cap to $1mil help?’
I believe the reporter garbled the story, as BB proposed to guarantee loans purchased by GSEs up to $1mil (rendering moot the long-debated question of whether the GSEs have an explicit guarantee). I don’t believe this would do much for households who bought homes they cannot afford, but it could go far to shoring up the value of toxic mortgage debt causing a panic on Wall Street, which is currently held off-balance-sheet in SIVs, by transferring the risk into the laps of U.S. taxpayers on Main Street. If anyone has better insights to this issue than my uninformed hunches, please share!
Because the government backed loans will give generous appraisals on the refinance and than take the junk loan off the current lenders hands .
The point is that after they get the increase to 1 million than next comes this special underwriting program and that special underwriting program .Countrywide has tons of junk loans they are holding that they need to pass off.
Look, the government wants to replace the prior lenders (the money source from Wall Street ) that don’t want anymore of investing in a corrup loan market .It’s a tight money market and BB and his Senator friends want to be the new source of money on easy term to re-spike the punch bowl .
“The dollar is cheap, but is likely to undershoot further, particularly in light of the recent downward revisions by our US economists on the growth outlook of the US economy.”
What in heaven’s name does he mean by ‘undershoot’ — certainly he is not suggesting the dollar is undervalued at this point?
I’ve been trading currencies for 5 years now, about 12 hours a week.
Many in currency trading do think the dollar is oversold. They have not seen a major currency devalue in a long time… the idea of a currency going 1.1:1 to 5:1 doesn’t occur to them
NOT the USD, never.
Did you read this gem: the dollar would remain on its back foot for two quarters, until the US housing market bottoms in 1Q08, and that the dollar should rebound with the economy.
You guys point out the two lines that immediately jumped out at me. Who wrote this piece of junk? A second-grader? If it is so cheap it shouldn’t be in danger of continuing to fall. Just stupid.
I better get dressed and go look for my Manhattan condo. We are so close to the bottom of the housing market that I need to be prepared to jump back in or miss out.
The fear in New York City is becoming palpable. I can feel it at work and other places. This disaster is turning very real.
NYCityBoy: Another comment about currency traders. they almost never talk money supply.
I admit I’m only an amateur economist (former training consists of one semester in high school, dozens of PBS series)… but to me… you have to at least consider economic fundamentals:
1. Fractional reserve banking.
2. Crazy lending, huge amounts lent out
3. Documented low savings rate
4. Wages have not really increased, no real inflation on the income side.
To me, consider them as a group of factors. If the people aren’t saving (depositing into banks), then where did all the lending money (output from banks) come from?
Modern fractional reserve banking at it’s most evolved: Just some number on a computer screen. No need to even print the money. “Fed printing press” is an obsolete term.
I have no real idea by how much, but perhaps we really are dealing with a diluted dollar. And those outside the USA are noticing first? They wonder how we can keep BUYING imports and sustaining a trade imbalance. What dowe have to sell that they actually WANT to buy?
What dowe have to sell that they actually WANT to buy?
Food?
“You guys point out the two lines that immediately jumped out at me. Who wrote this piece of junk? A second-grader? If it is so cheap it shouldn’t be in danger of continuing to fall.”
Whoever wrote it is not smarter than a fifth grader, and obviously never took high school calculus, because the first time derivative of the dollar’s trade-weighted value is near negative infinity and the second derivative is also negative.
RE: the first time derivative of the dollar’s trade-weighted value is near negative infinity and the second derivative is also negative.
Way the fook over my head
…negative infinity?
“negative infinity”
Just imagine a ball thrown high into the air as it approaches the ground and you will get the idea.
1Q of ‘08? That’s a little optimistic. Unless there is a bailout, the asset back market will be dead for years. (the 75B fund isn’t going to cut it)
The value of the dollar is what the Fed wants it to be. The health of the American economy and political influence abroad affect its value, but mainly it’s interest rates and money supply. The Fed could hyperinflate the money supply, or conversely stop printing and jack up interest rates, and that would greatly effect the value of the dollar independent of any real economic or political factor.
The question is why they are devaluing the dollar, since on the face of things banks benefit from a strong dollar. For that there is a thousand answers, and half a dozen I’ve heard even seem reasonable. I think they will keep it low for a year or two, it sounds like they aren’t really thinking of lowering it further (indications of no further interest rate reductions this year, printing slightly under historic norms), and after that they’ll push a few buttons and turn a few cranks and it will return to its prior value.
–
Against the Euro dollar is undervalued. If you don’t believe this take a trip to England or France. Currencies tend to trend and overshoot and undershoot all the time.
Jas
Jas,
Yes you are correct in the overshoot/undershoot of currencies. Haven’t the contributors to this blog accepted the scenario that house value declines will undershoot trend at some point in the future? Of course.
Now, when is the dollar at the undershoot point? Are we there yet? I don’t know the answer.
When is housing at the undershoot point? Are we there yet? Oh no. Not yet. Next year? What if we have a bad recession next year? Hmm.
Not yet. It’ll happen.
Roidy
All currencies are devaluing vis a vis gold
–
“Now, when is the dollar at the undershoot point? Are we there yet? I don’t know the answer.”
Against the Euro, yes.
I have manitained, since 1997, that Gold is the best currency going forward. Swissie is the next best.
Jas
Despite all the bad things going on, Americans still have reasonable priced fresh squeezed orange juice and real ice cream.
“Mickey Mouse no match for US immigration hassles
The plummeting dollar still does not offset the hassles of travelling to America for many European tourists, Disney said as it reported record profits and growing sales for fiscal 2007.
Growth in theme park attendance was one of the significant drivers contributing to Disney’s upbeat financials. But although international visitor numbers to Disneyworld in Florida and Disneyland in California made up 18% of the total, up from 15% a year ago, it was still two percentage points less than the 2001 level.
“Europeans view travelling to America as much more difficult than it used to be,” said the company’s chief executive, Bob Iger, on a conference call after the earnings announcement. Disney believes it should be made easier, he added….”
Guardian Unlimited
http://tinyurl.com/2ptguj
On the other hand, just visit Disneyland on any weekend. Its crawling with illegals.
Foreign visitors have never had their currencies vs. the Dollar, working so much in their advantage, and yet they aren’t coming?
Must be our bad?
“However, as long as China’s economy and asset prices hold up (i.e., a modest slowdown, nothing sharp), perceived economic de-coupling will continue to lead to downward pressures on the dollar, we believe.”
all eyes on the Chinese bubble.
It is clear that we had underestimated the intensity of the pressures impinging on the USD and the relative impotence of valuation supporting the dollar.”
So, is the article saying they previously underestimated, but now they’ve got it right and the dollar is undervalued?
(sorry, forgot to finish asking the question in the original post.)
Some of the M/I ( http://www.mihomes.com ) offers rubbished on Friday’s Bit Bucket actually look quite reasonable to me, especially when the below-5% 30yr fixed is factored in.
For example the Cincinnatti townhouses @$90/sqft: you would pay close to 3 times that price (with higher interest rates and only ARM’s available
) where I live in Australia. Same with the starter homes in Indianapolis.
Of course, I don’t know the locations at all . . .
same story from Europe, many of these homes would cost 2-4x more in the Netherlands (with lower interest rates and more favorable HMD, but also lower median income). Only in a few select hotspots I see prices that are similar to or higher than the general price level in the Netherlands.
We really need to ban the practice of comparing prices in one area to prices in another area. In some places $90 per square foot may be reasonable but in other places it is still a complete ripoff.
yes, but those fundamentals do not prevent foreign buyers from paying the price. I see exactly the same going on within my country, where buyers (speculators, or equity locusts - depends on your perspective) from Amsterdam will accept higher prices for top properties in my local market than people from my own province (where there are hardly any high income jobs). On an international scale the effect is even stronger. Although the number of foreign buyers is usually small compared to the local market, it may be a big influence at times when the bottom falls out and local buyers disappear.
Why would anyone from the Land of Oz give a flying fark about whether Indianapolis real estate “looks quite reasonable?” Are you thinking of making residential real estate investments in the American Outback or something?
I think there was quite some discussion yesterday about the question if foreign buyers can save the US RE market …
Well, in a sense Japan “saved” the American market of the early 1990s, by catching a lethal basket of falling knives in commercial RE.
Yes they did…..They got their butt handed to them in Pebble Beach….
Well, in a sense Japan “saved” the American market of the early 1990s, by catching a lethal basket of falling knives in commercial RE.
Actually, they avoided the falling knives in the Japan RE market by buyihg American real estate. Any foreigner buying stateside today may not make money, but will definitely lose less money stateside than in his own over-inflated real estate market.
“Actually, they avoided the falling knives in the Japan RE market by buyihg American real estate.”
With deflating real estate markets on both sides of the Pacific, they would have done best by avoiding falling knife real estate investments entirely and stuffing yen under the mattress instead.
Just trying to understand why the earlier posters were decrying these offers as poor.
I would have to know a heck of a lot more than I do now about ANY area in the US before I considered investing in RE. As it is, I posted several times a year or so back my views on a couple of Oz companies that were establishing or buying a (commercial) RE presence in the US. I thought they were insane.
every time a Dutch bank/financial announces that they have purchased a big chunk of American real estate (both private mortgage portfolios and commercial RE) their stock value increases (even just two weeks ago, they are still buying). Maybe same mechanism that lifts the stockmarket on bad news? The big Dutch financials still state that their losses on American RE will be less than 1% of total investment (usually ‘because they are AAA rated’).
They need to ask State Street how the AAA investments are looking today.
http://tinyurl.com/2gpdlc
One minute you are playing centerfield for the Yankees. The next minute you are getting cut from the New Rochelle little league team.
“The big Dutch financials still state that their losses on American RE will be less than 1% of total investment (usually ‘because they are AAA rated’).”
Well, maybe the big Dutch financials should read the following (from “Absence of Fear”, by Robert L. Rodriguez, CEO of First Pacific Advisors, June 2007):
“According to Darrell Duffie, professor of finance at the Stanford Graduate School of Business, “you can’t compare these CDO ratings with corporate bond ratings. These ratings mean something else entirely.” While so many investors and regulators are relying on these ratings, the rating agencies take the position, as exemplified by S&P, “Any user of the information contained herein should not rely on any credit rating or other opinion contained herein in making any investment decision.” As Joseph Mason, finance professor at Drexel University says, “The ratings giveth and the disclaimer takes it away.”"
As a matter of fact….alot of foreign vulture investors are now buying distressed properties in the US. Sadly with our dollar the way it is they are now getting our 50% discount ……
Sadly with our dollar the way it is they are now getting our 50% discount ……
But they are knife catching at it’s worse:
1) Falling currency
2) falling house reale value
3) declining acceptance of outsiders in the USA, both at government and social levels.
xenophobia is getting worse in the USA, not better. With our weak USD, we are less likely to travel and make friends overseas. Just wait until our movies and TV shows drop in popularity… we will have a very hard time not being the cool kids / culture that people follow.
FY and your “xenophobia”!
So you think Americans (USA) are getting less xenophobic?
I’ve lived over seas for 12 months (Chile) in 2004. No other Americans visiting our friends, very very few.
The USA is not well liked, and we aren’t going to fix that by sending GBW out and about. Nor our our troops making us friends. It is joe 6 pack that needs to out and make friends overseas, and here on the internet, but nothing beats person to person experience.
The USA is not well liked
Clinton was probably worse than Bush. Thailand used to be a close American ally. Then Clinton allowed Soros to get away with destroying Thailand’s currency because Soros was a big Goldman Sachs (formerly run by Robert Rubin) customer. Clinton also let Soros get away with his corner on the British pound, which again did not make Uncle Sam any British fans. Then there was Clinton’s intervention when the Singaporeans decided to flog Michael Fay, the juvenile vandal who happened to hold an American passport. Singapore’s ruler personally slapped Clinton down - something he had done with no American president before - or since. The fact is that Clinton pissed off a lot of close allies while giving freebies to America’s enemies.
Chileans have never forgiven America for preventing their country from becoming the tropical gulag that is now Cuba. That’s the reality of foreign intervention from a popularity standpoint - Carter allowed the mullahs in Iran to take over by refusing material support to the Shah, and we’re now taking it in the shorts, whereas Nixon engineered the Chilean putsch, and we’re still getting flak from them. Nonetheless, ask yourself this - how many Americans have been killed by Chilean vs Iranian government operatives?
Will they want to live here when there are riots in the streets?
townhouses @$90/sqft: you would pay close to 3 times that price (with higher interest rates and only ARM’s available
) where I live in Australia
I think you will find the big scam of USA housing is that square feet sells People consider a 4000 foot home worth twice as much as a 2000 square foot home. Clue: they don’t cost twice as much to build. And tiny lots are all too common (windows of houses that are only 5 feet apart, there really isn’t that much shortage of land in the USA).
I’ll also comment that in Oz right now, you probably would be fine to do an ARM loan. As you have HIGH interest rates, some of the highest in the world, and they are more likely to go down than up. In the USA, the kind of ARM that we are talking about now is ‘teaser rate”… which isn’t at all what an ARM was in the 1980’s when I last bought a house. The fact that idiots would even consider an ARM in 2003 with record low interest rates is the clue that the term ARM was hijacked to mean “low introductory rate”. American consumers fall for that nonsense all the time. Especially when they believe that prices going up will trump interest rate costs Housing only goes up, ya know?
RE: square feet sells…
Most of these McMansions are loaded with incurable internal obsolecenses, aka redundant rooms and non-usable square foot,
which can and will render the monsters as unsellable as heating costs and property taxes blow thru the roof.
I luv the 800SF double storied front foyers which do nothing than locate a stairway and serve as a heat loss conduit.
But WTF do you expect in a, “ha! ha! mine is bigger than yours culture”.
The owners get big bragging rights at their yearly XMas parties. I’d just like to be a fly on the wall when the fuel
oil bill comes in the mail.
In ye olden days, large houses were build so that unused areas could be closed off for the winter. In some cases, I recall noticing that this partitioning also made it easier to break up large houses into multiple flats. I wonder if the typical McMansion has this sensible design approach implemented?
Disclaimer: I have never shopped for a McMansion, but I have been through a number of real mansions in my time. So maybe I am just stating the obvious here…
“Most of these McMansions are loaded with incurable internal obsolecenses, aka redundant rooms and non-usable square foot, which can and will render the monsters as unsellable as heating costs and property taxes blow thru the roof.”
Totally agree. This is what will kill the resale value of these pieces of crap. Their short-lived attaction will die right along with spinner-rimmed Hummers and Escalades.
I’d like to see all the greedy ass MacMansion homebuilders get the s**t kicked out of them for building these monstrosities. What a friggin’ waste.
2500 sq ft and under homes in decent neighborhoods are going to be very desireable in the future.
DOC
For example the Cincinnatti townhouses @$90/sqft: you would pay close to 3 times that price (with higher interest rates and only ARM’s available
) where I live in Australia. Same with the starter homes in Indianapolis.
Are your houses built out of dimensional lumber and gypsum board, or are they make out of brick and concrete?
I sure hope America’s largest banks can hurry up and “recognise their losses” and “sell assets they are hoarding in the vain hope their prices will recover” before the Fed and the Congress can act to dump the CDOs (collapsed debt obligations) on the backs of American taxpayers!
Banks
Capital punishment
Nov 8th 2007
From The Economist print edition
American banks need to do more than let a few heads roll
Illustration by Satoshi Kambayashi
SINCE the barbaric “breaking wheel” was replaced by the guillotine in 18th-century France, methods of execution have increasingly sought to end life speedily rather than inflict long agony. There can, however, be few decapitations less painful than those at big American banks. On November 4th Chuck Prince left the boss’s office at Citigroup, the world’s largest bank, with the “tremendous support and respect” of the board ringing in his ears, even though the firm had to write down $8 billion-11 billion in October alone (see article). A week earlier, Stan O’Neal lost his job at Merrill Lynch after leading the investment bank to a loss with $8.4 billion of write-downs. He too entered retirement not on a tumbril but in a limousine, with $160m to soothe his discomfort.
However churlish you may feel about Wall Street’s new axiom—“the higher they fly, the bigger the parachute”—the departure of two of America’s most senior bankers in a week is a good sign. Accountability, after all, is a step towards clarity, and there are few more coveted resources in today’s fog-strewn and stormy banking industry. Both departures were accompanied by revelations of much steeper losses from American subprime mortgages than either Citi or Merrill had owned up to just weeks before. That attempt at honesty may have spooked the market because it showed how unsure the banks remain about how to value their subprime-related assets, but that is no reason to shy away from such disclosures.
One worrying lesson for bankers and regulators everywhere to bear in mind is post-bubble Japan. In the 1990s its leading bankers not only hung onto their jobs; they also refused to recognise and shed bad debts, in effect keeping “zombie” loans on their books. That is one reason why the country’s economy stagnated for so long. The quicker bankers are to recognise their losses, to sell assets that they are hoarding in the vain hope that prices will recover, and to make markets in such assets for their clients, the quicker the banking system will get back on its feet.
http://economist.com/opinion/displaystory.cfm?story_id=10102947
The quicker bankers are to recognise their losses .. snip.. the quicker the banking system will get back on its feet.
And, imo, this is why BB is proposing the GSEs might buy some paper from the lenders.. to thereby mark something to market.. to get something moving..
But will the offer of some limited amount of govt guarantee be enough to coax them? Will FannieMae be satisfied with a bit of profit for taking on most of the risk?
I do not think so, and i believe the plan will fail.. This market is more likely stall until it is forcibly kicked out of the plane.. with no parachute, and make a terrible splat.
“And, imo, this is why BB is proposing the GSEs might buy some paper from the lenders.. to thereby mark something to market.. ”
I don’t think you are right about that. If the point were to mark something to market, then I guess there would be no need to put in place a taxpayer-funded guarantee of loans up to $1m before selling something? Because a $1m freebie guarantee would obviously have a serious distortionary effect on the asset sale price.
Regardless of the govt guarantee, the price FNM pays will be a discount price.. they are not going to pay face value.
The govt guarantee is the carrot on the end of the stick for FNM. Why else would they buy toxic waste?
The ability to offload some larger debt to FNM is the secondary market’s tasty carrot.
So far, Fannie is not all that enthusiastic about this plan, claiming they want to know all the details.. I don’t think they will go for it without substantial govt backing.
“The govt guarantee is the carrot on the end of the stick for FNM. Why else would they buy toxic waste?”
The same reason you or I would buy a house: If they (or we) thought the selling price reflected fair market value. Judging from the ABX indexes for toxic mortgage debt, that fair market value might entail fire sale pricing. Oh well…
PB,
Aren’t the ABX indexes also supposed to reflect the value of residential real estate ? If so, it means fire sale home prices as well.
Considering the scope of the Subprime problem, I cannot help to wonder whether it is even possible for these bag-holders to mark-to-market without being insolvent. If that’s the case, the only option for these companies, if they want to stay in business, is to hold the zombie-paper at mark-to-model valuations, and hope to heck this mess ends soon, via a helicopter drop.
“is to hold the zombie-paper at mark-to-model valuations”
Or even better, “mark to make-believe”, aka Level 3 asset.
I would like to see them jump off the company building like they do in Japan. This should be written into their contract:
If you lose over 2 billion you will jump off the top of the building as everyone watches you go down.
I get outrageous commission offers every day from builders, as high as 21%. This one from Lennar was in my inbox this morning.
10% Commission
Very limited offer on select homes.
Closeout sale pricing from as low as $239,990.
Sell any home ready for immediate move-in at this Lennar Community
and receive 10% commission. It’s just that simple.
The Village at Swinton Square
3-bedroom town homes with garage
Delray Beach, FL 33444
better grab it- commissions for RE agents will shrink after the fall and mort brokers will really get crushed
think stock brokers 80’s
i’d tell them i’m not going to devote my precious time and resources hunting the backwoods for GFs for free. And if found, why turn them over to Lennar? .. and demand a salary in addition to commission.
Buyers should go directly to new home tracts . Why should a realtor get a big builder commission to turn a buyer over to a builder who has big signs and advertising in the paper .Lets get serious here ,the buyer can cut a better deal if the builder isn’t paying a bunch of money in commissions .
Regardless of if you use a realtor or not, you better get a home inspection. I used to sell real estate and I insisted all my buyers get a home inspection, new house or not. I never came away from a new inspection without a punch list of 20 or 30 items that needed to be corrected. Here’s some wonderful examples:
1)Electric lines buried without casing - shorting out and causing a fire
2)Shower drains not connected to the sewer - causing flooding against the
foundation
3)Cement bags hidden in the brick work -fire hazzard
4)Plugs that aren’t connected right - fire hazzard
5)Shingles without the tar paper underneath
I could go on & on with the shady things builders do to cut costs and put money in their pockets. The biggest rip off all is using their title company and financing company. Another way for them to make more money at your expense.
If you’re going to build, use a a small local builder with good references. You’re already paying 10’s of thousands too much for a national builder’s house. How do you think they pay all the layers, upon layers of staff, not counting the construction crew. If most of them go under, I won’t feel sad, because I’ve yet to find one that’s honest. The bottom line is their most important goal, not customer satisfaction.
If you’re going to build, use a a small local builder with good references. You’re already paying 10’s of thousands too much for a national builder’s house.
Ghost, I grew up in the biz and all I can say to your post is YES. Homebuyers of new construction by Toll, Beazer, Pulte, any of the national outfits - transact the sale under a false sense of security.
Nowadays especially, get a home inspection, even if you are buying new construction. Forgoing a home inspection before you close is just stupid. Side effect of a housing mania, I guess.
Good idea to get home inspection rights in the sales contract for new construction prior to close of escrow in this day and age .
homeprices corrected for inflation:
I posted a link yesterday to Dutch homeprices (on the Herengracht, Amsterdam) from 1650 to present, corrected for inflation but didn’t get any replies. I think it is a VERY informative graphic (despite the flaws with the post-1985 CPI). Does anyone have similar graphics for other countries over the last hunderd years or so? It would be interesting to compare them, if only to judge the influence of ‘easy money’ from Uncle Al on the surge in RE. In Amsterdam (financial capital), it was nearly straight up from about 1985; the rest of the country lagged by about 5 years.
Picture (I’m not sure if foreign viewers can see it without registering, sorry if it doesn’t work):
http://www.nrc.nl/achtergrond/article816285.ece
one of the important lessons is that RE is ’sticky’: it goes up or down for many years (like one generation).
P.S.: for those who can read Dutch or want to see the houses that this Herengracht Index is dealing with check this picture:
http://tinyurl.com/yuqgoo
Another lesson for current Americans: the worst housing crisis in the Netherlands occured after 1780. Homeprices dropped by 80% in about one generation. Cause: the Dutch colonial empire lost its important position to the English. The famous VOC (first multinational company worldwide) went bankrupt. The economy collapsed, so people had far less purchasing power and the steady flow of migrants to the Netherlands reversed, resulting in a 20% decline in the population which caused a further drop in home prices. Sounds familiar?
–
“Homeprices dropped by 80% in about one generation.”
In San Diego they drooped 89% (during the late 1800s) in lot less than a generation.
Q: What does today’s America have in common with the Dutch of 1760-70s?
Jas
in common: a world empire at the peak of its power.
In the 1-2 centuries preceding 1780 the Dutch economy was extremely innovative, the Dutch navy ruled the waves for many years (they had one of the biggest colonial empires and the strongest navy) and the Dutch republic was the hotspot for science and arts. All that attracted money and migrants from far away, everyone wanted to participate in the boom. To me that sounds a lot like the USA now. After 1780 it quickly went downhill.
–
Yes.
The term that I like that describes the similarities is: Financialization (Kevin Phillips?), i.e., economy’s switch from trading/production to finance domination. The economic elite get more and more focused on pure finance and financial profits (including rent on money).
Jas
to Jas: yes, I think that switch happened halfway the 18th century in Netherlands, so probably one generation before the economy started its decline (maybe another similarity …). In the late 16th and 17th centry the Dutch were working hard, producing and innovating. In the 18th century many wealthy people started living from the proceeds of their investments (e.g. from their shares in the VOC company or ownership in overseas colonies), or they were simply spending their family fortune on the good life.
“In San Diego they drooped 89% (during the late 1800s) in lot less than a generation.”
Sources please.
I’m interested in seeing a chart of Manhattan from 1865 to 1932 that plots real estate prices as multiples of rent, if any chart exists.
Does the Carina liquidation mean that at least some CDO’s will now have a market price the models can be adjusted against?
If fasb 157 goes into effect this week, yes.
Am I the only one that believes the Wall Street gangsters will find a way around this? Either they will find some loophole or use their legal teams to put this off as long as possible. Through the use of cryptic language and blunt legal force they will find a way to keep the game going.
I don’t think it will matter, Carina has started the liquidation ball rolling.
Hurricane Carina?
“Hurricane Carina?”
From “Market Movers”, Nov. 9, 2007:
“Carina: The 18-Notch Downgrade
You wondered what would happen when a CDO was forced to liquidate? Now you know:
The ratings on the most senior class of Carina CDO Ltd. were lowered to BB, two levels below investment grade, from AAA, while another AAA class was slashed 18 steps to CCC-minus. The chance of material losses to note holders is high, New York-based S&P said.
Carina is a CDO which was born in September 2006. When it failed an over-collateralization ratio test, the senior debt holders triggered their option to liquidate. S&P said the proceeds would be sold at “what will most assuredly be depressed prices”.”
You are right, NYC. The banksters own this country, and our “government” will do everything in its power to prop up their hegemony. This is a joke. They’ve got the $1,000 suits, now they should get some balls and some machine guns and do it the way Capone, Bugsy Siegel and the others did it. End this charade.
BTW, I will be heading overseas to live in the jungle through the winter (summer there). I will only have sporadic internet access, but I will always keep the HBB crowd in mind, and will catch up whenever I can. Thanks to everyone on this blog, (TXChick, Palmetto, NYC, Spike, Hoz, NHZ, Aladinsane, ProfBear, etc) and especially to Ben, who I hold in higher esteem than any of the “captains” or corporate America.
Jeez…. you’re building a process where? Surely not exotic with UV or O3.
Not for work, ex. Rainwater collection with carbon block + iodine.
Am I the only cynic who suspects a connection between BB’s $1m GSE-bailout remark last week to Senator Schumer and Cuomo’s GSE probe?
NATION’S HOUSING KENNETH HARNEY
Pressured appraisers, mortgage crisis linked in N.Y. suit
November 11, 2007
WASHINGTON – When an appraiser hired by your mortgage company confirms that the house you bought is worth what you paid, that’s reassuring. But what if the appraiser was pressured to fudge the number? What if the house is actually worth $20,000 or $40,000 less than you paid, and you’ve got no equity?
Does that happen very often? And what connection, if any, might inflated appraisals have with the current mess in the mortgage market?
A suit filed in New York on Nov. 1 suggests that puffed-up appraisals may not be commonplace in softening markets and could be the result of collusion by some of the largest companies in American real estate.
New York state Attorney General Andrew M. Cuomo, who filed the suit against First American Corp. and its appraisal management subsidiary, eAppraiseIT, believes that inflated appraisals have “contributed to the growing foreclosure crisis and turmoil in the housing market.”
http://www.signonsandiego.com/uniontrib/20071111/news_1h11harney.html
Try not to catch yerself a falling knife! Especially when your fellow would-be buyers are sitting on the sidelines and waiting for sanity to return to home pricing!!
HOUSING SCENE LEW SICHELMAN
Buyers are looking for market bottom
November 11, 2007
WASHINGTON – What the housing world needs is buyers. There are plenty of homes for sale, a record number nationally and perhaps an all-time high in your neighborhood as well. In many places, moreover, prices are falling, with motivated sellers, particularly builders, throwing in extras like free options and upgrades, help with closing costs and other goodies.
Mortgage money is still relatively inexpensive. And fairly easy to come by if you have a good credit record and cash for a decent down payment.
But apart from those folks who must move for one reason or another, there just aren’t many buyers.
The reason, of course, is that people are afraid to pull the trigger while house prices are dropping. Who wants to pay $250,000 for a house today when it might be worth, say, $240,000 next week? Or $230,000 the week after that?
No one, and that’s why most would-be buyers have taken themselves out of the game until prices hit bottom.
http://www.signonsandiego.com/uniontrib/20071111/news_1h11lew.html
I’ve got to ask this because it has bothered me every time I’ve seen it. How is buying a depreciating asset Okay if you plan on staying in it for years to come? Even if the prices were to go back up in twenty years, I still don’t see how this is a “safe bet”. I keep hearing this over and over again and the way I see it, if you over pay for something, you’ve over paid. PERIOD.
Why not wait the year or so and save yourself 50k, 70k or significantly more!
I don’t know about you but I’m not in the habit of pissing away $50 much less $50,000!!!!
Sorry for the rant but every time I see that in an article I cringe.
Enjoy your morning!
Danni
I agree Danni…these aren’t the good old days when Americans did what big brother wanted…thanks to the media..which helped fuel the housing boom…Americans know exactly what buying a home today can mean tomorrow….we are a “mobile” society where a job can keep us in a city for 3-5 years and then you may need to relocate…who wants to end up with 2 mortgage/rent payments?
Yeah, I never understood the concept that it is okay to buy an overpried home if you plan to live there for years either. Here in Bethesda, an expensive suburb just outside DC, if I am going to buy an 800K house to live in for 30 years, I want to buy an 800K house, whereas now all I can buy for 800K is 400K homes that have doubled in price over the last 5 to 6 years. In the end, we all have only a certain amount of money we can spend on our housing, and I would rather wait a year or two and then spend 30 years in a better home than my money would buy today.
What perplexes me even more is the mindset that the high-end won’t get hit at all. Rich people are very trusting of advisers. I’m betting a lot of rich people are a lot less rich today than they were 6 months ago. Let’s look at some of the big financial stocks. These numbers reflect 52-week highs and Friday’s close.
C $57.00 –> $33.10
BAC $55.08 –> $43.98
WM $46.38 –> $20.51
BSC $172.61 –> $96.91
MS $90.95 –> $54.20
Just those stocks have lost well over $100 billion in value and that’s a small sampling. Nobody can convince me that the rich boys all get into tech for the last 6 months of rally time. And if they did, they will get trapped in those tech stocks.
Add hedge fund and real estate losses to the loss in stock values and the high-end isn’t being spared during this downturn. They will continue to get hammered. So, how will all of the high-end markets continue to function so well? I think the high-end stuff will fall hard as this recession discriminates against nobody.
I think rich investors who have lots of money in stocks have so much capital available that their stock losses don’t (have to) influence their RE buying decisions. Some years ago I read a study about correlation of high end RE prices in Netherlands with stock market performance - prices tended to be sticky when the stock market went down (with a lag of 1-2 years), the most obvious effect was that turnover volume decreased significantly: when stocks go down, rich buyers may decide to wait a little longer with their new dream home. Wealthy people who really have to sell will take a haircut, but probably their new property will get a similar price reduction - it probably doesn’t matter that much.
Even in this “Age of Leverage”? I don’t think these are your father’s rich people. This is a new, smarter breed that saw even more vast wealth by taking bigger chances. Why else would hedge funds have proliferated to this extent?
I move that the floor of the NYSE be redone in green felt, with cocktail waitresses waltzing around-doling out refreshments, to better allow the cretins within, to see what they’ve become…
The Ultimate Degenerate Gamblers, in a nation full of them.
The only explanations I can come up with are (1) financial journalists are sufficiently ignorant about economics to feel comfortable with mirroring the realtor argument that it is always a good time to buy; (2) financial journalists are propagandizing with specious arguments to help realtor shills sell houses.
I agree with all of you about the following statement.
That could be a mistake for those who plan to stay in their new homes for quite a while. As long as you remain in the house, any further drop in prices will be offset by rising prices down the road. “In all likelihood, you’ll make money in the long run,” says Bernie Markstein, a senior economist with the National Association of Home Builders. “So your best deal could be right now.”
The economy could crash tomorrow, you could lose your job tomorrow, have a spouse die tomorrow, find out the house is built on a toxic dump and have to move tomorrow, divorce tomorrow, have taxes raised so high you can’t afford them tomorrow, have parents have to move in and your house is too small tomorrow. Life is too unpredictable to ever plan on staying in a property for very long. Then when the market hasn’t caught up yet and you’re upside down, you get burned. If a realtor recommends this, get rid of them today. No one should buy except for today’s circumstances, and never overpay hoping everything will catch up.
“The economy could crash tomorrow, you could lose your job tomorrow, have a spouse die tomorrow, find out the house is built on a toxic dump and have to move tomorrow, divorce tomorrow, have taxes raised so high you can’t afford them tomorrow, have parents have to move in and your house is too small tomorrow.”
But J6p and fellow sheeple don’t want to think about tomorrow. Thinking about tomorrow and what might happen takes too much mental exertion and might kill their fantasy. Besides, the MSM, RE and Wallstreet all say everything should be ok, right!? They saw it on TV, and they wouldn’t say it on TV if it wasn’t true.
Sarcasm off.
“How is buying a depreciating asset Okay if you plan on staying in it for years to come?”
It depends on why you are buying this depreciating asset. If you are buying the asset to make money then you are screwed. If you are buying it for reasons other than to make money then maybe you are not screwed.
If one buys a brand new car he is buying a depreciating asset. But he may be okay with that if the car was bought for reasons other than financial, especially if he plans to own the car for years.
The same goes with buying a house. The buyer of a house he can afford in a neighborhood he is compatable with may be making the right decision, even if the house declines in value. That’s because he bought the house other than for financial reasons. If he holds onto the house for the remainder of his life so much the better.
I agree: my impression (from past experience in my country) is that during or directly after a housing crash is a good time to buy if you have cash and want to buy special (high quality, rare) properties that are normally difficult to get, and you plan to stay there for a long time. You will loose money on the ‘investment’ because usually after a crash it takes years for prices to go up again, and high mortgage rates / inflation may cause higher carrying costs (compared to renting). If you wait 5 or 10 years until prices are most attractive from an investment perspective (more immediate return on investment), the most attractive properties are probably gone. It really depends on how much value you personally put on that special property. For buying a run-of-the-mill property (like most new construction in the US) it is probably better to wait until some years after prices have bottomed out.
“That’s because he bought the house other than for financial reasons.”
So what. All the other reasons do not outweigh taking a finacial ass-pounding. All other reasons are of an emotional nature that throw logic and finacial prudence out the window.
Most everything I buy is for nonfinancial reasons. I buy a car for transportation reasons. I bought a TV for entertainment reasons. The computer I am now using was bought for communication reasons. The house I bought years ago was bought for noninvestment reasons; I wanted to settle down and raise a family.
I’m willing to take a big hit on the appreciated value of my house simply because the house has more than paid for itself as measured in nonfinancial terms.
FWIW.
Ex…Are you still in the Reno area ?? Getting ready for the “prime” winter selling season …:)
“I bought years ago was bought for noninvestment reasons; I wanted to settle down and raise a family.”
I don’t quite get this…I seem to be raising a family quite well in a rental house, for half the monthly outlay of buying. I guess we are not “settled down” like when we owned a house in LA, and had to move for job reasons.
The truth is, it’s not a good idea to overpay by 30%-50%, an item that costs you hundreds of thousands of dollars, even if you plan to “use” it.
I guess we all have different priorities.
It’s not a good idea to spend money at all, until you can afford it. Once you are financially secure, I think it’s a good idea to spend money, if you want to. It’s a pretty rare person who doesn’t want anything, like a car, vacation, house, art, gifts for their loved ones, season tickets to their favorite team, etc.
Why on earth would I buy a house today, with my magic crystal ball guaranteeing that that house will lose $25k in the next year, and my rent for the equivalent house is $20k per year? I depends on whether I’m 24 years old or 64 years old. I want to get to the point of not paying for rent after year 30. ‘course, today, that number aint 5k…
“I want to get to the point of not paying for rent after year 30. ‘course, today, that number aint 5k…”
There it is. Pay off the house and you get to enjoy the benifits of “imputed rent”.
And as Buffett says “The price you pay determines your rate of return” (or words to that effect).
So if one buys a house AT THE RIGHT PRICE and holds on to it past the day he pays it off then he gets to enjoy a substantial decrease in his cost of living.
Owning a house outright isn’t exactly living rent free (there’s taxes and upkeep) but it’s close enough.
Danni,
The reason people tell themselves these things is because they want to buy now and are making excuses. Sadly, we are a country of instant gratification and entitlement.
Ah, what wisdom for a Sunday morning.
Also, I’m beginning to think we have some RE moles lurking on our blog.
“I’m beginning to think we have some RE moles lurking”
It’s about time…I need the RE bulls talking in order to hone my skills and debug my arguments. Too much “echo chamber” is a bad thing.
does one ‘debug’ arguments?
This arguement is so silly . Of course it isn’t prudent to buy until the prices have stabilized and it isn’t prudent to lend until the prices have stablilized . Why do you think the talking heads are always declaring a bottom in the news . It’s all BS . To the extend that a area got inflated beyond reason ,and to the extend that over supply exists, determines the bottom ,not a wishful thinking spin by the REIC or BB projected spin of 6 months for the market to become stable .Very odd that the talking heads want to raise the loan amounts when prices are going down . Could it be that they need a bagholder for current paper and they want to re-spike the punch bowl that can’t be re-spiked ?
‘The country’s three biggest banks have reached agreement on the structure of a backup fund of at least $75 billion to help stabilize credit markets, a person involved in the discussions said, ending nearly two months of complicated negotiations against a worsening economic backdrop.’
‘Now, Henry Paulson Jr., the Treasury secretary, is describing the proposal’s benefits as helping “at the margin.” In an interview Thursday, before the latest agreement was made, he acknowledged that the proposed backup fund would not rescue troubled SIVs, only lead to a longer and more orderly demise.’
‘This is something that is not a savior,’ Paulson said. ‘Anything at the margin that will speed up liquidity is worth trying.’
Are there any taxpayer-provided guarantees in play to help “stabilize” the Superfund SIV?
Read the article. I think they said all along that there aren’t. Treasury really can’t go down that road, because these SIV’s aren’t the only entitys holding bad MBSs. It isn’t a done deal apparently, and sounds like some investors won’t like it. They are losing rights. Another round of SIVs may be unlikely.
This is all about hiding debt off the books so that they don’t have to increase deposits or “mark to market” and cause massive writedowns. They bad things about these is that when the shoe drops, the tital wave is so extreme that companies that appeared to have perfect balance sheets are in effect not healthy.
Imagine Citigroup jumping back to $50 per share. Then a year from now as the mrket continued to get worse, they are forced to write down those losses. The stock gets crushed and investors are pissed and file lawsuits.
Think Enron.
The not “they” and tidal waves. Sheesh… I need to go to the gym and wakeup!
I agree with Tom that the main purpose of the Superfund SIV is to give companies an Enron-like means of hiding bad news off the balance sheet. But there may be an added bonus of figuring out a way down the road of unloading toxic mortgage debt on bagholders, with the mechanism to be determined while the Superfund enables the big banks to indefinitely delay bad news.
“I would like to know what those damn things are worth.” Mr. Ben Bernanke
So would I, the market is saying the current average worth is 33% of Banks purchase price. Is that to high, to low? Banks have written off 10% (DB) to 40% (Citigroup), but nobody is even close to 67% writedowns.
The taxpayers don’t/won’t have to pay, until the MLEC goes belly up.
I guess my only other thought about the “MLEC Fund” is that this is the same group that said last year, “The outlook is basically for another Goldilocks kind of year.”
I guess a “Goldilocks kind of year” is a drop of 17% in the dollar, a stagnant stock market and 2MM people facing Foreclosure. Now to be stuck with $800B in CDOs backed by $75B, another fairy tale.
PB ..BB and the Bankers want to off load the loss on another balance sheet until they can get the government backed bail out the bagholders loan program in motion . Because Congress and the Senate work so slow,a short term pass the balance sheet is needed before the loan bail-out program can operate and be the final bagholder .
The fact that BB thinks that he should bail out Wall Street /The Bankers while he makes a comments that he doesn’t even know the value of the CDO and SIV is sickening .In fact isn’t BB allowing Fed loans to be made to Banks at the discount window based on these same CDO’s and SIV’s that he doesn’t know the value of ,(if you believe his own comment).
This is such good news I had to post it twice. (sorry!)
The bursting bubble might just nix a tower planned right in my backyard! From Crain’s Chicago Business:
Nov. 09, 2007
By Thomas A. Corfman
Beitler’s plan for Edgewater high-rise collapsing
(Crain’s) - A deal between developer J. Paul Beitler and St. Andrew’s Greek Orthodox Chicago to develop a condominium high-rise on a site adjacent to the Edgewater church is falling apart, nine months after the collapse of another transaction with a different developer on the same site.
In August, Mr. Beitler had sought city zoning approval for a 45-story condo tower that would include 288 residential units and parking for 613 cars. The three-acre site is located just south of the church, 5649 N. Sheridan Rd.
“Due to the change in the economic climate, the cost of construction, the demands imposed by the Edgewater community and the parking requirement imposed by the alderman, Beitler Real Estate has requested that they restructure their proposal,”
“Mr. Beitler says that largely because of an impasse over the financing…”
“But he admits the downturn in the condo market and escalating construction costs haven’t helped.”
The bursting bubble is our friend!
Darn, and I was hoping they would build this to continue adding to the skyrocketing inventory and bank losses.
economy on fire?
http://www.itulip.com/forums/showthread.php?p=19509#post19509
A new player in the foreclosure info for a fee ($79/mo) game.
http://www.foreclosuretrackers.com/
The agreement reached Friday makes several changes that simplify earlier proposals. SIVs will no longer have to get the approval of at least 75 percent of their investors if they want to participate in the backup fund. And the backup fund will not distinguish between the assets it buys from each SIV. Instead, it will assign the same risk level to all their troubled securities.
So it will assign the same risk to all SIV holdings… and that risk is not zero? So they haven’t determined what the appropriate artificial price is, and they are hoping they can run the clock until the value of the CDO’s “recovers”. This is a joke, and as usual filled with doublespeak. Which “margin” is Paulson talking about? I think it means he wants to see the “good” CDO’s trade at high prices, so the suckers, excuse me, market, can price all toxic waste the same way. I’m gonna get that f*cker a red-and-white striped suit and hat. STEP RIGHT UP, COME GET YOUR AMAZING CDO’S HERE! Hawker Hank is a joke!!
The backup fund still needs the blessing of the major credit rating agencies. A fee structure and several crucial tax, legal and regulatory issues await approval.
OH, this is good news. Our friends, the ratings agencies, the SEC and the Bush Administration, including Hawker Hank. They will protect the public.
The market will undoubtedly see this as good news for the banks. Expiration is Friday, my puts are toast.
I’m not sure the market will surge on this news but the reaction in the next week will be telling.
Yes, I think the SIV is mostly ment to fleece the sheeple in some way. I guess the big EU pension funds will buy this junk unseen, and with some AAA+ rating from S&P they will buy even more (they have not admitted ANY subprime losses yet, and maybe they even see this as a way to prop up the valuations; whatever, these pension fund managers can never loose). Other than that, I share the fear of Professor Bear that this is just a first step in a procedure to bail out Wall Street and dump the losses on others (like the tax payers, foreign investors etc.).
Looks like everybody is going to get “AAA” for whatever garbage is stuffed into the latest sausage.
A fee structure and ….. await approval.
Note that the Street Wall-kers won’t even try to bail themselves out unless they earn a fee.
Recession? What Recession?
While Mr. Bernanke and others are waiting for the official diagnosis (a decline in the gross domestic product for two successive quarters), the disease is spreading and has been spreading for some time.
The evidence is all around us. Representative Elijah Cummings of Maryland told Mr. Bernanke that many members of Congress are holding forums in their districts “to help people who are coming to our doors, literally with tears in their eyes, and trying to figure out how they’re going to manage a foreclosure that’s right around the corner.”
The housing meltdown is getting the attention, but there’s so much more. Bankruptcies and homelessness are on the rise. The job market has been weak for years. The auto industry is in trouble. The cost of food, gasoline and home heating oil are soaring at a time when millions of Americans are managing to make it from one month to another solely by the grace of their credit cards.
The country has been in denial for years about the economic reality facing American families. That grim reality has been masked by the flimflammery of official statistics (job growth good, inflation low) and the muscular magic of the American way of debt: mortgages on top of mortgages, pyramiding student loans and an opiatelike addiction to credit cards at rates that used to get people locked up for loan-sharking.
The big story out of Mr. Bernanke’s appearance before the Joint Economic Committee was his prediction that the economy was likely to worsen. Only the people still trapped in denial could have believed otherwise.
This is what Representative Maurice Hinchey of upstate New York told the chairman:
“This economy is not doing well. And the example of the mortgage closures on 2 million people — and maybe a lot more than that as time goes on — is really not the cause of the economic problem we’re facing, but it’s just a factor of it. It’s a factor of the weakness of this economy.”
…
“We have an economy that is based on increased debt,” said Mr. Hinchey. “The national debt is now slightly above $9 trillion, and ordinary working people are finding that they have to borrow more and more to maintain their standard of living.”
“The average now is that people are spending close to 10 percent more than they earn every month. Obviously, that can’t be sustained.”
The chickens of our denial are coming home to roost with a vengeance. Meanwhile, the elites are scouring the landscape for signs of a recession.”
New York Times
http://tinyurl.com/2n475g
It seemed to me that the congresscritters were much better prepared for Bernanke than they were last summer and stayed on topic. Bernanke looked like he got caught with his hand in the cookier jar on a couple of occasions.
The country has been in denial for years about the economic reality facing American families. That grim reality has been masked by the flimflammery of official statistics (job growth good, inflation low) and the muscular magic of the American way of debt: mortgages on top of mortgages, pyramiding student loans and an opiatelike addiction to credit cards at rates that used to get people locked up for loan-sharking.
While private equity managers, hedge fund managers and the like make enough money to spend $72M on a painting and 91K on kitchen cabinets (thanks, sobay) largely through the engineering and exploitation of the very things that got the rest of America into this pickle. This is truly sickening stuff.
the chickens of denial are the overseas dollars coming home as the rest of the world shuns the desperate attempt for America to try and solve our debt problem.
the experience of inflationary pressures will continue while treasury talks up the “strong dollar policy” as equities plunge and commodities soar while the FED talks tough on inflation as they lower interest rates.
Conventional wisdom indicates that as the discount rate is lowered equities will surge in the short term, dollar decline accelerates, commodities surge even higher…
then housing gets worse, and credit spreads increase, dollar decline accelerates. More tough talk from treasury and FED.
equities plunge…..FED lowers rates…. equities surge.
this cycle will break down. I suspect the breakdown will manifest in equities plunging on discount rate lowering. Why? The circle must begin to break down in order to establish a new paradigm of expectations.
equities plunge? The nasdaq is still up 10% for the year.
But it fell 6% this past week. Do you think it will end up net positive for 2007?
volatility continues.
volumes lower.
credit derivative relief arrives same week as new accounting regulation hits the street.
financials begin the climb of the wall of worry, thats trembling with disaster.
sector rotation continues.
chasing relative return is now capital preservation.
treasuries are going lower.
dollar desperately seeks to find the bottom.
payrolls feel bloated.
insurance is getting more expensive.
inflation surges.
Voz,
useful observations, nice post.
“China created jobs for more than 10 million urbanites in the first ten months of the year, achieving a yearly goal much earlier than expected, according to an official with the Ministry of Labor and Social Security.
“Employment situation in China has been stable this year, with the first ten months completing 113 percent of the nine-million-job target set for the whole year,” Vice Minister Zhang Xiaojian said Saturday at a national conference of employment….”
http://tinyurl.com/3xn73l
China Daily
As long as China can keep its job growth at ~10MM/yr, there will not be serious and severe riots. The Chinese governments do not care about currency appreciation, depreciation or the value of precious metals; they, like all governments, only care about staying in power.
Im wondering why we put so much stock in the reporting of Chinese Ministers statistics while dismantling our own “government number hitters?”
I think that the Chinese figures reflect a more accurate representation of reality. Sad. I parse the economic numbers from China as well as the US. The US relies on Harry Potter’s Quick Quote’s Quill, always a single answer. There is no balanced ‘event reporting’ in the US. “China is the ‘bad economy guy’, they have to revalue the Yuan Renminbi”, the government and the media never look at the total picture of “where do the moneys go once they land in China”.
Many people in the US trust our government figures from habit without ever bothering to check that the figures are close to accurate. Many now distrust the governments figures on inflation; why should one trust the governments figures on trade, economic growth, employment or “a strong dollar policy”?
I have friends that still believe there were weapons of mass destruction in Iraq. Clearly one of the great lies of the decade. Almost all the 9/11 terrorists came from “our allies” in the Middle East. We attacked the only country in the Middle East that did not tolerate any terrorist activity! In this process, we have turned a minor terrorist organization (which according to the CIA, had less than 500 members) into a world wide terrorist organization doubling in size every three months.
No reasonable, well thought individual should have any trust in any figures from our government. They are fraught with lies and deliberate misstatements. When the US government makes a statement, one has to look at ulterior motives. “Where large sums of money are concerned, it is advisable to trust nobody.”
Bravo. All too true, and too frustrating.
Must have been a big Saturday night. Looks like everyone has the DT’s today.
The aspirin must have kicked in—no more shaking i.e. italics.
Thought you guys might get a chuckle out of this one:
Foreign Cash Could Boost Housing Market
Saturday November 10, 2:35 am ET
By Stephen Bernard, AP Business Writer
Foreign Cash Could Provide Much Needed Relief for U.S. Housing Market Thanks to Weak Dollar
NEW YORK (AP) — The weakening dollar has caused many problems for consumers, but it may also be providing the fuel for one unintended — and very welcome — benefit: a rally in the struggling housing market driven by foreign investors.
http://biz.yahoo.com/ap/071110/wall_main.html?.v=2
Waiting for GoDough?
From the LATimes RE Section:
Shadow Falls Over Appraisal System
Now, of course everyone who read this blog is aware of the fraud problem with appraisals recently, but now we’re seeing lawsuits and published research:
“From April 2006 to last month, eAppraiseIT supplied about 262,000 appraisals to the bank in connection with home financings. Post-closing reviews of nine appraisals performed on New York properties by Washington Mutual’s preferred appraisers found higher than accurate numbers in every one, according to the suit. The alleged padding ranged from $5,000 to $720,000.”
Yikes!
pu$h up bra
Think about it. Why do you think they keep touting credit?
If you run a business and your customers have to save then you don’t sell so much. Enter the world of credit. If people can finance purchases today and pay for them tomorrow, then that helps the economy grow. That is, until the whole country is bankrupt and all these businesses and banks move on to other countries to prey on other consumers (Think China, India, South America, and Russia).
Winners and losers?
http://www.signonsandiego.com/news/metro/20071111-9999-1n11default.html
You know what is kind of funny about the last article and affordability.
Even the banks can’t afford these prices: They have to sell the loans to keep everything going.
What a mess of a system.
Boeing seems like a natural corporate candidate to benefit from the Dollar’s dive, but is their airplane side as screwed up as this venture was?
Read this chilling 8 pager about how wrong it all went when they decided to do the satellite thing.
“Boeing, famous for making airplanes, had never built an electro-optical or radar-imaging spy satellite. But with the European Airbus consortium threatening its commercial airliner business, the company was trying to diversify.”
http://www.nytimes.com/2007/11/11/washington/11satellite.html?_r=1&hp&oref=slogin#step1
Thought people might be amused by this (very new) blog from Finland I came across while randomly surfing…
http://housingfinland.blogspot.com/
Is there a “financial terms for dummies” website I can visit to learn about the terms used in so many posts? I just recently learned what “shorting a stock” means and I don’t know what a SIV, derivative, or hedge fund is.
You can ask a hedge fund manager for their copy, but I don’t think they’ve finished reading it yet.
“Finance and Investment Handbook”
Downes and Goodman
Barrons
You know I think its really silly that the Feds are trying to bail out all this bad loan paper by using government backed loans as the bagholder . Bad loan paper is bad loan paper anyway you look at it .
If the Feds want to bail out the lenders ,just make them a big long term loan to cover their loss to keep them solvent . That way the taxpayers can make interest on the long term loan to the banks/lenders ,rather than bad paper being passed to the taxpayers . So what if the lenders will make less profit in the next 10 or so years paying back the big multi billion dollar loans made by we the taxpayers .
As far as new money loans that will be government backed ,they should not be up to 1 million and the lenders just have to get use to the idea that they have to make prudent loans in the future . Government backed loans should not be made until the market is more stable ,because we would not want the taxpayers to catch a falling knife loan wise .
The Fed Chairman should immediately raise the interest rates to save the dollar .
If the loan paper ends up not being as bad as the lenders that are holding them think they are ,or if they can re-write some of them and make some profit ,than they can pay off the TAXPAYERS BIG LOAN TO DUMB LENDERS ,sooner .
Of course the loans to the STUPID LENDERS OF AMERICA ,should be at a really high interest rate ,so the taxpayers can make good money off the creepy lenders that had the nerve to put America in this mess .
It occurred to me that military people will be hit especially hard during this downturn.
Thanks to housing privatization, the supply of base housing is being greatly reduced, so more military people have been buying houses the last few years. Military people are conservative (poor) by nature, and we tend to use fixed rate VA loans, with very little down. Unfortunately, we are also subjected to mandatory military moves, so when we need to sell, we need to sell. Add to this that many bases are located in huge bubble areas (3 AF bases in Fl, Nellis AFB in Las Vegas, 2 AF bases in AZ, etc…)
I am predicting that this will become a major issue in the military in the next few years. For the record, the military will not buy your house, unless it is a result of a down market caused by a base closure. On military moves, we are on our own.
Disclaimer: I am in the Air Force