Bits Bucket And Craigslist Finds For November 12, 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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Where were the realtors?
http://www.forbes.com/2007/10/19/fannie-subprime-mortgage-ent-fin-cx_kw_1019whartonsubprime.html?feed=rss_news
There’s one of the things I hate about the Realtor industry. It’s in the selling agents interests to sell a house to you at the highest possible price. The problem is that it’s also in the buyers agents best interest to sell the home to you at the highest possible price since their commission is based off of the sellers price.
Also I get so mad when an agent tells me that the seller pays their commission. I fired the last agent that told me this, of course he also told me that real estate was an “investment”, whereas it’s not, it’s a generally appreciating asset with high upkeep. The check might come from the seller, but who is giving the seller the money to write that check? That’s right it’s the buyer. It’s a scheme to disassociate the buyer from realizing that it is THEY that are paying everything, because they are the ones writing the check!
“Also I get so mad when an agent tells me that the seller pays their commission.”
“The sucker buyer bought my Mercedes and fake thingies”, is what they are trying to say.
I’m no fan of realtors, but I think there is a much stronger incentive to sell at a low price and move it quickly. For example, if a realtor sells a house for 100K in a week and pockets 3K and can do that consistently, that is far better than selling it for 110K and pocketing 3.3K after a month. I’ve read that realtors, on average, get more for their homes than for their clients.
I think the realtor actually pockets about 1.85%, after they pay off their agency. Somebody could correct me on that but for the most part neither agent makes the full 3%. I am in no way condoning the behavior of real estate agents.
the selling and listing agent each get about 1.5 %
listing agent is selling agent about 25% of the time ?
lower price higher turnover all the way- in 90 days the deal is dead
I noticed SAAB Realty in Northern VA is offering 2% of the commission on new house sales to the client. So the company keeps only 1%. If you pay 500K, you get 10K, etc. That seems kind of appealing to me. A Long and Foster agent would have to give 1.5% to the agency, so there’s not as much left. I don’t know how it’s treated for tax purposes, however. It would seem it would have to be reported by the client to the IRS as income.
I believe this was explored in Levitt’s Freakanomics book. Realtor owned homes stayed on the market longer and sold for a higher price.
Lep — that’s a good point and I think it is where there is a huge difference from other types of sales, like cars. The percentage variance in the real estate commission is tiny, so why not get the deal done. But on a car, where the sales person might make $200 or even $500, bumping the price up by a small percentage can result in a huge percentage increase in the commission.
The realtors are taught that it’s their duty to get the highest and best price the market will bear for the seller .
That being said ,the realtors will not care in the final analysis because they just want to make a deal . The realtors usually try to figure out who is the weak party ,the buyer or the seller ,and they push at the end that is weak . Realtors just want to make the deal and the correct price is not the issue as much as just making the deal .Any realtor would take a underprice listing in a flat second ,and usually they try to get the seller to underprice , (that way they don’t have to work as hard or put as much advertising dollars into the sale ).Alot of realtors will give both the seller and the buyer outdated comps so they can make the deal quicker . In a hot market the whole neighborhood is aware of the most recent high price sold ,so the realtors are forced into listing at higher prices . I’m not saying that some realtors don’t do everything by the book and try to acheive a fair deal between buyer and seller ,but lets just say most of them would sell their mother to make a deal .
So both sellers and buyers have to do their homework and not count on realtors to give them correct information ,because hype is the realtors middle name .
Also according to realtor codes , real estate sales people are not suppose to provoke panic selling or buying ,but they do .Realtors were suppose to only bring borrowers to property they could afford also and pre-qualify them ,but look what happened in the boom years . The realtors and the mortgage brokers were selling these toxic loans with a big fat promise that borrowers could refinance down the road ,and get in now ,and real estate always goes up ,and its total BS but the public bought it .
Here here! Suzanne needs to research the term “drawn and quartered”….
Under current market conditions any price will put bacon on the table.
The other thing I don’t understand about this fiasco: where were the buyers’ attorneys? Aren’t the buyers represented by attorneys in house transactions, and didn’t the attorneys ever think to warn their clients, hey, this might be too much to take on? Have there been any threats of malpractice lawsuits on this score?
Out here in the west, most people do not use real estate attornies. I’m not sure about the laws in Florida. It would be interesting to see if there is a coorilation between states that somewhat allow realtors to take the place of real estate attornies, and places where the bubble was the worst.
I live out west, and yes, most people don’t use a r/e attorney.
You have to be an idiot not to have an independent, outside attorney look over the paperwork and advise you, considering a r/e transaction is probably the largest transaction most regular people ever do.
Most people don’t use one in CA or FL. And you have to be crazy not to! I saved a fortune having an attorney in FL, even though the seller and the seller’s agent were very annoyed at all the scrutiny we put them under.
I’m an attorney in IL and attorneys are required at real estate closings. I think the mistake most people make on this board is that they think an attorney’s role is to give financial advice to the client, such as advising them that they are overpaying for the house, the terms of the loan are subprime or crappy, etc. Trust me, a client who has made a decision to purchase a home does not want to hear that they are getting ripped off nor do they want to hear some lawyer blabbing about why they shouldn’t go through with the deal, even if, in the lawyer’s opinion, it is against thier best interests. Because remember, the lawyer’s opinion is merely an opinion, and the client (as unsophisicated and stupid as they are) has their opinion which trumps the lawyers.
The lawyer does all the legal ‘behind the scenes’ stuff at a closing. They make sure the title being delivered at closing is sufficient, they negotiate closing credits for defects in the property, they coordinate the closing date and time among all the interested parties, they review the real estate contract, they do all that stuff. In addition, for the buyers, they go through the mortgage documents with the client to explain everything to them.
Of course, I have gone through hundreds of mortgage documents. I explain everything in plain and simple interest. I explain as best I can so that they can understand the terms. Quite frankly, anything I say by this point doesn’t really matter. The sophisicated clients have already negotiated favorable terms and rates with their mortgage broker or bank. The unsophiciated ones say, “I will sign whatever document you put in front of me so I can move into my new home today.” It’s as simple as that. Its not my job to fight with the mortgage broker for a 1.0% rate reduction or to get them to remove the pre-payment penalty. Once again, the lawyers job is to take care of the LEGAL stuff, i.e. title, credits, negotiation, scheduling, RE contract review, etc. The title stuff is HUGE. That’s the most important part.
The one thing people don’t realize here that needs to be recognized is that the attorney makes the least amount of money in the RE transaction yet he has the most risk. The RE agents split 6%, the broker gets thousands for ‘finding’ a lender (and tacking on fees), the title company get thousands for the title policy and location rental…..A buyer’s lawyer gets about $400 for the entire deal…yet he takes all the risk because he’s the one with malpractice insurance. The lawyer is the one that gets sued and his good name ruined because the client is unhappy. The broker rips them off and the bank gives them a raw deal and the realtor fails to disclose material information…so they sue the lawyer.
Anyway, my whole point about this is that people on this board assume a basic level of financial acumen from borrowers. This assumption is wrong. Many borrowers don’t have that financial wisdom. If they did, they would not be buying an overpriced POS in the first place. It’s not my job to impart financial wisdom upon the client because quite frankly, they don’t want to hear it. They’re already decorating the living room in their head when the sign the line that says, “your rate will adjust after 24 months and then every 3 months thereafter”. As soon as they say, “I only plan to live there two years and then refi or sell” - you can’t change their mind. Everyone talks about co-workers who are in fantasyland about the RE market. Those co-workers are my clients. I’m just there to make sure that they guy selling you the property is giving it to you free and clear. Tons of fraud is averted that way.
Thanks, Legal Eagle and others. It was not my intention to bash lawyers. I have personally been involved twice in situations where my lawyers warned me of various pitfalls of a proposed r/e purchase. Although it didn’t necessarily affect the outcome either time, I was nonetheless grateful for the advice.
I do think lawyers have an important role in keeping people out of the type of trouble we have witnessed. But obviously, if you tried to warn people and they didn’t listen, it’s not your fault.
Most people in Florida don’t use attorneys, either. For as long as I can remember, attorneys were thought of more as an alternative (or supplement) to title insurance and I think that long ago they were involved in the abstract process. Nevertheless, in this day and time I’d be pretty tempted to at least talk to a RE attorney to see what value he/she can add to my part of the transaction.
Again, you have to be an idiot not to have a lawyer review the deal. These are contracts, lawyers write them, and lawyers explain them to us non-lawyer people. When mysterious legal sentences appear in these contracts, lawyers are necessary to interpret them. They can also point out things like ARM’s mortgages, when you think you are getting a fixed, etc.
Lawyers usually do not negotiate for the buyer/seller, they write and interpret the contracts, etc, to protect the buyer/seller from themselves. In Mass, lawyers do all the closings, etc, and I found their advice to be invaluable.
it’s just the nature of the beast .. a salesperson has to sell. Otherwise, s/he doesn’t eat.
NAR’s never-ending campaign to elevate all of their members above the status of common, self-serving, sleazy hucksters that many of them are has been a huge success..
Yep, I think my new neighbors caught a major falling knife and were hosed into it by their realtor.
so much real, lasting pain is on the way.. With all the children and other innocents caught up in the mess, i can’t spare a speck of sympathy for anyone else.
Oh, I’m not sympathetic toward the new neighbors at all. They bought a Florida condo in this market. Even if it is a steal compared to peak, they’re still screwed. I’m just waiting for the closing docs to be recorded to see what kind of mortgage they got. I also want to know how much skin they have in the game.
This country has become a giant casino where there are many newbies sitting down at the poker table with the seasoned players. The question is, do the skilled players have any obligation to tell the rookies not to play, or should the rookies just walk away or educate themselves before sitting down at the table? These are big questions of morality, greed, trust, and innocence; and really get to the heart of what kind of society we want to live in.
I am a bleeding heart, but even I believe that at some point, one’s acts can be so unreasonably naive or uninformed that they deserve what they get.
“The United States is afflicted with new eras. Let us not think for a moment that the illusion, the aberration of the 1920s was unique. It is intimately a part of the American character. It was this nature of mass illusion. Prices were going up, people bought. That forced prices up further, that brought in more people. And eventually, the process becomes self-perpetuating. Every increase brings in more people convinced of their God-given right to get rich.”
John Kenneth Galbraith
“During my eighty-seven years I have witnessed a whole succession of technological revolutions. But none of them has done away with the need for character in the individual or the ability to think.”
Bernard Baruch
Wow, Hoz, what a great quote. However, I would take issue with the phrase “convinced of their God-given right to get rich,” and replace it with “hoping to fulfill their dream of getting rich,” as that’s really what this country (and its “American Dream”) is perceived by many to be about.
Thanks for the quote, Hoz. JKG must surely be smiling down from the next realm on the collapsing bubble, thinking, “I told you so.”
JKG’s “A Short History of Financial Euphoria” should be at the top of everyone’s reading list. It really is pretty short (about 120 small pages, if I remember correctly), but packs a punch. It confirmed my instinct back in late 2004 that this most certainly was a bubble, and the longer it went on, the uglier the fallout would be.
Hoz - “…their God-given right to get rich.”
So true. Too bad JKG didn’t add, “without hard work.”
I know a lot of people who work hard and are poorer today (in $) then they were 10 years ago. Hard work does not make you rich when you’re getting mugged after the day’s labors are complete…
RE agents get 1.5% after all is said and done, they may get $1or 2k per house.. dep on total cost etc. Honestly many RE agents are very hard working and unless you have to put up with the sht that buyers put them through just to get 1-2 k after everyone else gets their take…
..you guys wouldn’t bash ALL RE agents like you do.
The Good ones are worth their weight in gold, if they save you from over paying, paying for a dawg, notifying you of houses/areas that would be a better investment..
Then it is up to the buyer to be smart. Thats right, Smart and do their own due diligence or hire the right people to help them do that correctly.
Everybody was so busy making a small, but useful profit selling American Dreams, and banking on a delay time of 2 to 3 years before anybody noticed something was oh so very wrong with their nightmares, which also used to be called The American Dream.
Maybe those hacks on Wall Street knew that they only had 2-3 years to stuff their mattresses with fat bonuses. But from what we’ve read, the classy realtors in the trenches spent their salaries on Rolexes and Beemers as if that gravy train would go on forever. How many of them really saved for a rainy day?
–
“How many of them really saved for a rainy day? ”
Those with speculative mentality don’t think about rainy days. Sunshine is bound to return.
Jas
“Those with speculative mentality don’t think about rainy days. Sunshine is bound to return.”
Jas, that’s the single most relevant thought on this whole mess…
IMO most people simply do not want to go through the “hassle” of thinking things through when they get greedy, fixated and/or excited about something they “want.”
That, along with the “perfect storm” of RE agents, lenders, MSM and Wallstreet giving them the shuck-and- jive right down the Disneyland primrose path (because of their greed too) has created this monster.
I’ve expended a ton of metal energy digesting information over the last 5 years to avert and hopefully survive this disaster. Tried to kindly inform friends over the years to no avail. I’ve concluded most folks would rather go vege-out in front of the tube, get high (on whatever) or go shopping than work at ferreting out the “real” facts from the morass of BS being fed to them daily. “Information overload” is a very real phenomenon. Trying to sort and sift facts from the tons and tons of info. on the internet is tough enough–from the MSM (slanted TV and newspapers) it’s nearly impossible– especially during the run-up.
By the time the “truth” of or the “fallout” from the bubble hit the mainstream (because there’s no more $$ to be made by the mess or it can’t be prolonged by spin) it’s too frickin’ late. Endgame.
Here comes the rain, sheeple.
DOC
It’s funny you chose the term “Disneyland primrose path” - which I find extremely apropos btw — because I just heard on the radio this morning that “It’s a small world” now needs to be overahuled and somewhat re-designed because the boats keep running aground due to average Americans being so overweight.
That’s absolutely poetic in my book.
It IS a small world, but apparently it’s too large for most Americans - I remember reading that the majority of us don’t even have passports, and of those who do, the Majority never use them.
So the only “exposure” to world cultures many get is the filtered and contrived Disneyesque © representation, and we’re now apparently too fat to even experience that. Abandon hope all ye who emigrate here….
I love America, but good grief, a lot of my fellow citizens will deserve what’s coming to them in the fallout from RE and all the other debacles that may follow on its heels. It seems that is the only way some/most people can learn a damn thing.
Yes thank you Neil, I got popcorn.
I have a better question. Where were the politicians? We are now seeing the usual “hearings” in Washington (a.k.a politicians photo-ops) as these bums put on their phony “We are concerned for the average American,” expressions but you would think the Barney Frank’s and Chuck Schumer’s of the world had been on a space mission for 5 years and have just returned to see the results of loose lending. They are shocked! Shocked! Still, I’m sure they will find someone else to blame for this mess. Sh*t usually rolls downhill in these cases.
Frank and Schumer have only been in power for one year.
Surely, you are joking?
Scratch my last post. I smell partisanship in the air. I don’t want to fan the flame. Nothing to see here.
It’s all good, NYCityboy.
I’m trying to be neutral. I thought that only the party in power can only call official hearings, or at least, the power party controls the scheduling and media exposure. So even if (and that’s a big IF — Schumer represents NY and Wall Street) Schumer and Frank wanted to put a wet blanket on the real estate fire in, say, 2004 — poaching on AG Greenspan’s turf in the process — they would not have been able to schedule a hearing.
Maybe. But they could’ve done a news realease - the MSM is in their back pocket. No, hack pols of both parties were in on this and have been busily selling out the American people for some time now.
I thought that only the party in power can only call official hearings, or at least, the power party controls the scheduling and media exposure.
You are correct.
Schumer is not the chair of the Senate Finance Committee. Max Baucus is. Baucus and Grassley get along, so whoever is chair might sign off for something the other wants to look into.
Not so in the House.
Where are the politicians???? HINT: they don’t hire people like me.
I would ask Schumer/Frank/Pelosi if anyone on their staff reads this blog…I’ll bet all those Harvard Yalies are severely Clueless about the housing fraud/bubble.
I learned a long time ago, most people that graduate from ivy league schools do not have a lot in the way of critical thinking skills…..after all you need to dot the i and cross the t, and literally be perfect little automatons to get in. So alternative thinking and reading……NAH!
——————–
check out the GF website on my handle…thanks
Hey dj, I hope you have found a job; it seems like a long time that you’ve been looking.
I think you’d be surprised by the Ivy folks. Those whom I’ve known (and I am one of them, so consider the source) are quite the opposite of what you describe: critical thinkers, creative minds, with a dash of eccentricism.
In any case, I think that the apparent cluelessness of politicians crosses all educational backgrounds. I think it’s all tied up in the package of chararacter traits that led them to be politicians in the first place.
I’ll tell you this much the cluelessness is astronomical….this recession will rival 1980 because companies will be stuck with tons of moron employees who are useless in a crisis.
If you know of anyone that actively hires smart people let me know….i keep running into dead ends.
Corporate America is not in the business of hiring “smart” people. The are perfectly happy hiring dull people, as long as they are reliable and will work late (for free of course) to get the job done. Its OK to do a mediocre job, as long as it gets done on schedule.
NYC DJ, as you don’t have a day job right now, look into Ultrashort ETF’s. I have my toe in the water and I’m already making more money than I do on overtime every week. Major volatility.
It’s a thought.
I recall that in 2002, Bush was touting the “ownership” society” and record “home ownership.” Remember, we were emerging from a recession, the stock market was in the tank, and unemployment had risen. The only good economic news they could come up with was housing. Hence, they deregulated mortgage lenders, and the rest is history. In other words, the mess was intentional.
shoot W told us ALL to go shopping.
what do you expect.
CORP greed.
line the pockets of corps…
I have a better question. Where were the politicians?
They’re busy pouring gasoline on this mess!
- Lowering interest rate
- “Forgiving” tax on forgiven debt
- Raising conforming limit to $1M
okay, this article is crazy…did anyone else see this? Foreign investors are going to swoop in and save the housing market because it’s cheap for them with the dollar in the crapper…hmm, are there really enough foreigners who could buy all these houses? I don’t think so, this article is a last gasp of some crazy person at NAR…
http://www.msnbc.msn.com/id/21739273/
AZ Repugnant picked it up and ran it. Bahhhh… pure self-serving, hypothisising and speculation. NO bones to that article.
“Foreign investors”
Yeah, with FLA turning into one giant (Euro) trash incinerator.
Aren’t suckers from outside the US the final herd of sheep to the slaughterhouse?
History proves it.
As I pointed out yesterday, the Japanese RE infesters came in to the U.S. commercial RE market and caught lots of falling knives in the early 1990s, just as they were on their way to a fifteen-year-long real estate bust of their own. Perhaps the weak dollar will tempt foreign knife catchers to step up to the plate this time and buy some vacant tract houses out in the middle of the desert on the theory that real estate always goes up?
the euro is plunging today, so maybe the opportunity is already gone
GOTT SEI DANK!
(paid in USD, lives in Eurozone)
Wait. I am inordinately excited that instead of $1.47, I need only pay $1.455 for a EUR.
*cry*
The other reasons I am not buying this foreign savior theory are (1) there were already plenty of foreign investors during the mania phase who are now FBs looking for the exit door, which involves not only taking a bath on declining home values, but then taking another hit in converting back to the home currency; (2) the credit crunch is a global phenomenon, limiting the amount of loose lending available in other parts of the world to help foreign infesters catch falling knives in the U.S.; (3) everone was happy to buy U.S. real estate when it always went up, but not everyone is eager to catch themselves a falling knife.
On balance, I am guessing there is net negative foreign infestment in U.S. real estate at the moment.
I would add as a corollary to the good Professor’s reason #1, that in this age of the Internet, the foreigners are as well-informed about the US market as the Americans are, hence, they jumped on during the run-up and are jumping off during the run-down and taking an even worse hit because of the declining dollar.
no, in the age of the internet the foreign investors are even worse informed than the average US speculator, thanks to all the crap that is posted on investment websites, in lifestyl magazines etc. (that still cheer US RE as the sure way to get rich quick).
and if today is the start of a serious euro plunge, they have another reason to hold on at least a little longer.
I don’t think the EU investors are selling their US properties - they are probably ‘holding on for the long term’, just like with their properties all over Europe.
There is NO credit crunch in Europe (yet), you are SO wrong about that; lending is as loose as ever and in some countries mortgage rates are probably lower than ever (they declined significantly in the last weeks, probably another result of sneaky ECB manipulation).
I guess you don’t include GB (home of Northern Rock) as part of Europe? My bad…
What is this my bad…I have been seeing? Is it new slang for my mistake?
Word introduced by the same people that brought us “babydaddy” (said as all one word, meaning the father of my child). Mybad is said as one one word also, and you are correct. It means you have made an error or were mistaken.
“My bad” is how I apologize to my wife when I have a secret urge to irritate her.
babydaddy comes from “my baby’s daddy”. It’s a Southernism. (same as saying “he kids” for “his kids”)
I guess the big move into the Southeast is tracking back into the general culture after some delay.
“My bad” was around 10 years ago. I fought it for years, but you know what they say.
You’d have to be a fool to want to be a land lord on an individual house or condo from 3000 miles away.
Maybe some foreign investors will buy large lots of land (60 acres+, that has development potential) or entire up-scale hotels or apartment complexes to “buy and hold”, but the average FBer with a condo in Tampa shouldn’t hold his breath!
after 9/11 its alot more difficult for foreigners to even come to the US. There are many more requirements to get a work or student visas. VIsa appilcations can be held 6 months or more. VIsa holders have to actually leave the US to apply for an extension. Starting this year, Canadians and Mexicans need a passport to enter the country by air. We arent making it easy for foreigners to come here, or stay here. as tourists or students or workers or illegals.
How exactly do foreign investors make money on this investment? They eventually have to sell/rent in dollars, too.
I’m sure we’ll see a small number of expensive vacation and/or second home properties bought by foreigners — that Florida vacation spot will look good compared to Spain or South of France, or an NYC apartment for occasional visits ….. but not enough to make a significant impact overall.
Renting in dollars will be the deal-killer for any foreigners who do their homework and who would have bought with a view to covering most or all of their cash flow. Some will forget this part of it, but when they find out they’ve been screwed, word will get around. Having lived in tourist areas all my life, it’s my experience that most foreign buyers act because someone they know in their home country did — in other words, they do not act alone/in a void.
They are confused. There is a very important thing they forget when talking about foreigners… It is called “immigration status”. Most of rich foreigners do not view real-estate as investment. They view it as something that they have so should they want to spend a few months or years in say… Miami, they can live there… Same goes for NYC, or San Fran or wherever. Unfortunately for the bag holders, US makes it incredibly hard for foreigners with money to remain in the country for long period of time ( years ) as unlike illegal immigrants foreigners with cash interact with government-regulated forms of transportation quite a bit.
Will foriegners the neighbor HOOD. What I see is attempt to create new generation of FB’s.
Taking it a step further:
1) Japanese - They know when not to step in front of a train
2) Chinese - They know $ will be in Crapper when local currency floats, things will get really cheap.
3) Indians - See outsourcing is in crapper time to buy local RE & LOCAL Stocks one step ahead of American Hedgies.
4) South America - Drug lord not interested in investing in USA.
5) Europeans 1 step behind USA in heading over the cliff.
I think that this article is wrong. The writer says that a minority of real estate transactions involve buyers agents. Wrong. Any transaction (at least in California) has a buyers agent and a sellers agent, and they split the commission. Sometimes one agent serves both. But in either case they are required to be honest and loyal to their client(s). And to imply that nothing is owed the buyer is a lie. As usual, the writer stupidly believed what the realtor told them. Typical.
If you are one of the perhaps Trillion Dollars floating around outside our borders, you are coming back to the mothership quicker than ever before, and the foreigners holding them certainly don’t want more Dollar denominated items in their place, like hard to sell houses, that are about to fall in price, precipitously?
Do they?
REH — I think the difference is semantic. In Florida, for example, it is my understanding that a real “buyer’s agent” has a form to be signed, making such a designation and that designation changes the fiduciary relationship. There also is something called a “transaction agent,” which means not representing either party but just getting the deal done; I think that is for 100% in-house deals — one of the Florida agents on the board could clarify that.
Right ,realtors just can’t screw the buyers because the seller pays the commissions out of escrow . There are alot of rules involving disclosure and fair dealings in the realtors codes and business law that requires fair dealings in the real estate transaction .Any kind of fraud is not allowed and its not exactly “Buyer Beware”, but in practice it should be .Certainly this fake bidding practice is a horrible crime by the realtors because they obtained higher bids by fraud .Giving false information to induce a sale is also a questionable crime ,but how many people where the victim of this practice during the boom by the REIC .
The realtors use to stay some what in line in prior lending cycles because the lenders would spit out their deals if the contract didn’t meet with the approval of the lender or the appraisal wasn’t sound . Part of mu job one time was to read every sales contract and escrow instructions and check for fraud or a faulty contract as far as the bank was concerned .
Some news from Denmark:
http://gp.se/gp/jsp/Crosslink.jsp?d=913&a=381622
Housing prices take a nosedive in Copenhagen
One fourth of the equity has vanished for anyone who bought a 1 bedroom apartment in the center of Copenhagen a year ago. The slide of the Danish housing market continues.
There are not a lot of customers in the offices of “Home”, a broker, in central Copenhagen. Michael Hammerbak, a veteran broker, has never seen such a steep fall in prices before. He estimates that prices have fallen 16% in Copenhagen county the last year. It’s even worse in the central parts of Copenhagen.
- The fall is 25% in the worst-hit areas.
…
Signs inside Home’s offices tell us that many Copenhageners are trying to get rid of their apartments. There’s a 1 bedroom apartment in a neighbouring building going for DKK 2.8 million ($550k).
- The supply has exploded, says Michael Hammerbak. 63 000 Danish apartments are currently for sale, and this number has doubled in two years.
…
- Some of our customers are technically bankrupt, says Michael Hammerbak.
…
http://gp.se/gp/jsp/Crosslink.jsp?d=913&a=381623
Luxury dream turned into a nightmare
SEK 35 million ($5.7 million) for a penthouse with a view of the sea. NCCs project in the high-status suburb Tuborg of Copenhagen is empty and nervosity is spreading among Danes who bought homes at high prices.
…
The idea that someone would pay SEK 35 million for a 140 m^2 (1500 ft^2) apartment at the top of the building seems rather ridiculous today. But it was different when the Swedish construction giant NCC started building. As late as last year, Danish housing prices just kept going up. Luring Danish nouveau riche to Tuborg and other high-status areas wasn’t difficult. If you wanted an apartment, you had to be prepared to wait in line. Speculators flocked to the showings. There are plenty of stories about young gamblers who drove to the showings in their BMWs and bought dozens of apartments.
…
Lars Munktvaed and his family moved to a new house outside Copenhagen last year. He still hasn’t been able to sell his old home. He gives us a tour of the 200 m^2 (2100 ft^2) brick house in the northeastern parts of town. There’s a 16th century fireplace in the living room. There are ethernet connections in all rooms and Bang&Olufsen speakers in the kitchen. … He had the asking price fixed at DKK 8 million ($1.5 million) for a year. He then decided to lower the price by a hundred thousand ($20k) a week, but he gave up after he’d lowered the price by a million ($190k).
…
- Ordinary people are getting dragged into this. There are many, many people who’ve been left sitting with two apartments, says Katarina Hullert, a Swedish architect who lives in Copenhagen.
The Danish housing bubble has burst but all of the damage is not yet visible. The large construction companies enticed customers by agreeing to pay the customers’ cost of having two homes, for up to 18 months. Many of those who bought at the top have been able to push the problems before them. They will have to pay the piper eventually.
…
Nervosity has spread among the construction companies who are trying to slow down. New projects have either been cancelled completely or postponed to unspecified later dates. The last houses in NCCs grand project in Tuborg are part of the ones who have been cancelled. One wonders if they’ll ever be finished.
Thanks for the report, Swede. I haven’t seen much bubble news from Scandinavia. Interesting how prevalent the bubble has been in many parts of the world.
Off topic, if someone wanted to travel in Scandinavia, which of the Scandinavian languages is most widely spoken and would be the best to learn?
The easy answer would be Swedish, since they are the largest people.
In fact the scandinavian languages are so similar (except Finnish) that some people think they are just dialects of one language.
A language is a dialect with an army.
Thanks, Huck, from what you’re saying, if you speak one of the languages, you can probably make yourself understood in the other languages.
Palmetto, I traveled in Sweden and Denmark last year. In the large cities, pretty much everyone is fluent in English. Especially the younger generation that is taking your order at a restaurant or working in a shop.
I would recommend buying phrasebooks for each language you plan to need and spend some time with them. Within a few days to a week, you will be able to have your most frequent/basic conversations (ordering in a restaurant, etc) in the native language. A good effort is much appreciated, and will likely get more people to admit they know english than you would normally see
The only problem I had with this approach was in Croatia, when a waiter told me (in english) that he didn’t have time for our attempts! Also, bring along a tiny notebook and something to write with - written communication is easy using the phrasebooks!
I lived in Finland for three months (work-related trip) in 2000. I had no problems at Airport, car rental, hotel and restaurants. I could manage in English. In grocery stores or while out on a walk, I couldn’t make myself understood. People were trying to be very helpful though, they were very friendly. Finland is such a peaceful and beautiful place. Most kids I saw had a round face (almost a perfect circle, as I told my daughter).
I was greatly saddened on hearing about the shooting in a high school last week.
When I visited Oslo in September, I stopped to look at poster of real estate listings in a shop window. I couldn’t get a really good handle on equivalent prices because I had to convert square meters to square feet and Norwegian Krona to dollars, but everything was really expensive — something like $400K for a 1000 sq ft condo.
My business contact made a relatively high salary, and yet lived in a cramped townhome in the suburbs and biked to work, which is very dangerous there. They weren’t thinking of moving either, even though they just had a second baby. They were re-doing the deck instead.
And, ALL the houses in Norway were small, 1 1/2 story Capes, like small Swiss chalets. Anything bigger than a 3/2 was a probably a museum or a library.
free healthcare is incredibly expensive
M Freidman
Pseudo free market health care here is more expensive and scary with powerful lobbies and retroactive denials.
Make it capitalist or make it socialist. Don’t straddle the fence.
Save money. Use it wisely. I just paid $1.7k for a root ($1.3 for root canal, $400 for first three docs that were useless) canal that saved my tooth after going to 4th doctor, which incidentally does not take any insurance.
He does however allow anyone and their mother finance the procedure (GE and Cap One) or pay in installments.
Three first docs that I saw were all suggesting that extraction is the only option. Amazingly enough, the first three doctors had lines, took insurance and did not offer financing.
thanks for the report, none of this is reported in the Netherlands although it is relatively close geographically (of course, don’t scare the sheeple … the Dutch bubble still looks healthy on the outside, with homeprices at a 300-year high, even adjusted for inflation). Those Copenhagen prices sure sound extreme, a bit like New York City … What the report doesn’t mention is the other side of the coin: many Danish homeowners and flippers must have made out like bandits over the last years if prices got so high.
A 300-year high seems a little toppy, yes.
ha
don’t underestimate the Dutch, they are holding out for a 410 year high (inflation-adjusted!) which should be reached next year, if everything goes according to plan. 410 years ago is when the data series starts.
I wonder how the social fabric of Europe/Australia/New Zealand/Canada does compared to ours, when each housing bubble goes wrong?
–
“The supply has exploded, says Michael Hammerbak. 63 000 Danish apartments are currently for sale, and this number has doubled in two years.”
That is how all bubbles burst — exploding supply. For example, during 2000Q1 Crisco was issuing its Scam at $60B/year (including buying companies with the Scam)! Its annual revenue was less than $15B.
Supply more than catches up with the demand as prices skyrocket during the bubble. It is true everywhere there was a bubble.
Jas
Swede — thanks for the very interesting and thorough update. It’s a refreshing look into a part of the world we rarely see here. And it makes me wonder if a list of countries in which there was NO housing price bubble would be much the shorter of the two.
I’ve got a bulletin for the real estate has bottom crowd;
“Credit crunch has only just begun”
http://www.reuters.com/article/reutersComService4/idUSL0812957120071109
But the guy on CNBC just told me that the economy is strong, the dollar will strengthen and there will be no recession in the United States. Could he possibly be wrong?
The futures have turned green after the Asian selloff last night. It should be a light trading day. The boys could push the markets up today. There is still so much denial about the economy. It’s amazing how out of touch the pundits and politicians are. Personally, I think they just don’t care.
The last bear market phase nearly knocked CNBC off the air. We’ll know it’s safe to go into the market when the job is done this time.
Don’t tease me Chick. I already had to turn it off. I made it 6 minutes. CNBC is that car accident that I just have to look at. Sometimes it makes me want to tear out my eyes and put cement in my ears.
Also, tear the wiring attached to your computer/TV out and pour cement through any open vents of the electronic device.
That’ll shut it out good.
TX,
I didn’t know that.. Was that the 1999/00 .COM explosion, or a bear market before that?
I just think it’s funny how fickle people are. I would watch CNBC if the market was 5000, 500, or 50,000, what difference does it make.
I get the feeling that many people don’t know you can bet that the market will go down (short position). That’s my only explanation for why we don’t get mania shorting on the downcycles (as we all know we get mania big time on the upcycles).
Trust me, the money is just as green from a short position coming in. Frankly, I don’t care at all which way the market is going, I just need to have an idea of where its going so that I can try to make some $$ off it.
Not everyone loses when something falls in value/price. I think that others need to lose their bais towards “up good, down bad”.
Yeah, it was in 2002. They were on the ropes. I can’t tolerate it so I don’t watch it.
Watch the ads on that channel. About 10% are actually tring to sell you something other than their stock/investments. The other 90% are ads just pimping the company to get you to buy thier stock or give them you’re money to invest for you.
If people aren’t buying stock or making stock/bond investments, then there are not many advertisers for that channel.
I get the feeling that many people don’t know you can bet that the market will go down (short position).
I bet you’re right. From my admittedly naive understanding, the purchase of stock was traditionally a purchase of an ownership interest in a company; not so much a bet, per se, on the company as much as a genuine belief in the success of the company based on such things as its product and business plan. Such things as shorting are a bastardization of the original intent of corporate investing, and, in my opinion, a form of mere gambling that is not embraced as a good thing by the traditional investor. Another decent institution corrupted by greed, in my opinion.
“I get the feeling that many people don’t know you can bet that the market will go down (short position).”
Shorting is considered “speculating” and going long is considered “investing”, even though both are actually speculating when there is no dividend or if the person is buying because they think the stock value will go up and they don’t care about the dividend, which is what has been happening in probably 99.9 percent of stock purchases for the last 25 years at least. Because most people want to think of themselves as “investors”, and not “speculators” and because people with fiduciary duties are not allowed to “speculate” very few people short stocks. This is my assessment of the situation.
Speculation is the buying or selling of a stock or commodity for the purpose of selling or buying it later at a profit due to a change in price.
Buying growth stocks at absurd PE’s is just as speculative as shorting.
If the bear market gets some legs, it will be great to go long in value stocks.
Shorting like a bandit for now (thank you Market Ticker … and HBB!)
CNBC and Bloomberg are my two favorite Sirius channels and help pass the time while I’m sitting in Publix’s parking lot. I much prefer Bloomberg, but a nifty feature of CNBC is that it posts ticker numbers on the screen including the indexes and the biggest movers. Wish Bloomberg did that. I listen to CNBC if Bloomberg happens not to be interesting at the moment.
so is the Fox Business News station any better? We don’t get it in my village unless we buy yet another expensive tier of cable crap. Just curious.
Like Maria Bartaromo repeatedly saying that an individual making $200,000 a year is NOT high income, so should not be hit by hogher taxes as part of AMT reform.
Sorry lady, but when an individual makes 4x the median household income, they ARE high income. She just reports on a world where incomes are TRUELY INSANE, therefore is out of touch with the incomes of the rifraff.
She’s got a mouth like a carp.
More like a largemouth bass.
Perhaps A 5 Pound Bass, ala Robert Earl Keen?
http://www.youtube.com/watch?v=n3e0YeMYcHo
This is the part of the article that got my attention:
“Merrill included for the first time $5.7 billion of subprime exposure at Merrill Lynch Bank USA and Merrill Lynch Bank & Trust, while also upping by about $600 million its exposure to CDOs after an insurance policy Merrill had taken out against losses was terminated following a dispute with the unnamed seller.”
If I’m reading it right, Merrill had the insurance, then got into a dispute with the insurer, then had to put another $600 million on it’s balance sheet, or at least recognize more potential losses because the insurance side went away.
How many other times might this happen if push comes to shove??
everyone is about to push and shove, only the weak will perish.
Yep…..
The MSM has really come around, and have quoted many knowledgable commentators who paint an unbiased picture of the bursting bubble. But HP and BB have not yet taken the opportunity to speak openly about the situation at hand; hence we are not there yet.
“Today, the ultimate vision that must be dealt with is that the largest asset in most Americans’ lives, their home, is dropping in price, while the cost of financing…is rising,” Annaly Capital Management CEO Michael Farrell wrote in a note to shareholders last week.
“We are witnessing the piercing of a worldwide debt bubble.”
LOAN OFFICERS JUST SAY NO
The root cause is a deflating U.S. housing bubble, which if history is any guide, will be with us for at least a year and a half.
Good morning all. This headline got my attention: Talk of Worst Recession Since 1930. chttp://www.nysun.com/article/66268
“Our bear figures the next six to 12 months will be awful for investors as the market goes down “pretty substantially.” His frightening outlook calls for an additional 20% to 30% decline from current levels. A drop of that magnitude would put the Dow down in a range of roughly 9,100 to 10,400.”
Why does ordinary commerce have to take a dump just because the Dow farts? It’s just a casino game, really. The rest of us still have to eat, work, raise families.
Although I have no problem seeing the equities markets take a huge dump and take out the pigmen corporatists at the same time but I don’t think it has to just to make RE unwind.
The Nikkei hit a 15-month low last night. Our markets are still up 20% over that period of time. Of course you might have to adjust for the dollar going down harder than Jenna Jameson.
Jenna Jameson?
“thingies”?
“mouth like a carp”?
Wow, you’re on a roll this a.m.! Good coffee?
Back to topic, the wider economy will have to suffer because of Wall Street’s transgressions because so many bought into their “cult of personality”. Seriously, a society that wastes its time with the likes of Cramer and that nose candy fellow instead of watching out for each other is bound for some hurt.
I agree….Cramer already did it once in the IPO markets 99-01…..Now he is a cheerleader with the college crowd leading them down the same path…..What a pied piper….The other guy is just a weasel…
LOL — didn’t know who Jenna Jameson is (I’m too old and domesticated), so plugged the name into Wikipedia. There is a huge entry about her, including checklist details about orientation and real/fakes.
it’s more than a dow-fart .. credit is tight.
Small business employs over half of the workforce. Most, by far, small business loans are backed by the owner’s property, like a home. Right now property values are an unknown quantity and are near becoming too risky to lend on.
Small business income is normally spotty. Cash is often short for no good reason. Turn off the credit spigot and people get laid off quick. Eating and raising a family becomes problematic..
Joey — thanks for that insight, sad though it is proving to be. Never thought about all the housing that is pledged against small-business loans. Every drawer we open has more pain in it.
My guess… the stock market reflects someone’s (often misguided) estimate of how much money companies are going to earn. Generally it is a leading indicator - the market heads up before the economy does, it heads down before the economy does.
When the market heads down it is generally because ‘investors’ believe things aren’t going as well as they could. Things turn negative. So does the habit of hiring people and giving them raises and all sorts of things which contribute to ‘commerce.’ After all, if you run a business and aren’t selling product and accounts receivable are at bottom but there’s a high stack of acconts payable on your desk you aren’t happy about hiring a couple of new bodies or giving the ones you now employ a raise.
Maybe you even lay some off.
Why? Because of the psychological idea that things aren’t going too well.
On the flip side, orders pick up., bill are paid off, and businesses look to expand. They hire, they raise wages. Things are good.
“…the market heads up before the economy does, it heads down before the economy does….”
IMHO that is a tired old saw with little basis. The US economy was spent in Nov, 1999 the stock market reacted in Mar, 2000. The US recession ended in Nov, 2002 and the stock market did not start going up until Mar, 2003
I was blue, just as blue as I could be
Evry day was a cloudy day for me
Then good luck came a-knocking at my door
Skies were gray but theyre not gray anymore
Blue skies
Smiling at me
Nothing but blue skies
Do I see
Bluebirds
Singing a song
Nothing but bluebirds
All day long
Never saw the sun shining so bright
Never saw things going so right
Noticing the days hurrying by
When youre in love, my how they fly
Blue days
All of them gone
Nothing but blue skies
From now on
[2]
I should care if the wind blows east or west
I should fret if the worst looks like the best
I should mind if they say it cant be true
I should smile, thats exactly what I do
Irving Berlin
A hit from March, 1929
There was a recession thread yesterday. I wrote that the memory of 1982 still rings in my mind. There was a question about that time being bad.
To those that don’t know, it was really bad. I was pretty young but I remember most of it. We were coming off the Iran crisis. The Soviets were in Afghanistan. Plus the economy was in the toilet. It didn’t have a terrible impact on my family, other than psychologically. We had family friends that were out of work for two years or more. They ate through their savings. There were many kids in school with parents out of work. A lot of kids were receiving assistance that would have never received it before. Oddly, some of them were still the best dressed. Hmmm. I did runs with my parents to provide food for other parishioners. That was depressing times two. It was very bad.
There was an overwhelming sense of dread in the early ’80s. Then Reagan plunged us into deficit spending and everything started to come around and eventually we got the Roaring ’80s. It looks to me like that 25 years of deficit mindset is coming back to haunt us. At least back then we were all used to having not much of anything. This just might be a lot worse with a much more entitled population.
I recall it too NYCB…. I believe we were in far better shape then than now.
A friend was in the back of beyond for a few months in Guatamala, just after the new year and he told me of poor people he’d see, in their little shanties, all with a propane stove, mama making tortillas, chickens running around, penned in. He thought families got by on a few Dollars a day.
Contrast this with our entitled population, who has never really lacked for anything…
” friend was in the back of beyond for a few months in Guatamala, just after the new year and he told me of poor people he’d see, in their little shanties, all with a propane stove, mama making tortillas, chickens running around, penned in. He thought families got by on a few Dollars a day.”
I did two tours in guatemala ‘87′ and ‘95′. beautiful lush green verdant country but lots of poor folks. mostly the indigenous Mayan Indians. They would be everywhere -city and countryside-squatting on the streets and plazas making tortillas, selling drinks, refreshments, juices, ect. No Gov’t assistance nor welfare available in Guat for the poor. The right-wing Gov’t there, buttressed by the military, has always favored the rich property owners and has repressed and kept down the poor.
The most beautiful tourist region in Guat is Lake Attilan. Actually reasonally safe for tourists. Probably more than a few bold adventurous foreigners have already invested in property and set up tourist shops and tourism agencies there, at least those who know how to deal with corrupt repressive unstable third world gov’ts.
1981-2 was these worst in my lifetime….Real Estate both residential and commercial was “paralyzed”…..I almost lost it all at no fault of my own…Conservative, prudent business did not matter…..Volker blind sided everyone by pushing the prime rate to 18% and doing it very fast…..Many, Many business people, good honest hard working people that I know “Never” recovered from it…Lots of sleepless nights worrying about my family for scdave…..
Yeah, I was fresh out of the military and going to school at night. Working for $2.20 an hour on a loading dock. VA $ saved myass. I remember getting a .25 hour raise and management made out like it was a big deal. One meal a day and living on the edge.
Yep ,I remember those times in the early 80’s . The whole entire real estate market went dead at those high rates . People started doing alot of creative financing in those days . If a person had a assumable loan ,they were in great shape . Alot of seller carry back financing took place or wrap-a-round mortgages because of the expensive oney market . The secondary market did not want to buy cheap loans anymore and the banks started piling up money because saving accounts were paying so good . But the difference was that alot of people could hold about because the could afford their house payment because they qualified ,if they didn’t lose their job. In this market you have people who are going to lose their house because they never qualified even if they don’t lose their job.
I REO’d one condo and sold sideways in 81-83.
It is the main reason I never bought again.
Never dreamed 280k would balloon to 638k.
Areas with poor transportation will get a double whammy of drastic house price cuts and increased costs of traveling between jobs and neighborhoods.
James Mulva, the CEO of the third largest oil company in the United States, ConocoPhillips, says world peak oil is here. http://europe.theoildrum.com/node/3226
Doug Casey says
“Twenty years ago, a dozen fields produced a million or more barrels of oil per day. Now there are four, and one of them, Mexico’s Cantarell in the Bay of Campeche, is collapsing. Mexico’s state-owned oil company, PEMEX, projects Cantarell’s output will decline 14% per year from now on. That’s the best-case scenario. 2006 actual production from the aging field actually fell 27%!”
http://www.kitcocasey.com/displayArticle.php?id=1693
Precious metals are making a correction today. This is a good opportunity for you to buy a couple ounces of gold before they bounce back by $100 per ounce.
The dollar may bounce back a few points the next few days, but it’s paper money backed by nothing anyway. The long term trend is much more devaluation.
We’re going down folks. Did you see “60 minutes” last night? It shows why America is declining. Boomers raised a bunch of wussy spoiled prima donnas. I thought only my sister did. Her son is turning 32 in April and only worked one year in his life. Still lives at home and does not drive. I could see how spoiled and permissive his parents, aunts, and grandmother were from the get go and warned them about it but they said I was wrong. What does a 17 year old know anyway (back in 1976). Most of your equities should probably be in emerging markets ladies and gentlemen!
“James Mulva, the CEO of the third largest oil company in the United States”
I wonder if his mother’s name is Delores.
Seinfeld kick. I get it NYCboy!!
Rhymes with…
Total world resources of oil shale are estimated at 411 gigatons (411 x 109 tonnes), which is enough to yield 2.9 to 3.3 trillion (2.9 to 3.3 x 1012) U.S. barrels.[2][3][4][5] Among those, the United States accounts for 62 % of world resources…
According to a survey conducted by the RAND Corporation, a surface retorting complex (comprising a mine, retorting plant, upgrading plant, supporting utilities, and spent shale reclamation) is unlikely to be profitable in the United States until crude oil prices range between US$70 to US$95 per barrel (in 2005 dollars).[25] Once commercial plants are in operation and experience-based learning takes place, costs are expected to decline in 12 years to US$35–US$48 per barrel. After production of 1,000 million barrels, costs are estimated to decline further to US$30 – US$40 per barrel..
http://en.wikipedia.org/wiki/Oil_shale
Then you gotta be asking “why isn’t this resource being exploited to compete against $100 per barrel oil?”
More profit in strip mining Canada. Current cost $45/barrel US.
Holy smoke. 3 trillion barrels right here? I have never seen that before.
U.S. daily use of oil = 21,000,000 barrels or about 8,000,000,000 barrels per year.
Three trillion barrels would equal about 350 years of usage for the U.S.
They have been trying to access it for 50+ years, with little success.
from Wikipedia
“Tosco (The Oil Shale COrporation) was an independent U.S. based petroleum refining and marketing corporation. It was founded in 1955 in Santa Monica, California, and originally focused on efforts to extract oil products from oil shale and developing alternative energy sources. In 1965, Tosco entered into a joint venture with Atlantic Richfield to develop the Colony Shale Oil Project in Colorado….”
The raw, shale rock burns like coal.. kinda smoky, of course.. When the rock gets hot, the oily stuff inside vaporizes and can be cooled and condensed and collected.
Getting the process working seems like a pretty simple thing to this non-engineer.
When TOSCO was refining, it cost 9 bbls of oil to yield 10 bbls. The biggest problem that TOSCO had was getting rid of the shale slag. TOSCO mined. Current technology is in situ steam, less NIMBY reaction, but not real feasible at this time.
it’s as feasible as the hydrogen-car hype that is going full speed ahead.. and nobody even cares about the energy that is wasted from gas or oil cov=nversion - to - turbine - to - electricity - to - hydrogen losses.. Supposedly it’s better for the enviornment, but i don’t see where it is.
At least shale-oil/gas wont require an entirely new delivery infrastructure from coast to coast as well as the re-engineering of automobiles with the attendant costs of re-tooling factories.. plus increased consumer vehicle costs..
i wonder where the first hydrogen gas tank explosion will happen.. in someone’s car or in a filling station.
True. This however does not mean that oil shale is the way to go. It is, at best a stop gap measure, not a solution.
there’s only one good solution imo.. nuclear fusion… assuming we can figure out how to suspend and control a small, burning 1 million K temp plasma in midair for longer than a few seconds without killing everyone in the vicinity.
nuclear fusion, the technology that promised again and again (since the 50’s or so) that they would have a fully working prototype in 10 years and a real cost-effective version in maybe 20 years (with construction cost bigger than the budget of a small first world country). At least it keeps some engineers off the street so they don’t engage in more dangerous activities
better use that fusion reactor in the sky, no radiation problems and extremely good track record
“At least it keeps some engineers off the street so they don’t engage in more dangerous activities
”
Like building nukular weapons?
My dad worked for a defense contractor for 10+ years building super powerful lasers that could “theoretically” shoot down enemy ICBMs in flight. Of course, the atmosphere had it’s own ideas… the atmosphere just couldn’t be convinced it should give up things like preasure gradience, humidity, particulates, temp distortion, etc. It simply liked to scatter the beam WAY too much.
So, maybe we can put the laser on a satelite…. sure, if you want to lift a power plant that could supply 1 milliion houses into space.
Dang… we have these super powerful lasers, but can’t use them for their designed purpose…. Hmmm…. Maybe we can use them to fuse hydrogen into helium.
So, he was transferred from DoD to DoE…. Sure, you can just a gazigawatt laser to create fusion. And, you only have to put in about 1,000 times as much energy into it as you get out!
There was plans for a larger phase of work that, if everything went as planned, would require only 100 times as much energy to go in as you could get out.
It got cancelled, so dad ended up back in DoD trying to come up with other means (that would never work) of pretending it was possible to shoot down enemy ICBMs.
I hope my dad doesn’t meet your dad in a dark alley. ;^)
Dad quit DoD in the 1980’s when they asked him to work on nukes (darn conscience). Ended up working for a defense subcontractor (that blank patch on his CV working on secret projects made him hard to employ elsewhere).
He just about had an aneurysm when the Pentagon went public with selected parts of the SDI report, basically lying to Congress that their LASER defense program was feasible. I guess his work group had done a little work on that (on paper, not playing with any actual equipment) and knew it was crap … but he had to keep his mouth shut or end up in prison for treason (nice).
20 years later … he is still bitter. (He got to do some stints doing weather modeling in the interim, so overall he’s happier. Went off the lithium and everything.)
the ‘why’ may be more than pure economics… no doubt a political climate-change would be needed. If people suffer enough that may happen.
But it can be exploited when the time comes. Meanwhile the oil companies (who are the only ones with the cash and expertise to set it up) will continue to take the path of least resistance and suck the liquid of the ground.
I was hired by Exxon in ‘81 to work the Colony Project. Exxon had a $400Mil stake and the Gov’t an equal share. Poor little TOSCO owned the resource. Trained at Bayway NJ for two years as a Hydrofining Engineer. The big heads were sure oil was going to $30/bbl where the insitu process of extraction would be profitable (naive extrapolation). Oil prices fell, Gov’t pulled out and Exxon was forced to do the same. Poor little Tosco was left holding a bag of money. They subsequently bought the Bayway Refinery.
The oil is there and we know how to produce it. We will not be without oil in the forseeable future. The problem with targeting an oil price where shale oil production will be viable is in not recognizing that the production costs follow the price of oil up. It isn’t going to be competitive with wells (while they last), but it makes a lot more sense than burning food (ethanol) in our SUVs.
Government intervention always seems to foster malinvestment.
here’s a good news about oil shale.
http://money.cnn.com/2007/10/30/magazines/fortune/Oil_from_stone.fortune/
My Octomom tells me of many failed sons coming back to live with mama, in her neighborhood.
A few failed daughters, but mostly sons.
IMHO, its the sons movin back with momma b/c the chicks get the house in the divorce…
You probably missed it but last week Ben made it clear that he believes this whole generational blame-everything-anyone-ever-does on one age group is a divisive waste of energy.
Testify, Kay. I have observed that the divisive blame game is being played by many different groups and interests against other groups and interests. A house divided against itself cannot stand and that goes for families, companies and political units.
Ben is correct. The system and those that control it (Wall St/K St) has us feeding on ourselves instead of ripping to shreds the criminals themselves.
True for those who have no relatives expecting to get handouts.
Just wait until I quiz Octomom, just returned from Europe…
And Octomom knows all~
to be precise, i believe he said it wasted his bandwidth..
Did you see “60 minutes” last night? It shows why America is declining. Boomers raised a bunch of wussy spoiled prima donnas.
I watched that and wanted to be sick… these are kids that have no idea what a recession means, never mind a depression. As an X’er who started working professionally in the mid/late 90’s, I didn’t know what it meant either. I had only worked during boom times in a field with huge demand. Come the 2000 bust and the 2001/2 recession, it was a wakeup call.
I was unemployed for most of a year (2003) and had to sell my condo (for a profit luckily). My $500K (peak 2000) stock options went to $0 and my life was turned upside down. Needless to say, today I’m a bit wiser, definitely more cautious, and probably a bit jaded. We’ll see how the “Millennials” handle adversity…
Hi all,
Not sure if I still qualify as an Xer (32), but not all of us are like this. I’ve been working since I was 14. When there was no jobs in the rural area I lived in, I cleaned horse stalls for $5 an hour and then walked two miles up a trail to the nearest bus stop to ride the bus an hour into town to work at restaurants/retail places. Anyone I could find who would hire me that young. Put myself through college and grad school, and now am rethinking having children, because it is more important to me and the hubby to have enough money to live comfortably and take care of our parents who are getting older and are not all that healthy anymore.
My grandma lived through the depression and made sure we all knew what it was like from a young age. She started her own company with seven kids to raise and still works forty hours a week at age eighty three. I think its all in how these kids are raised now - given everything, coddled, taking everything for granted. I work a professional job, but should the economy hit the fan, I’am prepared to eat rice and beans and clean hotel rooms or whatever else I can find for work if need be. I can guarentee none of the spoiled Xers I know will be able to handle something like that. Sorry for rant:) This is one of my pet peeves.
Pelegirl …..If the world had more people like you in it , I would not be so worried about the younger generations . It looks like you are like your grandma ,or she had a good influence on you . I enjoy your posts .
What younger generation would that be?
(And I say this as a childless person.)
Awww….thanks Housing Wizard! My grandma is definately a role model for me. Amazing woman and as sweet as you could ever imagine. My dad is great too - incredibly hard worker that rebuilt his life and businesses twice. Sacrificed everything for his kids and always pushed me to go to college. My favorite memory was walking into the general store near our house after being gone for a year or two and all his morning coffee buddies cheering for me because he had been bragging for so long about my accomplishments in school. I’am lucky to have such good examples in my life.
“Boomers raised a bunch of wussy spoiled prima donnas.”
Wished I had seen the show, even though I really hate generational comments like that. Undeniably there are a lot of spoiled Gen Xs and Gen Ys out there, but for every one of those, I can also show you a Boomer who couldn’t be bothered to save a dime for retirement. We reap what we sow: garbage in, garbage out.
Kim I just looked on 60 minutes website and they have the video up, I’m going home at lunch to watch it. http://www.cbsnews.com/sections/60minutes/main3415.shtml
Thanks for the link. Just read the article (it sort of mirrored the cover story from - I think it was Business Week - a few weeks ago). Heading back now to see the video.
I graduated from college in 1979. Got a professional-level job right out of school. Was laid off in 1980. It was five and a half years before I found another professional-level job.
Many believe we’ll be just like Japan, in their housing bubble aftermath…
Makes for good comfort history food, but it won’t work here.
Let’s compare the countries, Japan 1990 and The USA 2007
Japan: A nation of savers, mostly cash transactions
USA: A nation of spenders in debt, mostly credit card transactions
Japan: A nation of workers, a team effort
USA: A nation that had it’s house do the work for them
Japan: No guns
USA: A “few” guns
Japan: Largely homogeneous society
USA: Heinz 57
Japan: Safe cities, excellent public transport
USA: Cities on the edge, non-existent to ok public transport
Japan: A country in search of it’s zenith
USA: It’s zenith came and went
Japan: The reason the banks ate the loans was to save face
USA: The banks won’t eat the loans, who are you kidding?
Japan, a volcanic rock with little to no natural resources. 336 people per sqkm.
USA, diverse geology with massive natural resources. 30 people per sqkm.
Japan: Nice weather
USA: Too little or Too much rain, crops and livestock suffer
You think Japan doesn’t get hit with the Siberian express? With typhoons? With heavy rain, and drought?
Come on man. Japan has weather too!!!!
Are you oblivious to the climate change that is happening in front of your very eyes?
Deny it so it goes away. Isn’t that how it works aladin?
I live in PHX where we just had the hottest summer on record. We’ve had more 90+ days this November than than the last 5 years combined. There is a mud flat near Flagstaff that is called Mormon Lake. It hasn’t been a lake in close to a decade.
But, climate change is NOT going to suck the metals out of the ground. It is not going to make our coal and natural gas deposits disappear. It is not going to turn EVERY bit of farm land into a dust bowl. Every forest won’t suddenly fall over dead. It won’t make the wind stop blowing or the sun stop shining.
Yes, Japan has a better culture of working together while the U.S.A. has a culture of brutal individualism.
But, at the end of the discussion, Japan is a volcanic rock with HIGHLY limited natural resources while the U.S.A. has an abundance of natural resources.
Too little rain is usually the problem. In the US Midwest, years with widespread flooding somehow manage to produce good crops on the undamaged acres.
I believe cotton and vegetable crops can be damaged by untimely rain.
Japan is a great place, can’t wait to return next summer and ride/photograph the rails and scenic countryside…if the JPY is still weaker than the USD…which I am not so sure of - it’s under 110 this a.m.
While every place has its pitfalls one should not judge any place until they’ve spent a dreary Midwest winter in a Rust Belt city - even after typhoon no place in Japan could be as depressing as gray slush, bare trees, and yellow snow.
And the most important thing I think Japan has, is a sense of history and belonging. How they somehow squeaked out a living on more of a mountain, than a island, for so very long…
Is testament to their self-sufficiency, a good trait.
Tell that to the Ainu.
The Japanese have very dirty hands. (That said, I am a fan of all things Japanese–I just keep things in perspective.)
I spent a month in Tokyo once, working on a project. What I remember most about the work is that at 5:00, which was the nominal closing time, not a single person in the office left/went home. They all kept on working, even though they were not being paid overtime. I think that their work ethic is their salvation with regard to any adversity.
just so you know that is a lie, they arent really working. They have to look like they are a hard worker or else they dont get the promotion
Its a rat race
“USA: The banks won’t eat the loans, who are you kidding?”
I fully expect the infestment banks to keep pushing the effort to have Congress pass the tab for collapsed debt obligations on to the American taxpayer. I hope I am pleasantly surprised to discover I was wrong, but not optimistic based on historical evidence.
Affordable McMansions
http://www.stockmania.com/index.php?showimage=90
“Affordable housing for the rich”
Right on!
–
http://www.economist.com/displayStory.cfm?story_id=9968857
Ailing Celtic tiger?
Ireland’s property market is already showing signs of a correction. Estate agents report prices down in some areas by around 10% this year, and shares in companies with property market exposure have also experienced falls. But is a contraction a welcome correction in a bloated market? Or could the property market spiral downwards, harming the broader economy via a weakened construction sector, lower household spending and rising unemployment? These are serious risks, though the data so far points to a soft landing.
In the decade up to 2006 residential property prices in Ireland rose more rapidly than in any other developed-world economy. Strong demand partly explains this: incomes, employment and population all grew robustly. The increase in the supply of new housing was just as phenomenal—the number of annual housing completions in 2006 was almost five times that in the early 1990s, which compares with static output in the euro area and the UK. Considering both these dynamics, prices in recent years have almost certainly overshot, as suggested by a range of indicators. For example, the house price/average income ratio is the second-highest in the OECD. Also, as household indebtedness has grown more rapidly than in any other OECD country over the past decade, to approach 100% of national income, and as most mortgage debt remains subject to variable interest rates, sensitivity to changes in rates is greater than in any other OECD country. And rental yields are at historical lows. Despite this, large numbers of investors continued to enter the market in 2006 in anticipation of further price increases.
With a cooling of the market already underway, Ireland may be about to experience a period of sharply falling property prices. With the cost of mortgage servicing rising, many borrowers are beginning to be squeezed. The many investors who have bought to let are particularly vulnerable. Those who have borrowed to finance property purchases are experiencing a widening in the gap between rents and mortgage repayments. For many investors, the logic of holding property is now based entirely on the assumption of future capital gain. If this assumption changes, there is likely to be a rush to offload properties. This is the most likely trigger for a correction in the Irish property market and an almost certain, sharper than forecast slowdown in the wider economy.
…
I work with a lot of Irish. They have bought the “real estate only goes up” bullsh%t hook-line-and-sinker. The stories from Ireland are just frightening. The Irish have branched out into so many different countries. It will really get ugly.
–
Irish followed the English!
Anglo countries have led the way for housing bubble and borrow-and-spend. But, in recent years everyone seems to have joined the party. It is hard to see others party and sit quiet.
Jas
Gold is taking a big dump this morning. Are “The Boys” selling the good to hide the bad?
That’s probably the case. But it’s a good opportunity to buy more. I have relatively little platinum compared to gold, so my purchase this weekend will be platinum.
E*Trade is also taking a major dump. My puts will do great but unfortunately, my whole trading account is in there with a big chunk of money!! This is coming at the worst possible time. Dammit…
DP
They just mentioned bankruptcy for E*Trade on CNBC. This is ugly.
http://finance.yahoo.com/q?s=ETFC
So by all means, everyone, sell your gold!
The SEC is also after them for frontrunning retail client orders. It’s about time. ETrade, Ameritrade, Schwab all do it. This is something I saw every day as a daytrader. Schwab was the worst. People think they are getting good deals on commissions with these brokers but they are costing you a lot more in executions than you “save” on commissions.
F*** them. I am pretty sick of Schwab’s BS. Looking to move to TOS.
is anyone shorting Starbucks? If not, why not?
SBUX was on my short target list already in Deceber 2004, but its share price has been remarkably resilient. I guess the stock market believes consumers will still be willing to pay a fortune to consume caffeinated sugar water even after the effects of the credit crunch hit U.S. consumers’ credit card limits?
Problem with SBUX is - look at the clientele. So far this downturn has hit who the hardest - construction workers, auto makers, and real estate agents. Only one of those three are typical Starbucks clientele.
Give them time - as financial, tech, and retail get hit (starting right about now), Starbucks will follow.
With the writer’s strike in full gear, I wouldn’t bet against coffee shops. They’re jam packed right now.
The five day chart tells quite a story, including a massive avalanche of volume today and evidence that the stock price is magically life-supported at $4 instead of being allowed to sink all the way down into its grave.
http://finance.yahoo.com/q/bc?s=ETFC&t=5d&l=off&z=m&q=l&c=
i’m in same boat.
E-Trade shares plummet on writedown fears
By Ben White in New York
Published: November 12 2007 17:40 | Last updated: November 12 2007 19:15
Shares in E-Trade, the online broker that has seen its expansion into the mortgage market backfire, had plunged 53 per cent by midday on Monday amid fears that its dependence on uninsured deposits could force it to sell assets at fire sale prices.
Prashant Bhatia, Citigroup analyst, cut his rating to “sell” and said there was a significant chance of E-Trade winding up in bankruptcy.
http://www.ft.com/cms/s/b5125456-9141-11dc-9590-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fb5125456-9141-11dc-9590-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
It appears this is more of a rally in the dollar. USD/CAD has gone from $0.90 to $0.96 (and cost me dearly). EUR/USD has gone from $1.475 to $1.455 and the dollar index has gone from 75 to 76.
It is tough week to have most of your investments betting against the USD.
yes, euro goldprice is hardly changed from last week. I wouldn’t be surprised if this is caused by massive ECB intervention. The big players in Europe were screaming for ECB action last week to lower the euro and euro interest rates, and usually they get what they want.
Hey NYCityBoy,
How was the NY crew HBB soiree Friday nite?
It was small. It was pretty fun. The overwhelming sentiment is negative.
we could have used a few more people…but then NYC is not really crashing yet…when it does i’ll bet we will have a very nice big get together.
What NYCBoy said. We will try to do it again early in ‘08.
Slim weighs in from Tucson. Our first-ever HBB meetup consisted of Yours Truly and Tango In Uniform. We talked for something like two and a half hours, and oh, was that fun!
HBB meetup, the sequel, will happen in early ‘08.
I just turned on CNBC, again. A loser from Zip Realty is talking. He just said they are seeing strength in Boston. I was in Boston two weeks ago and it is a disaster. WTF? Why do they keep letting real estate shills discuss real estate? I have the day off work and I’m already on my third beer. Time to change the channel again.
Put the beer down…slowly step away.
No go have a nice bowl of cheerios
Smiles,
Leigh
no=now
I saw the loser as well saying “all we need is to let fannie do 600k-700k loans and then everyone can buy a house”.
What a fool - to buy a 600k house requires income of 171k per year!
171 is about 3x household income … so about 9 people (6 wage earners, 3 children, oldsters, or hangers-on). Should be about 2500 sq ft — room for everyone!
In the early 90’s there was lots of talk about the benefits of co-housing. *gg*
This is the house that Jack built
(with apologies to Mother Goose)
This is the homeowner tattered and torn,
Convinced by his wife to buy the McMansion,
That was hyped by the realtor full of hubris,
Goaded by the taxman licking his chops,
Abetted by the appraiser’s song and dance,
That was used by the broker to bloat the mortgage,
That was sold by the banker to enrichen his coffers,
That was sliced and diced by the hedgefund manager,
Packaged and repackaged and pumped and dumped,
That burst the bubble,
That ate the equity,
That lay in the house that Jack built.
Wonderful…
Here’s my effort:
(Sing a Song of Sixpence)
Sing a song of Subprime,
A pocketful of wry,
4 and 20 Bad Loans,
Baked in a lie,
When the pie was opened,
They all began to sink.
Now, wasn’t that a dainty dish
To set before the King?
The King was in his Gulfstream V,
Counting out his money,
The Queen was in the backseat,
Eating caviar with honey.
The trade was in the garden,
Hanging out the loans.
Along comes a Black Swan,
And sometimes things don’t go as we supposed!
I suggest “A pocketful of lies”
It was all just one big lie, wasn’t it?
Citibank Korea: A wholly owned subsidiary of Citigroup
“Citibank Korea said yesterday it will accept voluntary retirement from employees with more than 10 years of service as part of a deal reached with the union. Those who retire with 15 years of service, for example, will receive three years’ salary plus up to 25 million won ($27,600) in other bonuses.
Experts say the decision is part of the group’s worldwide restructuring plan that began earlier this year. In the spring, the U.S. banking group slashed 17,000 employees, or 5 percent of the total. It also expects to write down roughly three or four months of its profit for $55 billion of exposure to U.S. subprime mortgages.”
Inside JoongAng
12 November
Hoz — does that seem like a good deal, to you? I’d think of it more like a layoff w/buyout than retirement, given that the annuity value of that money does not look particularly high. I suppose it’s a lot better than “retirement” with no handshake.
What was behind the massive sell off in the last half hour on Friday? Another hedge fund liquidating?
–
Dominos are falling — Merrill downgrades the Enterprise Software
Consumer are hurting.
Businesses that sell to consumers are hurting.
Those that supply to businesses are hurting.
Echostar says consumers aren’t paying the bills for their DISH.
One has to be blind to reality not to see the recession in the economy. Yes, the housing bubble burst led it.
Jas
This is what passes for “business news” in Fort Collins, CO:
http://www.coloradoan.com/apps/pbcs.dll/article?AID=/20071112/BUSINESS/711120314
http://www.coloradoan.com/apps/pbcs.dll/article?AID=/20071112/BUSINESS/711120315
The Fort Collins media ignores the local Intel Itanium chip designers for the sexy high paying jobs.
They don’t cover Intel (or HP or Avago, or AMD, etc.) because those companies are not hiring. If you see any hiring at all its to replace someone who quit. The head counts at those firms Ft. Collins facilities have pretty much been flat. That last time I recall sering Intel mentioned in the Coloradoan was when they had their last mass layoff.
For Prof G.S. Bear,
“…NARRATOR: The 20s was a decade of all sorts of fast money schemes. Three years earlier, everyone was buying Florida real estate. As prices of land skyrocketed, more people jumped in, hoping to make a killing. Then, overnight, the boom turned to bust and investors lost everything.
GROUCHO MARX: ["The Cocoanuts"] Florida, folks. Sunshine, sunshine. Perpetual sunshine all the year around. Let’s get the auction started before we get a tornado. Right this way. Step forward, everybody.
NARRATOR: In May, the Marx Brothers were before the cameras with their first film, The Cocoanuts. Its subject? The Florida land boom. Now, in 1929, the gullibility of those naive speculators was something to laugh about.
GROUCHO MARX: Eight hundred wonderful residences will be built right here. Why, they’re as good up, better. You can have any kind of a home you want to. You can get even get stucco. Oh, how you can get stucco. Now is the time to buy while the new boom is on. Remember that old saying, “A new boom sweeps clean.” And don’t forget the guarantee.
NARRATOR: Groucho Marx would film these scenes and then rush to his broker to put more of his savings into the booming market, on margin, of course.
Mr. MARX: Max Gordon, a Broadway producer, was also heavily in the market and Gordon could never get over the fact that the market was going up and up and up all the time. And he said to my father, “How long has this been going on, Groucho?” And my father said, “I don’t know, but my broker down in Great Neck tells me that it’s because there’s a worldwide market for American goods and it’s never going to go down, that the market’ll just keep going up and up and up.”
NARRATOR: May 1929. Stock prices were going up and up. With so much money to be made, people were borrowing more money than ever before to buy stocks. Market leaders like William Durant, far from being worried, were ecstatic. Off on his annual visit to Europe, he announced that everything would be fine as long as we all continued to believe. “Confidence — not halfway confidence, but 100-percent confidence — is the real basis for our prosperity.”
Astrologer Evangeline Adams was now putting out a newsletter. Her 100,000 subscribers learned how the Zodiac could influence stock prices. Her advice for the coming summer: buy….”
When an interviewer asked him how much money he’d lost from gambling, he (Chico) answered, “Find out how much money Groucho’s got. That’s how much I’ve lost.”
millions..
Was it just a month or two ago that I read on Bloomberg that the stock market was set to take off because based on trailing PE, it was a “bargain” at just slightly above its historical average?
Well, now that temporarily inflated profits are somewhat less inflated, what is the trailing PE of the DOW?
Just remember the E in the denominator is based on a highly-volatile recent earnings figure (refer to Shiller’s method for correcting this noisemaker, as explained in Irrational Exuberance). If the Fed avoids volatile measures of inflation, perhaps Wall Street should steer clear of volatile measures of stock valuation?
Prof. G.S. Bear wore Groucho glasses while trick-or-treating with his sons this Halloween.
You have to love the irony of Groucho ridiculing Florida housing investors on the silver screen while catching a falling knife in the stock market. I am sure a similar fate awaits many of today’s stock market investers who don’t understand the connection of the credit crunch to the stock market’s likely future course.
“This semisucker is the type that thinks he has cut his wisdom teeth because he loves to buy on declines. He waits for them. He measures his bargains by the number of points it has sold off from the top.”
Jesse Livermore
The financial markets key purposes are designed to move moneys from weak hands into strong hands. Suckers are an excellent source of funds.
Hoz - “The financial markets key purposes are designed to move moneys from weak hands into strong hands. Suckers are an excellent source of funds.”
That’s why I don’t play. Between fees and “frontrunning” as Chick describes and all the other ways the rich have to screw me, I just pay my rent and keep my powder dry. What I’m losing by being in cash is outweighed by what I’d lose owning a house or, at this point, stocks. The latter kinda’ reminds me of a blind date.
“Max Gordon, a Broadway producer, was also heavily in the market and Gordon could never get over the fact that the market was going up and up and up all the time.”
Isn’t that amazing? The stock market always went up in 1929, same as it does today.
“…NARRATOR: There were some people, however, whose investment strategies made money. On October 29th, Jesse Livermore’s wife, hearing of the crash, ordered the servants to move all the furniture out of their mansion into a small cottage on the estate.
Mrs. LIVERMORE: So when Mr. Livermore got home that night, he walked into a totally vacant house. When she told him that she had effected the move because she was sure that they had lost all their money, he told her that he had made more money that day than he had ever made before.”
Uggh! Just spent the day with a friend of a friend from high school. She and her hubby bought a 3/2 in a very marginal neighborhood in Dec. 2005. I had heard she had gotten a real bargain, around $300,000 for it. Which I know is no bargain, but in 2005 in the OC it actually was unheard of. The place is not that great, and the street a little rundown, but I thought it would be okay for the money spent. Just found out she actually paid double that, $600,000 with a ten year ARM. My god, that’s a $3500 a month payment (or more) for a rundown house in a not so good neighborhood. My house is just a tad smaller, but much cuter with a better neighborhood for $1400 a month rent. Not to mention that I’am quite certain interest rates will be sky high come 2015 when the loan resets. This bubble is crazy!
Poor NYC neighborhood “degentrifying.”
http://nymag.com/news/features/40648/
Good article. It’ll be interesting to see how this dynamic plays out in big cities all over North America — which neighborhoods degentrify, which ones reach some kind of stasis, which ones implode.
From the article:
Gentrification in New York has gone from an implausible economic rejuvenation to an unstoppable social juggernaut to a widely held article of faith.
I think that’s true for most of the cities I know well — people just forget (or don’t want to remember) just how sketchy parts of NYC or Chicago or Washington, DC were in the ’70s and ’80s. There are many that think our cities can’t slide that far again.
I agree, it’s a good analysis of the gentrification/degentrification model. It took a while to read but it was worth it.
Wonder what they used to make that photo look like a Rockwell.
In case you have any friends who are too happy right now, the same (New York) magazine offers:
Your Pre-Holiday Guide to Downer Films
http://nymag.com/movies/features/40646/
It’s a bungee-jumping market today…
http://www.marketwatch.com/tools/marketsummary/
Looks like someone decided to pound gold while trying to push the DJIA up off the floor. If anyone can figure out a rhyme or reason to explain today’s action (other than a chaotic aftershock from last week’s financial earthquake), I am curious to hear the story…
BANKS ARE CLOSED!
Few traders are in it is just a holiday trade to adjust positions. A non event.
The holiday is pretty much world wide.
OPEC makes noises like it might increase production and oil / gold drops.. nothing too mysterious about that. Then there’s some bargain hunting in the stock market.. Treasuries are being bought, indicating some flight to safety.
The aging bull looks like it is running short on Viagra today.
The stock market charts look to me like evidence the market is trying to continue the selloff; perhaps I need to go clean my glasses.
November 12, 2007 1:54 P.M.EST
BULLETIN
Street gets into rally mode
Top financials head a parade toward Monday gains, though E-Trade and Countrywide suffer further. Commodities prices are in retreat.
Stock bulls take heart! The DJIA is still way up from its 2007 lows. Now is a great opportunity to buy the dip. In fact, there has never been a better time to buy stocks.
52-Wk High: 10/11 14,279.96
Prev. Close: 13,042.74
52-Wk Low: 03/14 11,926.79
I got a lot of strange looks when i’d told friends I joined the $700 Club, and i’d rather not go back there.
Next shoe to drop: Plankton’s credit card limit.
HSBC, the Subprime Seer:
Sanguine View Isn’t Likely
By CARRICK MOLLENKAMP
November 12, 2007; Page C1
…
“HSBC has proved to be one of the most frank, or perhaps realistic, of all the players in the consumer-finance space,” said UBS AG banking analyst Alastair Ryan. “If their message is indeed that things have again turned for the worse, others will follow.”
HSBC’s results also could have bigger implications for the U.S. economy. Some analysts expect the losses at HSBC Finance to prompt a slowdown in lending at its 1,260 U.S. branches and other lending outlets, which provide mortgages, auto loans and credit cards to retail customers. That is an area that economists have been watching closely for signs of contagion from the credit crisis. Any pullback in such lending could curtail U.S. consumer spending, which has been the country’s main driver of economic growth.
UBS’s Mr. Ryan estimates that HSBC Finance’s book of consumer loans outstanding will shrink or remain flat in 2007 and 2008. That follows an expected 4% decrease between 2006 and 2007. In auto finance, he believes that loans outstanding will increase 3% between 2007 and 2008, compared with 6% growth between 2006 and 2007.
http://online.wsj.com/article/SB119481148063189270.html?mod=hpp_us_whats_news
The last paragraph is a doozy…
In recent days, other financial firms have trumpeted new concerns about next year. Last month, Morgan Stanley analyst Betsy Graseck said in a report that she expected “contagion from subprime housing to prime housing to auto to card loans.” Capital One Financial Corp., a large-credit-card issuer, reported Friday an increase in loan charge-offs and delinquencies in October. Last week, home lender Washington Mutual Inc. predicted a bleak outlook for 2008 U.S. mortgage originations, predicting a drop to $1.5 trillion from about $2.4 trillion this year.
Write to Carrick Mollenkamp at carrick.mollenkamp@wsj.com
BTW, if WaMu’s predicted drop in originations to the tune of $900 bn
(37 1/2 percent) materializes next year, then home prices have a lot farther to fall than most MSM commentaries suggest.
November 8, 2007, 11:11 am
Jim Cramer in Middle of Spitzer-Cuomo Niceties
By Danny Hakim
(Eliot Spitzer, top, and fellow Harvard Law student Jim Cramer, left, with Cliff Sloane. Mr. Spitzer and Mr. Cramer are old friends.)
Gov. Eliot Spitzer and Attorney General Andrew M. Cuomo appeared together for their first joint news conference in some time to announce a number of steps to bolster Mr. Cuomo’s investigation of corporate practices that contributed to the home mortgage crisis.
Coming a month after some tensions surfaced between the sides, the two were putting the best face on their relationship — each made a number of complimentary remarks about each other. The governor said he would propose a new law aimed at protecting borrowers and was creating a $2 million grant program to help counseling groups and legal aid societies.
But the governor’s old friend and Harvard Law classmate, the CNBC stock analyst Jim Cramer, made the appearance a little more interesting.
http://cityroom.blogs.nytimes.com/2007/11/08/tv-stock-analyst-in-middle-of-spitzer-cuomo-niceties/
This is not new news. I can’t stand Cramer but he’s disclosed that friendship since about 1996 or 1997. I think Spitzer was an investor in the Cramer Berkowitz hedge fund.
–
http://www.ajc.com/business/content/business/stories/2007/11/09/ramsey_1110.html
Dave Ramsey’s gospel: Spend less. Pay off debt. Save.
Radio host brings financial message to Gwinnett Arena
By BILL TORPY
The Atlanta Journal-Constitution
Published on: 11/09/07
Radio host Dave Ramsey’s advice to people climbing out of debt is slap-your-forehead simple. It’s as blunt as a health guru telling fat people, “Just shut your pie hole.”
So why did 5,000 people this week pay their way into the Gwinnett Arena — some shelling out $169 — to hear the ever-more-popular Ramsey tell them the obvious?
The reasons for that are simple, too: Motivation. Behavior modification. Even a little entertainment — everyone likes seeing see a bald, middle-aged guy hopping around the stage in chains to show society’s bondage to debt. Listening to Ramsey is like going to church. Or AA. Or to see a personal trainer. You know you need to do sit-ups, but it takes someone standing over you to do them.
“It’s not the information, it’s the inspiration,” Ramsey said before the event. “This information is not rocket science.”
It’s not. But it has made the once-bankrupt real estate investor a multi-millionaire. His syndicated show, based near Nashville, Tenn., is heard on 325-plus radio stations. He is among the nation’s top eight radio hosts with a weekly audience of 4 million, according to Talker Magazine. He implores listeners to cut up credit cards, pay off debt and live within their means, even if it means eating beans and rice or rice and beans.
“Get a second job,” Ramsey tells callers. “Deliver pizzas.”
…
I listen to Dave Ramsey’s radio show a bit. I agree with him on most things. My biggest issue with him is that he is still in bed with the real estate community as he strongly encourages folks to use realtors on real estate transactions. I would fully onboard with this guy would preach that most folks involved in real estate transactions (realtors, mortgage brokers, appraisers, etc.) don’t have your best interests at heart and the buyer is the one paying for everything - not the seller. As much as he preaches against the credit card companies, he needs to include just as strong of criticism against the real estate community.
Dave Ramsey is spot on regarding everything EXCEPT real estate. He’s in deep denial. I called into his radio show one Sunday and as much told him so. He played stupid of course. I was easy on him because of the compassion he exhibits when these down and out callers phone in.
He is starting to catch up on the down market, but he has definitely been WAY behind the curve.
The pile of foreclosure calls early in the year failed to clue him in, but I think the inability to refi on the part of the people who come to his organization for financial assistance has started to get some inkling to trickle into his brain.
I grit my teeth every time he tells people they need a good “reel-a-tor,” but, to be fair, he’s usually telling it to some idjit who was trying to FSBO and probably was unrealistic about the price. He also tells that to people who have hired dimwit newly minted Realtors&tm; who have had the house on the market for ages without a bit and definitely have it priced too high.
Dave also refuses to believe a recession is coming. A number of callers have brought it up as their reasons for getting out of debt. He tells them they’re stupid. Okay, whatever, Dave.
Of course, he doesn’t have to worry–debt counseling is counter-cyclical.
I’d put some money with Kleiner Perkins Caufield & Byers if I could.
Al Gore joins famed venture capital firm
http://www.reuters.com/article/domesticNews/idUSN1247526320071112
Home loan crunch a boon for pawnbroker
SOUTH SAN FRANCISCO — David Newman isn’t an economist, but from his vantage point as a pawnbroker, he sees an economic underbelly most people don’t see.
“Times are getting harder, and more people are hurting these days,” said Newman, manager of Cash Loan Inc. pawnshop in South San Francisco.
http://tinyurl.com/2n2btm
This looks like forced liquidation to me at day’s end. Catching the BIDU knife at 300. Jeez! Only $130/share off the high less than two weeks ago!
i agree, we’ll see some hedgies comin out in body bags come Friday.
buyers today, in certain sectors, are the stronger hands.
dija notice Sun Microsystems 4/1 happend today,
closed 20.51
JAVAD
“you didnt brung yer stock split witch-a-didga”
Investors Playing Musical Chairs
David C Nelson Nov 12, 2007 9:55 am
http://www.minyanville.com/articles/CSCO-KO-pg-PEP/index/a/14828
Why would Blackstone’s chief want to try to paralyze the mortgage market with fear? It does not seem cricket.
Blackstone chief talks of mortgage crisis ‘black hole’
By James Politi in New York
Published: November 12 2007 19:09 | Last updated: November 12 2007 20:46
The US mortgage crisis is “deeper” and “scarier” than anyone expected, Tony James, president of Blackstone, said yesterday, as shares in the US private equity group fell on news that its revenues had fallen sharply below expectations in the third quarter.
http://www.ft.com/cms/s/ed96bb54-9151-11dc-9590-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fed96bb54-9151-11dc-9590-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
‘IMF urges subprime transparency
By Scheherazade Daneshkhu, Economics Correspondent
Published: November 12 2007 13:18 | Last updated: November 12 2007 21:57
European banks should be required to disclose their exposure to the US sub-prime market, the International Monetary Fund said on Monday.
However, it cautioned that regulators should not overlook the benefits of financial market innovation that have been “a powerful source of growth” for the continent.’
http://www.ft.com/cms/s/8170aa66-911a-11dc-9590-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F8170aa66-911a-11dc-9590-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
I call BS on this “financial innovation that has been a power source of growth” story. The crazy mortgage lending that has pushed the world economy to the brink is an instance of burning the legs of the chair on which the global economy sits to heat the room. And there is little about the crazy loans that are very innovative. I have read that interest only loans were the most popular type in the 1920s, and the 30-year-fixed was a financial innovation to fix the problem of lots of homeowners who got stucco.
And zero-down and guaranteed mortgages also represent nothing new under the sun. From Economics in One Lesson (Henry Hazlitt — 1979):
‘Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general taxpayer to subsideize the bad risks and to defray the losses. They encourage people to “buy” houses they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief, in the long run they do not increase overall national production but encourage malinvestment.’
Looking at the interactive charts on the Wall Street Journal and NY Times websites, my county has just under 14% of all mortgages being subprime.
Any data, or anecdotal evidence, as to how far to expect home prices to fall?
The NASDAQ 100 appears to be in freefall mode…
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=NDX&sid=127123&dist=TQP_chart_date&freq=1&time=9
The precipitous drop in GOOG’s share price is highly reminiscent of the dot bomb bust…
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=GOOG&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
Ditto for BIDU…
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=bidu&intflavor=basic
I guess we should look on the bright side: At least the stock market did not drop precipitously in October.
I decided to do some math, to see if the FB’ers story every made any sense, even in a housing market where prices weren’t dripping. It doesn’t.
Suppose you have no money. You want a 600K house, but can’t get financing. If you had a 20% downpayment, you may qualify for a 6% loan, but you can’t afford any more than that. So you finance at 100%.
You have bad credit, and no downpayment, so you’ll never get that fixed 6% loan. The best you can get is an Adjustable loan with a higher interest rate, but a “teaser period”
The Loan salesmen tells you he can get you into a home at a 1-year teaser rate of 4%, and after that, it’ll adjust up to 7%, and not increase by more than 2% a year after that. But! Because house prices always go up, in one year the house will be worth 720,000. In effect, you’ll have 20% equity in the home, and be able to get that 30-year fixed mortgage.
(BTW: Monthly payments on a 600K mortgage at 6% are $3597.30, not including taxes. Figure 4K/month)
So you start paying your $2864/month. Six months later, you get an appraiser to tell you your house is woth 700K. You get a HELOC. Six months later, your payment goes up to $4000 (7%) + PMI + The Heloc payments, or almost $5500. You cry to your Congresswoman, who drafts a bill to tax Reuven more to bail you out.
So far, we’ve seen this story 100 times. But look at this math.
For this to have worked out….for the FBer to be able to re-fi into a fixed mortgage a year later, (and not have PMI payments, too) prices would have to go up 20% a year! Any fool can tell you that just isn’t sustainable. Look what happens to a 600K house over 30 years if prices go up 20%/year:
600000.0
720000.00
864000.000
1036800.000
1244160.000
1492992.000
1791590.400
2149908.480
2579890.176
3095868.211
3715041.853
4458050.224
5349660.268
6419592.322
7703510.787
9244212.944
11093055.53
13311666.64
15973999.96
19168799.96
23002559.95
27603071.94
33123686.33
39748423.60
47698108.32
57237729.98
68685275.98
82422331.18
$98,906,797.41