Bits Bucket And Craigslist Finds For November 17, 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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the dollar as a shunned currency:
Published: 17 November 2007
The decline of the dollar, symbol of US global hegemony for the best part of a century, may have become so entrenched that some experts now fear it is irreversible.
After months of huge and sustained turmoil on the money markets, lack of confidence in the world’s totemic currency has become so widespread that an increasing number of international traders are transferring their wealth to stronger currencies such as the euro, which recently hit its highest level against the dollar.
“An American businessman over here who is given the choice would take anything but the dollar,” David Buik of Cantor Index said yesterday. “I would want to be paid in yen, and if not yen then the euro or sterling.”
http://news.independent.co.uk/world/americas/article3169638.ece
Given the UK has a housing bubble, a large current account and public spending black hole and a reliance on “The City of London” to generate money from exotic finance products, it won’t be long before sterling`s on the toast rack with the dollar.
I think it is very interesting that the Feds raided the Liberty Dollar operation at this particular moment in time, when it has been around for a number of years. Why now? Coinkydink? I don’t think so.
Some one said yesterday that story was a fake. Anybody have a link?
I’ll try to find the link, Ben, but I watched Paul Kangas run the story on the PBS Nightly Business Report on TV last night.
Here is the story by AP:
http://seattlepi.nwsource.com/local/6420ap_id_liberty_dollar_raids.html
http://ap.google.com/article/ALeqM5jZHepUhX3cYLnSqZV2tm_byrun3AD8SV1B5O2
Here’s the link from Associated Press on the Liberty Dollar raid:
http://ap.google.com/article/ALeqM5jZHepUhX3cYLnSqZV2tm_byrun3AD8SV1B5O2
I posted the link, but not coming through as yet. AP story came up when I googled.
The AP article is OK, but the WP article is great! Check out the comments. These are some angry folks!
http://blog.washingtonpost.com/the-trail/2007/11/16/post_203.html?hpid=topnews
liberty dollars or campaign buttons.. you decide.
http://tinyurl.com/2ujqtf
You can view the search and seizure warrants in PDF format here;
http://www.libertydollar.org/ld/legal/raid.htm
jeeze.. $20 million Liberty dollars in circulation but, being shut down, they have no money (of any stripe) or gold or bank accounts. So, Liberty paper dollars are worth.. ?
How is this differnent from the franklin mint’s “dollars” of all stripe and sort?
http://www.franklinmint.com/subcategory.aspx?sid=2&category_id=252
I like those. If they weren’t shut down, I’d buy one. Maybe a handful.
me too.. they are real collectors items now..
but $20 equals an ounce of silver? What’s up with that?
Meaning, I like the buttons/coins, not the warrants. But isn’t it interesting that Liberty Dollar was raided NOW, not years ago.
What the heck, maybe they could make laminated cow plops with impressed images of shrub, Paulson, Bernanke and Greedscam and make US Economic Meltdown Commemorative coins. With a special REIC edition featuring images of Liarrhea, LAY and Yun.
IIRC, part of the purchase went directly to Paul’s campaign coffers.
They need their profit margin too.
palmetto.. ya think the sudden surge in Ron Paul’s campaign money mighta had soemthing to do with it? $5 million collected in a few days last week.
Not just the Treasury asking “where did that money come from”, but some of his campaign opponents could have made a few phone calls. RPaul claims he has nothing to do with it.
“ya think the sudden surge in Ron Paul’s campaign money mighta had soemthing to do with it? $5 million collected in a few days last week.”
I was wondering that myself. The thing to remember here, is Liberty Dollar has been around for a while. All of a sudden, they’re raided?
On a somewhat related note, the Libertarian Party issued gold political medallions in 1980. Here is a partial eBay listing for an item recently sold there (for obvious reasons I don’t want to give the link):
“Here is an unusual item. This is a 1980 medallion coin issued by the Libertarian Party (believers in the gold standard) in .999 fine gold weighing 1/10 ounce. Uncirculated. Great keepsake, store of value, and political statement all in one, with starting bid below the gold value.
“Obverse: Faces of Clark and Koch, Pres. and V-P candidates. Words: “A NEW BEGINNING, CLARK KOCH Presidential Ticket Libertarian Party 1980.”
“Reverse: Picture of a broken chain signifying the break with the past and central banking. Words: “Libertarian Monetary Authority, LIBERTY, Fine gold 1/10 oz., ONE GOLD DIME.”
“Some interesting history: David Koch (pronounced “coke”), the Vice Presidential candidate, was one of four sons of Fred Koch, who founded the John Birch Society, and became partial owner of Koch Industries, a privately-owned Kansas oil and gas company. Koch was one of the first billionaires in the country, and contributed an estimated $1.6 million of his own money to the 1980 presidential bid, part of which was used to mint these coins. His brother Charles Koch, with whom he wrestled for control of the family business, founded the Cato Institute. [Source: endgame.org]”
-end eBay quoting-
BTW, the coin sold for about 20% above gold value.
I wonder if this has to do with the IRS’s loss in court to the fellow who was paying his employees in gold coin of the realm. They might be lashing out and/or trying to muddy the water relative to precious metal coinage.
palmetto.. ya think the sudden surge in Ron Paul’s campaign money mighta had soemthing to do with it? $5 million collected in a few days last week.
Ron Paul and his campaign had nothing to do with the Liberty Dollar that was using his name and likeness to pitch their coins. Paul’s spokeman explicitly disavowed any association with them. As far as the “surge of support,” I was one of those donors, along with 36,000 fellow Americans who are fed up with the status quo. I’m not surprised to see the Republicrats stooping to smears and whisper campaigns to counter Ron Paul’s momentum, but I’m sorry to see some in here engaged in the same behavior.
Gee, maybe now counterfeiting of the Euro and Yen will be in vogue!
If the Treasury Nazi’s can do this…BATF will be coming for your guns.
The totalitarian noose tightens.
“If the Treasury Nazi’s can do this…BATF will be coming for your guns.”
Let the bodies hit the floor.
Let the bodies hit the floor.
Let the bodies hit the floor…
Feds Raid ‘Liberty Dollar’ HQ in Ind.
By RYAN LENZ – 1 day ago
EVANSVILLE, Ind. (AP) — Federal agents raided the headquarters of a group that produces illegal currency and puts it in circulation, seizing gold, silver and two tons of copper coins featuring Republican presidential candidate Ron Paul.
Agents also took records, computers and froze the bank accounts at the “Liberty Dollar” headquarters during the Thursday raid, Bernard von NotHaus, founder of the National Organization for the Repeal of the Federal Reserve Act & Internal Revenue Code, said in an interview.
The organization, which is critical of the Federal Reserve, has repeatedly clashed with the federal government, which contends that the gold, silver and copper coins it produces are illegal. NORFED claims its Liberty Dollars are inflation free and can restore stability to financial markets by allowing commerce based on a currency that does not fluctuate in value like the U.S. dollar.
“They’re running scared right now and they had to do something,” von NotHaus told The Associated Press Friday. “I’m volunteering to meet the agents and get arrested so we can thrash this out in court.”
They’re given ‘em away in Vegas!
New homes for less than 200K.
Vegas is toast.
http://www.lvrj.com/news/11516421.html
Not yet ready to give away, however they are heading that way!
I’ve seen brand new homes from $179k, in the Central Valley…
Smaller to medium builders, and a plastic banner usually announces the offering as:
“Housing Bubble Estates, from just $179k”
No builders bother pimping the geegaws and things taken for granite, anymore.
It’s all about being the cheapest seller, and even that’s not working.
A former co-worker retired and moved to Vegas in October ‘05. She bought a brand new house and was so elated that it was “already worth $40,000 more than I paid for it.” I told her she had to be careful because this thing couldn’t last forever. She looked at me like I was crazy. I wonder if she brags that it is now worth “$50,000 less than what I paid for it” and falling fast. Bwahahaha. Pride cometh before the real estate a$$ kicking.
Maybe she is elated to be part of the “in” crowd.
LOL. Bankruptcy is the new black….
STill way way overpriced - ‘94 that house was 84k now rehabbed but still not worth IMO 150k.
Houses across fwy in DHS desert hot springs are a dime a dozen..houses you wouldn’t live in in Windy zone for 279k still. STill to high all the way around this valley
http://palmsprings.craigslist.org/rfs/481630233.html
Preach to me neighbor. If I wanted a wind tunnel, I’d be in Anza. If I wanted a long commute, I’d be out at the beach.
housing slump hits triangle:
RALEIGH, N.C–It appears the nationwide housing slowdown, as well as the mortgage crisis, has finally caught up with the Triangle.
New numbers from the California company RealtyTrac, which publishes a national database of foreclosures, shows one out of every 319 homes is in foreclosure. That’s an increase of 105% from the same time last year.
It’s a more modest leap of 17 percent from the second quarter of this year.
http://www.nbc17.com/midatlantic/ncn/news.apx.-content-articles-NCN-2007-11-16-0018.html
What about Western NC, Watcher? Are they in trouble or still doing well?
Here in Western N.C there are many builders turning in keys for spec homes.
Houses for sale all over. Much too many to recovery any time soon.
Some homes still sell, but not many.
Lots of abandoned developements.
The was just a planned condo developement that has been put on hold.
It will be slow here for years, but the bright spot is that people aren’t fleeing the area. It’s a place where people come to if they can sell in Florida.
Prices falling and sellers getting desperate.
2 hours west of Boone…….
Wow! I had no idea because no one ever talks about it. My inlaws bought 9 acres with two cabins up there Christmas 2006. Thanks for the info.
I work with somebody that owns a house in Highlands. For more than a year I was telling him the Highlands area was ripe for a beating. “No way”, he would say. All those rich Atlantans would keep the prices soaring. I told him the problem was that the mountains were overpriced and dependent on money from Atlanta and Florida. Ouch.
We met up a couple of weeks ago. I asked how Highlands is doing. He said anything over $2 million is still moving well. Everything else is just dead. It looks to me like they have eaten their seed corn. Mark Highlands off your list. It is toast.
Pardon me if this is a comment that has been made before, but I just saw another article on the housing market in which a seller or realator blamed the “negative coverage” in the media for keeping potential buyers on the sidelines. I am one of those fence-sitting buyers, and being something of a financial contrarian I would be happy to buy a house when the market isn’t hot. The problem is THE PRICE! In the greater DC area/maryland suburbs, I rountinely see houses priced 200-300K above what people payed for them in 2004 and 2005. Sorry, but I don’t want to pay 700-800K for your 1942 cottage or your 1952 rambler, even if you did slap on slap on some granite countertops (which I have no interest in). I find it hard to believe people would rather believe “the media” is keeping buyers away instead of a little thing like an extra 250K. My husband and I both have good, six-figure jobs and plenty of savings for a house. I also have a toddler and am 7 months pregnant. My nesting instinct is about as high as it gets, but I can’t bring myself to buy instead of rent with prices the way they are.
kallenford, The price is the 800 lb gorilla in the housing room. I doubt you will find much disagreement with you here on HBB as that is one of the central themes and has been for as many years as I have been on this blog. But the MSM, REIC and the rest of the koolaid gang avoid the topic like the plague. I believe it has to do with self interest. If you are a bull you want the prices to stay high because it means you are wealthier on paper at least, but if you are a bear you see that the wishing prices on listings continue to be disconnected from the fundamentals like income and what were once accepted heuristics for purchase like 3x gross income, rent x 100 or 150.
Hang in there, this train wreck has only just begun.
I still see shills on AOL real estate message boards saying such things as “inflation is taking off so you better buy a house now before prices go up out of reach!”
I see that too here and it makes me want to toss chunks. That does highlight a point I did not make and that is that you have to add those who stand to profit more from higher prices to the bull camp. That omission was a big one IMHO because it is that sector, specifically REALTORS, that push the high priced crap onto J6P. As I see it the motivation for that camp is eroding. It may be better to sell anything at lower prices rather than nothing at the higher prices. But these clowns will stay on message as long as they can.
“Sorry, but I don’t want to pay 700-800K for your 1942 cottage or your 1952 rambler, even if you did slap on slap on some granite countertops (which I have no interest in).”
The Linoleum Revolution has begun. “Let them eat granite” while we storm the Bastille.
kallenf - Hang in there, your instincts are correct; don’t let your hormones get the better of ya
It’s hard when you want to buy, but, man, imagine not being able to sleep because you’re worried about having paid too much while the housing market and the rest of the economy tanks. I loooove to sleep at night. zzzzzzzzz
You’re in a good spot. My advice is to look at the inventory numbers and the “just listed” every week or so — I use the coldwell banker website (cbmove.com) - covers the DC area pretty well.
Take a zipcode you like, and a housing type you like - and you’ll probably see prices continue to creep down (the lack of “new” single family development in close-in neighborhoods has slowed the drops in SFRs compared to, say, Loudon & Prince William Cos.) - I definitely see asking prices on neighborhoods I track in Alexandria (Old Town, Del Ray, Rosemont, Beverly Hills) down off 2005-06 highs. The declines may be slower in nice neighborhoods — but, I believe they will continue for some time.
Honestly - tracking the market down when you are not an owner is almost as fun as tracking it up was from 2000 to 2005 for owners. I bought a place I like and can afford in 2002 — but, I still enjoy knowing how the market is moving. Patience and knowledge will serve you well. The market will become reasonable — and perhaps even excellent — for buyers in the future. Don’t be frustrated that it still may take some time.
Kallenford,
Good for you for standing your ground. Hard as it is, be patient for another year. You’ll be well rewarded. See my comment in Local Market Observations. Saw more for sales signs than I ever, ever, have seen in Georgetown. Good luck with the new baby.
Thanks everyone for your thoughtful comments. I will blame my rant, and the typos, on my pregnancy ;).
This brings up the question of why people cannot breed in a perfectly good rental? Why would this not satisfy the nesting instinct? Are McMansions and granite countertops hardwired in to our biological needs? Obviously not. The ownership society is a cultural standard, one that is coming undone at the seams, but will only die kicking and screaming. Congratulations for letting reason guide you.
–
Rosenberg: Is the recession still a forecast, or has it already arrived?
America is full of recession deniers, especially, economists. As I have been saying for two months: THE RECESSION IS HERE ALREADY. Below is confirmation by the best Wall Street economist by far.
Jas
-x-x-x-x-x-x-x-x-
David Rosenberg, Merrill Lynch; 11/12/07:
Is the recession still a forecast, or has it already arrived?
The consumer seems destined for a recession — the confidence surveys are suggesting as much Over the four months to November, the University of Michigan consumer sentiment index has collapsed by 15.4 points to 75.0. In the 30-year history of the data series, we’ve only seen two other times (we are not including the Katrina effect here) when consumer confidence has fallen so far so fast at this critical shopping period for retailers, and they were October 2001 and October 1990 — both times the economy was officially in recession. And, as the chart below illustrates, the year-over-year trend in U of M “buying intentions” has swung deep into negative terrain, at -14.1% — closing in on the pace we saw just ahead of the last two economic downturns.
…This then begs the question: could it be that the recession has already started?
Twenty reasons below suggest why indeed this could well be the case. And, aswas the case in 1990 and 2001, we just don’t know it yet — it’s called purgatory:
Real average weekly earnings peaked in January
Motor vehicle sales peaked in January
U of M consumer expectations peaked in January
Truck tonnage peaked in March
The Conference Board’s “Jobs are Plentiful” index peaked in March
Construction spending (total) peaked in May
Household employment peaked in May
Employment diffusion index peaked in May
Transportation services index peaked in May
Bond yields peaked in June
Long Beach container shipments peaked in June
ISM (mfg and non-mfg) peaked in June
S&P 500 EPS peaked in June
Dow Transports peaked in July
MSCI cyclical stock index peaked in July
Manufacturing orders peaked in July
Real manufacturing sales peaked in July
CRB Industrials peaked in July
LME copper inventories bottomed in July
Railway carloadings peaked in September
“The slumping housing market led to thousands of job losses throughout California last month, prompting fears that the state and local economies are lurching into a recession.”
http://tinyurl.com/ys55vj
“Kelly Cunningham, economist at the San Diego Institute for Policy Research, said that other than a brief blip in 2000, this is the first time in 10 years that the county’s unemployment rate has been higher than the national rate.”
“Cunningham said the dip in the labor force means that some self-employed workers – including real estate agents, mortgage brokers and construction contractors – are no longer working and may soon show up on the unemployment rolls.”
–
Just in case someone takes solace from the graph, the YoY employment goes negative one year AFTER the beginning of the recession. Employment is the laggiest of all the lagging indicators. This allows charlatans among economists and Wall Street bubble-meisters to claim that there is no recession because employment is still growing. The minimum YoY growth in employment at the onset of past recessions was +1.3%!
Jas
Jas - I like that - “laggiest.”
Iceberg dead ahead!
Economists employ ‘R’ word on jobs data
By Dean Calbreath
STAFF WRITER
November 17, 2007
The slumping housing market led to thousands of job losses throughout California last month, prompting fears that the state and local economies are lurching into a recession.
California lost 15,800 jobs and San Diego County lost 1,700 in October, according to seasonally adjusted data released yesterday by the state Economic Development Department.
Payrolls at nine of the 11 major industries in the state fell last month, led by construction, which lost 4,200 jobs. The only industries to gain workers were professional and business services and educational and health services.
In San Diego County, the job losses included a 1,000-worker decline in construction employment, which was counterbalanced by growth in professional and business services, which grew largely thanks to the hiring of 600 temporary workers.
“I think we’re headed into a recession,” said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange.
…
“The economy is getting a little weaker than I previously expected,” Cunningham said. “Whether or not we’re going into a recession, it will definitely feel like a recession. We’re probably already experiencing that. There’s sometimes a lag between what we’re feeling and what the economic statistics show.”
If it walks like a recession, quacks like a recession and feels like a recession, IT’S A RECESSION FOR CHRISAKES!
“The economy is getting a little weaker than I previously expected,” Cunningham said. “Whether or not we’re going into a recession, it will definitely feel like a recession. We’re probably already experiencing that. There’s sometimes a lag between what we’re feeling and what the economic statistics show.”
These guys couldn’t find their a$$ with a road map and a compass. It is no wonder that Americans don’t trust anybody any more. We are fed a constant stream of lies and bullsh#t.
The Economist magazine shoots from the hip, which I greatly admire! No Wall Street or REIC booster journalists trying to pull the wool over sheeples’ eyes in order to make them easier to fleece.
Recession in America
America’s vulnerable economy
Nov 15th 2007
From The Economist print edition
Recession in America looks increasingly likely. Can booming emerging markets save the world economy?
IN 1929, days after the stockmarket crash, the Harvard Economic Society reassured its subscribers: “A severe depression is outside the range of probability”. In a survey in March 2001, 95% of American economists said there would not be a recession, even though one had already started. Today, most economists do not forecast a recession in America, but the profession’s pitiful forecasting record offers little comfort. Our latest assessment (see article) suggests that the United States may well be heading for recession.
http://economist.com/opinion/displaystory.cfm?story_id=10134118
Ok PB. A 4am post and an 8am post with a promise of getting some sleep in between. Do you actually sleep or is that coffee you like so much just run straight into your vein through an IV?
At the beginning of the year they were saying a 5% increase in home values was “baked in the cake”.
Looks like the only thing baked in 2007’s cake now is a recession a.k.a. depression.
seems like it’s time to sit back and enjoy downsizing or renting, enjoy a few years worth of living expenses in government securities and precious metals, maybe put on a sweater and turn down the thermostat a tad…
Actually many of us saved in the “good times” of rapidly appreciating house prices by renting instead of buying, and we’re getting ready to spend in the bad times.
I talk about that all the time, Bill. The good times were the past 3 or 4 years. That’s when people should have been saving and preparing. Now the bad times are upon us and all of the rabbits will want to feast off the turtles. This is one turtle that won’t have any problem telling all of those rabbits to go (blank) themselves. The only lesson that teaches is a lesson that is filled with pain.
All that…and you don’t list the Wizard’s #1 tool…what in the Hail happened to Sir Greenspent BOX INDEX!
It’s likely that Q4 GDP growth, after final adjustments in the Spring, will show negative GDP growth, at least on a per capita basis. Nominal GDP growth should really be adjusted for both inflation and population growth. The latter is growing .8-.9% annually at last check. Real overall GDP growth is likely to come in around 1% at first guess and be adjusted downward later in the winter - there is a tendency for weak quarters to get adjusted weaker and strong ones to get adjusted stronger. Real GDP growth in Q1 ‘08 is likely to be no better than 0 to 1%. So I would say, yes, a mild recession is just about in the can.
After that whether we go into a deeper recession or stagflation (with some positive real GDP quarters in ‘08) is pretty hard to tell. The longer out the forecast, the more important politics (fiscal and tax policies and the like) becomes, but I would lean toward a deeper recession than the blips of 91-92 and 00-01, with at least one severe down quarter.
Once there is a print of, say, -1% or more, the gnashing of teeth will be overwhelming, and the country will embrace communism, military rule, or Balinese Hinduism, if presented with enough doom-and-gloom conviction.
Check out who funds the presidential candidates, this go round…
It’s an extended financial syndicate:
La Casha Advanca
(except for Ron Paul)
http://rabbit-hole-journey.blogspot.com/2007/11/campaign-contributors-of-media-anointed.html
The Canadians will save Scottsdale!
“Realtors here say that Canadian buyers increasingly are showing interest in houses here as winter residences and investments.”
http://www.azcentral.com/arizonarepublic/business/articles/1117biz-sr-realestate1117.html
Hoardes of Loonies, descending upon the Southwest…
$nowbirds
Yes, Canadians are shunning FLA in a big way, because of the taxes, supposedly. So they’re looking for another place in the sun. AZ is it. Meanwhile, the scuttlebutt is, FLA gov Charlie Crist might be drafted by the Guiliani campaign for veep. LMAO! I like Charlie as a person, he’s a “nice guy”, but as veep? Failing upward!
If Guiliani is Republican candidate for Pres. He had better pick a women VP, especially if Hillary is Dem. candidate. Sorry drifting into politics. No doing so would stike me as dumb.
I saw a segment on the news about hoardes of Europeans taking advantage of the weak dollar by going on shopping sprees in the U.S. in major shopping areas.
In the mid 80’s when the Dollar was king, there was a brief, but thriving business, importing European spec Mercedes, and modifying the car to meet U.S. specs, because the D-Mark was worth so little @ the time, you could clean up on exchange rates.
They were called “Grey Market Vehicles”.
What items will Europeans buy from us, with their strong currency?
Or is it more of a chance to finally see our country, on the cheap?
Countries with weak currencies are a great place to shop and an awful place to invest. The rest of the world bought into Wall Street’s mortgage securitization meat grinder with all they had. I doubt they are smart enough to realize that buying American real estate might not be any wiser than buying that bogus MBS toilet paper.
I’ve got one in my garage.
There have been so many European tourists here in Washington, the past year, you wonder if you’re still in the states. Even now approaching winter. (Though the fall weather much better than summer.)
While ordinarily a falling dollar might attract more international tourists, post-9/11 security measures have actually resulted in a larger percentage of international travel to countries other than the U.S. even as the dollar falls. The very people we should want to come here, those coming temporarily to see America, we’re driving away. Some are still coming, but others that might are opting to travel some place other than America.
http://tinyurl.com/23ka49
“Overseas travel to the United States has plummeted 17 percent in the past five years, travel industry officials say. And while a recent surge in travelers from Mexico and Canada has helped the industry rebound, it masks a precipitous and painful drop in travel originating in other countries.”
“The U.S. share of international travel has dropped from 9 percent to 6 percent, the group says.”
“The travel industry blames the U.S. government for under-staffing border posts, which they say is contributing to widespread perceptions overseas that the United States is hostile to foreigners.”
http://tinyurl.com/2snmht
“Thirty-nine percent of travelers surveyed said the U.S. “is the worst when it comes to being traveler-friendly in terms of obtaining necessary documents or visas, and having immigration officials who are respectful toward foreign visitors,” according to the survey. The region with the second-greatest percentage: The Middle East/Sub Asia, with 16% of respondents.”
Other benefits to buying abroad were tax-related: importing “used” cars resulted in lower duties than new cars, but I believe that loophole was closed
There are still some nice packages available from MB and BMW but they’re no bargains.. And you still can’t import modern luxury diesels for love or money
I’m kind of surprised Ben hasn’t done more of an update on AZ.
AZ financial projections predicited 15,000-20,000 construction jobs added each year. In the last year we lost 19,000 construction jobs.
PHX predicted population growth would remain over 100,000 a year.
In October, we added 1/3rd the number of retail jobs as expected. State wide we added only 20,000 jobs over the last 12 months. My guess is that less than half…heck, maybe none at all…were in PHX.
I really hope we don’t have 100,000 people moving to this city for something under 20,000 new jobs.
Worse, the rate of job growth indicates most of the real growth was in the first half of the year with YoY job gorwth already possibly negative.
New 130 acre shopping mall opened in Casa Grande. This adds to the major new shopping “districts” opened in Tempe, Chandler, and Glendale. We doubled the major retail space in this city while increasing population 20%, based on the assumption population would grow another 20% over the next decade or so….. Just in time for the consumer to run out of steam.
Existing homes are selling at about half the rate of normal for this time of year. Something like 19 months of supply, a bit inflated since this is the “slow time of year”.
Tax receipts continue to come in well below expectations.
I haven’t seen any good economic news for PHX.
In the past two days, I have gotten emails from every single online merchant I have purchased anything from in the past two years. They are offering discounts, free shipping, etc. and trying to drum up urgency. They must really be worried about Christmas.
We should do a contest to see who can get the most print catalogs between now and Christmas. Our paper recycling bag is filling up about every 3 or 4 days. I order online quite a bit and every one of them is bombarding us with catalogs. I think I have thrown away 8 Hickory Farm catalogs already.
I can also verify double the amount of catalogs this time of year compared to last year. Sorry kids, money’s tight in my house.
I’ve noticed everywhere I shop, from carryout for lunch during work week, to Eastern Market - a Capitol Hill green grocer / butcher/ baker place like Lancaster market in Philly, service seems much better, as if they’re very glad for your business. Also was downtown in DC on Thursday night. Lots of empty restaurants. Thursday was the 13th -close enough to the 15th (payday.) If I am out tonight will be intersting to see what crowds are or are n’t.
Hey, if Kent, the guy who lives near Waco is reading today, could you email me off line. gymnastgal32 at yahoo dot com. Thanks.
Me too chick. I smell desperation. 2008 is going to be the real start to great pain for all those who got fat in our obessive consumer society.
I will be ready to short indices and individual stocks at (hopefully) the right time.
Added to that, more ARM resets all the way through the end of 2008. Still, I’m sitting on the fence for a few more years. Remember, 4.28% Series I bonds for 5 years is a 9.28% relative gain compared to a -5% (negative rate) house price appreciation during the same period. Umm…But today I’m buying platinum bullion!
Added to that are the 401k redemptions that are coming. I suspect 2008 will see a wave of people cashing in 401k accounts and discontinuing any kind of new payments into their 401k accounts. This too will have an awful impact on a market that counts on a steady stream of easy money to prop up prices. Once the credit cards are cut off the only thing left is that piddly little 401k account. We are still far far far away from the bottom of this mess.
That’s what always scares me about the market — 401k redemptions and slowing of contributions. I don’t know how to track those flows — but, if I suddenly see a huge uptick in those old “choose to save” ads, I’ll know SOMEBODY is worried about it, and it’ll be time to head for the hills, marketwise. I’m wondering if the 20% “penalty” might be a better outcome than taking similar losses. If I had a huge arm reset on a house I lived in and didn’t want to leave, and I could pay it off with my 401K …. that might be a better choice in the long run — then rebuild savings with lack of housing expense.
Kind of off-the-wall thinking, but I wonder if anyone in Washington will propose a tax holiday on 401K withdrawals that are used solely to keep people slaves to their newly re-set mortgages — or some variation of that.
” I’m wondering if the 20% “penalty” might be a better outcome than taking similar losses.”
Actually it’s a 10% penalty for the Fed and states vary. This is on top of the tax you must pay for all withdrawals. But remember the 401(k) is a vehicle, not an investment. You can put your money into cash, Treasuries (even though you lose the tax benefits), or CD’s with good banks. So taking the money out and paying taxes and penalties on it should be the last thing you consider. If you are really worried make it more conservative.
Hopefully you don’t have a really horrible plan with bad investments and no safe fixed income choices or *shudder* annuities that will take huge fees if you liquated before 7 or more years. Roll old plans over to Vanguard which has a lot of great options.
Ok, maybe I should have gotten some sleep last night. *Liquidate*
Ugh I had to do that after the 2nd stint unemployed.. The first stint in 2001 got my attention and I economized as much as I could (stopped buying toys, found a lower-rent apartment, started cooking for myself) but by the time the 2nd came about it was longer term and after 3-4mo I had no other choice.. After that I was pretty ready for my 3rd stint (paid-for car with liability-only insurance, even lower rent, more savings).. Eventually got out of NYC to escape the cycle (IT jobs going out-of-state/abroad or becoming contractor/glorified temp work) and able to reduce my expenses even further… Still not where I want to be but I’m hoping I’ll be ready.. Working for a privately-held large company that’s over 100 years old, weathering multiple recessions/depressions.. Fingers X’d…
I expect we’ll start to see some corporate confessions after the first of the year. I’d like to see a rally in Dec. to get the index puts again.
you have an excellent nose for the pulse of the market, I think we are about to enter rally mode, and I would not be suprised to see near all time highs in the indcies prior to Jan 08. which is why I have been selectively taking long positions; however, I believe a lot of pent up selling demand is waiting till after the first of the year to sell (BETA up in December, and blow-out in January). My currency postions have not played out as I would have hoped, but they should be ripe for redemption in January after the big tax sell-off, and continued Fed string pushing. Make no mistake the drumbeat for rate cuts continue, and the bond market will not take no for an answer.
I have been asking myself why the Hedge funds are so quiet, I thought more negative news would be hitting the street, but I guess the smartest guys in the room are busy basking in the sun with the cash advance of the bonus money.
I am also expecting broad-based global Bank consortium to really get moving…think G20.
If the persistent slowdown of financial instruments continues, its red light morn… all hands on deck, put the burger down and turn off the tube…we gotta get moving.
For those interested in the hinterlands and its odd ability to continue avoiding the housing crunch. A little behind the curve, but upstate NY always is that way:
Home sales rise in Oct., but median price falls
http://tinyurl.com/3yvhra
During October, there were 1,133 closings, 28 more than the same month last year, according to the Greater Rochester Association of Realtors.
But there is a sign that better times may be ahead. The number of purchase offers accepted in October increased 12.1 percent to 799 — 86 more than the same month last year.
“Rochester, compared to the rest of the country, is pretty stable,” he said.
And to add to the disconnect from the rest of the country:
Local car sales increased 8% in October
http://tinyurl.com/35rswq
Reality will strike here eventually, but bucking the trend today.
Upstate New York went through a Depression in the early ’90s. I saw it firsthand. They shouldn’t get too far ahead of themselves. But something tells me they will.
RE: Upstate New York went through a Depression in the early ’90s. I saw it firsthand.
I stopped at the Harley-Davidson dealership in a town called Gloversville on my way back from Cleveland in like 2000.
Man-I thought the town was a movie set for a film on the Depression.
Shuttered factories, fading downtown, old housing stock falling into disrepair.
Talk about spooky.
Those are old glove factories. Gloversville, interestingly enough, is not named for Mr. Glover but for the fact that it considered itself the glove manufacturing center of the U.S.
mwhahahah… Gloversville and it’s sick sister Amsterdam. G-ville is the heart of the leatherstocking area long known for it’s tannerys. I think there are a few left. Amsterdam was the carpet manufacturing capital of the world until it all shipped south leaving alot of empty factories, much like the steel industry in eastern PA.
RE: Gloversville and it’s sick sister Amsterdam.
Exeter-I wasn’t dissing G-Ville. I was in town because the HD dealership was one of the few who at the time was selling their bikes @ MSRP.
Maine is pretty hardscrabble in places. I admit I was somewhat shocked at what I saw. I find the demise of any American former mfg. town very sad.
However, I found Leatherstocking country’s lie of the land rather aesthetically pleasing. With faltering water supplies who knows what will happen in this part of the country.
Upstate NY is hella beautiful and hella cold in the winter. I’ve always thought it would be cool to be an artist or photographer or writer and live there. If you want civilization, hop on the train.
“Rochester, compared to the rest of the country, is pretty stable,” he said.
That’s kind of like saying the Baltimore Orioles, relative to the rest of the American League, are pretty stable.
Stable meaning always in poor shape! Over the past decade or so, this area has lost almost 50,000 jobs at Kodak alone. Xerox is down 10k from its big days and the largest employers are now the University of Rochester and Wegmans markets. The times they are a changin’, but if it’s for the better, it’s sure taking its sweet time.
Those are bad links Bizzaro.. repost them.
I just clicked on them exeter and they worked for me, but here are the compete addresses:
http://www.democratandchronicle.com/apps/pbcs.dll/article?AID=/20071117/BUSINESS/711170321/1001
http://www.democratandchronicle.com/apps/pbcs.dll/article?AID=200771116031
I saw a bump in “sold signs” displayed again after the last Fed rate reduction. I’m around Syracuse. A rental we were going to take after our closing went under contract hours itself after we closed. The owner was relieved although he did own other rental properties and wasn’t new to the landlord situation. The price was VERY low for a 4 BR in decent shape (Probably $20 -$40k below comps which here is 10-20%). I know he was talked down further because he called us several times making sure he could still back out of the deal and go with us renters if the deal fell through.
I did notice in Manlius, Fayetteville, East Syracuse, Cazenovia, and DeWitt, it appears its the smaller homes that are moving: the ranches, small capes, smaller, older colonials, etc. So at least the buyers are being cautious in that they aren’t buying the biggest, most expensive house they can find.
One pricier 1 year old home being sold by a women who wasn’t happy with the unfriendly locals is finally sporting a sold sign. No word yet how much of a loss they took to make it happen. It’s been for sale for close to a year. Her husband was already working back at his previous position in the midwest. Now she can finally reunite her family.
One larger colonial spec home with land out in New Woodstock sat for over a year. The paper now reports it as bank owned.
The 4000 foot Fannie Mae foreclosure a few miles out from me still sits dark. Wonder how those pipes are doing. They’re asking $325k for what appears to be a 1970s built home w/ problems I noticed just from peering in the windows. Yeah, good luck with that one FM.
What does Rochester have other than RIT and garbage plates?
Xerox?
Kodak?!?!
(Granted, Wegmans is my favorite supermarket, but still..)
Buffalo/Niagara Falls is Detroit without the glamour, and Rochester isn’t doing much better…
GuvBonds don’t look so good, after Adrian Ash noticed something…
“US government bond yields have now sunk so far, so quickly, that on Thursday this week – in a little-noticed event – they slipped below the latest reading for US inflation.”
“Yes, even on the Dept. of Labor’s much-despised Consumer Price measure, the cost of living in America in October was officially higher than two-year Treasury yields today.”
“Two-year yields have dropped by more than 0.5% over the last month. They’re dropped by nearly 1.5% since November last year. CPI inflation, on the other hand, has risen from 2.0% in January to above 3.5% last month.”
“In short, two-year Treasury bonds are now deemed so desirable – because the subprime mortgage disaster demands such aggressive Fed rate cuts – that investors are willing to let inflation destroy their wealth. (Or rather, the wealth of their clients…)”
http://www.financialsense.com/fsu/editorials/ash/2007/1116.html
Some investers prefer Zimbabwe’s higher returns to conundrumishly-low returns in U.S. assets. Zimbabwean asset prices have nowhere to go from here but up (just like Japan circa 1995?).
Investors Go to Treacherous Places Seeking Returns
By Sarah Childress
Word Count: 992 | Companies Featured in This Article: Industrial & Commercial Bank of China, Impala Platinum Holdings, Anglo Platinum
Johannesburg, South Africa
Zimbabwe is an economic nightmare. The annual inflation rate is 8,000% and rising. People don’t have food to eat.
Yet investors have started pouring millions of dollars into the country. Foreign direct investment has rebounded, reaching $103 million in 2005, up from just $4 million in 2003, according to the most recent figures available from the United Nations Conference on Trade and Development.
What explains the flood of money? Some investors are betting there’s nowhere to go but up.
http://online.wsj.com/article/SB119525981996196458.html?mod=todays_us_nonsub_money_and_investing
Looks to me like some investors are betting that Mugabe, finally, is toast. Even he can’t continue murdering white farmers forever and get away with it scot free. Might mean there is a sweetheart deal for him to live somewhere else, with much of what he’s looted from the country. Used to irritate me to no end that we’d give the Zims big wads of foreign aid and he would turn around and slam us in the newspapers and buy MIGs from the Chinese. Whatever it is, something’s up.
“In short, two-year Treasury bonds are now deemed so desirable – because the subprime mortgage disaster demands such aggressive Fed rate cuts – that investors are willing to let inflation destroy their wealth. (Or rather, the wealth of their clients…)”
It’s a run on the corporate debt market. It’s about capital preservation. Think about this: Investors are saying they’d rather knowingly lose 1 pct to inflation than some unknown amount from investing in corporate debt.
I’ll be lost in space tonight…
8 p.m. is when the Leonid Meteor Shower is supposed to peak, on the left coast.
Your time may vary.
http://www.space.com/spacewatch/071116-ns-leonid-preview.html
“I was a victim of coicumstance!”
– Curly Joe Stooge –
How Could So Many Top Execs
Lose Their Jobs Over Bad Loans?
By George Anders
From The Wall Street Journal Online
In a world full of bosses with short memories, too many bankers stand out as amnesiacs.
First came a series of ill-fated loans to the developing world in the 1980s, followed by massive defaults on real-estate lending in the early 1990s and worrisome exposure to the collapse of hedge fund Long-Term Capital Management in 1998. Now banks must contend with the subprime-lending mess. In each case, they have vowed to be more careful next time. So far, they haven’t been.
http://www.careerjournal.com/myc/survive/20071116-anders.html?mod=RSS_Career_Journal&cjrss=frontpage&cjpartner=wsj_hpp
“In a world full of bosses with short memories, too many bankers stand out as amnesiacs.”
Don’t f—ing get me started, Stucco. Ben would kill that post for sure if I go off on that rant.
Banking execs = a bunch of fooking stooges who don’t have to perform because the worst that can happen to them is to get a golden shove w/$100m+ in pension money.
Wall Street has an overload of hapless victims these days.
Bond Funds Are Victims of Timing
Thinking Worst Was Over,
Top Performers Now Lag Behind
By TOM LAURICELLA
November 17, 2007
After successfully dodging the bond-market storm earlier this year, several big mutual funds thought the worst was over. It was a bad call, and now they’re feeling the pain.
The result: Some funds with great long-term track records — including funds from Capital Research & Management’s American Funds, and Legg Mason Inc.’s Western Asset Management group — have taken significant hits in just the past month or so. Some that have long been top performers are now posting below-average returns and lagging behind the broad bond market by anywhere from one to nearly five percentage points, a huge gap for bond funds.
Some of these funds used a “bull-market strategy” of buying on a dip, says Jeffrey Gundlach, manager of one bond fund that has largely avoided the recent damage. That strategy “doesn’t work in a bear market,” he says.
…
The funds doing the buying took small positions in battered bonds backed by subprime mortgages, or in debt issued by beaten-down mortgage lenders such as Countrywide Financial Corp. In general, mutual funds have steered clear of the risky mortgage-backed-securities market, which has inflicted tens of billions of dollars of losses on Wall Street giants including Merrill Lynch & Co., Bear Stearns Cos. and Citigroup Inc.
Indeed, bond-fund managers in general take credit for being better than these giant Wall Street firms at spotting the early-warning signals a year or two ago of housing-market trouble. They say it was clear to them, for instance, that lenders were making it too easy for borrowers to get mortgages by offering, no-down-payment loans to buyers with poor credit.
There were warning signs in other parts of the bond market, too, suggesting that the prices on riskier securities were vulnerable to big declines, says Tad Rivelle, a portfolio manager on the Metropolitan West Total Return Bond Fund. “We recognized that the corporate-bond market, the high-yield market, as well as the subprime market” were all making borrowing too easy.
Perhaps the most vocal warning was issued by Mr. Gross of Pimco, a unit of Allianz SE. In 2006, Mr. Gross began worrying about the impact that a collapse in the housing market would have in 2006 and repositioned his portfolio toward lower-risk investments. It turned out that he was early in his prediction, and as a result his fund’s performance fell far behind through the first half of this year. Now, however, his Total Return Fund is beating 97% of rival funds so far this year with a 7.1% gain, 1.3 percentage points ahead of the benchmark Lehman Brothers Aggregate Index.
“When the tide goes out, you get to see who’s swimming naked,” Mr. Gross says.
UNLESS OPAQUE ACCOUNTING PRACTICES ARE USED TO HIDE THE HORDES OF NAKED SWIMMERS, THAT IS!
http://online.wsj.com/article/SB119526115180896482.html?mod=home_we_banner_left
Birthday $uitors, notwithstanding.
On bond funds and the problems with pricing assets, as an investor, I have absolutely no confidence in the prices of bond funds right now.
News stories are constantly reporting the difficulties in marking to market vs marking to model.
Am I off base?
On bond funds and the problems with pricing assets, as an investor, I have absolutely no confidence in the prices of bond funds right now.
No one should have confidence in those prices. The only bonds whose prices have any meaning are T-bonds, because they can always get the Federal Reserve to buy them if necessary. Yes, that is very inflationary, but the inflation affects all bonds, not just the T-bonds.
And before anyone suggests TIPS, those are rigged too. The government is NEVER going to come clean about actual inflation, as doing so would increase the deficit immensely, through increased borrowing costs and increased outlays tied to the cost of living index.
Pump-and-dump incentive pay package awarded to another Wall Street exec…
Thain to Get $43.1 Million For Taking Helm at Merrill
By Randall Smith
Word Count: 443 | Companies Featured in This Article: Merrill Lynch, NYSE Euronext
Merrill Lynch & Co. awarded John Thain $43.1 million in cash and stock payable over five years for signing up as its chief executive Wednesday, plus options tied to Merrill’s stock price rising by as much as $40 a share.
http://online.wsj.com/article/SB119525327951096227.html?mod=hpp_us_whats_news
Ode to Carly Simon…
You walked onto the Titanic like you were walking onto a yacht
Your port(folio)hole strategically dipped below one’s eye
You scoffed it was no big loss
You had one eye on the mirror as you watched icebergs slam hard
And all this time you dreamed that you’d go beyond being partner
Adios to just being partner, and…
You’re so Thain, you probably think this song is about you
You’re so vain, Ill bet you think this song is about you
Don’t you? don’t you?
http://www.youtube.com/watch?v=nLQ5Uh4d3W4
“You’re so Thain, you probably think this song is about you”
Hilarious!
Where is the “Shareholders’ Bill of Rights”? Congress wants everybody else to have a special BoR. Oh, that’s right, the fat-cat Wall Streeters that own the politicians would never allow such talk.
Shareholders, Pah. I hate it when the news talks about “investors” when they update on the stock markets.
They are speculators like everyone else. “Shareholders” also include the big boys who make the rules. Any small players in Wall St. needs to realize “the markets” make money at someone else’s expense. For every winner there is a looser each one betting on a price direction.
Like RE complex who turned a blind eye in good time, “Shareholders” will turn a blind eye if they are making money. They are like everyone else when they start to loose but not liking it that risk they signed up to, is a reality.
I don’t get it with all the whiners and suing for stock losses. Just hit the sell button and walk away. You lost. If you lost big, then serves you right for not diversifying.
As for bonds, With the shafting of conservating banks & pension funds by mis-selling them “AAA” paper that turned out to be worthless, Wall St. will find out that they lost something as well that will be harder to recover from: Their reputation.
Apparently out-of-work real estate “professionals” think they will try their hand at tech.
http://www.techcrunch.com/2007/11/16/will-the-credit-crunch-inflate-the-internet-bubble/
It probably won’t affect me. I’ve been a software engineer since 1985 and I’m in a niche market and willing to travel coast to coast for the higher hourly pay. Many people are stuck in their communities, struggling to pay $4,000 monthly payments for houses that should not really cost over $150,000. Tech has to draw from limited pools or pay the big bucks to soldiers of fortune, such as me.
Good
http://bigpicture.typepad.com/comments/2007/11/the-big-threat.html
“In various publications, Ben Stein has been flogging the meme that because the sub-prime mortgages are such a relatively small percentage of the total US Economy, its really not all that problematic.”
Doesn’t sound like he inherited daddy’s brains nor vision…
I believe he owns seven houses. He likes houses.
Am I alone in thinking CFC may soon be a buying opportunity? Either that, or they’re on their way to BK…not sure which way to go on this yet.
Judicious1 : CFC always goes up. They are not making any more CFC. Suzanne researched it. You can do it.
Seriously Houston, pretty soon the only direction they could go is up, if they survive.
So in other words they’re a sure bet to go up, if they don’t go down?
A “sure bet”? That’s funny. Seriously though, when I see Soros take on 1.8M shares of this stock, and it falls by a third since then, I start to pay attention.
CFC surviving doesn’t mean there isn’t a lot of downside left in housing.
I didn’t know Soros had joined BofA in that bottom fishing expedition. Stock price on CFC, BZH, HOV and a few others basically represents a non-expiring call option on survival. Price could gap to 1 and change any day. Why not buy companies that will have a big 4th qtr - GME (check your local mall), or even MSFT, and try to make a few bucks?
“CFC surviving doesn’t mean there isn’t a lot of downside left in housing.”
Especially given that the Fed has granted CFC ‘too big to fail’ status…
Economic Outlook: Housing figures could intensify recession fears
By Chris Flood
Published: November 16 2007 19:52 | Last updated: November 16 2007 19:52
This week brings important updates from US and UK policymakers that will shape investors’ expectations on the timing of any further loosening in monetary policy.
Ongoing strains in money markets remain evident as a lack of visibility over subprime mortgage losses ensures continued reluctance among banks to lend to each other in inter-bank markets. But the ability of central banks to restore confidence and break the log-jam in money markets will depend crucially on forthcoming economic data and the balance between rising inflationary pressures and the extent of any slowdown in growth.
The downturn in the US housing market shows no sign of ending. The National Association of Homebuilders’ index reached the lowest level in October since the series began in 1985. November’s data, due out today, is expected to show a further decline from 18 to 17.
The US economy sank into recession in the final quarter of 1989 and first quarter of 1990, coinciding with the previous low of the NAHB index in January 1990.
http://www.ft.com/cms/s/0/0b287e4e-946f-11dc-9aaf-0000779fd2ac.html
Bears should not be mistakenly identified as grinches…
Stocks Climb Despite Unease About Shoppers
Treasury Yields Hit 2-Year Low as Investors Pull Away From Risk
By SCOTT PATTERSON
November 17, 2007; Page B1
Here come the grinches.
Troubling news about consumer spending as the holiday shopping season builds to a crescendo has kept stocks under pressure in the past few weeks. Such worries — fed by high energy prices, a dismal housing market and a spate of big losses by Wall Street banks — sent investors scurrying out of risky bets to the relative safety of U.S. Treasury bonds, sending yields to their lowest level in more than two years.
Despite those concerns, stocks finished the week on a high note, mounting a solid late-day rally Friday. The Dow Jones Industrial Average gained 66.74 points, or 0.51%, to 13176.79. But the blue-chip average is down 7% from its record high of 14164.53 on Oct. 9. For the week, the Dow was up 1%, leaving it ahead 5.7% year-to-date.
The Standard & Poor’s 500-stock index gained 7.59 points to 1458.74, up 0.3% for the week and 2.9% this year. The Nasdaq Composite Index rose 0.72%, or 18.73 points, to 2637.24, up 0.4% for the week and ahead 9.2% for 2007.
The benchmark 10-year Treasury note gained 20/32 point for the week, or $6.25 per $1,000 invested, sending its yield to 4.15%, the lowest since September 2005.
Investors may get more bad news in the coming week, which ends on “Black Friday,” the day after Thanksgiving, traditionally the day when many retailers turn profitable for the year. The week begins with a gauge of the increasingly glum mood of home builders, the National Association of Home Builders/Wells Fargo Housing Market Index. Economists at Lehman Brothers expect the index to slide to its lowest level since it began in 1985.
If the NAHB report doesn’t dim investors’ holiday spirits enough, the Commerce Department’s Tuesday report on October housing starts could do the trick. In September, the index dropped 10%, much worse than expected. Another big decline could be in the cards, economists say.
http://online.wsj.com/article/SB119526522686696586.html?mod=googlenews_wsj
Look out below - Fanny’s going to fall off a cliff –
http://money.cnn.com/2007/11/15/magazines/fortune/fannie_losses.fortune/index.htm?source=yahoo_quote
Rule number one of accounting in the Age of Opacity: If you don’t like what the numbers are saying to your shareholders, change the calculation!
Market Scan
Fannie Mae Spooks Shareholders
Andrew Farrell, 11.16.07, 5:00 PM ET
Investors weren’t wooed by Fannie Mae’s assurances that its mortgage losses are under control and bailed from the stock Friday.
Shares of Fannie Mae (nyse: FNM - news - people ) fell $2.35, or 5.5%, to $40.69, on continued worries that the company’s losses from bad loans might be worse than previously disclosed. Fannie Mae purchases mortgages from mortgage lenders and is now stuck with a large amount of risky mortgages defaulting at ever-higher rates.
Shares of Fannie Mae began their slide Thursday after it was reported that the company is masking its credit losses. Fannie Mae recently changed the way it calculates its credit loss ratio, which measures the amount of bad loan losses as a percentage of the company’s loan holdings. The new accounting method creates a lower credit loss ratio.
http://www.forbes.com/markets/2007/11/16/fannie-mae-closer-markets-equity-cx_af_1116markets44.html
AFX News Limited
New York AG to investigate Fannie, Freddie dealings with Washington Mutual
11.07.07, 12:41 PM ET
WASHINGTON (Thomson Financial) - New York Attorney General Andrew Cuomo today announced that his office is investigating whether Fannie Mae and Freddie Mac are doing enough to ensure that mortgages they buy from Washington Mutual are not based on inflated appraisal values.
http://www.forbes.com/markets/feeds/afx/2007/11/07/afx4312264.html
Can anyone comment or offer a link on the connection of Fannie and Freddie to the WaMu/eAppraiseIT investigation? My understanding is that the GSEs may have purchased loans based on fraudulently-inflated appraisals. This raises serious concerns when Bernanke and Schumer are trying to sneak a stealth proposal below the political radar screen to put the taxpayer on the hook for insuring GSE-securitized loans up to $1m.
Friday, November 16, 2007
Appraisers charged with fraudulent practices
South Florida Business Journal - by Ed Duggan
(Fannie Mae, Freddie Mac under AG scrutiny [Buffalo]
Real estate appraisal company eAppraiseIT sued by N.Y. [Albany]
WaMu shares tumble 17 percent [Seattle])
New York Attorney General Andrew Cuomo filed a complaint Nov. 1 against First American Corp. (NYSE: FAF) and its real estate appraisal subsidiary eAppraiseIT, charging them with wrongful conduct that the complaint says constitutes, “a deceptive, fraudulent, and illegal business practice.”
First American, which does business throughout Florida and had $8.5 billion in revenue in 2006, said the suit had no foundation in fact or law and called the allegations “specious.” It said the attorney general’s allegations were largely based on a handful of e-mails that were taken out of context or mischaracterized.
The Florida attorney general’s office told the Business Journal it had only received one complaint against First American or eAppraiseIT, and that it had no current investigation under way.
The New York case alleges that eAppraiseIT allowed the loan production staff of its largest appraisal client, Washington Mutual (WaMu), to handpick appraisers who would bring in appraisal values high enough to permit certain loans to close. It was also charged with improperly allowing WaMu (NYSE: WM) to pressure eAppraiseIT appraisers to change appraisal values that were too low to permit loans to close.
http://www.bizjournals.com/southflorida/stories/2007/11/19/story4.html
Wednesday, November 7, 2007
Fannie Mae, Freddie Mac under AG scrutiny
Business First of Buffalo
Two of the leading financiers in the home mortgage industry have been issued subpoenas by New York state Attorney General Andrew Cuomo as part of a widening fraud investigation.
Subpoenas have been sent to Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), the AG’s office said Wednesday. Last week, Cuomo filed suit against First American Corp. (NYSE: FAF), and its subsidiary eAppraiseIt, one of the nation’s largest real estate appraisal management companies, for colluding with Washington Mutual (NYSE: WM) to inflate the appraisal values of homes.
“In order to fulfill their duty to consumers and investors, Fannie Mae and Freddie Mac must ensure that Washington Mutual’s mortgages have not been corrupted by inflated appraisals,” said Cuomo. “Our expanding investigation into the mortgage industry has uncovered that Washington Mutual improperly pressured appraisers to provide inflated values that best served the lender’s interest. Knowing this, Fannie Mae and Freddie Mac cannot afford to continue buying Washington Mutual mortgages unless they are sure these loans are based on reliable and independent appraisals.”
…
“If true, the appraisal practices described in the complaint would violate Fannie Mae’s requirements for loans we purchase from lenders or securitize,” said Brian Faith, spokesman for Fannie Mae. The agency will cooperate with the probe.
“It is against our interest to purchase or guarantee mortgages with inflated appraisals, and so it is in Fannie Mae’s interest that these appraisal practices be investigated.”
http://www.bizjournals.com/southflorida/othercities/buffalo/stories/2007/11/05/daily30.html
Fannie Flunks Again
By Seth Jayson November 16, 2007
Fannie Mae (NYSE: FNM) has been brutalized this week, and for good reason. An incisive article in Fortune explains the suspicious nature of a recent accounting change at the government-sponsored mortgage-trader.
In short, it looks like Fannie has sweetened its estimates of bad credit at precisely the time when mortgage loans across the board are actually getting worse and worse. Rotting loans are precisely the problem at many big banks, Citigroup (NYSE: C), Morgan Stanley (NYSE: MS), Merrill Lynch (NYSE: MER), Bank of America (NYSE: BAC), and others.
…
Unfortunately, even investors smart enough to stay away from Fannie may have to suffer for its behavior, at least if there’s a green light for the housing bailout plan proposed by Fed Chair Ben Bernanke. Let’s hope the legislators in Congress grow some spines and take a look at this latest whoop-ti-doo. Fannie’s cavalier attitude toward estimates of credit risk is a prime reason to sink the plan, which would have Fannie — and sibling Freddie Mac (NYSE: FRE) — buy million-dollar mortgages and stick taxpayers with the responsibility of guaranteeing them.
http://www.fool.com/investing/general/2007/11/16/fannie-flunks-again.aspx
It sounds to me as though the GSEs are given a pass on the accounting treatment that has sunk the careers of a couple of big Wall Street investment bank CEOs (in the wake of acknowledging the need for $5bn+ subprime debt writedowns). Since the GSEs are publicly traded companies, shouldn’t they enjoy the same level of accounting scrutiny which has been applied to Merrill and Big C? Because otherwise, the GSEs would enjoy an unlevel playing field compared to their Wall Street competitors.
Nov 16, 2007
Subprime mortgages, subprime currency
By John Lee
Last week, US Federal Reserve chairman Ben Bernanke told the US Congress he would support raising the limit on the size of the individual loans eligible for securitization by the government-sponsored mortgage finance entities from US$417,000 to $1 million, on a temporary basis.
He suggested that Fannie Mae and Freddie Mac could pay insurance premiums on these loans to the federal government, which would “act as guarantor” by taking on some of the credit risk.
Charles Schumer, the Democratic chairman of the Joint Economic Committee, enthusiastically welcomed the idea and said he would try to insert it into legislation already before Congress.
It came as Bernanke told Congress that estimates that set the total losses from subprime mortgages at about $150 billion were probably “in the ballpark”.
Given that the Fed and European Central Bank have already injected well over $150 billion since August, Bernanke obviously lied about his ballpark figure. But just how big is this subprime mess?
http://www.atimes.com/atimes/Global_Economy/IK16Dj02.html
Is there any way to buy the dips on the ABX indexes? Because a level of 18 or so on one of these indexes (compared to 95 a year or so ago) just has to be an indication that subprime is oversold, doesn’t it???
http://markit.com/information/products/abx.html
Can anyone who understands possibly explain the relationship between these ABX indexes and housing prices (if there is any)?
Or between the indexes and the market value of subprime loans?
16-Nov-07 Overview
Index Series Version Coupon RED ID Price High Low
ABX-HE-BBB- 07-1 7 1 389 0A08AOAC1 18.13 97.47 17.24
From the Fortune article…
“Fannie Mae’s potentially misleading disclosure comes at a crucial time for the company. Fannie Mae was severely penalized last year for overstating earnings and for a lack of oversight. As part of its punishment, the amount of home loans that Fannie Mae can make was limited.
But now influential members of Congress, including Senator Charles Schumer, want Fannie Mae’s watchdog, the Office of Federal Housing Enterprise Oversight (OFHEO), to temporarily lift the portfolio limits on the company and its rival Freddie Mac. Legislators want both lenders to buy more subprime mortgages to help stave off foreclosures.“
I sure wish there was a way to find out if Sen. Charles Schumer was trying to sell any property.
“Legislators want both lenders to buy more subprime mortgages to help stave off foreclosures.“ ”
Really means…
“Legislators want both lenders to buy more subprime mortgages to help stave off bankruptcy of their banking buddies who are major financial contributors.”
There. That’s better.
L
Fannie Mae should be required to clear up the cloud of doubt over its accounting practices before any measure to put the U.S. taxpayer on the hook for insuring its debt is passed by Congress. It sounds to me as though an honest accounting of Fannie’s balance sheet could reveal that the worst-case scenario mentioned below has already occurred.
From the CNN article linked in above:
Management acknowledges that credit losses are mounting. During an analyst call last week, Fannie Mae CEO Daniel Mudd warned that the company’s loss ratio could rise to eight to 10 basis points in 2008, due to a worsening housing market. It’s not clear whether that forecast is based on the old or new methodology.
The company may already be exceeding that 2008 guidance. Based on the old methodology for calculating the loss ratio for the third-quarter alone, the company’s annualized loss ratio is already at 14 basis points.
If so, Fannie Mae’s mounting losses are disturbing.
So what could a soaring loss ratio mean for Fannie Mae? Consider these numbers: At Sept. 30, Fannie Mae had exposure to $74 billion of loans with a FICO credit score below 620. Loans scored below 620 are generally classified as subprime. In addition, Fannie Mae has exposure to $196 billion of Alt-A mortgages, home loans for which the borrower doesn’t have to submit complete documentation for basic criteria like income.
At the same time, Fannie Mae has only $40 billion of capital.
Worst-case, credit losses from high-risk loans like subprime and Alt-A could eat away at that capital and leave the mortgage giant on an extremely weak financial footing.