Running Away From A Free-Fall
Some CNN Money news from Wall Street and Washington. CNN Money, “The number of housing permits issued nationwide fell to a 14-year low in October, although housing starts edged up slightly, according to the government’s latest reading. It is seen as a necessary step to work through a record glut of completed new homes available for sale on the market. The report comes a day after the National Association of Home Builders’ survey on its members’ confidence matched a record low level.”
From BBC News. “Doug Roberts, chief investment strategist at Channel Capital Research, said the latest figures from the Commerce Department would not offer much comfort to the struggling housing market.”
“‘There’s a massive over supply, right now the mortgage market is tightening up, and people are running away from a free-fall,’ he said.”
The Associated Press. “All of the strength came in the volatile apartment sector, which jumped by 44.4 percent. Construction of single-family homes fell for a seventh straight month, declining by 7.3 percent in October compared to September.”
“Applications for building permits, seen as a good sign of future activity, fell for the fifth straight month in October…down a sharp 24.5 percent from a year ago.”
From Builder Online. “Builder confidence held at record lows in November due to ‘continuing mortgage market problems and a substantial inventory overhang,’ according to the latest National Association of Home Builders/Wells Fargo Housing Market Index.”
“‘Builders are worried that the national media has tended to report negative housing stories as if there is one real estate market, when, in fact, there is no such thing — all housing markets are local,’ said NAHB President Brian Catalde. ‘As a result, some healthy markets are being unfairly impacted by this negative media coverage.’”
“‘I think that the media coverage is on the top of the list — that’s basically the media talking about all the foreclosures that are coming around the corner or all the inventory that will be available to bid on,’ Jim Brewer, VP of construction with Sherman Oaks, Calif.-based Spiegel Development told BUILDER Online.”
“‘We have buyers that are convinced that if they just sweat it out for a few more months, there will be a lower price or a better deal,’ Brewer continues. ‘Nobody wants to be made out for a fool to have paid more than the next guy.’”
From Reuters. “The index was unchanged at 19 in November, matching last month as the lowest reading since this gauge started in January 1985. Readings below 50 mean more builders view market conditions as poor than favorable.”
“‘The housing recovery is absolutely going to be measured in years, not in months,’ said Sue Woodard, executive VP of Mortgage Market Guide.”
“D.R. Horton Inc. said Tuesday it swung to a loss in the fiscal fourth quarter from a year-ago profit. Chairman Donald R. Horton said he expects the housing environment to ‘remain challenging.’”
“The latest quarter includes pretax charges of $278.3 million for inventory impairments and $40.3 million of write-offs related to land option contracts that the company doesn’t intend to pursue. The latest period also includes a pretax goodwill impairment charge of $48.5 million.”
“Sales declined 35 percent to $3.12 billion from $4.8 billion in the 2006 period.”
“‘Market conditions continued to decline in our September quarter as inventory levels of both new and existing homes remained high while pricing remained very competitive,’ Horton said. ‘We also experienced reduced mortgage availability due to tighter lending standards, and buyers continued to approach the home buying decision cautiously.’”
From Bloomberg. “Freddie Mac, the mortgage buyer that has helped almost 50 million Americans purchase a home, posted its largest-ever loss and said ’significant deterioration’ in the housing market may force it to cut its dividend and raise capital.”
“The loss was caused by a $2.24 billion decline in the value of derivative contracts and $1.2 billion in credit losses among the $2.7 trillion of mortgage assets Fannie Mae owns or guarantees.”
“Freddie Mac’s $713.1 billion portfolio as of September included $105 billion of securities backed by subprime mortgages.”
“The fourth quarter will also prove ‘difficult,’ CEO Richard Syron told analysts today. ‘There is nothing we see right now to be more optimistic,’ Chief Financial Officer Anthony Piszel said.”
Dow Jones Newswires. “Freddie Mac said its estimated regulatory core capital was just $600 million above regulatory requirements. In order to keep it from falling below that, it has engaged Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. to help consider ‘very near-term capital raising alternatives.’”
“Freddie Mac is also ’seriously considering’ reducing its fourth-quarter dividend by 50%. If those measures are not sufficient, then the company ‘may consider additional measures in the future such as limiting growth or reducing the size’ its retained portfolio.”
“Freddie also said the fair value of net assets attributable to common stockholders, before capital transactions, fell about $8.1 billion during the quarter. The reduction was largely due to the credit losses.”
The Wall Street Journal. “Chuck Schumer is lucky Congress ignored him. We’re referring to the New York Senator’s idea, which he has loudly promoted for months, that Fannie Mae and Freddie Mac should ride to the rescue of the housing market by buying up unwanted mortgages and guaranteeing them. Now those two mortgage giants are themselves under scrutiny amid concerns that they’ll report big losses.”
“Shares in mortgage lender Paragon Group plummeted 46 percent in early trading Tuesday after it disclosed difficulty securing new financing because of the subprime lending crisis in the United States. Paragon is Britain’s third-largest company specializing in ‘buy-to-let’ mortgages, for buyers who intend to rent rather than occupy a property.”
“‘Whilst terms for renewal have been offered in principle, they are not attractive for a variety of reasons, including the high cost of such facilities in the current market environment,’ the company said.”
The Herald. “Alistair Darling yesterday promised to protect the interests of taxpayers in resolving the Northern Rock crisis, telling MPs that he ‘fully expected’ to get back all the public money loaned by the Bank of England, currently estimated at £24bn.”
“In a statement to MPs, the Chancellor made clear that the vast amounts loaned to the Newcastle-based mortgage lender - put at £900 for every taxpayer - were secured against ‘high quality’ assets it held. ‘The government has a clear duty to protect the public interest and we will do that,’ declared Mr Darling.”
“Vince Cable, the acting Liberal Democrat leader, said taxpayers’ money had been used to prop up the bank and provide a profit opportunity for ’spivs in the City.’ He called for the UK Government to nationalise ‘temporarily’ Northern Rock to provide stability before it could be sold off.”
“However, Jim Cousins, the Labour MP for Newcastle Upon Tyne Central, said nationalisation would mean ‘a slow lingering death’ for the 6000 jobs at Northern Rock, its assets and the reputation of Britain as a major financial services centre with Mr Darling playing the role of undertaker.”
“Northern Rock Plc. slumped for a second day in London trading after saying yesterday that bids are ‘materially below’ its market value. ‘I can hardly believe that someone would come in and offer zero to the shareholders,’ said Christian Stoian, who helps manage 2 billion euros ($3 billion) at (a) Swedish pension fund, including a 1.5 percent stake in Northern Rock. ‘It is not a bankrupt company. They are making money.’”
“The cost of borrowing pounds for three months rose to a two-month high yesterday amid concern that losses linked to U.S. subprime home loans will grow.”
“‘People are making comparisons with Railtrack, where shareholders got nothing,’ said said Simon Maughan, an analyst in London. U.K. rail operator Railtrack Plc operated around 2,500 stations in 2001 when the government asked the High Court to put the company into administration. About 49,000 shareholders lost a three-year legal battle to gain compensation in 2005 after a company partly funded by the government bought Railtrack’s shares.”
“John Gieve, the Bank of England’s deputy governor for financial stability, said that money markets may face renewed ‘tightening’ before the end of the year.”
“‘There still may be more bad news to come,’ he told a conference today on hedge funds in London. ‘There’s still a worry we haven’t yet seen the bottom. Some markets are still very illiquid. As the year end approaches, we may see some tightening in money markets.’”
“Losses on holdings backed by U.S. subprime mortgages are prompting banks to hoard cash, driving up credit costs for companies and consumers. The three-month London interbank offered rate for pounds, or Libor, rose to 6.49 percent today, the highest in two months, suggesting banks are still reluctant to lend to each other.”
“‘It’s already happened,’ said George Buckley, chief U.K. economist at Deutsche Bank AG in London. ‘That’s telling you something about what the market thinks about the subprime risk.’”
“‘In the last few weeks we’ve seen another lurch. There’s been more pain than people anticipated,’ Gieve said. ‘Hedge funds have not been blown away yet by the first real market stress,’ he said.”
“The Bank of England ‘identified that the most likely course of instability was the low risk premia, particularly in structured credit markets,’ Gieve said.”
“The risk that banks and brokerages from Citigroup Inc. to Bear Stearns Cos. will default on their debt is accelerating as analysts increase their estimates of losses from subprime mortgages, credit-default swaps show.”
“Contracts on New York-based Citigroup, the largest U.S. bank by assets, rose 16 basis points to 95 basis points over the past two days, according to broker Phoenix Partners Group, setting a record today for the seventh time this month.”
“Contracts on New York-based Bear Stearns have climbed 24 basis points the past two days to 174 basis points, about a six-year high. A rise signals investors are less confident in a company’s creditworthiness.”
“They dubbed it ‘The Survivors’ Conference.’ In early November, 2,000 people who handle asset- backed securities for a living crowded into a ballroom to hear speaker after speaker explain why 2008 may be their worst year ever.”
“‘These events tend to become deeper and play out longer than most people initially expect,’ says Michael Mayo, an analyst who covers securities firms at Deutsche Bank AG in New York. ‘This is one of the slowest-moving train wrecks we’ve seen.’”
“The tumbling U.S. housing market will continue to inflict the damage. Mortgage-backed securities and collateralized debt obligations containing those securities are falling in price and won’t find their footing anytime soon.”
“That’s because most of the subprime mortgages, which provide collateral for $800 billion in securities, have yet to go bad, says Christopher Whalen of Institutional Risk Analytics.”
“‘The collateral is not yet problematic,’ Whalen says. ‘That’s the next big shoe to drop.’”
“‘Until housing prices bottom out, the writedowns won’t stop,’ says Peter Kovalski, who helps manage more than $12 billion. ‘The Street wants things right away, but it doesn’t work that way.’”
“Wall Street profits are also plunging in the fourth quarter. Lower profits mean more firings. Bank of America Corp., JPMorgan Chase & Co., Bear Stearns, Citigroup, Lehman Brothers and Morgan Stanley announced more than 24,000 job cuts in the first 10 months of 2007.”
“New York law firms are cutting associates for the first time since 2001 as the collapse of the subprime mortgage and credit markets causes private equity deal volume and structured finance work to slow.”
“McKee Nelson is asking associates to take sabbaticals with 40 percent pay for campaign or charity work, unpaid sabbaticals that last as long as a year or severance packages that include four months pay and benefits, Nelson said.”
“‘When we realized this wasn’t a transient event, we decided to size our staff to what we anticipate demand being,’ Nelson said. ‘It’s nobody’s fault that the market has caved in.’”
“It is seen as a necessary step to work through a record glut of completed new homes available for sale on the market.”
They are really all desillusional aren’t they? Peak Oil and energy costs are the kiss good bye to suburbia… and urban housing can absorb 10 X the people there today.
I agree the exurbs are doomed… However, I personally don’t see the nearer suburbs being decimated by higher energy costs, as many people’s choice of vehicles and incomes will allow them to easily absorb higher fuel prices without significant impact.
In any event, it should be interesting to see how this all plays out over the next few years.
Bob: It’s been brought up on other days, other threads, we need to start using technology. We don’t need huge office parks and buildings sucking up energy and space. We don’t need to spend hours in a tin box fighting to get to the office. Most jobs can be done at home. We could use video conferencing instead of people flying all over the place for a 2 hr meeting.
I actually brought this up yesterday. I’ll mention it again: drive across country and see just how little of the country we actually live in or use. Most of it is totally vacant land. That seems kind of ridiculous.
The way I live now is stupid. I live in the Bay Area, have to drive 50 miles each way, which takes around 1 hour each way with no accidents. 2 if there is one, which is frequent. I work in the tech industry and could easily do EVERYTHING I do now from home on a $750 PC box that uses a low power AMD processor.
People pay more for areas that pay higher wages. Sure- little trinkets like ” ethnic diversity and weather” are thrown in to make an excuse for the higher costs of living-as well as those higher wages that are supposed to make it even out. But as I’ve seen here in CA, those higher wages don’t mean diddly-squat, and in fact, the scale has been tipped ridiculously far and out of favor with wage to a point where wage is no longer really applicable.
I could very easily do what I do from home, in another state, in another location where the cost of living is 1/4th the cost of that here. Even if I took a 40% pay cut, I’d still be in better shape.
In my opinion, the classic idea of living in huge metropolises is a waste of energy, resources, time, and money.
“I could very easily do what I do from home, in another state, in another location where the cost of living is 1/4th the cost of that here.”
How about from another country, say India? And that person won’t be you but someone making 1/10th of what you are making now.
I agree 100% about tele-commuting being a great idea. In fact, I proposed the very same idea to a superviser at my old big corp HMO years ago where I was a cubicle monkey. Result? Very nervous, worried, facial expression while fake smile thanking me for my idea. Translation: no way in HELL is anyone giving up their physical worker drones in-person oversight because then it’s just a short step to getting laid-off as telecommuting can show just how many useless, deadwood, supervisors are sucking the blood out of the company.
I even went further with the idea of say having the offsite people perhaps come in mon or fri or both, just show they are still alive, and reassure the supervisers their Phoenix School Degree was still usefull … HA ! Of course that went no where.
Corps are all about ” IF THE IDEA DOESNT COME FROM THE HIGH HOLY GRAND COUNCIL, AND HAVE 7 DEPTS APPROVING IT ALREADY, THEN DONT MAKE WAVES OR ELSE YOU GET NOTICED AS A TROUBLEMAKER & END UP IN THE COPY ROOM “.
God the red tape was stifling. SO GLAD to be out of the Bullshit corp rat race where nothing innovative was ever accepted from the rank & file, despite all the “feel good” HR outreaches. Thats why anyone with half a brain & an once of get up n go hates the effin bootlicking atmosphere of corp life. I know I did.
ok ok rant off - for now
Ditto what Aquis said. I also think part of the reason why most managers are very intimidated and suspicious of telecommuting –regardless of how much sense it makes– is they are also worried that the drones will stop working once they are no longer under direct supervision.
It does take a fair amount of self discipline to focus on your work when you are at home, and not be distracted by kids, pets, spouse, TV, Xbox, that comfy bed right over in the next room, etc. Anyone who has ever done a self-study course will know what I’m talking about. Being in a workplace-only environment does instill discipline and remove a lot of temptations/distractions by default.
I think we’ll see more and more satellite offices. There are very few workers with the discipline to get work done while at home. Generally speaking, they need to be in a separate environment, away from pets, kids, wives, chores, etc.
Company is in SF, needs to grow from 50,000 square feet to 60,000 square feet. Is it better to find a 60,000 square foot space in SF, or find a 10,000 square foot space close to where their employees live, and keep the 50k they have. Cut down commutes, keep employees happy, and maybe even poach a few employees from their competitors. I think we’ll see this as a growing trend.
Yep and the next step will be to install you with a GPS chip to monitor your movements and cameras about the work area to monitor your work. Might even put some sensors in your chair to see how long you manage to stay at your desk.
“…not be distracted by kids, pets, spouse, TV, Xbox, that comfy bed right over in the next room, etc.”
I’ve never understood this concern. The only thing management needs to monitor is the finished product. It doesn’t matter if the telecommuter is working in their underwear or at midnight. What does matter is if the product is finished on-time and correct. The method of production should not even enter the discussion.
I have worked from home for about 10 years and the people that I supervise either work from home or go to an office sporadically.
You are right, it takes a lot of discipline to work unsupervised. But like I tell my team we are all professionals and you are going to be held accountable if you don’t deliver in the time specified.
In the corporate world, what you actually produce is far less important than: following processes, kissing butt, making the important people look good, performing demeaning tasks when commanded to do so, making the morons in charge feel special, etc.
I am very certain that where I work a working product is just an accidental byproduct of dumb luck; if it happens, great, if not, who cares since process is our most important product. I am sure that most corporations are the same way, which is another reason they fear telecommuting: once one strips away all the BS, most people probably put in only 20 hours or so of real “work” a week, and half the time that is probably being spent on some doomed program that will end up in the scrapheap anyway.
But hey - it’s a paycheck, so there you go!
My current employer, the senior management of which is populated almost exclusively by overweight male boomers, absolutely refuses to consider the idea of telecommuting even though it would be relatively easy to implement. Not trying to start up another gen flame war, but there generally seems to be a certain demographic associated with managers who won’t allow telecommuting, and that’s not going to change any time soon.
You have to devise a plan to kill off their human capital. This is a standard concept in academia. Try to force management into situations that make them look stupid. Make up new terms for things and begin to circulate these among workers. Try to develop new concepts and markets that are outside the expertise of current management.
And let us not forget the overpaid top management that needs an exec asst not to do really productive work, but basically babysit and wipe their butts. I expected to be attending meetings, doing complicated stat reports and prepping budgets, etc. They can’t dial a phone, let alone answer their own, they can’t make a lunch/dinner reservation, make travel plans or do their own personal taskes. They don’t do any work - just assign it to everyone else on ridiculous deadlines, criticize, micromanage and then take all the kudos for the results (and the fat bonuses). Had to work from home for 2 weeks when I broke and dislocated toe and couldn’t drive (opened big door over foot running after boss who had left to get message to him). The idiots wanted to know why I couldn’t find some sort of public transport (60 miles each way). I should have said STFU because I don’t have to work at all - I’m the one doing you the favor, but there were 16 managers dependent on me to keep the Nazi boss off their A$ses. There was NOTHING I couldn’t do from my lounge chair on the patio or from my bed. When I went back I lasted 1 day before the butthole was screaming at me for no reason when I was trying to help him and I gave notice. Not one time in those 2 weeks did he ever ask what happened or how I was doing - just whined because I wasn’t there in person.
Same here. I have a boomer manager who won’t allow telecommuting for whatever paranoid reason.
RE: Peak Oil and energy costs are the kiss good bye to suburbia…
You can throw in rising property taxes to cover exploding pension costs and health care for public employed parasites.
Ineffectual town managers have given away the farm to the public employee unions due to their gutless avoidance of confrontation.
my county has a dept of womens affairs !
Are women having a lot of affairs in your county?
On a more serious note, I used to know a fellow who was a sales manager for a TV station years ago and each year, he’d get a budget for the annual party to entertain the advertisers and media buyers. He told me he made sure to use every cent of that budget, even if he didn’t have to, because otherwise the budget would be cut back if he economized. Govs work much the same way, I think. Unless absolutely pushed to the wall, as the local govs have been here in FLA, govs tend to expand budgets as much as possible so as not to lose the money. There is no incentive to economize or cut back, unless the money’s just not there. That’s why there’s top heavy management and the rank and file gets cut back. The managers keep their stanglehold on their immediate areas and do their best to expand it. This mechanism was very neatly laid out in the book “Power” by Michael Korda in the eighties. Although it applied to corporate fiefdoms, the same applies to government. As citizens, we have to be very insistent on cutting, cutting, cutting, most especially when there’s a surplus, which should only be allocated to improvement of infrastructure.
AHAHAHAHAhhahahaaaaa !!!
My wife works in the education system in Southern California. She goes on and on how they over spend on crap and useless personal. They say that if they don’t use it they will lose it. Why not run the government as a business “lean and mean” and start hiring more teachers. I think big government is a joke!
Agree with Palmetto and IE. The entire way the govt spends should be restructured, and they should be rewarded for saving.
Problem is, if taxpayers see a surplus, they will want reduced taxes…but there will always be something unexpected that will require those surplus funds (like Katrina or the fires, etc.).
We need to allow govt entities to save (even have major allocations) & protect the savings from the taxpayers who will want to see it going toward their special purposes, rather than saving for a rainy day.
Anyone who’s worked in govt will tell you that there are contingents of taxpayers in every locale that are very vociferous & powerful in the communities and they have specific plans for the public money (parks, special decorative walls, murals, inefficient infrastructure requests that benefit only the few, etc.).
Budgeting properly, when you work for the govt, is easier said than done.
BTW, it’s NOT the unions and rank-and-file workers that are the problem.
The whole concept of running a government like a business is flawed. The government could behave no better than the worst monopoly. Look at how big and bloated Microsoft has become. In many ways the government is being run like a business, one that is successfully maximizing revenue and growing. Profit means nothing to them because they steal every penny and have no risk of loss.
To encourage a government to be efficient would require a rewards system where in the politicians got big bonuses for cutting taxes, eliminating debt, and staying under budget. Lets give them 5% of every dollar they save the tax payer. The politicians would then be in a position of optimizing performance (work accomplished for the money) in order to get re-elected and to make money.
The problem you have is defining the baseline and numerous other things.
Why not run the government as a business “lean and mean” and start hiring more teachers.
Because there is no objective way to measure “lean and mean” in government. In business, if you get leaner, it is measurable in profit. As a result, a business can set a goal (e.g. 5% increase in net income) and work towards that.
In government, there isn’t any objective measurement of performance. If the government runs out of money before performing “function X”, it just chalks it up to “not enough resources” instead of “mismanaged resources” or some such thing. If the government, on the other hand, gets leaner, how do we objectivly measure that? Without a method of measuring “better” or “worse” performance, there is never any positive goal for a government to move towards.
So agree CA Renter - It’s not the staff and workers that are the slackers. And, they don’t get bonuses and for several years in CA have been lucky to see 1.5% - 3% raises that get washed out in increased med insurance costs. You could get rid of probably 75% of upper and middle management and run the show just fine. All they seem to do is meetings and ideas for more initatives, committees, studies and busywork. My rant o the day is why our tax dollars are spent for anyone to answer anyone else’s phone these days - There are actually managers that refuse to have voicemail because they want a live person answering their mail and then handwriting message slips. It’s very frustrating when one wants to really do intensive, productive work and instead they get to go braindead all day and are forced to look busy.
By law…or actually Supreme Court decision, the President of the United States (and all the bureaucracies he controls/leads) are required to spend as close as possible to the budget Congress alots. If the President fails to spend money in a department or program because he thinks it is a waste of money, this violates the separation of powers and he is in the wrong.
Having worked for the federal government for 8 wonderful years in my life (Dept of Interior and DoD) and then as defense contractor, I have seen money spent/blown that would make every tax payer pissed. Unfortunately, you may have a program/project (fire fighting for example) that may have a slow year. If the budget isn’t completely spent in the slow year, you may have the unspent money cut from your budget next year, which may be the year you would need every cent. How would you play the game?
Second, how do you think your local Senator and Congress member get elected? By bringing jobs to your town through government programs, such as through DoD contracting.
Third, remember when Congress passed line-item veto for Clinton and mayor Rudy G. brought the case to the Supreme Court to get it ruled unconstitutional (again separation of powers)? Now he is running for President.
public employee unions due to their gutless avoidance of confrontation ??
That’s because the bastards are on the dole along with the Unions….Just because they are not Union (City Manager) that does not mean that they are not “Grossly” overly compesated…$270,000. per year for ours….
AND, They retire @ 90% of their last five years starting @ 50….Man that pisses me off…..
RE: “Grossly” overly compesated…$270,000. per year for ours….
Here in Mazzholeland there are Lt. ranked state coppers pullin’ in $280k per year plus bennies via rigging their OT and flag detail work.
State legislators are terrified to take on the greedheads.
Hey, NAG….Care to comment on this one?
I don’t really agree with the idea that everyone will need to move to cities since cities have several fatal flaws in a costly energy world:
- Huge amounts of energy needed to sustain them. Okay, we don’t have as much money spent on gas driving cars around, but consider the costs of supporting all those big buildings from an energy perspective.
- People in the cities aren’t driving around all the time, but think about this: how are we going to get food and other products in and waste and manufactured products out? That’s right - more energy. If we hit Peak Oil and have to curb consumption, having everyone move to a vast, crowded, and completely artificial environment where one is far removed from any ability to grow food, obtain one’s own water, etc. seems counter-intuitive to me. Now, if we’re talking about some “city of the future” with some mix of green, crop-growing areas and buildings, that’s different, but we won’t see that in our lifetimes.
- Cities, quite frankly, suck for the most part. They are full of crime and predators of the 2-legged kind. Corruption rules them from top to bottom, the pollution is staggering, etc. Nobody is going to want to live in such conditions. Okay, maybe not “nobody,” but if suburbian vanished tomorrow, don’t think everyone would move to the nearest big city. Some of us would find another way since I have no desire to be shot, robbed repeatedly, or spend my days tripping over druggies in the pathway.
That being said, the current surburbia model is flawed for a couple of reasons, but NOT because we need to cram all the people in one place.
- Surburbs are way too crowded and are full of far too many people who all leave the area and drive to work, and that work is often increasingly far away. Part of this is the Bubble-effect, making housing close to work unaffordable, but part of it is cost-cutting, lousy planning on the part of leaders, and the general destruction of America’s economy.
Why should the nearest decent job be 50+ miles away? What does that say about the state of an economy? Why are all the jobs crammed in a few places? Oh, it’s convenient… right up until the whole areas is gridlocked and overbuilt.
- Suburbs built with the assumption of cheap gas. Similar to the first one, but this goes deeper into stupid design choices that one sees these days. Suburbs with no sidewalks, no places to ride bikes, and finally, no places to actuall go to unless one wants to get in the car and drive, drive, drive.
I see a different future, one of much smaller towns, each somewhat self-sufficient because they will need to be - importing everything from afar simply won’t be practical. Similarly, surbubs built in absurd places (the middle of the desert, etc.) will be abandoned, and large cities will have to undergo HUGE changes if they want to attract people, including systemic elimination of the criminal population, reduction in pollution, and a vast increase in green space that may end up being used for crops or pollution control.
Just my thoughts.
Totally agree, PTM!
‘As a result, some healthy markets are being unfairly impacted by this negative media coverage.’”
__________________________________________
Notice that this lying puke does identify these mystery markets?
errr….. doesn’t.
this lying puke
I think there is some validity to the concern that negative media coverage is impacting otherwise healthy markets. But the problem is not the media, per se; it’s the facts that the media are reporting that are the problem. Darn that media for reporting the facts.
And in any event, the media coverage serves only to hasten the inevitable decline that is being caused by fundamental economic factors; it can’t actually cause the demise just as it didn’t cause the run-up. But I think some people genuniely believe that it can.
He doesn’t have to identify the healthy local markets because ALL local markets are healthy, or at worse “a bit slow”. It is only the national real estate market that is collapsing.
Exactly my point Groundhogday. The REIC always manages find a mouthpiece to babble more denial although most of the liars have been identified.
Lereah- check
Yun- check
Seiders- check
Kudlow- check
Meserow- check
Watts- check
Feel free to add your own to the Liars Club.
“‘We have buyers that are convinced that if they just sweat it out for a few more months, there will be a lower price or a better deal,’ Brewer continues. ‘Nobody wants to be made out for a fool to have paid more than the next guy.’”
Yeah, Captain Dipshit Obvious. That’s the idea. And, btw, I don’t think ANY buyers are “sweating it out”. You, on the other hand, could take a ride down a slip and slide.
Right! What the hell would buyers be “sweating out?” I for one am as cool as a cucumber and will continue to watch from the sidelines.
Its funny how the REIC is trying to instill fear. Rarely does it work. I can survive for years sans a paycheck… how many recent buyers can claim that?
I’m not even on the sidelines. I’m up in the stands with a big ol’ bucket.
Got popcorn?
Neil
This “sweat it out for a few more months” baloney is the sellers’ approach, not buyers’.
I just read a blurb where one of the drywall manufacturers is “waiting it out” for the eventual market recovery, but there, the wait time was expressed as a matter of 2-3 years. Well, at least the builders’ suppliers seem to have a clue.
Made for a fool… Yeah, I don’t want the neighbors to laugh at me if they find out I overpaid… NOT!!!!!
The lower price is about how much a month extra spending cash I’ll have AND my ability to sell later and pay off my exisint mortgage balance.
You are correct sir.
This was a very good article/opinion in Sunday’s Freep. However it was written by the CEO of ING Direct (aren’t they up to their eyeballs in toxic crap).
http://www.freep.com/apps/pbcs.dll/article?AID=2007711180612
Thank you. Difficult to believe a CEO of a Bank wrote that, but very true. With him as CEO may be ING did not play fool with as much subprime….I have some $$$ at ING Direct. When Fed ratge was 1%, long before others , they used to pay 2% savings rate with no strings. Been loyal to them since then, even though npw they are not paying the highest. (4.4% now…)
Saw that article too and thought it was great, and a rarity at that. But how many people will actually come around to thinking that way, in Detroit or anywhere else??
Blano - did you catch that special section with the Wayne County tax foreclosure listings? It was larger than the whole Sunday newspaper.
Sure did……that was a whopper!!! Saved the sections for around where I live and am going hunting starting next week.
“The latest quarter includes pretax charges of $278.3 million for inventory impairments and $40.3 million of write-offs related to land option contracts that the company doesn’t intend to pursue. The latest period also includes a pretax goodwill impairment charge of $48.5 million.”
The always mysterious $48.5 Million pretax goodwill impairment charge, whatever sort of gobblydgook it actually means?
Probably means they paid too much for something and are recognizing that.
Here ya go Alad.
http://www.investopedia.com/articles/analyst/110502.asp
When a company buys another company, almost always the purchase price is in excess of net assets (basically what you have after adjusting for debt). So, if company A purchases company B, and company B has 4M in assets and 3M in debt it would seem that company B is “worth” 1M. However, Company B is an established company, with recurring customers, knowledgable employees, established practices, etc. In practical terms, company B should be “worth” more than the sum of it’s parts/assets (assuming a relatively healthy company). This difference, since it is not tangible (like equipment, inventory, etc) is assigned to “goodwill”.
Periodically, companies have to “test for impairment”, meaning they must determine if the book value of goodwill is still worth what it was when it was initially recorded. If it is not still worth book value (actually it’s a bit more complicated, but this is an acceptable short-cut I think for our purposes) they have to write down the difference to represent the current market value.
For the most part, in theory, nothing about this is sneaky. Companies have value above and beyond the purchase price or market price of their underlying assets. If they don’t, they are probably doing a poor job of being a company. If a company gets purchased, obviously everyone on this board (I would think) would agree that the owner of the company to be purchased would and should expect the sales price to include not just the underlying assets, but the intangible portion of its value as well.
On the other hand, because of the subjectivity inherently involved in this valuation, this is an area where even honest professionals could have problems (such as mistakenly over valuing the company to be purchased) and dishonest professionals could use for less appropriate purposes.
“‘We have buyers that are convinced that if they just sweat it out for a few more months, there will be a lower price or a better deal,’ Brewer continues. ‘Nobody wants to be made out for a fool to have paid more than the next guy.’”
You mean like the folks in CA who paid $700,000 and asked for a $50,000 rebate, because the builder was selling off units for $400,000? LOL! Danged right, Brewer, the buyers who are left are pretty cagey, but don’t blame the media, these are potential buyers who didn’t belly up to the bar when the media was pumping the bubble. And I didn’t hear any complaining from the REIC then.
“Brewer continues. ‘Nobody wants to be made out for a fool to have paid more than the next guy.’”
The Greater Fool Paradigm.
but don’t blame the media, these are potential buyers who didn’t belly up to the bar when the media was pumping the bubble. And I didn’t hear any complaining from the REIC then.
Just gotta LOL on that one.
————————-
Exactly! I doubt any HBB’ers are “sweating it out” or worrying about getting in before they get priced out FOREVER!!!
The media doesn’t have an effect those who refused to buy above their means. We’re just waiting for prices to return to “normal” price/rent and price/income ratios. If they never do, guess we’ll just be lifetime renters. Nothing wrong with that.
“They dubbed it ‘The Survivors’ Conference.’ In early November, 2,000 people who handle asset- backed securities for a living crowded into a ballroom to hear speaker after speaker explain why 2008 may be their worst year ever.”
BWAHAHAHAHA! I called it the “Not Yet Dead” conference.
RE: “Not Yet Dead” conference.
Today’s quote from Robert Toll on AP blurb about builder’s pessimism regarding conditions around the country
‘FROM MISERABLE TO PURGATORY…”
hehehe…rebound in spring ‘08…tell me about it.
“BWAHAHAHAHA! I called it the ‘Not Yet Dead’ conference.”
Or maybe a ‘Dead Man Walking’ stroke-a-thon.
Weak-end @ Bernankes
Ok now dammit that’s just farking funny right there.
Wonder if there’ll even be a conference next year.
“Freddie Mac said its estimated regulatory core capital was just $600 million above regulatory requirements. In order to keep it from falling below that, it has engaged Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. to help consider ‘very near-term capital raising alternatives.’”
Pawn shop = ‘very near-term capital raising alternatives.’
What do you have to hock?
Freddie got hit by a Mack truck. Ouch!
Anyone know the rough financials for Freddie? Assets, capital, etc….? How much loss would it take for Freddie or Fannie to become insolvent?
I’m just loving how large Freddie and Fannie losses are putting an end to talk of expanding their role! Now if conforming loan rates would just rise a bit to better reflect risk.
CFC, FNM and FRE going down hard today…
1. FNM = pooped in panties
2. FRE = pee’ed in panties
3. CFC = diarrhea…no panties
depends.
Now you know why I avert my eyes when tipping liquid to my lips!!
Too funny!
Leigh
“CFC, FNM and FRE going down hard today…”
There are some big pension funds deeply invested in the GSE(s). Wonder how long its going to be before they report their resulting losses? Voters won’t appreciate this news.
The only long bond fund my 401k is offering is invested in Fannie to 30%. I wanted long bonds (treasuries, quality corporations) but passed on that Fannie offer.
“…but passed on that Fannie offer.”
Ya know fannie offers never come with a rain check option.
The bigger they are the harder they fall…
Are there any implications either for or because of the suggestion to guarantee GSE-securitized loans up to $1m? For instance, if no GSE bailout measure passes, I would guess this would be bad news for a firm that is heavily dependent on making Jumbo loans in CA.
Another interesting article which points out that the recent popularity of piggy-back second mortgages allowed PMI to dodge the foreclosure meltdown:
http://www.mortgagenewsdaily.com/11132007_PMI_Insurers.asp
Just thinking, what if you owned one of those homes that are 100k+ over what the nearest comps are…and it could get worse..unless it is your Dream home forever, wouldn’t it be an idea..let it go into foreclosure and everyone ie: you, get out from under the massive debt? It would be forever before you could pay off the mortgage/ sell it for what you paid…
Just thinking..
I heard that it was popular in California in the last housing downturn to send your lender the keys = jingle mail. You would get a black mark on your credit report; but if the mortgage was non-recourse, you wouldn’t have other financial set-backs.
“‘These events tend to become deeper and play out longer than most people initially expect,’ says Michael Mayo, an analyst who covers securities firms at Deutsche Bank AG in New York. ‘This is one of the slowest-moving train wrecks we’ve seen.’”
No kidding, Mayo, it’s killin’ us, too, we just want it to be over with, but your boyz have different ideas.
‘The Street wants things right away, but it doesn’t work that way.’”
I call BS on this. “Da Street” gets things right away in terms of rate cuts, tax breaks, you name it. All the good stuff. But “Da Street” won’t let the purge take place right away. Oh, no, they’ve just got to draw that one out, with spin and playing hide the salami with the real figures.
The “street” is still planning on bonuses in the neighborhood of $200k/employee! I’d sure like to live in that neighborhood, and you wouldn’t even have to pay me an annual salary.
Could someone out there answer this question from another blog?
“I thought that PMI was required for loans for more than 80% of the home value. Many of the troubled loans I’m hearing about seem to be loans for close to 100% of the value of the home. Yet I haven’t read any news of PMI, which should be covering the mortgages and consequently protecting lenders as well as Wall Street investors. It seems like we should be reading about an insurance meltdown instead of a mortgage foreclosure crisis.”
I believe those 100% loans are really 80/20 piggy backs where there’s a 1st of 80% so PMI is not required and then a 2nd of 20%.
I found this article:
PMI does not cover the full exposure of the lender. They are covering the top slice (maybe 20% in this case) plus some fees. In the case of a 90% loan, then PMI is usually 10% of loan amount. In order for the Lender not to void their claim for the PMI coverage, several things must happen. The lender must manage the default to its completion, usually foreclosure or a workout or short sale. Any agreement short of foreclosure must be approved by the PMI company.
PMI may want the house back following a foreclosure, in order to attempt to recoup any loss they may have due to a claim. In that instance, they may not approve a short sale.
PMI will often approve a short sale if the market indicates that they have no shot at recouping their loss or claim. Or often, there is some middle ground, whereby the Lender could sell it for 85 to 90% of the original loan amount, thereby reducing any such claim to PMI. Much like any foreclosure and dealing with Loss Mitigation, each case is different… not sure why, maybe it is the Rep you deal with, the latest whim of mgmt based upon their recent losses, et al… Those policies change all the time, so the best thing to do is ask… and see what they say.
Just know that unless you are paying 100% of what is owed the Lender, they will need to get PMI to concur with any decision on their part, so they do not lose their opportunity to file the insurance claim, except in the rarest of instances, a Lender may decide to forego the PMI claim.
http://www.delphifaq.com/faq/real_estate/f887.shtml
A couple of points:
1. PMI is only required if a lender requires it–with the madness going on, it wouldn’t surprise me if lots of lenders weren’t requiring PMI. Can you imagine an insurance company insuring a lender against losses without proving that the borrower has income (subprime, no doc loans)? I can’t.
2. Most of the 100% financing arrangements that I’ve heard of include a first deed of trust (going up to 80% of value) and a second deed of trust for an additional 20% of value (the “piggy-back” loan).
Don’t worry, an insurance meltdown is coming. Many of the RMBS portfolios had insurance against losses (in addition to the insurance that some institutions held on their own). Another vicious cycle within the vicious cycle.
Increased defaults/foreclosures==>Lowered ratings on RMBS==>lowered values of RMBS==>lead to losses for the lenders==>trigger claims on insurance==>lead to weakening insurance companies==>lead to lowered ratings on insurance carriers==>which lead to lower ratings on RMBS since the insurance is part of the safety of the loan.
There is an PMI insurer meltdown going on.
Yep - another great selling point for the mortgage brokers at the time, why pay PMI - after all your house value is only going to go up - instead get an 80/20 loan and that “PMI payment” can go towards paying off your loan faster or maybe allow you to afford a bit more house instead!
SaladSD has a good link above.
PMI won’t cover jack if there is a whiff of fraud or corruption.
This will be their only out.
This mortgage mess is a virtual gold bonanza for litigation lawyers.
hd, I would think it would be a bonanza for litigation lawyers, too, but the last part of Ben’s post would seem to indicate otherwise.
Yep, I’m hoping PMI has a field day declining to pay out.
I think those are business attorneys who were doing to legal work on the front end of the securitization. Litigators will be working overtime for years.
RE: hd, I would think it would be a bonanza for litigation lawyers, too, but the last part of Ben’s post would seem to indicate otherwise.
Big P~…These laid-off lawyers are the fancy pants deal doer’s not unlike, the 3 piece suit, big lunch, L/O stiffs who do the front end schmoozin’ with real estate agents for XYZ bank or mortgage company.
As we know they’re all toast.
Who will be in demand are the nasty pit-bulls willin’ to get down in the trenches, not unlike the foreclosure work-out guy who has to clean up all the garbage created by the greed and recklessness of the hot-shots in the loan dept.
I still maintain that once the Cuomo investigation blows the lid off eAppraiseIt and exposes the massive systematic corruption and rackeetering inherant in the collusion between lender and appraiser-the PMI’ers will exploit the knowledge to keep from paying off.
Hell all I’d do is subpoena the appraisal records from XYZ Loan company and say-Well, Mr. President Loan Guy…seein’ as there are 2000 licensed and certified appraisers in your county, why was 95% of your work done by 2 individuals?
Perhaps, because they always gave you the number you dictated to them? Seems one of these guys with less than 5 years experience paid cash for a half $$$mil of residential property.
Is this the norm for a lowly, newly minted real estate appraiser with a high school degree?
With back up from Cuamo’s investigation, these loan chucks won’t have a chance in front of a jury.
I see the vision you see hd74man . Would love to see the defense the Lenders/Appraisal Co. comes up with …..
A Federally-insured depository institution (FDIC, NCUA) cannot put into its portfolio a home loan where the LTV is greater than 80% unless it is insured (FHA, VA, or private mortgage insurance).
As for the piggybacks, the FDIC-insured institution would hold the 80% 1st mortgage loan while the 2nd mortgage loan was pooled, securitized, and sold through Wall Street. The holders of the securities backed by the 2nd mortgage loan, the piggyback, are effectively at risk for a 100% loss should the borrower default.
I have a question about my put options. My brother told me that the holders are likely to default leaving me with nothing if the economy tanks and that according to a banker friend this happened before in the 1980’s. Is this something to be concerned about. I have never been a stock investor, but being unable to buy a home for a reasonable price, i have been buying puts for the last several months and selling them before they expire. I am comfortable with the risk of the market going up, but is there a risk of the put sellers defaulting if we see a crash? thanks in advance for any advice.
That’s been brought up before here, and not sure if there were any definitive answers. I think there is a chance of that happening, but not sure of the odds. Of course, if you have made good money and sell, not a problem for you.
Puts as in put options? In that case you don’t really deal with sellers. You are most likely dealing with OCC and if OCC defaults… well, then you have a much bigger problem than losing money.
Thanks.
To me, another thing that is crazy is that people,RE agents and banks don`t try to hide the 80/20 piggy back loan scam from anyone. Its a total scam and people are like, yea, so what. I paid it for a couple years back in 1993 and did not gripe or try to cheat my way out of it.
Lane
“‘When we realized this wasn’t a transient event, we decided to size our staff to what we anticipate demand being,’ Nelson said. ‘It’s nobody’s fault that the market has caved in.’”
Nobody’s fault? Your clients indicate otherwise.
http://www.mckeenelson.com/ourfirm/index.cfm
“Our White Collar/Investigations and Enforcement Group represents numerous high-ranking current and former Enron executives in connection with the multiple ongoing criminal and civil investigations of the demise of that company, on issues ranging from accounting fraud and insider trading to technical allegations relating to commodities trading and ERISA.”
A real feather in their caps, lemme tellya.
Thanks, Catherine. Like I said below, I would think these guys would be gearing up for a massive demand for white collar criminal defense attorneys. Maybe they know something we don’t. Then again, maybe like their clients, they’re beyond stupid.
Nobody’s fault?
It was Ben Jones’ fault!
“New York law firms are cutting associates for the first time since 2001 as the collapse of the subprime mortgage and credit markets causes private equity deal volume and structured finance work to slow.”
Sheesh. You’d think these white shoes would be gearing up for investor and government lawsuits, big-time bankruptcy work, etc.
Business attorneys are not litigators, and vice-versa.
That’s why most strong, stable lawfirms have both a business practice and a litigation practice. When one area is slow, the other area is generally busier. Happened here in the Bay Area during the dotcom blow-up. IPOs slowed, but shareholder lawsuits skyrocketed. Some attorneys were busier, others, not so much.
I can imagine if your business was putting together private equity deals and structured finance deals, you are playing a lot of golf. If your business was litigating fraud, you’ve sold your golf clubs, as you won’t need them for a while.
“Chuck Schumer is lucky Congress ignored him. We’re referring to the New York Senator’s idea, which he has loudly promoted for months, that Fannie Mae and Freddie Mac should ride to the rescue of the housing market by buying up unwanted mortgages and guaranteeing them. Now those two mortgage giants are themselves under scrutiny amid concerns that they’ll report big losses.”
H.P. Lovecraft has nothing on senator photo-op…
It had all the makings of a horror flick, call it:
“Chuckie, the Re-Animator”
“Chuck Schumer is lucky Congress ignored him.”
Schumer is lucky? Heck, WE’RE lucky, but we’re not out of the woods yet.
And to think, I used to like Chuck. He used to be a loud voice in support of our working middle class.
He’s a perfect example of what happens to career politicians once Wall Street grabs ‘em by the boo-boo.
[Cheech starts toking on the giant joint]
Chong: Toke, toke it up, man!
[Cheech starts choking]
Chong: Kinda grabs ya’ by the boo-boo, don’t it?
Cheech: Hey, how am I driving, man?
Chong: [looks around] I think we’re PARKED, man.
Chuck’s more like Gloria Swanson, in “Sunset Blvd”
[last lines]
Norma Desmond: [to newsreel camera] All right, Mr. DeMille, I’m ready for my close-up.
2 more in WAPO trying to pass a bail bill
“Chuckie, the Re-Animator” battles Georgie, the decider. A classic horror flick of epic proportions.
Godzilla vs Rodan?
More like “Dumb and Dumber”.
D’ya think BB knew about the GSE subpoenas when he made the $1m guarantee suggestion?
“We have buyers who are convinced if they just sweat it out…”. Sweat it out? Hey dude, who’s sweating it out? Here I am in my recliner and the only sweating out I’m doing is refilling my beer mug. Which gets easier and easier, ’cause every time I go out and buy a sixpack, houses drop in value. Maybe I should drink more beer.
‘Maybe I should drink more beer.’
Always, always, always a wise choice, my good sir.
Careful Otto, sellers may get back at you by “pulling their house of the market”, that will really make you sweat. ROTFLMAO
Wall Street is increasingly…
The House of Broken Ploys.
“Freddie Mac said its estimated regulatory core capital was just $600 million above regulatory requirements. In order to keep it from falling below that, it has engaged Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. to help consider ‘very near-term capital raising alternatives.’”
Don’t drop the soap, anyone.
I think the US’s much ballyhooed “financial services industry” (just about the only industry we’ve got left) is about to go the way of the US’s automobile industry. They’ve finally put out the financial equivalents of the Edsel.
gov enterpize , need we say more
I bet bb is moving printing presses into the basement as we speak
The worst housing slump in 16 years caused “significant deterioration” in the third quarter that will continue through year-end, Freddie Mac said in a statement after reporting a net loss of $2.02 billion, or $3.29 a share, three times what some analysts estimated.
“It’s as bad as it possibly could be,” said Howard Shapiro, an analyst at Fox-Pitt Kelton in New York. Shapiro today downgraded Freddie Mac shares to “sell” from “overweight.”
So much for the “guarantee.” Chuck Schumer, are you listening?
And worse…
Wells Fargo & Co. Chief Executive Officer John Stumpf last week said the housing market was the worst since the Great Depression. Banks and securities firms worldwide have already reported about $50 billion in losses from subprime mortgages, loans given to borrowers with weak credit, that have been defaulting at a record pace. The total damage may reach $400 billion, Deutsche Bank analysts said last week.
Finally, the engineer can see the train wreck coming at the crossing.
“The total damage may reach $400 billion, Deutsche Bank analysts said last week.”
I can’t even wrap my mind around that figure. On the other hand, when you’re talking figures that the central banks just write down in a book, who cares?
“$400 billion” = the approximate combined wealth of the ten richest citizens on the planet
Well Palm…. A better way to gauge losses associated with housing is to consider it about one third the monetary cost of the Iraq failure.
400 billion is only $1250 for every man woman and child in our country. No big deal.. right? 400 billion is round 1, round 2 will be another 300 billion, round 3 will be another 200 billion…. until total losses are over $2T.
Wow. That’s an interesting way to look at it, GS.
We know it’ll be be interesting when even the big Wall Street crooks start comparing the events that have happened (and what is yet to come) to the Great Depression.
They lead us to this ruin, I just hope they have to eat most of the crap that results from it!
It seems like the $1m guarantee and the Superfund SIV proposals face similar problems. How do you guarantee or pool assets when nobody on the planet has a clear idea of how low their market value has fallen?
‘This is one of the slowest-moving train wrecks we’ve seen.’
You’ve got that right.
BTW, 1.2 million permits/starts/completions per year is getting there, but it is still too high. We’ll have to get down below 1 million for a few years to offset the many years over 2 million we have had. Lower, but still not low.
WT, one of the things that’s happening in FLA, is that developers and land owners are rushing to get re-zonings, even permits, etc., any of the open-ended goodies they can get their hands on right now. Most don’t intend to do anything at this point, they just want to have it the future in case the “hometown democracy” movement is voted in, which it looks like that might happen, at least in West Central Florida. Developers and land owners are crapping their pants that they may not be able to do what they want with their land, because people around here are pissed about the unfettered, ugly growth.
Can you tell a little about this hometown democracy stuff?? Thanks.
Here ya go, Blano. Probably the most neutral link. If you google under “Hometown Democracy Florida” you’ll get some other links, some for, some against.
http://www.flhometowndemocracy.com/?gclid=CLn4ob-J7I8CFQMsFQod0R7OKQ
I’ll take the ballot box planning of the big money developer infested master planning hands down. What big corporate money did to what was formerly pristine rural land is outrageous.
I actually like the idea. The developers hate it, of course and so do many business and gov interests. However, it would be great to see more people get involved in their local gov and it gives the people more of a voice and an opportunity for reality based civics education. We couldn’t possibly do a worse job than our elected officials. Had I based my first buying decision on what the comprehensive plan for the county showed back in 2000, I’d be screwed today, because of course it changed within a year. I was assured by the land planning dept that they were going to keep things “rural in nature” in a certain area. It’s all paved over with massive development today, not to mention they had a huge ammonia pipeline leak and people had to be evacuated.
Thanks!!
We have something like this in Maine. Last week, Wiscasset voted against a change in their plan that would have opened the door for a gassification plant on the grounds of what used to be the Maine Yankee nuclear power plant. Last summer, a bunch of towns voted against big box stores, despite or because of an expensive campaign by the Bentonville folks. People here fight development tooth and nail.
“‘These events tend to become deeper and play out longer than most people initially expect,’ says Michael Mayo, an analyst who covers securities firms at Deutsche Bank AG in New York. ‘This is one of the slowest-moving train wrecks we’ve seen.’”
A very interesting point. Most financial catastrophes move quickly because the ex-assets are fairly liquid by comparison to real estate. Since RE transactions have high friction, and loan resolution now has high friction due to securitization, this train wreck will provide extended spectacle for long term popcorn munchers, and long term pain for “playas”.
” this train wreck will provide extended spectacle for long term popcorn munchers, and long term pain for “playas”.”
And a long-term pain in the arse for those of us who just want to see RE bottom out and get back to normal. Groan!!!!
Was it Paulson or BB who spun the “all contained” BS.
http://www.bloomberg.com/apps/news?pid=20601087&sid=atzHj5IWr2ms&refer=home
Whoever it was ought to be put in the back of an Army truck with a dunce cap on and a placard with his infamous line hung about his neck and driven around DC, similar to what the Chinese Commies use to do to those who strayed from Mao’s enlightened path.
While they mob is at it you can put Greenspan and Arnell up there too. Any others?
Now that would make my Thanksgiving.
Perhaps cork-up all these wind-bag RE shills, too… tie strings around their necks to keep their bloated-asses from floating away, and attach them to said trucks rolling down the parkway.
Would give the Macy’s parade a run for its money…
Paragone
“Shares in mortgage lender Paragon Group plummeted 46 percent in early trading Tuesday after it disclosed difficulty securing new financing because of the subprime lending crisis in the United States. Paragon is Britain’s third-largest company specializing in ‘buy-to-let’ mortgages, for buyers who intend to rent rather than occupy a property.”
‘buy-to-let’ = yet another doomed bubble-era investing craze
Effects on Society
In the UK, “buy to let” has been described by some as the epitome of what is wrong with British society. The basic idea behind buy to let is “How do I get someone else to work for me?” or “How do I get money without having to work?” This forms much of the basis of real estate investment.
Buy to let owners can effectively become unemployed and yet still receive massive incomes. Not only do buy to let dealers make money from rent, but they can and often do make massive profits on the sale of their housing stock. The result in the UK has been a wealth divide never seen since Victorian times. Buy to let, as a form of real estate investment, together with shrewd banking tactics have driven up house prices in the UK to such an extent that first time buyers, who genuinely need a first home, let alone a fourth, can’t afford to get a foot on housing ladder. It has become a massive problem in the UK which cannot be underestimated.
http://en.wikipedia.org/wiki/Buy-to-let
I’m amazed that anyone still considers this the “worst housing slump in 16 years”. Anyone that doesn’t see that we crossed over into “worst housing slump since the great depression” several months ago is a fool.
Foreclosures, price drops, sales drops, etc. have all already surpassed the early-90’s and early-80’s downturns in almost every area of the country, and the situation is deteriorating more rapidly every month.
“the situation is deteriorating more rapidly every month.”
Not fast enuf, IMO. When I still see some prices in the Tampa Bay area at over a million for a faux mansion, there’s still denial. Nothing in the Tampa Bay area is worth over a million, unless it is in Sarasota and even then. Not to mention $700,000 properties in Pinellas County. ST. PETE, for chrissakes. ST. PETE!!!!! Gotta be a joke.
Question is though - are those *asking* prices, or *sold* prices? Asking prices are meaningless right now, especially in your neck of the woods.
BTW - not sure if you own a home or not - sorry if you do - but I’m loving every minute of the Florida crash. I have relatives down that way, and would like to eventually buy some property for retirement, with water access. The way it’s looking now I should be able to get something real cheap in about 5-10 years.
packman, I’m insulted you would even ask if I own a home here! LOL! (just kidding). Nope, I rent. Ex and I sold our abode at the top of the market, in 2005. I’m looking forward to buying back in when the time is right.
Way to go!!
I dunno Packman. The early 90’s were bad. Real bad… And I don’t see us at that point yet. At least not in the northeast but my money is on the fact that it will be much worse than the early 90’s. We are so into the early stages of this yet that I think whats coming will shock even the most bearish among us. At least housing anyways.
“Vince Cable, the acting Liberal Democrat leader, said taxpayers’ money had been used to prop up the bank and provide a profit opportunity for ’spivs in the City.’ He called for the UK Government to nationalise ‘temporarily’ Northern Rock to provide stability before it could be sold off.”
I believe he is pretty much calling Darling, a wanker.
tee hee, am I (originally from London) one of the few who know what that is?
“While overall housing starts edged up to an annual rate of 1.23 million from 1.19 million in September, topping forecasts, that was due to a blip of sorts, a 46 percent spike in the more volatile starts in buildings with five or more housing units.”
Translation: The economy will need more inferior housing (apartments) when those who are foreclosed need a cheap rental to live in.
“‘There’s a massive over supply, right now the mortgage market is tightening up, and people are running away from a free-fall,’ he said.”
I can’t get the image out of my head of a bunch of naked swimmers running away from the beach towards higher ground as a 100 foot high tsunami races in towards the shore…
“‘Builders are worried that the national media has tended to report negative housing stories as if there is one real estate market, when, in fact, there is no such thing — all housing markets are local,’ said NAHB President Brian Catalde. ‘As a result, some healthy markets are being unfairly impacted by this negative media coverage.’”
But with the impactment of the subprime securitization sump pump, the crunch in real estate lending is potentially global.
All housing markets are local, and all financing is global, hence the bubble and ongoing bust.
“However, Jim Cousins, the Labour MP for Newcastle Upon Tyne Central, said nationalisation would mean ‘a slow lingering death’ for the 6000 jobs at Northern Rock, its assets and the reputation of Britain as a major financial services centre with Mr Darling playing the role of undertaker.”
What’s it gonna be, Darling…
Wooden Stake or Silver Bullet?
“The fourth quarter will also prove ‘difficult,’ CEO Richard Syron told analysts today. ‘There is nothing we see right now to be more optimistic,’ Chief Financial Officer Anthony Piszel said.”
Must be time to buy the dip on FRE, then.
“‘The collateral is not yet problematic,’ Whalen says. ‘That’s the next big shoe to drop.’”
“‘Until housing prices bottom out, the writedowns won’t stop,’ says Peter Kovalski, who helps manage more than $12 billion. ‘The Street wants things right away, but it doesn’t work that way.’”
- Juan Sixpack is no longer buying pick up trucks, big screen tv’s, boats, ATV’s, vacations…. well, you get the pictures. The damage is very deep and very wide….even illegals are not sending home the same amount of money.
Juan Sixpack investor apparently isn’t buying any ol’ paper that gets thrown his way these days, either:
http://blogs.wsj.com/deals/2007/11/20/chrysler-financing-deal-postponed/
Just another $200 million of collateral damage.
Daimler Benz to Cerbrus: “Give us Chrysler back and throw out Nardelli.”
“Give us Chrysler back and throw out Nardelli.”
Sheesh, Nardelli. Failure is success.
Just wait until Chrysler bellies up…all these go-go corporate LBO loans from earlier this year that the IB’s couldn’t pawn off will be the next round down when they go bad.
Gee, hmmm… you know, if we had kept our jobs in THIS COUNTRY and PAID PEOPLE appropriate wages instead of outsourcing everything, reducing most jobs to McJobs with unlivable salaries and no benefits, and substituting actual earnings with debt, maybe this problem wouldn’t have happened? Oh, but then the “Masters of the Universe” on Wall Street might have only been very rich instead of digustingly ultra-rich. Can’t have that, can we?
Speaking of free falls, what does it mean when all the entries on this page of form XXX-USD are green, all those of form USD-XXX are red and the only one showing a change of 0.000 is USD-ZWD?
http://www.bloomberg.com/markets/currencies/eurafr_currencies.html
Cost of Thanksgiving dinner up 11 percent from last year
= no inflation
Is it too late to get them in this year’s Guinness Book of Records?
“Contracts on New York-based Citigroup, the largest U.S. bank by assets, rose 16 basis points to 95 basis points over the past two days, according to broker Phoenix Partners Group, setting a record today for the seventh time this month.”
How does bailout for hire work?
Freddie hires Wall Street banks for bailout
Heidi Moore 20 Nov 2007
Freddie Mac has hired Goldman Sachs and Lehman Brothers to help it raise capital as its depleted coffers come dangerously close to violating the minimum funding requirements regulators have imposed on the agency.
http://www.financialnews-us.com/?page=ushome&contentid=2449226663
Just wondering - one of the problems at Fredde MAc is their holding of subprime loans. However, I thought they could not buy these types of loans. Is this correct?
Good news for DC/MD HBB’s.
“Defense Secretary Robert Gates on Friday signed a memo ordering the Army to begin planning for a series of expected cutbacks, including the layoffs of as many as 100,000 civilian employees and another 100,000 civilian contractors, starting as early as January.”
http://news.yahoo.com/s/ap/20071120/ap_on_go_co/us_iraq
Forward to that a$$ clown “Lance” at BubbleMeter!
He also writes alot on the NoVa Bubble Fallout blog by Harriet. He is rather amusing, with his $1m townhouse in Dupont Circle. Who would ever want to live farther out than the Beltway??? It’s only farmland and hicks out there in Fairfax.
Stocks just crashed over 100 points in the last 10 minutes. What did the FED minutes say? Probably not very good.
Last cut had alot of debate and was a close call.
Well the dollar dropped like a rock today, and oil shot up over $2 so the sucker rally died.
“Stocks just crashed over 100 points in the last 10 minutes.”
Dow Drop Inn.
Anyway, the Fed minutes were a lot of “maybe”, I guess that’s the problem. People don’t like “maybe”, it doesn’t give much scope for prediction. “Maybe” actually drives people insane. I’ll bet the markets would be better off if the Fed said no more cuts, from here on out, we’re raising. At least you’d know where you stood. This way, Fed acts like a cocktease and the big swinging dicks on Wall Street don’t know whether they’re going to get laid or not.
Never mind, I spoke too soon.
Freddie Mac takes a $2 B loss only 1.5 years into this housing market correction? How did this happen when they are supposed to be buying prime loans, using sophisticated underwriting models?
I hope this puts a stop to the crazy idea that Freddie and Fannie should increase their loan limits from $417,000 to $1,000,000. They do not have the capital to support this, and the result would be probably 60% of their loans coming from California. The biggest beneficiary of increased loan limits would be lenders like Countrywide. The biggest losers would be tax payers who will have to pay for a bigger bailout, and home buyers permanently priced out of buying a home in high priced areas like Calif.
Loan limits for Freddie and Fannie should have decreased this year based on the formula. They are holding them level, but decreasing them would help affordabilty.
Somehow or the other, subslime crept on to FRE’s balance sheet. Sneaky ole’ loans!
Mwhahahaha! Oil trading up $2 to 98 and change…. MWHAHAHAHA…
Allen Greenscam promised me that as long as I didn’t travel outside the country a weak dollar wouldn’t affect me;
By Mark Shenk
Nov. 20 (Bloomberg) — Crude oil rose more than $2 a barrel, heading for a record close, after the U.S. dollar declined to a new low against the euro.
“As the dollar falls, U.S. refiners need to bid more to compete with overseas consumers,” said Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. “Investors look at crude oil as an inflation hedge. The weaker dollar also cushions the effect of higher oil prices in other countries so demand doesn’t take the hit you might expect.”
Thanks Greenscam.
You can’t make this stuff up…now that CFC has tanked from $40 to ~$10, an analyst downgrades the stock from “Outperform” to “Inline.”
Hello? Any analyst that has an “Outperform” on a plummeting stock should not be taken seriously, and thus not be able to cause a stock to drop further. [Shaking head in disbelief].
html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
Countrywide stock sank almost 12% after Fox-Pitt, Kelton analyst Howard Shapiro said the nation’s largest mortgage lender’s viability to remain in business is likely in jeopardy if Freddie and Fannie — both beset by third-quarter losses — are not able purchase its loans. Shapiro downgraded the stock to in line from outperform, in a note titled “The Lifeline is Withdrawn.”
http://www.thestreet.com/_yahoo/newsanalysis/banking/10391109.
I never pay attention to analysts, but i think the ratings “outperform”, etc, are compared to others in the same industry. So the stock could still be plummeting, and it “outperforms”. (Not true in this case, though!)
IndyMac one year ago was trading at $47. Today, $7.95. But they’re not making any more IndyMac! In the long run, IndyMac always goes up. Don’t worry about short term IndyMac corrections.
Group Hug HBBers.
Its worse than we ever thought now.
I know a guy who has to make 7k to 10k a month shorting or else he can’t pay all his mortgages. Is this a typical amount for shortcakes?
I’m preying to my 90 day bills. Thank you for not taking away my principal.
Good luck to him on that one!
Of course, it all depends on how much he’s playing with.
THANK YOU STUPID LENDERS AND FBs! SRS AND SKF are going to fund my retirement!
Here comes the last half hour of the day PPT.
Apparently high oil prices are now good for the market because it boosts prospects for the energy companies?!?! And a good report from Nordstrom means all indexes should rise? That’s what Bloomberg seems to think. I am clueless about all this.
They simply have a short attention span and total inability to join the dots. Just like morons in SF that now want to stop all shipment via Bay because it might cause another accident (without realizing that their iPhones and iPods are coming via that exact path).
Amen! I’m in northern CA and I’m sick and tired of all these treehuggers driving their SUVs to WholeFoods (”it’s to keep the kids safe!”) while chatting on their child-labor chinese-made iPhones.
People in LA (where I spend a few days/month) are actually LESS FAKE! They drive their Hummers, but they’re PROUD of it! (”If I don’t someone else will), instead of trying to rationalize it.
L.A. and S.F. has the most unusual relationship…
People from el lay really like baghdad by the bay, and the bay aryans really dislike el lay.
It’s funny seeing the market go up AND gold go up today, after two days of the market dropping AND gold dropping. Clearly one or the other is mistaken….
I agree with what most of you are stating and can really relate to your frustrations. To start with; most, if not all managers are nothing but kissa$$ corporate idiots that are made to be company clones. They have little or no brains at all. As a matter of fact most of them have an IQ of 69 (mental retardation level). They can not make decisions on their own. They go behind their big office, close the door and call their bosses to get answers; reason being, they don’t want to lose their jobs by making a decision that makes their bosses look stupid. They micro-manage to justify their job. They make everyone’s life miserable because they ARE miserable. They don’t have a life; chances are their relationships with their spouses suck. Maybe the spouse is even cheating on them! Tele-commute, are you kidding! Then they (managers) would not have a job; out of the question. For these reasons and more; I quit corp america and am working alone from home-thank you very much!