Bits Bucket And Craigslist Finds For November 25, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Robust Start…
As always the well trained American consumer does their job! No problems here, just say charge it pleases.
http://apnews.myway.com/article/20071125/D8T4EQR00.html
I would expect a rally on Wall Street based on this nonsense. When you read into it all you can see is that profit margins must be way down. That is what those discounts are doing. They generated more sales but at lower margins. They probably stole demand from the rest of the season as well. Good job, retailers. You are borrowing the homebuilder model.
NYCB, how do we even know these numbers are real, in the first place?
I don’t believe any of the numbers that I see from these tools. But it’s not really my opinion that matters when it comes to rallying the market. The reality of this economy comes out in fits and bursts between the bulls–t of the “official” numbers that we see. The shills love all of these bogus numbers. It confirms their existence, until the next dose of reality hits them between the eyes.
NYCB,
I can’t see how WS can still believe the analysis that is being produced. I wish I knew what they are really thinking. I assume that it is a case of being in their “best interest” to base “investment” decisions on this garbage. I do know this: investment is NOT what WS or any of the “markets” (ABCP, financial, stock,etc) are actually doing. They are gambling pure and simple. Nothing more.
Roidy
P.S. I see nothing wrong with gambling. We just need to call it that. A pitcher of pee is a pitcher of pee. A pitcher of beer is a pitcher of beer. It is a mistake to confuse the two.
They come in pints?
What’s good for the Merrill and friends is volume. Note the recent $38B bonus expectation for just a handful of these companies (outside the subprime divisions). $200K per head !! (’course the trickle down theory works here as the admin staff each get a buck 2 ninety-eight)
I suspect many of us simple folks ( and the companies we work for or fund our IRA’s etc and that invest in the market) are trying to use the stock market to get healthy in their accounts.
If you were upside down in your own “investment” gamble of a house (refuse to call them a home) and facing increasing mortgage payments, you’d likely continue to gamble if you could, too.
The data’s from a company called ShopperTrak, which apparently measures foot traffic into stores -not actual sales- which of course foot traffic was up because stores were open longer — I’m a bit skeptical..
I did some contract work for them I think. They put in these bizzare little boxes above the entrances inside stores. A camera and on-board computer (all in the compact little box) can tell if people are walking into or out of the store optically. It then dials out via directly connected modem every night and reports the numbers.
I’d not be surprised if the numbers are real. You have to remember that the deals were insane. I’m more curious if the consumer has spent its allowance in two days.
I think so, my sister was out and about this am (chicago northside), said stores were dead.
went to wally world for dog food and toothpaste, store… dead. Wait to checkout 0 seconds. only four registers open. Inventory to the ceiling.
went to mall for haircut, price down from 16.50 to 13.50 (I only get two haircut per annum), left a 6 dollar tip…wait to haircut, 0 seconds.
Rite Aid for milk, all registers closed. Couple from Germany disgusted at lack of attention at the front counter, deposited 10 dollars worth of food on the counter and left. I thought I saw them throw away some dollars as they went through the front doorway. store dying… wait to checkout 45 seconds.
folks, this was 12 to 1 o’clock on Sunday afternoon.
mood of the sheople, downtrodden, defeated, apathy…palpable.
I went to mall today and to Best buy on Saturday, and there was no traffic at all. Food court is usually crowded with people, but today it seems desolate. I do not believe that there was any significant sales increase over the weekend at least here in NoVA.
Good point- Who spent Saturday collating all the data from 1000’s of locations? I couldn’t put it togther in a period of 6 months with good reporting or do thay have a HAL who personally knows each companies data base?
OK, here’s what I don’t get about this blog - the doom & gloom. I can understand having the foresight to know that housing had become unaffordable. But as far as the apparent hoped-for collapse of the general economy - to what end? Personally, my work has never been better, I suspect that holds for many professional and self employed technical workers. Of course, if you think you can make a living by running the local Panda Express you might come up a little short in today’s economy. Point being - stick to housing! This OT stuff is getting to be nonsense drivel.
And I quote:
“Please post off-topic ideas, links and Craigslist finds here.”
But I’ll answer your question, from my point of view: I don’t want to see the economy collapse, as such. I want to see the “house of cards economy”, which is based on lies, credit and not much in the way of production, go down in flames like a Malibu house in the fire zone. I want to see some truth and ethics in business and finance and I want to see intelligence emerge in the US population as a whole. For that to happen, perhaps this current economy has to implode. But is that a bad thing? Sometimes you have to apply the wrecking ball to a hazardous, unstable structure in order to build something strong and stable.
I second that, Palmetto!
Personally, I would love to see a shift from this “service-based” economy back to one that actually produces something of value.
We made great, high-quality products and had many inventive ideas — not to mention our agriculture (hope we get past all the droughts). We need to see income moving from “hedge-fund” types and entertainers and back to people who WORK for a living.
Your post is OT from the bits bucket.
When the weathermen forecasts a tornado or a hurricane is he being gloomy? Or is he just looking at the data and making an assertion?
If you think this all starts and stops with housing, you haven’t taken the time to study the historical implications of credit bubble dynamics. We don’t want bad things to happen, we just want a return to balance and normalcy where savers aren’t punished.
I will say this much: When I first started reading I too thought some of the posters here were overboard, although it was very clear there was a bubble, and the pain would be felt. As a survivor of the Bay Area 89 downturn, that was clear to me.
I did not think the results would be as widespread as they turned out to be. The posters here were right about the extent, and I was wrong.
In other words, what I too had perceived a couple years ago as negativism and pessimism turned out to be true…
tbgpalisades,
I am thinking along the same lines, there will be pain inflicted in areas of the economy due to over irrational lending/spending on homes. However, I believe it is good for the economy that home prices are starting to decline a much needed correction.
The overall economy seems to be holding OK. The markets will dip and change– (potential time to buy), Even before this weekend, I was supprised at the number of shopers - mostly women- at Target recently..
Troll alert.
Hey PB I have had this name since I have started posting on this site for well over 1.5 years. I keep the same screen name- At least!
OKLL — since you raised it, how frequently have you posted here?
When you put a roof on a house you had better understand the dynamics of the rest of the structure.
“Hey PB I have had this name since I have started posting on this site for well over 1.5 years. I keep the same screen name- At least!”
I have had the same screen name, too, except for a period of time after some troll hijacked my original name (Professor Bear), at which time GetStucco got started.
And BTW, even though you say your screen name is unchanged, I can’t recall you posting before today (spelling ineptitude always grabs my attention!). Are you quite certain you are not the reincarnation of LV_Landlord?
You know PB several of us have been here since the start (or close to it anyway). Like you I posted under another name until it was stolen (elsewhere, not here) so looking for another screen name that I could remember I started using my middle name. And now use it on other sites as well. So far its turned out ok.
And as far as sites go this is by far the very best in every way.
Seeing the dogpile…
I’m quite sure I’ve seen OK LL post here before. Not very often, but definitely rings a bell — and he/she was one of the more optimistic ones then, too.
Believe I’ve seen him in a few threads where other posters were dissing OK.
Just my $.02.
“overall economy seems to be holding OK”
IMHO the overall economy is trembling under massive debt in a deflationary crisis. cmon back when the panic of ‘08 makes the little august flatulence feel “toppy”
Dow theory hits the exit button.
Market timers? still all in at S&P 1450
Oil has not even topped a hundred dollars, yet
Securitization, dead in the water.
looking for triggers? if the long end yields start to spike, the game is over…divergence of Mortgage rates from the 10yr has begun.
“(potential time to buy)”
Please deduct (- subtract) all the homes sales in the last 5 years that where purchased without 20% down…now try to match that number with “potential Buyers” going forward into the next 5 years that will need to have 20% down…If I were a real estate agent that would be my Gloom…If I were a mortgage lender that would be my Doom.
Hwy50 — cash down payments — that is another area that I think is under-analyzed and underreported in the MSM. It is not like down payments are going to be waived by some miracle — not when so many funders of bad mortgages have been burned. Yet no one, to my knowledge, has analyzed how much cash on hand that typical prospective buyers have. Likely it is very, very little. Little enough to blow a big hole below the waterline of the SS House-Price.
“…Even before this weekend, I was supprised at the number of shopers - mostly women- at Target recently”
Confirmation bias…
Self discover your “potential” others:
http://amisharesuffering.blogspot.com/2007/01/circumstantial-evidencelike-when-you.html
It is a fact that the economy has been carried by a consumer, not business for last several years. It is a fact that the growth in salaries did not match the growth of consumer spendings. It is a fact that the US has no savings.
It is -accepted- that the US consumer used appreciation of housing as a method to tap the newly minted equity to finance consumer spendings. Given that now we see the easy access to home equity go away, where is the consumer going to get the money to maintain healthy apetite for goods and services? I really want to know because if there is something that US consumer is about to tap to maintain his/her buying power, then as a businessman I should be looking at the badly managed struggling enterprises whose owners are convinced that the market for their products and services is gone.
“It is a fact that the economy has been carried by a consumer, not business for last several years. It is a fact that the growth in salaries did not match the growth of consumer spendings. It is a fact that the US has no savings. ”
Amen. I remember last holiday season watching a woman in an evening dress climb into a Hummer with a gallon of milk in the supermarket parking lot. In the store, I saw plastic, fake-fur covered singing/karaoke deer heads for sale. That’s right, wall-mountable singing deer heads with built in microphones so one can sing right along. Driving home, I viewed rows and rows of ugly Mc Mansions–built so close together—one couldn’t risk swinging a golf club without skull-fracturing their Mc Neighbor.
Now, I think it’s pretty clear to anyone with an ounce of sense that people are buying Hummers and Mc Crapboxes for reasons other than bighorn hunting in the Yukon or needing 6 bedrooms and 3 baths for a family of ten, but what’s really sobering is some total piece of crap novelty deer head with the entertainment value of a milisecond being successfully marketed and sold to Mr. and Mrs. 6pack.
That’s when I knew it (bubble burst and economic fallout)was going to be much worse than previously believed.
DOC
DOC, one of the funniest (or pathetically weird) things I’ve read was in my local RE section of the paper today. They are now including rooms in new homes here called “man caves” complete with bear heads on the walls, outdoor hunting scenes on the walls (I assume these are permanent not just paintings/pictures), bear rugs, etc.
Exactly, “The consumer is the economy Stupid” , well about 70% of it. The housing bubble was just an extension of the credit bubble. The housing bubble has burst and the credit bubble is about to burst as well. The American economy has shifted away from what made it great. We were smart, capable and willing to do what ever it takes to put food on the table. Today we are not so smart, not as capable as many other countries and no one want to take a minimum wage job. Our economy is a house of cards that has been built up by a “consumer”. Americans Cunsume. We don’t produce squat any more and when we do produce it is of inferior quality or is deemed to costly for the American consumer of quantity over quality. In other words we have heaps and heaps of what we sow. It is going to take lots of pain and suffering in order for the American economy to become better. I read this blog and see the pleasure in peoples tone when they write about the coming change. Some appear to want to gloat in their “I knew it” attitude but others like me just want to understand the coming situation, survive it, hopefully thrive in it and finally I truly believe America CAN be GREAT again. I just want our house to get cleaned in order to move onto bigger and better things. We need to go back to the basics of what a government should provide. Currently with the potential of Peak oil to come on the heels of this recession coupled with the fact we spent 800 billion fighting a war over oil. I think we need to drive for energy independance. This is the key to America moving forward and leading the world through the coming energy crises.
Excellent post shakes; We allow the rest of the world to produce while we consume and our corporations no longer invest in capital equipment with profit, they buy back stock or declare a dividend. No need for new equipment if nothing is produced.
We had best wake up soon and smell the roses lest they wilt!
Then don’t read this section, palisades. By the way, how are prices holding up in the palisades?
tbgpalisades,
Who appointed you the boss of everybody? If you don’t like this blog, stop wasting my bandwidth. Personally, I make a huge effort in every media appearance to point out the postitive aspects of housing returning to sane levels. I see no doom and gloom at all, but the triumph of rationality. Will there be financial and even personal damage involved? Sure, but that’s unavoidable and as much a part of the housing bubble story as the rest. And who knows, maybe the edgy stuff will motivate some people to shore up their finances.
Next time chill out before you accuse all of us because you don’t like a post or two. I was trying to WARN people long ago so this stuff could be minimized. What were you doing?
I so much appreciate the civility of this blog. On other blogs there would have been extreme name calling, threats, and tin foil hat blurbs about it all being a martian plot. Bravo folks.
Bugs: “eh, actually Martin the Martian does have a plot…but Daffy & Wiley E. Coyote used parts they got from a China ACME catalog…and it kinda of all fell apart.”
acme - all China manufacturing etc.
Ben,
I think there is a place for some alternative thoughts on this blog, otherwise all bloggers will be continually patting themselves on the back. In support of tbgpalisades, it does seem that the bloggers on this site, or some of them anyway, speculate on the Stockmarket. The latter has not been short of its bubbles, fueled by cheap money or in many cases “nothing down”, until the margins are called. Now that housing has been brought into the investment category, why knock it? Housing does at least have an end use in itself, you can live in it or rent it. Stocks have no end use, returns ( equiv to rent ) is minimal in many cases, and when they crash, boy do they crash. So why do all your bloggers, who short this, or long that, not take a similar attitude to housing. From my experience, and I have been in Real estate a number of years, housing seldom falls more than 25% to 30% ( 50% sometimes when desperation sets in for some buyers ), but comes back strong after about 5 years. I think this issue is more to do with financing than actual housing, lax financing has had the same affect on the Stockmarket in the past (e.g. 1929 crash ). Probably, all your bloggers are correct in predicting a meltdown, but its not housing that is causing it, it is the greed of the markets and those that run them. The focus of that greed depends on what is popular at the time, be it Tulips, Stocks, Land or Housing. So I would suggest that this housing slump is taken for what it is, a correction, perhaps a big correction, but nothing different to Tulips, Stocks or any other target for the speculators. Its only those late to the party that get slaughtered, but many enjoy the spoils of war if they get in and get out at the right time. Greed is only good for those that benefit from it, its no good for those that suffer because of it. Its a pity there are too many of the latter.
“…housing seldom falls more than 25% to 30% ( 50% sometimes when desperation sets in for some buyers ), but comes back strong after about 5 years”
Counter-argument,
O.K., …now given your experience and stated prediction…please compare ALL past busts…with the CURRENT status of American’s cash safety net…Their National Savings? Of course, this could be mitigated by the demographics of a sudden mass kill off of the elderly and subsequent distribution of their accumulated life savings…but that scenario doesn’t seem probable over the next 5 years, unless… something “viral” comes along the human vector pipeline…
Got Indemnity?
“Housing does at least have an end use in itself, you can live in it or rent it. Stocks have no end use, returns ( equiv to rent ) is minimal in many cases, and when they crash, boy do they crash. So why do all your bloggers, who short this, or long that, not take a similar attitude to housing.”
&
“Now that housing has been brought into the investment category, why knock it?”
O.K., how many families are kick to the curb, because I lose 80% of my personal investment in GE? But, If I as a “Land Lord” “speculator” let my investment in a house get foreclosed upon…why do the “renters” have to pay a “consequence” because of my loss?
“In support of tbgpalisades, it does seem that the bloggers on this site, or some of them anyway, speculate on the Stockmarket.”"“Now that housing has been brought into the investment category, why knock it?”
What??? The whole point of this blog is that most of us here see the insanity of SPECULATION in housing. How many strawberry pickers in the 90’s could borrow $500k to invest in IPets.com?? We’re not knocking housing, we’re knocking the perfect-storm of greed-driven actions that have fueled the bubble (Lax lending, idiotic cheerleading and rampant speculation) that will result in economic pain felt by those who did not participte in it. IMO we’re going to see increased crime, unemployment, dollar devaluation and neighborhoods of partially built homes turn into squatter nests that will need to be bull-dozed.
“housing seldom falls more than 25% to 30% ( 50% sometimes when desperation sets in for some buyers ), but comes back strong after about 5 years. ”
Tell that to the Japanese.
DOC
Nothing to worry about, Ben[dover] Bernanke is the ultimate Great Depression ‘maestro’.
Got Hyperinflation?
From my experience…
If you haven’t lived through a depression, you don’t have the requisite experience.
Palisades: The current housing boom/bust cycle is huge - just look at the Schiller price curve. Some really smart people on this blog have showed real estate hobbyists like me how housing relates to the entire economy, and how the behavior of the past five years threatens to topple the US, and possibly the world economy. This is riveting stuff. Dramatic, yes, but so far predictions have been correct. I’ll bet that this past spring you would have scoffed at the idea that Merrill Lynch and Citibank would lose 40% of their stock value as a direct result of mortgage financing. Read and learn, and don’t let your emotions get the better of you.
To support and comment further along the lines of REhobbyist this blog has presented plenty of links to foreign governments/central bankers concerned w/the collapse of the dollar (brought on by credit and housing bubbles).
Why are you accusing certain posters of gloom and doom when it is a worldwide concern among the most educated and highly postitioned?
tbgpalisades comment says something:
1. randomness of viewers here think this is soley housing bust shadenfreud.
2. Doom and Gloom need not apply to in technical/professional thought streams.
3. managers in the “real” economy (those running the Panda Express, et al) are hard pressed to come up with the money to participate, shouldnt think, and therefore, do not count.
4. Nonsense drivel: is code for, “I do not believe, because my life is different”
believe what?
many thoughts are shaped here, many people look to others for idea generation….. what is tbgpalisades saying, and what does it mean?
apologies:
“general economy” was the terminology:
implies: present-day society is a huge counterfeit, where this truth of wealth has underhandedly slipped into extreme poverty.
-or-
inflation has been defeated, deflation cannot manifest… nothing has gone awry, its all good….. doom and gloom be damned.
I’ve been a long time reader of the blog (perhaps since the beginning). I’ve tried to refer people here, but generally they pass it off as doom & gloom (the same thing the realtors say when I call into their talk shows and own them on the air). As a long time follower, I remember when things were different, the media never spoke about the bubble at all (except a few specific people like Fleckstein), and people on here were often linking to OFHEO, Credit Suisse, Shiller, etc. People were discussing the facts. Now we are more in the popcorn munching mode of watching the things discussed a few years ago play out.
I refer people here once or twice, and tell them to read the comments. If they don’t, it doesn’t matter to me as I have a clear conscious.
These blogs have kept me sane, in an insane world.
Personally, my work has never been better, I suspect that holds for many professional and self employed technical workers.
Maybe if you work in Bangalore. Here at the home front, the big tech employers are giving microscopic pay raises, when they aren’t too busy offshoring the jobs.
Small raises yes, but Bangalore isn’t an option any more.
We have 200+ workers in Bangalore. India wages are going up 25% a year, the dollar is down at least 11% this year against the Rupee. This is 36% annual inflation against the buck.
Our own internal calculations show it will cost the same to build software in the USA as Bangalore by 2009. And given 36% wage increases, prices double every 2 years…So, it will be 2x as expensive to offshore by 2011.
India was a FAD.
“India was a FAD.”
El Pato, I hope you are right…this is this morning’s cheerful news.
Bangalore torpedoed?
They’ll just find another cheap place to do business. From what I am hearing inside my megacorp, Brazil is the next hot tech offshoring hot spot.
Anyway, we have over 10,000 employees in Bangalore. The guys I work with over there keep getting promoted, etc.
RE: India was a FAD.
LMAO…See we arent’ all doom and gloom here!
India will be more than a FAD, it will be our competition.
What’s the new hotness? Russia?
The comment about Brazil being next is correct. The IBM folks I work with are being replaced with new IBM peeps in Brazil.
Who is reponsible for training the Indians? My list starts with JOHN CHAMBERS.
El Pato,
For the next few years I figure wage inflation in the U.S. will remain 2 to 3%. However, I see your point. Wages are rapidly rising in India, as well as China. Eventually it will not be economically feasible to outsource. If some pundits are right, retiring baby boomers will be irreplaceable, primarily because there has been a birth dearth in the U.S.
Eventually there will be a demand for higher wages, whether due to overworked U.S. professionals or due to expensive labor in other countries making them less attractive.
For now, the momentum is in favor of more inflationary monetary policy. It will take awhile to turn that oil tanker around.
Pallisades, the bursting of sub-prime was only the canary in the coal mine. It’s exposing major cracks in the foundation of:
Corporate Debt
Commerical RE debt
Government Debt
Trade Debt
This is the first time - count it - first time where Fed cuts have not manifested in significantly lower YTM across the debt spectrum.
None of the above is doom and gloom. It’s simply a summary of what has happened so far.
It’s simple math. If you have $5 and you used to spend $2 on gas, you had $3 left for other discretionary items. Now if you have to spend $3.50 on gas, you have $1.50 left for discretionary items. Suddenly you have half what you did for other things. Companies sales go down, they lay off, now these people have no money to spend on other companies items. It’s basic economics and I’m sorry but parts of it are looking more like doom and gloom. It’s the same with housing, the more you have to spend as ARM’s go up the less you’re going to spend in the general economy. We all know it here, and anyone who can’t figure it out, needs to go back to a fifth grade math class.
“…Personally, my work has never been better,”
The high…rests upon the low Lao Tzu
If you’re after getting the honey - hey
Then you don’t go killing all the bees
Joe Strummer - ‘Johnny Appleseed’
“the doom & gloom…But as far as the apparent hoped-for collapse of the general economy - to what end?”
We have a diverse crowd here…
Some believe that things are fine, economy wise.
Some believe that we’ve just gone through a long period of “buying things we can not afford” (high price houses, consumer toys, etc., all bought on credit), and extremely high and risky lending and leverage (banks, hedge funds, pension funds, low interest rates, etc.) and that the economy is due for a correction from that.
Of the gloom and doomers, some of us are only *predicting* a collapse…only a subset of us are *hoping for* a collapse.
And of those hoping for a collapse, I would venture to guess that the reason for such a “hope” is to teach Americans the value of thrift and living within their means again, instead of buying things that they can not afford in order to keep up appearances, or indulge their “inner child”.
“Personally, my work has never been better, I suspect that holds for many professional and self employed technical workers.”
Work isn’t the whole story. Most of the people I know have good jobs, and are getting small pay increases each year. However, a good number of them are stretched to the limit each month, including a couple I know that brings in close to $200,000 a year. It’s not just about how much money you make, it’s also about how much money you spend. Many of the families I know are just one job change/relocation or one medical bill, or one ‘life change’ away from disaster. The flexibility of an emergency fund is just not there…it’s been spent on diamond anniversary rings, high cost cameras, expensive cars, and high house payments.
People that make a lot of money, but spend it *all* (on a month to month) basis on consumer goods (as opposed to investing some of it), are they considered “rich”, and “doing well”? Yes, at least until an “emergency” comes up…then the whole house of cards comes tumbling down.
Great post. I’m one of those hoping for a collapse, for just the reason you mentioned.
My work has never been better either. I think this year I will make record income. In fact, since August of 2000 my career has dramatically improved and finally became enjoyable for me. However I think things occur in cycles. Therefore my personal investing habit since 2000 has been to minimize the risk and invest more.
Some of you posters have been saying that there will be blood in the streets and that ammo will be the best investment. From that perspective, I am hoping there will not be any collapse. Be careful what you wish for.
Personally I wear blue jeans, have a broken cheap watch (its buckle is broken but I can still wear it), and purposely do not make myself attractive for robbers, con-artists, and such. A mugger encountering me on a sidewalk would move on to the fool wearing a Rolex (and with an IPOD, totally distracted). This is not to say that I will avoid isolated upscale places for a refuge. Vail, Aspen, Jackson Hole, Sun Valley are all far away from Baltimore (262 gun-related homicides this year in one of the most severe anti-gun cities in the U.S.). Umm. I would not really go to any of those four resorts. California still has a lot of relatively safe places and great climates. I won’t mention which ones though. You can find them on web sites that discuss crime statistics.
…”the doom and gloom.”
You say that like it’s a BAD thing….
Personally, I love this site for so many reasons–the imaginative use of the idiom, the often frighteningly accurate geo-economic analyses, the book recommendations and sly gossip, even, dare I say it, the embittered misanthropy.
But chief among these is the comfort, nay succor of sharing in the lovely group Shadenfreude that abides here. For some of us, it offers a satisfying alternative to everything from after-dinner wine sluttery to unabated retail therapy. After decades of Cassandraism, it’s nice to finally be vindicated…even if only amongst ourselves.
There is so much heartbreak these days for human beings who think. Why begrudge us our small, if mean-spirited pleasures? At least we’re not off peddling I/O AIMs to illegal aliens in tinfoil strawberry-pickers’ hats.
“There is so much heartbreak these days for human beings who think. Why begrudge us our small, if mean-spirited pleasures? At least we’re not off peddling I/O AIMs to illegal aliens in tinfoil strawberry-pickers’ hats. ”
Amen. Knowledge can be a bitter pill. I have to consistently redirect my thinking toward being thankful for what I have to counter the discomfort of watching and waiting for the pain to get worse.
It’s no surprise at all to see folks just bury their head in the sand; turn on the tube, blindly trust the MSM, go shopping and tell themselves all will end well. Many of my coworkers fall into the above category. Scary.
DOC
“I can understand having the foresight to know that housing had become unaffordable.”
Your argument is that that Ben’s Blog had the foresight on housing bust, but it dosen’t have any knowledge of the economy. They are a product of each other.
If I an to assume you are a college educated professional, it’s time to rediscover the pursuit of knowledge.
If you are going to build a house from the foundation up you better understand the dynamics of the entire structure.
Wow…Touche’
Exactly, discussions of the broader socioeconomic situation are entirely on topic here. Why? Not because of what any HBBer might write - but because of what the MSM, REIC, Gov’t etc. have said and done during this boom. They are the ones, not us, that made housing into just another commodity - and we’re the ones left to cope with the fallout.
tbgpalisades,
Please let us hear from you next year when you have lost your job due to our healthy & rubust economy.
How dare anyone have the audacity to suggest that the economy of past 7 years, rather the past 27 years is typical or that it can be characterized as “good”.
And also, I WANT TO SEE EVIDENCE OF THIS STATEMENT—–>
” housing seldom falls more than 25% to 30% ( 50% sometimes when desperation sets in for some buyers ), but comes back strong after about 5 years.”
SHOW ME. Provide hard data of ANY MSA or town that recovers and resumes an upward trend exceeding the previous high.
Personally, I believe you’re a troll and a liar but I’ll give you the benefit of a doubt once.
Some of the doom and gloom is warranted. The economy has been partially sustained by HEWs for the last several years and I suspect that is largely going to come to an end. The debt-based spending will stop, and there will be a lot of bankruptcies which will impact all of our lives, including people employed in firms totally unrelated to real estate. Unfortunately that’s the reality.
I don’t want to see our economy trashed. I would like to know how to best survive the next few years and so I use this blog as a tool along with some critical thinking skills to help determine our financial next steps.
One must have knowledge in order to survive. Read financial and economic blogs and ignore the MSM. Remember “In the land of the blind, the one eyed man is king”
“Point being - stick to housing! This OT stuff is getting to be nonsense drivel.”
Wall Street ready to ride out month
With turbulence back in November, investors await inflation and housing reports for signs the economy is OK.
November 25 2007: 3:33 PM EST
NEW YORK (AP) — November has been a nerve-racking month for Wall Street, and investors are hoping this week’s readings on economic growth, home sales and inflation don’t meet their worst fears.
The Dow Jones industrial average is on pace to post the biggest monthly loss since September 2002. Sentiment certainly has shifted since early October, when the overriding belief on Wall Street was that the credit crisis was largely over.
Since then, dozens of financial institutions have revealed huge losses on risky mortgages - even Fannie Mae (Charts) and Freddie Mac (Charts, Fortune 500), government-sponsored entities that private lenders rely on to buy their mortgages in hard times.
Meanwhile, the credit markets remain very squeezed, so the companies that depend on them have several tough quarters ahead as they overhaul their investment strategies and wait for the housing market to bottom out.
http://money.cnn.com/2007/11/25/markets/bc.apfn.wallstreet.weeka.ap/index.htm?postversion=2007112515
Here’s my theory: Did you see all those idiots waiting for stores to open at 5 am? They were waiting for ridiculous low prices on items that are being sold at below cost in order to bring the sheep in and spend more. One would have to be desperate for a bargain to go to such lengths. That doesn’t bode well for future sales this season.
I’m surprised nobody got trampled this year.
Go do an IQ test at these circus events.It is all about show.Bunch of losers with nothing else to do I guess.
We’ve been trained that nothing is better than wretched excess.
I think it’s the kids. Thirty years ago we’d wait in groups overnight for the first crack at rock concert tickets, now my kids are waiting for cheap Ipods and computers.
I don’t think it’s just the kids. My 81 year old father stood in line last year at 3am for a big screen TV, even though he could buy the most expensive one there is and not miss the money. Along with him were my BIL age 58, my nephew age 32, and his cousin age 35. I think it must be the thrill of the quest. I’d rather relax.
RE: Bunch of losers with nothing else to do I guess.
Got a new Sears portable air compressor for $76.00 w/ list @ $129.95 in their Saturday morning 7AM/12PM sale.
Inventory stacked to the ceiling and nobody in the store @ 8:00AM.
Definitely deals to be had. Got cash?
I think the Black Friday AM crush has now become a staged event by marketers (snicker).
Here’s my theory: Did you see all those idiots waiting for stores to open at 5 am?
Being able to sleep in is one of my greatest treasures (I usually get up at 6:00 AM on work days). Why would I want to get up at 4:00 AM (or earlier), stand in line in the freezing cold, when it is almost certain that I won’t get one of the loss leaders advertised in the flyers. I learned first hand 2 years that it was a futile experience. We wanted to buy a laptop for my daughter. There must have been 100 people in the laptop line, and only 10 of the advertised laptops in stock. We went home and ordered one online from Dell. It only cost about $60 more. Never again.
“There must have been 100 people in the laptop line, and only 10 of the advertised laptops in stock. We went home and ordered one online from Dell. It only cost about $60 more. Never again. ”
LOL. Good for you!
DOC
The Sat morning after black friday when i went to pick up a printer at Best buy was completely dead at 10 am. All the crammed consumer shopping spree activity took place friday, and after this i suspect retail will be flat or dead till maybe last week before Christmas day. The consumer is being flattened by high gas prices and disappearing MEW, rising food costs, steadily rising unemployment( or rapidly rising in RE related fields/construction). Creditcards are being maxed out to enable consumers to barely stay afloat on bills and holiday spending.
We can turn this into happy-talk for Palisades.
“Best buy was completely dead at 10 am. … i suspect retail will be flat or dead till maybe last week before Christmas day. The consumer is being flattened by high gas prices and disappearing MEW, rising food costs, steadily rising unemployment( or rapidly rising in RE related fields/construction). Creditcards are being maxed out to enable consumers to barely stay afloat on bills and holiday spending.”
Make it, “Best buy was completely dead at 10 am, so I had the store to myself! … i suspect the retail clerks will get more time than ever with their families this season, except maybe in the last week before Christmas day. The consumer is looking at all the new models of gas-sipping micro cars, a potential boon for the dealers, they’ve decided their home is a home and not a piggybank and even though those steaks at Publix look so yummy, veggies are better for them and so they’ll be dropping meat from the plate most nights. And thank goodness for unemployment benefits! Good ‘ol Gummint when you need it! As for Creditcards, we’ll show the banks who’s who with those higher interest rates — we will just make out minimum payments without asking for a limit increase. Things are great.
Kids were lined up 4 deep, at the gumball machines…
Making the minimum payment on your credit card balance is “I bacha de morte” (the kiss of death).
Actually, we found the Spokane Costco and Mall both to be tapering off even by mid-day Friday. Minimal lines and waits for anything. Talking to various clerks, it was apparently hectic first thing in the morning but slowed by noon.
How long was Black Friday this year? I think it started Thursday afternoon.
If they start it Wednesday next year they can probably report a growth of 30%.
Here Wal Marts, Target etc opened at 5am, Penney’s & Kohl’s at 3am. I can’t remember the mall stores but some opened at midnight and one at 11pm on Thanksgiving. I never remember much in our area opening before 5am before this year.
I think the numbers were so high because people were shopping for the bargains. Regular reductions are not enough for them to afford what they want. Last year started off OK but ended dismally by Dec 31st, if I remember right. Plus it’s not the sales that really count to these stores, it’s the profit margin. Every store I’ve gone in in the last two months has had probably half the store on sale at any one time. Anyone remember when sales only took place at the end of each season, and starting on Dec. 26th?
In my travels around the world, one thing Americans have a lot of catching up to do on, is the art of haggling.
If you know how to haggle, everyday is Black Friday, from a savings standpoint.
Are you suggesting you try the bartering method at your local check-out stand? good luck with that.
I always haggle, try this
“Do you offer a discount for cash”
” Write that price quote down. I’m going across the street with it.
“Give me a better price or lose this customer for ever”
Doesn’t work at my grocery store.
“According to ShopperTrak RCT Corp., which tracks sales at more than 50,000 retail outlets, total sales rose 8.3 percent to about $10.3 billion on Friday, the day after Thanksgiving, compared with $9.5 billion on the same day a year ago. ShopperTrak had expected an increase of no more than 4 percent to 5 percent.”
I could be mixing up my research firms but doesn’t ShopperTrak actually track “foot traffic” which is then “marked to model” to generate an estimated sales figure. The data only means that more people were in the malls and stores then last year if I have not mixed up my research firms.
Very well could be that more people were trolling the malls and stores because they couldn’t bust out the cash to hit the movie theaters.
Negative Net Sales
Toll Bros is going to have to go a long way to put a positive spin on this.
“…Toll Bros., a luxury builder that also hasn’t marketed any discounts, had zero net sales in the week ended Nov. 11 and a negative net-sales rate of two homes in the week ended Oct. 14.
That means the company, whose homes are priced from $345,975 to more than $1 million, had two more cancellations in Las Vegas that it had sales.”
http://www.lvrj.com/business/11801831.html
Not a problem. Toll is going to make it up in volume.
LOL!
For whom the negative net-sales Toll…
Yes, I can just see their new ad campaign:
“Hurry! The sales office at Vista de Nada, Toll’s newest luxury subdivision, is now open and accepting cancellations.”
No, in California it’s Rancho de Nada.
@Talon
LOL Vista de nada…good one
–
Less they sell less they lose!
Jas
Huh.. Until I read that, I did not even know that negative net sales was a possiblity. I was not thinking about “returns” as an impactor of sales figures (I thought there would be some funny accouting that allows them to still book the sales, and then book the return on a different part of the balance sheet).
Either way… That can’t be good!
“Little Johhny didn’t sell any lemonade today as his stand”
“Well, at least he didn’t have negative sales!”
The potential problem with having multiple sets of numbers is when you hand the wrong notebook to the wrong guy.
Woes…
http://www.nypost.com/seven/11242007/business/countrywide_woes_mount_573368.htm
“If this dislocation proves to be longer in duration”
Dislocation? What a stupid name for the implosion of the market as they knew it.
What could be dumber than thinking it good to separate the originator from the risk? Oh, it is great for the originator, but HORRID for the risk holder.
Oh, I know…. the only thing dumber than separating the originator form the risk, would be to assume that the systems collapse under the weight of tens of billion in losses per quarter, is only temporary.
Sure, the bag holders are taking a jashua tree colonoscopy, but within a few months they’ll be back to buying the MBSs and CDOs on the secondary market…. Ummmm.. NO YOU MORON!!!!! That system of separating originators from risk is DONE and ain’t NEVER coming back.
Sorry, I can’t agree. If Argentina can float bonds, MBSs can be sold.
Securitization has become an integral element of the mortgage market, yet it is a flawed process, with misaligned incentives, information loss, insufficient accountability, difficulty in pinning liability on culpable parties. More and more securitized products are becoming the subject of concern, yet there is not enough bank equity for them to step back into their “buy and hold” role. But for some bizarre reason, regulating aspects of the securitization process is treated as a third-rail issue. Things will likely have to break down further before anyone will take the need for reform seriously.
Parties funding our trade deficit are foreign central banks. Private demand for US financial assets has vanished. And with the Gulf States in the process of diversifying away from the dollar, and central bank purchases of dollars stoking domestic inflation in China and the Middle East, it is an open question how long they will maintain their support.
Eating out…
One couple of lard butts is cutting back on eating so they can buy X-Mas presents.
http://www.latimes.com/business/la-fi-restaurants24nov24,1,4065752.story?coll=la-headlines-business&ctrack=3&cset=true
Requires registration. Go to BugMeNot.com to get logins for all these news sites, or get the BugMeNot browser plugin to do it automatically.
“The Johnsons of Riverside County, an area racked by high home-foreclosure rates, once dined out daily, usually at the nation’s biggest pancake-house chain [IHOP]. But lately, the couple have been indulging only once a week.”
Oh, the humanity! How can anyone live without Rooty Tooty Fresh ‘n’ Frooty?
PF Chang’s and Chili’s profits are down 20%. Good riddance to 15 pieces of flair. Makes sense, though - most of these chains are built around new suburban housing tracts. They’d be the first to go when the developments empty out. My uncle in PHX was lamenting that future archaeologists will think that TGI Fridays’ and Wal-Mart are temples, with entire neighborhoods built around their daily worship.
” My uncle in PHX was lamenting that future archaeologists will think that TGI Fridays’ and Wal-Mart are temples, with entire neighborhoods built around their daily worship.”
LOL! So true and it sort of makes you wonder about past civilizations. I’ll betcha bubbles go back to the dawn of mankind.
“entire neighborhoods built around their daily worship”
That would be an accurate observation.
Except in suburban DFW where the real temples have parking lots larger than Walmarts.
” My uncle in PHX was lamenting that future archaeologists will think that TGI Fridays’ and Wal-Mart are temples, with entire neighborhoods built around their daily worship.”
Hmm.. Interesting point of view.. Is BUDDA the one being worshipped at these temples? I think so, seeing that what the patrons of these fat factories look like.
Especially when every relic that will be uncovered says “Made in China” on it.
Bugmenot is a good site! Also has free online “coupons”
You mean you don’t worship daily at the GOLDEN ARCHES??
I just came hom with a gift of coffee and Sausage Biscutt from the Temple O McD’s
My cousin does some of the industrial kitchen design for a restaurant with similar demographics to the ones mentioned (not any of these). She is an independent contractor so she gets paid by the job. She said this year her income was way up - lots of new openings and she was very busy - but she is worried about next year.
I asked her where the new places were going. It sounded like towns where this place would be the trade up restaurant (from McD’s, et al) rather than the trade down option (from Bertucci’s, for example). I think she is right to be scared. Last T-day she floated the idea of the two of us doing an international vacation together - this year, not a peep.
“During the recent Day of the Dead holiday, his restaurants installed elaborate shrines decorated with flowers and gifts.”
Ode to Realtors?
Wednesday, November 21st, 2007
Nine Ways to Profit From the Diving Dollar
By Martin Hutchinson
Contributing Editor
Let me put it bluntly: The U.S. dollar is nose-diving against foreign currencies. So far, it’s down 12% against the euro, 7% to the yen, 8% to the pound, 15% to the Canadian dollar, and 10% to the Swiss frank. And that’s just in the past year alone.
And the effects are far-reaching, tugging at the standard of living Americans have grown accustomed to - far beyond the expense of a European vacation.
What’s happening? Here’s a list:
* Domestic prices are up across the board because imports now cost more with a devalued dollar. Less purchasing power here means international companies will offer American consumers fewer products.
* The United States is losing its grip on the overall world economy. At present rates, China will have a larger economy than the U.S. in 2050. A tanking dollar also weakens the United States’ strength in international relations, as it hopelessly tries to negotiate with strong-currency countries and economies.
* With each move the dollar makes to the downside, tens of thousands of dollars are bled from your retirement savings. That “Magic Number” that retirees are planning on is getting higher by the day, mainly because of the rising cost of imports - namely oil and other commodities. This is driving up the overall cost of living. As a result, the amount you planned to retire on could already be too low by future standards, forcing you to work longer or lower your standard of living.
Thankfully, there are simple solutions to these currency conundrums.
http://www.moneymorning.com/2007/11/21/nine-ways-to-profit-from-the-diving-dollar/
At least the U.S. stock market ended the week on a high note…
Falling Dollar Takes Investors for a Ride
By JOANNA SLATER
November 25, 2007
As the once-mighty dollar continues to wane, it’s proving a source of both risk and opportunity for investors.
The dollar’s long slide has become a fixture of financial markets in recent years. Against the currencies of a broad group of trading partners, the dollar now stands at its weakest point in more than a decade.
[Go to Chart] STEEP SLIDE
• Chart: The dollar has fallen steadily.
The situation is even more dramatic with certain individual currencies. Earlier this month, the dollar hit a modern-day nadir versus the Canadian dollar and a 26-year low against the British pound. This past week, it touched a fresh record low against the euro. One euro now buys roughly $1.48 compared with just $1 five years ago.
Meanwhile, last week a new factor emerged to weigh on the dollar: talk that oil-rich nations in the Persian Gulf, which have pegged their currencies to the dollar for years, are reconsidering those arrangements.
http://online.wsj.com/article/SB119594067109303078.html?mod=home_we_banner_left
Luckily this scenario (mentioned in the article) has never happened before (just like U.S. residential real estate prices have never declined on a national basis), and is hence highly unlikely to occur…
The problem is that the weaker the dollar gets, the higher the likelihood that the downsides will kick in. Eventually, an enfeebled currency could spur higher inflation, as imported goods become more expensive. It might even cause investors around the world to rethink their purchases of U.S. government bonds, purchases the country needs in order to finance its deficit.
In that case, the Federal Reserve could be forced to raise U.S. interest rates to attract investment — thereby raising borrowing costs for U.S. consumers and businesses and potentially punishing stock prices.
The likelihood of such action depends not so much on the magnitude of the dollar’s decline, but on whether it begins to tumble in a more rapid, disorderly way, says Russ Koesterich, head of investment strategy at Barclays Global Investors. “If the dollar starts to go down very quickly, it will impact monetary policy at a time when investors have a very benign view of how the Fed will behave.”
“..In that case, the Federal Reserve could be forced to raise U.S. interest rates to attract investment”
Riddle me this Batman:
How many $450,000 / $550,000 / $650,000 / $750,000 house will be sold if mortgage rates are… 14% & up
Dollar carry trade up next. Dollar carry trade meaning US investors will increasingly invest overseas in fast growing emerging markets to get a better return plus the fact that the dollar is going down in value gives it a even better return. Now will emerging markets have RE bubbles like the US did with the Japanese doing the exact same thing with the Yen carry trade? which now looks over as the YEN is going up verus the dollar.
I think its OLD populations tending to have deflation and living off their investments in Young populations which tend to have Inflation. And of course building massive large homes in a maturing population like in the US is really stupid. Will the US increase immigration to solve this problem? Probably yes in an effort to Inflate out of this. japan on the other hand does not favor immigration to solve their aging problem.
“And of course building massive large homes in a maturing population like in the US is really stupid.”
I had the pleasure of staying with Mom for 8 days in the old middle income neighborhood of a small, now expensive town with a UC campus (homes around 35 yrs) Five family homes in the court, all but one with retired parents and that one DINKs. The court across the street has four homes, all retirees. The street is a couple blocks from the high school and nary a high school kid to be seen nearby.
These are all 3-4 bdrm around 1800sqft. The WWII Dads are said to be dying at a rate of 1,000 a day. What happens when Moms start dying at the same clip?
Realistically, I believe these will hold up better due to ‘location’, cost to heat/cool and the relative price to sq ft ratio.
A NYT business columnist indicated this morning that the most recent stock mutual fund bubble, emerging markets, has run its course.
Thankfully, there are simple solutions to these currency conundrums.
Buy low sell high
Kind of… unfortunately US population starts with dollars….
Just when SoCal real estate investors thought it was safe to go back in the water…
Wildfire Spreads in California
Associated Press
Word Count: 459
MALIBU, Calif. — A fast-moving wildfire pushed by seasonal winds raced through the canyons and over the mountains of Malibu for the second time in little more than a month, destroying dozens of homes and forcing as many as 14,000 residents to flee.
Forty-nine homes were destroyed and 27 damaged, said Los Angeles County Fire Chief P. Michael Freeman.
Fifteen helicopters and 15 airplanes, including a retardant-dropping DC-10 jumbo jet, attacked from the air while 1,700 firefighters battled flames on the ground. Six firefighters suffered minor injuries.
The fire erupted before dawn …
http://online.wsj.com/article/SB119592514850703073.html?mod=hpp_us_whats_news
These wildfires must be fought, using primarily precious freshwater supplies.
Don’t be surprised when you get your 90 day notice, like the ATL…
City of Angles…
Not to worry, those stupid “Malibu: A Way of Life” license plates still selling like hot cakes.
“I see trampled people”
It’s a way of life all right; where you keep a bag packed with your passport, some money, and the family photos in case you have to make a run for it
Finally an aritcle that states what many people on this board have been saying for a couple of years. It is cheaper to rent than to own.
“Owning became more expensive than renting in the first quarter of 2004, and that trend has persisted. In the second quarter of this year, nationwide, the average annual cost of owning a home was $17,707, compared with $15,721 for renting.”
http://www.washingtonpost.com/wp-dyn/content/article/2007/11/23/AR2007112301911.html
Another good one:
“Don’t think of a home as an investment,” said John McIlwain, senior fellow on housing for the Urban Land Institute. “It may well help build your wealth, but don’t buy a home just because you want to make money. There was a time years ago when people were making money, but homes are to be lived in. If homes are to be lived in, they must be maintained, and owners have to be prepared to invest time and money in that cause.”
It is amazing how long it has taken basic information like this to penetrate MSM outlets.
I posted this yesterday. What’s interesting to me is that the article still attempts to take a “balanced view”, as if the ratio of owning vs renting costs (for new buyers) was somehow disputable.
Look at the numbers. This is statistical hocus-pocus.
You mean to tell me it costs less than $2000 per month to own a home?
These figures don’t consider the cost of BUYING the house, or they include the general population numbers of homes that are owned FREE and Clear.
It is not a comparison of buying vs. renting.
Once again the MSM tries to bamboozle the American Public. They usually succeed.
You mean to tell me it costs less than $2000 per month to own a home?
I don’t find that all that surprising. These numbers are national averages, which could come up to almost anything. My wife and I bought a small (new) house in late ‘98 in central AR. The total payment has always been less than 600/mo, including taxes and insurance.
Also, take into consideration the longer one owns, the less the interest is a portion of the payment. And if someone owns a house outright, they shouldn’t be excluded from the national average. When you are buying a house, it becomes a possibility that you might can own it (or some other) house outright at some point in the future, that’s the nature of buying and should be considered.
Wow, here’s a guy who wants to sell his contract on one of those overpriced Miami condos. Lotsa luck, fella!
http://tampa.craigslist.org/rfs/488675270.html
Just emailed him a cash offer of 50% sight unseen. LOL. Doubt he’ll like that much.
You go, txchick!
“I bought at 2005 price, and I am selling for the same price.”
What a daydreaming butthole. I bought pets.com at a 1999 price and won’t accept a penny less.
I was down in Miami about 6 months ago, what a mess. I’d expect to see some of those Condo’s going for a dime on the dollar before it’s all over.
“Doubt he’ll like that much”
He has a (917) AC which means he was an early-adopter of cell phones in NYC. I love the NYC peeps that try to export the NYC condo mentality to other cities.
Good luck!
Today it’s perhaps worth $400K and is headed lower….His deposit is already gone and he should walk away if he doesn’t get lucky and sell it……..it is doubtful that the $400K level holds as this unit will be competing with 15-20,000 new ones that are coming online in Miami in the next 12-24 months…..The developer in our building (which just opened 2-3 months ago) has dropped prices to 10-12% BELOW the 2003-2004 pre-construction levels….We expect to lose several hundred thousand dollars on the unit we just closed on, but expect to save even more hundreds of thousands when purchasing something larger in 2009-2010…should get VERY interesting here in the MIA…..Happy Holidays to all the HBBers!! Darryl
Darryl, while I admire your optimism, when you close in 09-10 you will be paying fair market price at that time and so your mark-to-market accounting for your Miami RE purchases at the time is expecting to show a several hundred thousand dollar loss for the unit you currently own. I don’t exactly understand the additional hundreds of thousands savings. But Miami is a fun place to be loaded, and it sounds like you are!
The unit we are in for the next two years will no doubt lose value….It is a $550K 3 Bedroom that if I had to guess sells for $300K in 2009-2010, but at least we are comfortable for now………..The $3.5 million dollar penthouse I want should decline roughly the same % so hopefully we could buy it at $1.9, so while we lose $250K we would save $1.6 for a net savings of $1,350,000.00…..Sold a property in Laguna in 2003 (I thought things were bubblicious then!!), then got VERY lucky and sold our expensive place in Miami at the peak in 2005….rented cheaply in 2006 until July 2007. Housing crash works in your favor if you are either moving from rental to ownership or upsizing.
Whoa — spilled my gruel on that one. Fortunately, the table top was clean so I could scoop it back into the bowl.
That’s some expensive stuff, Darryl. You related to Shania Twain or something? Anyway, good for you, if that’s what you want.
I doubt that a St. Joseph statue is going to help him. He better fly to a place with a volcano and start sacrificing virgins to get it sold.
Already flagged for removal.
Here’s an amusing article on the lengths people will go to around here to avoid paying property taxes.
http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/112507dnmettaxdelinquent.2ade05d.html
Great article, tx. Would be good for the Texas thread. Interesting to note that most of the top ten offenders are commercial operations.
I dislike taxes as much as the next guy/gal, but c’mon..there has to be some recognition that the infrastructure of a modern society is not going to build and maintain itself. Yes, there is plenty of graft, greed, waste, patronage, etc., but maybe if the deadbeats expended as much effort trying to fix the system, rather than escape the tax burden, things might be better.
I realize that I am being a bit naive with the “fix the system” thoughts, but if everyone had the not gonna pay it attitude, then where would we be.
Maybe what we need it to bring back tar and feathering??
Another large conundrum in Dallas is why certain multi-million dollar estates have valuations at fractions of their apparent market value. No cite. These articles come out every year or so, right around tax time to raise my blood pressure.
“I realize that I am being a bit naive with the “fix the system” thoughts, but if everyone had the not gonna pay it attitude, then where would we be.”
We would be much better off. We would have political leaders who would use whatever tax money was able to be collected toward things that benefited citizens and humanity in general, as opposed to multi-trillion-dollar wars. A couple trillion dollars will buy you a lot of infrastructure. Or at least a kick-a** high speed rail system to connect major cities.
All taxes should be optional based upon privileged activities. You can not have a “free” society when, with a stroke of a pen, the government can steal your house via taxes, put you out of work via taxes, and steal all of your savings via inflation. Economic freedom is the foundation of all other freedoms. No one is obligated to arrange their finances so as to pay more tax, nor should the be punished by arranging their finances to minimize taxes.
And that costs you directly each time you pay on time and in full.
ARMs Control: How to
Avoid Mortgage-Reset Grief
By ARDEN DALE
November 24, 2007; Page B2
Pay attention to the details if you have an adjustable-rate mortgage. Many three-year ARMs are due to reset to higher rates over the next 18 months, and many homeowners aren’t prepared.
ARMs are mortgage loans with payments based on indexes that adjust periodically. The amount due each month may go up several times over the life of the loan.
http://online.wsj.com/article/SB119585631801902404.html?mod=hpp_us_personal_journal
I believe in the right to bare ARMs
“Pay attention to the details if you have an adjustable-rate mortgage. Many three-year ARMs are due to reset to higher rates over the next 18 months, and many homeowners aren’t prepared.
ARMs are mortgage loans with payments based on indexes that adjust periodically. The amount due each month may go up several times over the life of the loan.”
Amazing, isn’t it? The FB’s need to have this explained to them by the Wall Street Journal when it was all right there in the mortgage docs.
*sigh*
BTW, I’m curious, how many people believe that their ARM rate is fed + X and not LIBOR + X or prime + X? Because I do not see LIBOR or prime dropping…
I’m confident most FBs voraciously consume the Journal
Here is some good news for contrarian investors in the U.S. stock market. The current plethora of gloomy stories about the U.S. economy will either lead to higher U.S. stock prices (through the “bad news on Main Street is good news for Wall Street” effect) or else will lead to temporarily lower stock prices, providing an opportunity to buy the dip.
There has never been a better time to buy stocks, since stock prices always go up in the long run!
ECONOMIC PREVIEW
A week of weakness seen for U.S. economy
Analysts bearish on data as economy ‘perched on the edge of a cliff‘
By Robert Schroeder, MarketWatch
Last Update: 12:01 AM ET Nov 25, 2007
SAN FRANCISCO (MarketWatch) — “Perched on the edge of a cliff.”
That’s how one economist describes the U.S. economy as the markets get ready for a busy week of data, including numbers about the already damaged U.S. housing market, orders for durable goods and personal income and spending.
“What we’re looking for is confirmation that indeed the U.S. economy is slowing sharply in the fourth quarter,” says Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ. Zentner said that within a month, it could be apparent whether the economy is slipping into a recession or not.
“The U.S. economy is really perched on the edge of a cliff right now,” says Zentner.
http://www.marketwatch.com/news/story/story.aspx?guid=%7B26267B62%2DB250%2D4619%2D8026%2D58BB14036B24%7D&siteid=rss_wsj_hpp
Survivor’s guide to a slowdown
Published: November 23 2007 19:24 | Last updated: November 23 2007 19:24
The credit market is still in turmoil, economic growth on both sides of the Atlantic looks likely to be weak in 2008, and the prices of a variety of assets are worryingly high. Asset prices should already have discounted that negative outlook for next year, and it is foolish to try to predict their path too precisely, but for the average investor trying to manage their wealth, it is worth considering a scenario in which the slowdown becomes worse.
A shock in the US housing market has hit construction, produced losses for banks and lenders, and caused a reappraisal of the right price for risk. Financial sector profits have been hit and credit will be harder to come by. The next stage could be a wider slowdown in investment and consumption that hurts corporate profits still further, causing layoffs and rising unemployment, and therefore still weaker US demand. In the worst case, the result could be a global recession.
http://www.ft.com/cms/s/f5aa2580-99f6-11dc-ad70-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Ff5aa2580-99f6-11dc-ad70-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
“Asset prices should already have discounted that negative outlook for next year, and it is foolish to try to predict their path too precisely, but for the average investor trying to manage their wealth, it is worth considering a scenario in which the slowdown becomes worse.”
How can markets properly discount bad news which is permitted to be indefinitely hidden off balance sheet?
Outlook darkens for Detroit carmakers
By Bernard Simon in Toronto
Published: November 25 2007 19:29 | Last updated: November 25 2007 19:29
The dark clouds over General Motors, Ford Motor and Chrysler appeared to be lifting a month ago, but a new squall has engulfed the Detroit carmakers.
Their stock market performance reflects the change. GM shares touched a three-year high of $43.20 on October 12 after winning concessions from the United Auto Workers union. Carmakers had also made progress in other areas, such as revamping car rental sales, improving their discounting discipline and financial restructuring. But by early last week GM shares had fallen 40 per cent while Ford shares were down a fifth. Both regained some losses on Friday.
http://www.ft.com/cms/s/bd4a3dc0-9b8a-11dc-8aad-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fbd4a3dc0-9b8a-11dc-8aad-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
From a Detroit News columnist: “That’s about the last thing unemployment-leading, foreclosure-laden, depression-ridden and politically-lost Michigan needs — more white-knuckle quarters from the automakers and suppliers who, like it or not, still define the Big Mitten and its moribund economy.
How all this ends up for Detroit remains to be seen for us poor slobs who hold mortgages here, who work outside the industry, whose communities are under relentless financial pressure from tightening budgets, aimless political leadership and, soon, declining property tax revenue.
GM is exposed to the subprime mortgage meltdown through its 49 percent stake in GMAC, which lost $757 million in the third quarter alone. How much uglier it might get GM isn’t saying. “
Recession
http://bigpicture.typepad.com/comments/2007/11/read-it-here–1.html
It’s not different in Caleeforneeah…
California
Sliding into the sea
Nov 22nd 2007 | LOS ANGELES
From The Economist print edition
The state’s economy looks even more wobbly than the rest of America’s
http://economist.com/world/na/displaystory.cfm?story_id=10191726
Wow Professor…
“Out of every three additions to the ranks of the unemployed in the past year, one was Californian.”
We of the Golden State represent 1 out of 9 Americans, population-wise, and 1 out of 3 Americans out of work, lately…
Serf’s Up!
“The biggest threat to such areas, and to the state’s economy as a whole, comes from the American consumer. Southern California is the nation’s warehouse: some 40% of all imported goods arrive in the country through the ports of Los Angeles and Long Beach. Since 1991 port traffic has risen steadily, along with consumer spending, though much more rapidly. Between 2005 and 2006 alone it swelled by 13%. The boom has generated many new jobs for truckers and warehouse operators. For the past four months, though, imports through the port of Los Angeles have been down compared to the same period last year. Exports have risen, but not enough to make up the difference. If this trend continues, it will make even a prolonged writers’ strike seem inconsequential.”
Imagine the triple whammy on the city of angles…
The defense industry, entertainment industry and consumer industry all crapping out, all at once?
7 Out, Line Away…
TxChick — the link you posted does not work (at least for me…)
http://www.bigpicture.typepad.com
Investors fear new round of turmoil
By Gillian Tett and Jennifer Hughes in London and Krishna Guha in Washington
Published: November 25 2007 20:32 | Last updated: November 25 2007 20:32
Investors fear the financial system is moving into new credit turmoil, which could create further losses for financial institutions – and potentially hurt sentiment in the “real” economy.
Credit markets are trading at levels which imply that investors assume that the US is heading for a recession, bank analysts and economists have warned.
http://www.ft.com/cms/s/16e2b24c-9b93-11dc-8aad-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F16e2b24c-9b93-11dc-8aad-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
I can’t see the rest of this piece by L Summers (I don’t have an electronic subscription to the FT) but I am guessing he puts in another plug for a GSE-led mortgage bailout? Never mind the subpoenas or the cloud of doubt over the soundness of their balance sheets…
Wake up to the dangers of a deepening crisis
By Lawrence Summers
Published: November 25 2007 18:51 | Last updated: November 25 2007 18:51
Three months ago it was reasonable to expect that the subprime credit crisis would be a financially significant event but not one that would threaten the overall pattern of economic growth. This is still a possible outcome but no longer the preponderant probability.
Even if necessary changes in policy are implemented, the odds now favour a US recession that slows growth significantly on a global basis. Without stronger policy responses than have been observed to date, moreover, there is the risk that the adverse impacts will be felt for the rest of this decade and beyond.
http://www.ft.com/cms/s/b56079a8-9b71-11dc-8aad-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fb56079a8-9b71-11dc-8aad-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Sun, November 25, 2007
Guess who pays?
The sub-prime mess in the U.S. has found its way north, and …
By LINDA LEATHERDALE, BUSINESS EDITOR
Hate to be the bearer of bad news:
But as predicted, the credit crunch is here. And now we’re being nickeled and dimed to death to pay for losses racked up when our banks were lured into the U.S. sub-prime mess by floating instruments, called asset-backed commercial paper (ABCP).
These babies, that bundled up collaterized debt obligations and sold to investors, caused a liquidity crunch this past summer, sending markets into a tailspin. The Bank of Canada was forced to jump in and prop up our financial system by injecting billions of dollars.
Now there’s been a flurry of write-downs by our Big Banks, which has hit share prices and set the stage for disappointing fourth-quarter and year-end results. Those sweet dividends that bank investors love may not be so sweet.
http://torontosun.com/Money/2007/11/25/4683506-sun.html
O Canada!
Our loans newfound land!
True Yankee Patriot loans in all thy sons comand
With sinking hearts, we see thee rise
The Loonie strong and free!
From far and wide,
O Canada, you stood to make some fees
Go ahead and keep those loans, yours now, you see
O Canada, you are just as mixed up in this, as we
O Canada, we stand together in misery
I need a car now, but I think in 6 months it’s going to be a bloodbath for car manufacturers and I agree with others that previously said here on this blog that some won’t survive. Man, I spent the whole week meeting with car dealers. It took me 5 different joints to find one that understands what’s going on with the bigger picture. He gave me a great price in 3 minutes.
If I were a dealer I’d be scared $hitless about the housing bubble as MEW’s fueled many of the new car purchases. That being said, some of them are going to get what they deserve with all of the plastic pieces of garbage on those lots.
Have you tried craigslist?
Yeah, believe it or not (I’m guessing you’ll believe this), it was pretty obvious on Craigslist who is losing their ass to their house. I guess I was wrong about the Florida-Durable-Goods-Jettison-Hierarchy! Looks like the car is going first in some cases.
I made a good deal with a dealer in Tampa. That’s the good news. The bad news is I gotta’ drive to friggin’ Tampa again!
Tampa car dealers…………….we’re here to make Nigerian business men look honest!
If you can wait, by all means do so. But there are good deals to be had now on used vehicles, particularly on V8 powered stuff. I got my truck for 25% below book. I’m in SoCal.
The way things are evolving, I am wondering whether any mortgage bailout that materializes in the U.S. might have to involve a newly-created financial entity (like the S&L crisis’s Resolution Trust Corporation) rather than the flagging GSEs?
This could be unfortunate for certain Senators who count on GSEs for campaign contributions.
America’s mortgage giants
Not-so-dynamic duo
Nov 22nd 2007 | NEW YORK
From The Economist print edition
The mortgage market’s supposed saviours are its latest victims
WHEN it comes to nasty surprises, this is the credit crisis that keeps on giving. Until a few weeks ago it had been assumed that Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) that tower over America’s $11 trillion mortgage market, could survive the storm with at worst a few bruises.
That script is now being dramatically rewritten.
http://economist.com/finance/displaystory.cfm?story_id=10191754
Some commentators just won’t let go of the idea that Fannie and Freddie should ride to the rescue at any moment…
Wake up to the dangers of a deepening crisis
By Lawrence Summers
Published: November 25 2007 18:51 | Last updated: November 25 2007 18:51
…
Third, there needs to be a comprehensive approach taken to maintaining demand in the housing market to the maximum extent possible. The government operating through the Federal Housing Administration, through Fannie Mae and Freddie Mac, or through some kind of direct lending, needs to assure that there is a continuing flow of reasonably priced loans to credit worthy home purchasers. At the same time there need to be templates established for the restructuring of mortgages to homeowners who cannot afford their resets, so every case does not have to be managed individually.
All of this may not be enough to avert a recession. But it is much more than is under way right now.
The writer is the Charles W. Eliot professor at Harvard University
http://www.ft.com/cms/s/0/b56079a8-9b71-11dc-8aad-0000779fd2ac.html
DEAN CALBREATH
Governor-led deal helps, but it’s no game-winner
November 25, 2007
Gov. Arnold Schwarzenegger may have swatted a home run last week – or at least a double or triple – when he got four mortgage lenders to agree to ease the way for subprime borrowers to keep their homes.
Unfortunately, this may only be the bottom half of the first inning of a game in which we’ve already fallen way behind.
http://www.signonsandiego.com/uniontrib/20071125/news_1b25dean.html
Speaking of baseball, Tori Hunter going to the Angeles and the Dodgers getting Joe Torre it’s gonna be a better baseball season in LA. As Vin Scully would say “We’ll hi everybody it’s a beautiful night for the ballgame….”
Vin Scully is the closest thing to an immortal, in sports.
“On his Web site brokerforyou.com, for instance, local real estate agent Bob Schwartz estimates that condominiums in downtown San Diego and Mission Valley have lost about 25 percent of their value since 2005. The condominiums that Schwartz has evaluated in Fashion Valley and Pacific Beach have declined by an average of nearly $100,000.”
Those declines sound about right. What’s not noted is that there are condos in this general area that increased in “value” about 600 percent from 1999 to the peak in 2005. Prices still have a lot more to fall.
“Christopher Carroll, an economist at Johns Hopkins University, estimates that every $1 decline in house prices reduces consumer spending by about 9 cents. That suggests that this year’s nationwide drop in prices could have already sucked nearly $100 billion out of retail sales. And tightening credit standards may result in further cutbacks.”
All is well as the USS American Economy steams toward Antarctica with Paulson and Bernanke at the helm.
Another reason not to buy until the mania is fading away into the pages of financial history: If the foreclosure crisis leads to a crime wave in your neighborhood, you can move away without taking a hit to the value of your property.
Neighborhoods suffer as crime follows foreclosure
By J.W. Elphinstone
ASSOCIATED PRESS
November 25, 2007
Associated Press
Spider webs and temporary locks are signs of a foreclosed home in Atlanta’s Westview Village, where a community association monitors vacant properties.
Eighty-five bungalows dot the cul-de-sac that joins West Ontario Avenue and East Ontario Avenue in Atlanta. Twenty-two are vacant, victims of mortgage fraud and foreclosure.
Now house fires, prostitution, vandals and burglaries terrorize the residents left in this historic neighborhood called Westview Village.
“It’s created a safety hazard. And if we have to sell our house tomorrow, we’re out of luck,” said resident Scott Smith. “Real estate agents say to me, ‘We’re not redlining you, but I tell my clients to think twice about buying here.’”
http://www.signonsandiego.com/uniontrib/20071125/news_mz1h25vacant.html
These units were built in the slums of Atlanta. Developers and investors moved in droves to take the worst of the worst and put up shoddily built dwellings for those who couldn’t even afford to rent, but could qualify with little income and no downpayment to “live” in a new home. A home surrounded by the elements of life few of us would tolerate. This was in an area where no one would want to live. The people who must live there would given anything to esacape. “Drive-by” victims are common place.
What the 21st century RE investor did for these poor people was unconscionable. But those that profited are enjoying the evil fruits of their deeds somewhere else, while behind is rubble. Every mortgage broker, appraiser and lender involved should be imprisoned. But the truth is nothing illegal was done. Unethical, yes…there are no prisons for the unethical.
Why did NAFTA get passed?
“Cantu says he gave his first national political check, for $1,000, to Bill Clinton in his first run for president. Cantu said he has been grateful to Clinton for pushing through Congress the North American Free Trade Agreement over the opposition of organized labor. NAFTA turned this stretch of citrus orchards in the Rio Grande Valley into a fast-growing industrial hub”
http://www.washingtonpost.com/wp-dyn/content/article/2007/11/24/AR2007112401359.html
NAFTA got passed in order to undermine American citizens and trash the country in the interest of “globalism”. We might as well face the fact that our politicians, in most cases, are animated pieces of crap who fancy themselves as lords and ladies at the court. No wonder people don’t want to pay taxes. Who wants to pay for the salaries, pensions, healthcare and perks of the pols?
It was the first step towards the creation of Meximericanada.
“Meximericanada.”
I and others like me will never agree to that. Right now, even as I type, some newscaster is hyperventilating about how an alleged “illegal immigrant” helped an alleged American boy who was found wandering in the desert. I find that so interesting. If illegals commit crimes, they’re “immigrants” or their illegal status is not even reported, as in the piece of crap who kidnapped for ransom a local Manatee county boy, Clay Moore. But, now our Pravda media blats about the “illegal immigrant” who helped an American boy. I guess it is OK to report the legal status of the immigrant if he did something good, but not OK when they commit crimes.
Pen…….Its….. Mexarika!
Well, if the economy really does implode, it will be a lot easier to sell the NAU to Americans. Of course, Mexicans and Canadians (the man on the street, not the pols) aren’t so keen on it either. Mexicans in particular see it as their ultimate nightmare being fulfilled: the complete loss of their sovereignty to the US. Mexican pols love it because it will mean access to DC (or whatever our equivalent of Brussels ends up being) pork. I am surprised that Canadian pols are interested, as I see such a union as a liability for them.
“Mexicans in particular see it as their ultimate nightmare being fulfilled: the complete loss of their sovereignty to the US.”
Your kidding, right? The Mexicans, who are crossing our borders in droves, are concerned about their National Sovereignty? Get Real.
They just want a better paying job that gets them a car and air conditioner. They don’t care about any laws or legalities or any state regulations.
I lived 12 years in Mexico. They are VERY concerned with their sovereignty. That doesn’t mean that they won’t come here to work, but unlike previous generations of immigrants, their loyalties remain with Mexico. Which is why you always see their trucks decked out in Mexican flags and the names of the states they came from. They have no interest in becoming “gabachos”.
Have you ever read the lyrics of the Mexican national anthem? It makes the Star Spangled Banner sound like an ode to world brotherhood. The first verse is “Mexicanos al grito de guerra” which loosely translated means “Mexicans, you are called to war”.
“Thought” for the day, from the President of the NAHB:
The Front Porch
News and notes about real estate and our built environment
November 25, 2007
QUOTABLE
“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.”
– BRIAN CATALDE, PRESIDENT OF THE NATIONAL ASSOCIATION OF HOME BUILDERS
http://www.signonsandiego.com/uniontrib/20071125/news_mz1h25porch.html
“all housing markets are local”..
ok, fine, I accept that..all housing markets are local.. and it just so happens, that right now,…
ALL LOCAL MARKETS HAPPEN TO SUCK!
What difference does it make if a market is local, regional or national?
Speaking of the NAHB, has anyone happened to stumble upon a current version of the NAHB vs. SP500 chart? I can only find the outdated one the circulated some time ago.
But, financing is global…
… as are book sales.
All Real Estate Is Local: What You Need to Know to Profit in Real Estate - in a Buyer’s and a Seller’s Market (Hardcover)
by David Lereah (Author)
List Price:
$21.95Price: $16.46 & eligible for FREE Super Saver Shipping on orders over $25. Details
…
49 used & new available from $6.99
http://www.amazon.com/All-Real-Estate-Local-Sellers/dp/0385519222
excellent..
it can sit on the shelf next to Greenspan’s book..
wonder how LIErahs fl condos are working out- he needs to go BK- he ruined many lives
Make sure you go back far enough to get a wide angle picture. If you go back far enough, at some point the S&P 500 wins (somewhere between 85 and 90, based just on several of the largest builders).
If you happen to pick 1991, the HB’s will look like a great investment. (So far.)
Yeah some markets kept going when others were crashing. However now they’re crashing too. Some markets didn’t double or triple, so they may not crash as far as others, but most are going back to 2000 prices, at least. If this country goes into a recession, some parts of the country will follow behind other parts, but in the end everyone will get hit. Housing is going to be the same. Bad loans were made everywhere and eventually every area is going to be overrun with foreclosures and for sale signs. It just takes time to trickle all around the country.
RE: all housing markets are local.”
Too bad the financing isn’t.
“…..Twenty-two are vacant, victims of mortgage fraud and foreclosure….”
Now even the houses are “victims.”
Taking different paths
November 25, 2007
The Standard & Poor’s Case-Shiller index says San Diego County homes priced below $482,114 in August were 15.4 percent off their peak, reached in June 2006; those in the middle-price tier fell 11.3 percent from their peak in November 2005; and those priced at more than $678,768 fell 5.8 percent. The overall downturn was 9.2 percent from the peak in June 2006.
http://www.signonsandiego.com/uniontrib/20071125/news_mz1h25topper.html
The Holiday’s Shopping Season Can’t Stop the Coming ‘Severe Recession’
By Danny Schechter, AlterNet. Posted November 24, 2007.
http://tinyurl.com/2bmgf3
I especially liked the following description:
“It would be an understatement to say that the world has changed almost beyond recognition in the past two decades. We appear to have re-entered the age of the dinosaur, gigantic creatures stomping across the planet, ‘guided’ by pea-sized brains. So … we have increasing concentrations of powerful media — media that is actually an entire raft of processes critical to the survival of capitalism — either in the hands of vast corporations or the state (which in any case is now openly in bed with the big corporations) …”
Does manipulation trump reality? Seems like that’s the case so far.
Thanks for this. I remember when he was billed as “Danny Schechter, the News Dissector.” BTW my contribution to Black Friday: one pair of jeans on Ebay for $16.99.
This is the big show, this holiday shopping season has unprecedented importance. It will set the mood for 2008 - and the PTB knows that a third silent spring is in the bag - the MSM news we read during the next four weeks will reflect their desparation over that certainty.
Best Buy wouldn’t take returns on Black Friday. I tried to return an unopened DVD - I guess they couldn’t bare to part with my $9.99 - times are tough y’know. They said it was to enable the service desk to check out customers - except there weren’t that many.
The SD Union Tribune posted the October DataQuick numbers for SD County in today’s paper. The blurb at the bottom left corner of the first page of the Home section reads, “HOUSING PRICES / October’s Market / A neighborhood-by-neighborhood survey of transactions for the month, which showed a slight uptick in overall sales volume from September. D2”
A glance at the five-year sales charts on the bottom of page D2 shows a much bleaker picture than the chirpy blurb suggests. It turns out that although the October 2007 sales figure (ALL HOUSES AND CONDOS) was indeed higher than the September 2007 sales figure, it nonetheless represented the second-lowest level of sales over the past five years.
Similarly, the numbers of resale houses sold (1085) and resale condos sold (529) for October 2007 were lower than in any other month over the preceding five year periods (with the possible exception of September 2007).
http://www.dqnews.com/ZIPSDUT.shtm
Where Mansions Go Begging
http://tinyurl.com/2l4q97
It’s a NYT article, so you may have to register.
WHAT is striking about the mansions and tree-lined roads of this exclusive suburb of Detroit is not the elegance and wealth — it’s the real estate signs.
Almost 700 homes are currently on the market in the five Grosse Pointe communities, according to brokers, twice as many as in the same time in 2005. And since June, prices for the most expensive houses have dropped by around $100,000 a month.
In all, there are nearly 41,000 homes on the market in Detroit and its three surrounding counties, twice as many as in 2005.
“You can’t invent buyers,” said Mr. Taylor, who noted that in 2004, his agency had an average of six open houses for each listing. This year, it had just two for every listing. “These numbers prove what we’ve experienced,” he said. “There are substantially less people looking in this market.”
And that will be the case for the foreseeable future.
I grew up in the blue collar section of downtown Detroit, and never even drove to Grosse Pointe. It was a world apart. And now they’re selling mansions for the price of a small California stucco box. Maybe I should retire to Grosse Pointe . . . .
… There’s always the option of paving them over and building some Quickie Marts
Weekend Investor
NovaStar Offered Early Clues
To Looming Mortgage Tumult
By HERB GREENBERG
November 24, 2007; Page B3
Now that we know what we should have been looking for, it is easy to spot signs that the mortgage morass was occurring long before it actually happened.
Some warnings were more obvious than others, even if they went unheeded. Take, for example, the matter of insurance at NovaStar Financial, once one of the leading independent subprime-mortgage lenders.
http://online.wsj.com/article/SB119585203373502362.html?mod=googlenews_wsj
WoW! A Starbucks! It’ll have to sell now.
http://chicago.craigslist.org/chc/rfs/488723299.html
I wish I had a Dunkin’ Donuts franchise, our area could use it.
You must not live in MA — There is one on every street corner– I love Dunkin Donuts— I don’t like the elietisim of Starbucks
We’re disadvantaged in this part of FLA. When I go up North to visit, the first thing my sis does is take me to Dunkin’ for a cup of coffee. They have the best take-out coffee, IMO.
RE: I love Dunkin Donuts— I don’t like the elietisim of Starbucks
DD? Too expensive…New England Coffee self-serve @ your local MobilMart for half the price.
“DD? Too expensive…New England Coffee self-serve @ your local MobilMart for half the price.”
And tastes better too.
Thanks for the heads up. I live in the Atlanta area now and I will be moving out west, however when I get the chance I will hit the Mobilmart!
Commercial dominoes going down the lane of Residential.
will the contagion end?
oops.
“PARIS, Nov 25 (Reuters) - French investment bank Natixis (CNAT.PA: Quote, Profile, Research) on Sunday put the cost of the financial crisis prompted by the U.S. subprime mortgage turmoil at 407 million euros ($602.6 million) for its third-quarter results.
The bank, formed in December 2006 out of the merger of Ixis and Natexis, is the most severely hit among French banks by the crisis. Its two parent companies on Nov. 22 bailed out the subsidiary by taking over the CIFG bond insurance unit.
They plan a CIFG capital injection of around $1.5 billion”
bond insurance…….needs a little rate cut relief.
Here is a puzzling Craig’s listing from the San Diego “real estate for sale” thread. I can’t even figure out what they are trying to sell…
http://sandiego.craigslist.org/rfs/488731690.html
P.S. I am way too lazy to do a careful count, but the number of “real estate for sale” San Diego Craig’s listings since just last week is well into the thousands. A quick glance over many of these pages shows a considerable number with “Bank owned” in the blurb.
It’s a political opinion ad, according to which everyone lives at the corner of Recession Street and Depression Drive.
I am staying in downtown SD this weekend. The sign twirlers here are the best I have seen. Perhaps it has to do with the large number of youthful homeless…
This is just wrong.
http://www.suntimes.com/news/metro/666451,CST-NWS-kettle25.article
FSBO dreamer.
http://chicago.craigslist.org/wcl/rfs/488750062.html
Flipper’s nightmare.
He he he, idiots are referencing Zillow to say what a great deal this place is, hope they choke on it, Hinsdale is 50% overpriced
This deserves a prize of its own. The shots of the blatantly staged dining room include a price tag visibly hanging from one of the chairs.
The Zillow reference is great. It shows the last sale of this home to have been substantially beneath the Zestimate and prices for that ZIP code. Confirmed we are go for low ball offers, but you might want to wait for the bank to list it at a lower price. Isn’t technology wonderful?
Take 5…
ABCP
ABCP, its easy
Easy as thievery
Its like counting on dishonesty
Or simple as losing do re mi
Sing a simple melody
Thats how easy losing money can be!
http://www.youtube.com/watch?v=cLxqsZHgAmk
Here is a depressing article in Business Week.
http://tinyurl.com/2agxtc
We all think its hilarious when someone buys more house than they can afford and then runs into trouble; or when people run up there credit card buying junk. We dont have a problem with big banks piling on fees and higher interest rates for people who spend too much. But now the big banks are doing the same thing to medical bills. Community hospitals are selling their receivables to big banks. The banks then proceed to raise interest rates and pile on late fees. In many cases these hospitals are community owned or get big tax breaks for being non-profit. One lady had a $60 bill become $4000 with interest and fees.
GE: We bring good things to life
“The GE card typically comes with an introductory 0% interest rate, but after Diltz didn’t make her initial payment, the rate leapt to 26.99% on an annual basis. In August, 2006, GE Money Bank sued her in state court in Queens.”
GE: We bring good things to life
Rewrite:
GE: We bring debt to life
Thanksgiving update:
Of course, close relatives ratted me out as a housing bear, and tried to drag me into some real estate discussions while the turkey was being served. *Sigh*. I extricated myself from all of them, I *so* don’t want to talk about real estate with anyone that will get upset if it doesn’t always go up.
The results of me just listening:
1. Boyfriend of a relative, a relatively young attorney, has property in Palm Springs. He assured *everyone* that the housing crash was happening *elsewhere*, but not where his house was located. He went on to say that LA in general, and Palm Springs in particular might see a small blip down, but it would be short lived. After all, “this is Palm Springs” we are talking about. People were asking me direct questions on this one, but I politely excused myself to talk to some other relatives.
2. Just found out that a close relative *had* taken all of the equity out of the house they owned, despite my warnings a year and a half ago to not do it. Because of a job change, they will probably have to move, and may have to short sell and rent. *Sigh*.
Results from “Black Friday” shopping encourage my wife…we have a bet about the Christmas shopping season; I predicted that we’d see a reduction this year, she doesn’t think we’ll see a pullback until next year. At least we are on the same page as to the eventual direction.
“we have a bet about the Christmas shopping season”
In looking for a gauge of the overall economy I wouldn’t particularly look at Black Friday. If things are going south that will increase people’s desires for togetherness and connection with friends and family. People like holidays, and if a Christmas spree lifts them a little bit, then that will be the last thing to go.
a reduction in shopping, such a difficult metric.
sales will be higher but smaller than expected. The generally real economy will appear fine. Financial writedowns will continue but they will be smaller than expected. Generally economy really fine. Markets surge and plunge as the attacks at home and abroad continue. FED cuts rates, but wags finger and runs lip. Real? Housing crash rate of implosion increases, but at a rate lower than expected……Equities plunge? Commodites surge? Inflation defeated, GDP deflator increase shows really generally economic conditions are exactly what they should be to manage expectations. Rollovers stop at FED and buttermilk acres of evergreen soylent green wash over the US.
I live in PS area and can assure you the boyfriend is a dolt. Desert Dweller can confirm. Prices aren’t dropping as fast as other places, but nothing is selling. This time of year you would have to sell your child in order to find a rental normally. This year there’s as many rental signs as for sale signs. There was a time not too many years ago when there were less than 200 homes on the market and now there are over 10K.
“This time of year you would have to sell your child in order to find a rental normally.”
Funny thing is, renting out is the BF’s current plan…I don’t know if that was the original intention, or if it was a relocation, or if it was a flip gone bad, but the intention is to now rent it out.
Pakistan is about to tear itself apart, another unwanted sideshow to the overall circus atmosphere.
ewwww!, is that White Elephant crap, I smell coming from the main tent?
Thanksgiving update:
my SIL made a great re deal. She rented a weekend cottage in the Boston Hills–a beautiful, mountainous area in the southern part of ny state–for 250 a month, which includes heat and all utilities. Place comes with 26 acres, a fireplace, Japanese soaking tub and deck. Went out to see it Friday, and my dogs had a blast. Only downside, it’s hunting season for the next couple of weeks, and you could hear shotguns in the distance. Now that’s my idea of reasonable rent.
Damn, let me in on it. I’ll retire there on the interest I am earning off my future down payment.
That sounds beautiful, spike. How in the world did she negotiate such a low rent?
Wow! That’s an amazing deal. I know what you mean about the hunters. 80 acres here and the owner’s daughter and her horses had a near miss last week in the back field. The hunters aren’t even supposed to be here. Signs posted everywhere but since when does that stop the hunters. You can’t even enjoy your own land during the season. So we sit near the house. Luckily for us even that is awesome.
“Atta boys” for your sil!
Get this, my SIL didn”t negotiate…that was the deal offered. The owners are a doctor and his teacher wife, bought a larger home (about 2000 sq. ft.)on the opposite edge of the 26 acres. The cottage is newish, about 4-5 years old, and about 1,000 sq. ft.
The doctor bought this place about a year or two ago, and my best guess and SIL’s is that they preferred to have it occupied, rather than empty. She’s a teacher, and she has met the wife at school doings. I’m guessing that the utilities alone are close to 200, but the place was very well built. It’s also posted, but hunters tracking prey don’t always care…and the notices aren’t on every tree. I tried to keep the dogs close, but they went nuts running thru the trees and up and down the ravines. I still need to make a living, but that is what I would go for, if I could afford to quit working.
I posted this house from Craigslist SD a couple of weeks ago. I thought the listing agent couldn’t have made the pictures any more ridiculous looking with the blindingly blue sky badly pasted in or the tightly cropped pictures which hide the very busy street next to it. I was wrong.
http://sandiego.craigslist.org/rfs/488487359.html
Somehow, they have managed to outdo themselves again. If the revamped pictures aren’t bad enough, the new description of the property is beyond nauseating. Keep in mind that this is a nothing special 60’s house in a spotty neighborhood built on a corner next to a major 4 lane thoroughfare. It’s some of the best abuse of adjectives that I have seen in a RE ad.
I can’t find the old listing pictures with the interior to link them, but there’s a reason they concentrate on the front, as oddly landscaped as it is. The realtor should be smacked with txchick57’s trout.
3% of nothing, carry the nothing… I applaud the ingenuity. This realtor is truly worth 3% of nothing.
I bet many of his prospective clients can’t even read the long sentences of his poetry.
The pictures and description are fantastic! once I read the Realtors bio I realized why. He is a profesional photographer, movie producer, and writer. ( not to mention black belt and inline skating champion ) I would expect no less from the most accomplished man I have ever read about. I also understand he helped Al Gore in the Internet and Global warming areas, but was to Humble to mention it. Click on info to read more about this amazing man.
I’m awestruck. Maybe I should print out a copy of his ad and have him autograph it.
LOL! Thank you for sharing.
Last weekend, we hit some open houses that happened to be FSBO. I got follow up calls from both owners this week.
One was very polite and was checking before going with a realtor. Their house was beautiful and probably was a good price for her town as recent as this spring. The slowdown just reared it ugly head in this area in the last quarter so there are still a lot of deniers that CNY will get hit.
I had mentioned how we sold our home so quickly (unltra low price) during the tour and the owner seemed to be listening and considering whether the same tactic might be necessary for her. She also mentioned that their income was not what it was when they bought the house. I noticed the price of the home is still the same this week, though.
The second home’s owner was very aggressive and kept pushing me about the price, asking whether I’d consider the home if they lowered the price. I didn’t really want to get into it with her. I enjoy my temp rental right now. And what I really want is a long term rental.
My home from a month ago was bigger, our yard was 3x as large, our garage had a generous door size and they had the teeny doors. We had plenty of extra storage room in the garage on the sides and with one deeper stall. (Plenty of room for the shed items) There’s was a just big enough version. We had wood floors, they had vinyl. You get the picture. Yet they were asking $30k more.
I didn’t compare house to house w/her but when I explained we priced for our house to move and wouldn’t be paying any higher for our next home she wasn’t too happy with my final figure. She couldn’t get off the phone fast enough. (Well you did push, honey!) This home will be fun to watch. It had been featured in the local paper and did have a busy open house. Obviously no other takers though or I doubt I would have gotten the heavy hand.
From Craigslist SD.
Casting call for first time buyers. Buy a house, get a smoking deal and appear on “a famous property show”.
http://sandiego.craigslist.org/rfs/488143736.html
“Are you a first time homebuyer? Not that you have to be, but we have been asked to cast on a famous TV show for Home buyers? Are you interested? Call now because spots are filling fast.
Limited time only. Call NOW.”
Deal huh? I think the realtor is the one doing the smoking here.
Ha! Spiegel online: two alarming articles in one day (a sunday to boot): “The Schweizer Notenbank (Fed of Switzerland) warns that the situation has gotten much worse since August. ‘I regard the situation as very serious’, says its vice president Philipp Hildebrand to the “Sonntagszeitung” (Swiss sunday paper) ‘We experience a second wave of crisis symptoms in the credit markets.’
Ha, there is definitely the sound of alarm bells those last few days around here. Reporters/journalists in August were clueless. From the questions they are asking now, on TeeVee, it appears they have done their homework, they make their interviewees from the finance sector sweat now (e.g. on the German Bloomberg Channel.)
If I know my Gnome Bankers of Zurich-adjacent mindset, like I think I do…
They were under the same pressures to take on dodgy loans, as everybody else, if not more.
Not very neutral in matters economic, are the Swiss.
When has the Swiss ever been neutral on any subject?
Artful Dodgers (or the art of robbing Paul to pay Peter)
This just makes my whole 35 year career worth it. As some of you know I am a hardass appraiser in Orlando.
I told a story a few months ago and I got confirmation that I made a difference in a residential deal. Damn it feels good.
IN a nutshell a borrower signed a contract in 2006 for a house in the defunct Levitt project for $245,000 or $235,000m can’ t recall exactly.
The sales office tried to load me with a bunch of year old data but i pulled some sales in public records and MLS. I valued it at $175,000 as of 8/1/2007.
Within a month I got a call from the Sales Mgr. saying I was all wet. I said, hey, you sold these units at these prices didn’t you.” ” Well yes we did but those aren’t real sales as we had to dump them because the buyers backed out!” I asked, ” do you see the smokin’ hole in your foot?” CLICK!
I just ran the sale and it was recorded at $175,000. Well there is $60,000 we don’t have in the mix.
Oh by the way, Levitt has pulled completely out of the project leaving hundreds of owners stranded. Hundred s of lots and many unfinihed houses as well as the unfinished 37,500 sf clubhouse. Maybe I was high.
“Maybe I was high”
Yeah, maybe it should have been $155,000
If all appraisers were like you we wouldn’t be in this mess now.
Amen.
Also you won’t have to experience the dreaded knock on your door.
What if rather quietly, you had become the 3rd largest carmaker in the world, but nobody has ever heard of the name of your company, “Geely Automotive Holdings”?
So you pay a pittance for the name “Chrysler”, and bingo…
Everybody knows of you, all of the sudden.
Sounds like the next step, for this Chinese automaker.
You get credit for having the name of the coolest building in NYC, as an added bonus…
http://english.pravda.ru/business/companies/22-11-2007/101408-china_low_quality_cars%20-0
Things Change
Yikes - I wonder what kind of contamination drivers of Chinese cars would be exposed to?
Exhaust gases will be routed to heat the inside of the passenger compartment.
“The slowdown just reared it ugly head in this area in the last quarter so there are still a lot of deniers that CNY will get hit.”
I concur 100% with this statement. Q3 sales numbers for almost all counties in NY can only be described as horrific. I will say it has shook some denial out of the empty skulls of RE cheerleaders. Those numbers were a milestone.
Watching some NFL today, and all the carmakers commercials all say the same thing “$3,000 to $6,000 Cash Back”, their latest euphemism for the word rebate, which used to be a euphemism for the word discount.
Dang, what happened? Somehow we lost a few purchases between the first comment by WMBZ way up high above and this one…
“U.S. consumers spent 3.5 percent less during the post-Thanksgiving Day holiday weekend than a year earlier as retailers slashed prices to lure customers grappling with higher food and energy costs.”
Bloomberg
http://tinyurl.com/3bevjn
“Dang, what happened? Somehow we lost a few purchases between the first comment by WMBZ way up high above and this one…”
My guess? Retailers used statistical models to project what total weekend sales would be based on Friday’s activity. However, as many on this blog correctly speculated, nearly all of the early sales were for the loss-leaders that retailers had advertised at or below cost. Once the stores ran out of their limited stock for these items, sales activity decreased far, far more than the models projected. Consequently, retailers will have to revise their initial reports of success to the more gloomy reality that we expected.
I made three economic projections to my co-workers and family last June (inspired greatly by what I had read on this blog):
1) Sometime before February, regular unleaded gas would cost over $4 at the pump (I live in Sacramento)
2) Sometime in the next year (before June 2008), the stock-market would experience a single-day drop by 10% or more (ie, one of the five worst days every)
3) The holiday retail sales (same store, YoY) would decrease by at least 5%, making it the worse holiday season since 1991
I think that I just might go three-for-three on all those projections.
“Retailers used statistical models to project what total weekend sales would be based on Friday’s activity.”
Sounds like retailers used mark-to-model (instead of mark-to-market)…
Time to lay the groundwork for another FFR cut next month…
Fed sensitive to risk of rate cut
By Krishna Guha in Washington
Published: November 25 2007 21:44 | Last updated: November 25 2007 21:44
Ben Bernanke and his deputy, Don Kohn, are likely to reassure the market this week that the US central bank recognises the threat to growth posed by the relapse in financial markets.
Analysts expect the two top Federal Reserve officials to use scheduled speeches to acknowledge that the downside risks to growth have increased since its October 31 meeting.
http://www.ft.com/cms/s/50dbf2a2-9b9c-11dc-8aad-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F50dbf2a2-9b9c-11dc-8aad-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
The Return of the Screw
Turning the screw back to 1973 – or perhaps further
Published: November 25 2007 17:36 | Last updated: November 25 2007 17:36
Judging by the behaviour of world markets last week, investors are now convinced the credit squeeze is harming the real economy. In other words, in terms of a question I posed last week, they think this crisis is more like 1989 than the more benign one of 1998. So let us give the screw one more turn. What price 1973?
Anyone with memories of that time will shudder at the comparison. In the UK, the FTSE All-Share index plunged more than 70 per cent in the space of two years. By 1975 inflation rose to 27 per cent, at which time UK Libor stood at an astonishing minus 16.4 per cent in real terms.
http://www.ft.com/cms/s/93d95d0e-9b7b-11dc-8aad-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F93d95d0e-9b7b-11dc-8aad-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Test
Where does this mysterious “liquidity” originate? And once injected, does it ever have to be repaid? Or is it simply a form of manna from heaven — the fruit of the proverbial money tree?
European Central Bank in move to calm markets
By Greg Robb, MarketWatch
Last Update: 12:24 PM ET Nov 25, 2007
WASHINGTON (MarketWatch) — The European Central Bank has pledged to provide extra funds into the money markets this week and continuing through the beginning of 2008 in a move designed to ease mounting stress.
The central bank for the 13 countries that use the euro as their currency said it will “reinforce” its policy of providing more than usual liquidity “in the upcoming main refinancing operation as well as in the following ones for as long as it is needed and at least until after the end of the year.”
http://www.marketwatch.com/news/story/european-central-bank-set-cash/story.aspx?guid=%7BD4FAF570%2D7D14%2D4B67%2DB345%2D28644C5B167D%7D&dist=hplatest
“U.S. consumers spent 3.5 percent less during the post-Thanksgiving Day holiday weekend than a year earlier as retailers slashed prices to lure customers grappling with higher food and energy costs.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=az8yoBGs.Tak&refer=home
“The NRF’s projection put a damper on some earlier estimates, including one from MasterCard Advisors on Friday that estimated Black Friday purchases to hit $20 billion this year, up from $19.1 billion last year.”
http://money.cnn.com/2007/11/25/news/economy/nrf_blackfridayweekendsales/index.htm?postversion=2007112516
Also, ShopperTrak RCT Corp., which tracks sales at more than 50,000 retail outlets, said Saturday that total sales rose 8.3 percent to about $10.3 billion on Black Friday, compared with $9.5 billion on the same day a year ago.
The news from Main Street that consumers spent less this Black Friday than last, despite retailers slashing prices, is precisely the sort of story
that contrarians are looking for to spark a massive Wall Street rally tomorrow. So far as the bulls on Wall Street are concerned, every piece of bad news gives another reason to party on.
P.S. I really wish Jon Stewart would tune in to recent developments in the financial world, as the story at hand seems naturally made for The Daily Show!
“A US Federal Judge, C.A. Boyko in Federal District Court in Cleveland, Ohio ruled to dismiss a claim by Deutsche Bank National Trust Company. DB’s US subsidiary was seeking to take possession of 14 homes from Cleveland residents living in them, in order to claim the assets.”
“Here comes the hair in the soup. The Judge asked DB to show documents proving legal title to the 14 homes. DB could not. All DB attorneys could show was a document showing only an “intent to convey the rights in the mortgages.” They could not produce the actual mortgage, the heart of Western property rights since the Magna Charta of not longer.”
http://www.financialsense.com/editorials/engdahl/2007/1124.html
Dollar Displaces Yen, Franc as Favorite for Funding Carry Trade
By Bo Nielsen
Nov. 26 (Bloomberg) — Using the dollar to pay for purchases of currencies with higher yields is proving to be the most profitable trade in the foreign-exchange market.
A basket of currencies including the British pound, Brazilian real and Hungarian forint financed with dollars returned 17 percent this year, compared with 9 percent when funded in yen and 7 percent in Swiss francs, according to data compiled by Bloomberg. Falling U.S. interest rates and increasing volatility in the yen and franc are making the trade even more appealing.
“With the dollar giving the appearance of being in free fall, it increases the attractiveness of using the currency to fund investments,” said Avinash Persaud, chairman of London- based Intelligence Capital Ltd., which advises hedge funds that manage more than $89 billion. “That process will only add more fuel to the decline.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aWMXWN6PFHa4&refer=home
Subprime lottery winner announced…
1000% hedge fund wins subprime bet
By James Mackintosh in London
Published: November 25 2007 22:20 | Last updated: November 25 2007 22:20
A Californian hedge fund has made more than 1,000 per cent return this year by betting against US subprime home loans, making it one of the world’s best-performing funds of all time.
Lahde Capital, set up in Santa Monica last year by Andrew Lahde, last week passed the 1,000 per cent mark, after fees, following the latest leg of the credit market turmoil. The fall in the value of subprime-linked securities has boosted a group of funds which spotted the problems in advance.
http://www.ft.com/cms/s/0/7b6160be-9b80-11dc-8aad-0000779fd2ac.html
WE’RE HEADING FOR THE BROWN STUFF
Gord warning on economic misery to come
By Vincent Moss Political Editor Vincent.Moss@Mgn.Co.Uk 25/11/2007
Gordon Brown warned yesterday that Britain’s economy is facing a rough ride as the American housing crisis deepens.
In his gloomiest forecast yet, the PM painted a bleak picture for our property market and job prospects after Christmas.
Mr Brown predicted America’s economy will slump in the first three months of the New Year - and said that will hit Britain too.
The PM’s grim assessment was coupled with a call for a worldwide “early-warning system” to head off future financial storms.
He said: “There’s absolutely no doubt now that the American economy will slow, which will have an effect on the European economy over the next few months.”
Here is an early warning system: thehousingbubbleblog.com
http://www.sundaymirror.co.uk/news/sunday/2007/11/25/we-re-heading-for-the-brown-stuff-98487-20157318/
November 25 2007: 5:18 PM EST
The next credit scandal
The real outrage of the credit crunch has been in the way major banks disclosed potential losses. Now, there are billions more in undisclosed risk.
By Peter Eavis, senior writer
NEW YORK (Fortune) — The major banks have already reported billions in unexpected losses from complex investment vehicles known as CDOs. Now they face big risks from other corners of the debt markets — but don’t expect them to warn investors anytime soon.
The failure by banks to properly inform shareholders of their potential losses is perhaps the biggest scandal so far of the credit crunch that began this summer.
Earlier this year, for example, Merrill Lynch, Citigroup and Bank of America gave almost no indication that one particularly toxic debt product — CDOs, or collateralized debt obligations — could be the source of billions of dollars in losses.
Those losses came to light this fall, blindsiding shareholders and pummeling banks’ stock prices.
The lack of disclosure not only has unsettled investors, but also has raised the prospect that large losses are lurking in other parts of the banks’ businesses.
http://money.cnn.com/2007/11/24/magazines/fortune/eavis_conduits.fortune/?postversion=2007112517
November 25 2007: 5:22 PM EST
Don’t look now: Here comes the recession
Even with a boost from holiday spending, the U.S. economy looks shaky, thanks to slumping housing prices, Wall Street woes and debt-laden consumers. How bad could it get?
By Colin Barr, senior writer
Debt-strapped consumers seem likely to cut back spending to the point where it shrinks the U.S. economy.
NEW YORK (Fortune) — The cash registers were ringing on Black Friday, but make no mistake: American consumers are jittery, and seem all but certain to push the U.S. economy into recession.
After years of living happily beyond their means, Americans are finally facing financial reality. A persistent rise in energy prices will mean bigger heating bills this winter and heftier tabs at the gas pump. Job growth is slowing and wage gains have been anemic. House prices are sliding, diminishing the value of the asset that’s the biggest factor in Americans’ personal wealth. Even the stock market, which has been resilient for so long in the face of eroding consumer sentiment, has begun pulling back amid signs of deep distress in the financial sector.
http://money.cnn.com/2007/11/23/magazines/fortune/barr_recession.fortune/index.htm
Freddie and Fannie’s Achilles’ heel
Both troubled lenders need capital, but they cannot raise it in the way that many companies would. Fortune’s Carol Loomis explains their vulnerability.
By Carol Loomis, Fortune senior editor at large
Neither Fannie Mae nor Freddie Mac can make use of the most popular form of preferred stock.
NEW YORK (Fortune) — Mortgage giants Freddie Mac and Fannie Mae need capital - in today’s credit crisis, there’s no doubt about that. Freddie even said last week that it was “seriously considering” cutting its $2 annual dividend by half, a radical step indicating how strapped the company is. Freddie also reported it had hired two Wall Street firms to explore “capital-raising alternatives.”
And Freddie and Fannie are going to need some especially creative alternatives. Why? When either Freddie or Fannie attempt to build capital, they are handicapped by a peculiarity that very few investors know about: They cannot sell the most popular kind of preferred stock, the “cumulative” variety, because their regulator will not let these securities count toward capital.
http://money.cnn.com/2007/11/23/magazines/fortune/loomis_freddie.fortune/index.htm
November 25th, 2007 at 19:46:46
Ann Lee: Rob the poor to pay the rich
Ann Lee/Huffington Post
Every day CNBC features talking heads who drone on with the same platitude that there is fear in the market regarding the lack of transparency in the banks. “Lack of transparency” is really a euphemism for “bankrupt.” Whether it is Citicorp, AIG, Fannie Mae, or your pension funds, all these large financial institutions own or guarantee trillions of dollars worth of collateralized debt obligations (CDOs) that contain subprime mortgages and other worthless collateral which people now realize are total scams. The most outrageous part of this drama is that the government will allow these investment bankers who dreamed up this financial engineering in the first place to receive millions of dollars each in the form of yearend bonuses for underwriting all this worthless paper. This latest boom and bust of not only subprime mortgages, but of all types of credit ranging from out-of-control consumer credit card issuance to rampant private equity acquisitions have created the largest transfer of wealth from the poor to the rich in modern history. None of the experts on television will ever admit to it because if the average American actually understood what has happened, social upheaval would probably ensue.
http://rawstory.com/comments/41178.html
Here is the complete version of what I just now posted…
Rob the Poor to Pay the Rich
Posted November 24, 2007 | 07:05 PM (EST)
Read More: Aig, Ben Bernanke, Citicorp, Fannie Mae, Gerald Corrigan, Us Treasury, Wall Street, Breaking Business News
http://www.huffingtonpost.com/ann-lee/rob-the-poor-to-pay-the-r_b_73968.html
The latest Roubini recap is out. A stiff drink before reading is highly recommended. This housing bubble thing is soooo old news….
GS, where did you ultimately place your folks’ money? (mom?)
Hi Fred,
I just talked them into getting out of stocks. I think my dad is basically sticking to CDs denominated under $100K. Looks like I may I have to talk to them about getting some foreign currency diversification…
90% short term TBills for my Mom. Of course, I’m still long PM’s. I’ll be in your hood for a week and will be looking up the local bullion dealer
Take care.
Nice synopsis that draws on many of the posts in today’s bits bucket.
EconoMonitor
Liquidity and Credit Crunch in Financial Markets is Back to Summer Peaks, Only Much Worse and More Dangerous
Nouriel Roubini | Nov 25, 2007
There is now increasing evidence that the liquidity and credit crunch in international financial markets is back to its summer peaks of August and, in most dimensions, even worse than in the summer; financial markets are now in a “virtual panic mode” according to a market participant (as reported by the FT). This worsening of the financial markets turmoil has occurred in spite of the hundreds of billions of dollars and euros that have been injected in the financial system by the Fed, the ECB and other central banks and in spite of the 75bps cut in the Fed Funds rate by the Fed. This massive easing of liquidity – both its quantity and price - has miserably failed to stem a severe liquidity crunch that is now back to the summer peaks, as evidenced for example in the interbank markets – both in US and Europe - by the sharp widening of Libor rates - at a variety of maturities – relative to equivalent maturity government yields and/or policy rate; such sharp rise of spreads to summer levels signals a worsening of the liquidity crunch.
Indeed the ECB is now announcing another massive injection of liquidity. This injection of liquidity will miserably fail like the previous ones as the ECB is not getting it that a reduction in its policy rate is now necessary and urgent. As the Fed Funds cut by the Fed suggest, such policy rate cut may not prevent a worsening of the liquidity conditions; but the lack of a cut in the ECB policy rates makes such a liquidity crunch in Europe – and the risks of a serious contagion from the US hard landing - even worse than the alternative.
http://www.rgemonitor.com/blog/roubini/
I just wish Nouriel wouldn’t always sugar coat the picture so much…
Sorry if already posted; just in case not…
Wall Street’s money machine breaks down
The subprime mortgage crisis keeps getting worse-and claiming more victims. A Fortune special report.
By Shawn Tully, Fortune editor-at-large
November 12 2007: 12:13 PM EST
(Merrill Lynch CEO Stanley O’Neal lost his job.)
The toll keeps rising
(Fortune Magazine) — Two things stand out about the credit crisis cascading through Wall Street: It is both totally shocking and utterly predictable.
Shocking, because a pack of the highest-paid executives on the planet, lauded as the best minds in business and backed by cadres of math whizzes and computer geeks, managed to lose tens of billions of dollars on exotic instruments built on the shaky foundation of subprime mortgages.
Predictable because whether it’s junk bonds or tech stocks or emerging-market debt, Wall Street always rides a wave until it crashes. As the fees roll in, one firm after another abandons itself to the lure of easy money, then hands back, in a sudden, unforeseen spasm, a big chunk of the profits it booked in good times.
http://money.cnn.com/magazines/fortune/fortune_archive/2007/11/26/101232838/
Thought American families were somehow unique in spending themselves hopelessly into debt? THINK AGAIN.
Average Briton is now £33,000 in debt
By Nick Allen
Last Updated: 2:35am GMT 26/11/2007
Families are stretched to the limit of their borrowing capacity, with personal debt having almost doubled since the turn of the century, an independent report warns today.
http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/11/26/ndebt126.xml
Let me be the first to suggest that the hedge fund industry is likely to do for the global financial system what Enron did for the U.S. energy market.
Credit Suisse Quits MTS
In Protest of Open Trades
By ADAM BRADBERY
November 26, 2007; Page C10
LONDON — Credit Suisse Group decided to stop making markets in European government bonds on four trading platforms operated by MTS SpA, protesting MTS’s decision to open trading to hedge funds.
The Credit Suisse decision could pave the way for other banks to shift their bond market-making businesses away from MTS as platform requirements ease. Rivals include Bloomberg LP, Eurex Bonds, ICAP PLC’s BrokerTec platform and Espeed Inc., which is an affiliate of Cantor Fitzgerald LP.
…
Credit Suisse said Friday it was prompted to move its market-making business because of its opposition to MTS’s plans to allow nonbanking entities, such as hedge funds and proprietary trading firms, to trade on its EuroMTS benchmark euro-denominated bond-trading platform.
The bank, as with some other primary dealers, believes hedge funds could exploit the European market-making system. Mr. de Caumont said the funds aren’t interested in providing liquidity in the bond market by buying and selling bonds when counterparties need them to, but instead simply want to make money with high-frequency automated spread trading.
http://online.wsj.com/article/SB119603240792103376.html?mod=googlenews_wsj
Massive $1B Ponzi Scheme
http://www.pe.com/reports/2007/wealth/