Bits Bucket And Craigslist Finds For November 26, 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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RETAIL- guess the sky’s not falling yet
This is funny… National federation said that the spending was down 3.x percent so everyone is pointing that the traffic was up 4.8%. Amazing…
1. Wal-mart and Best Buy offer door-buster loss leader sales.
2. Sheeple fight each other to get in at 5 am, but they buy only loss leader product.
3. MSM touts great shopping season.
4. Wal-mart says, hey wait, we lost money because the sheeple didn’t buy anything else.
5. MSM ignores.
6. Weeks of low sales finally turn on light bulb at MSM HQ. Oh, shopping maybe not so good?
7. Stories about losses masked by Money Honey happy talk over latest acquisition by “private equity firm.”
8. MSM pins hopes on gift card purchases which don’t count till spent.
9. Not much $$$ gift cards, but Oh Wait, Britney’s driving DUI again! Poor K-fed.
Don’t we see this every year?
Potemkin Village Mall
10. ????
11. Profit!!!
Got underpants?
I ended up going to Target Friday night because she was only visiting for a couple of days and it was our only chance. The store was not crowded at all. We only got a few odds and ends, mainly medicine for her cold, some candy, and wrapping paper. We don’t spend much for Christmas presents, about $40 each for 7 people.
I got the same feeling when I went to Walmart. Most people were buying ordinary stuff - toothpaste and dog food not flat screen tv’s or digital cameras.
I went to Frys on Sunday - not much excitement there either.
Who knows though - Americans love to shop and probably won’t stop till all 11 credit cards are maxed out. So, it’ll probably be another banner year for retailers.
From what I hear Fry’s here in Austin was pretty crazy on Friday, however. The line was 2 hours “long” and wrapped through the store. No clue what people were buying, but I have a hard time believing it was worth waiting 2 hours to buy.
I went to Staples on Friday at around 11. They still had some of those door-busters available–got a great deal on a printer.
Ditto with our local office depot (they still had the $5 PC speakers I stopped by for). Lots of TVs and printers in big piles. We stopped by aroun noon.
We went to a furniture store here in Omaha called Nebraska Furniture Mart (for those familiar, it is a Warren Buffett owned company). Anyway, we went there for my sister who bought a Dyson DC14 for $299 (about $200 to $250 off retail). There was a limit of 150 per store, and 1 per customer, they sold out in 7 minutes. BUT (emphasis on the BIG) that was probably the most expensive item they sold en masse. Just about everyone was picking up $3 electric carving knives, $3 2GIG memory sticks, and $40 electronic picture frames, hardly ANY flat panel TV’s were leaving.
Don’t look…
http://money.cnn.com/2007/11/23/magazines/fortune/barr_recession.fortune/index.htm?section=magazines_fortune
Others are more direct. Nouriel Roubini, an economics professor at New York University who has been predicting the collapse of the housing bubble for years, wrote recently that not only is a recession inevitable, he also sees “the risk of a severe and worsening liquidity and credit crunch leading to a generalized meltdown of the financial system of a severity and magnitude like we have never observed before.”
“Such a meltdown, he writes, would include bank runs such as the one seen earlier this year at Britain’s Northern Rock and the bankruptcy of some broker-dealer firms.”
It’s interesting that such views are finally getting some coverage in the MSM.
Loved the straw man that was set up right after the quote from professor Roubini about others not thinking that americans would be selling apples on the street anytime soon. He didn’t say that, did he?
“Loved the straw man that was set up right after the quote from professor Roubini about others not thinking that americans would be selling apples on the street anytime soon. He didn’t say that, did he?”
But aren’t the moronic strawman arguments the only way to rationalize the wacked out logic these days? Ya know…. we have to fight them over there so we don’t have to fight them here brand of stupidity.
Straw men are also for those with neither the smarts nor the diligence to judge the content of the source on its own merits.
Yet they seem to be quite effective don’t they GS?
Here is what he wrote:
http://tinyurl.com/2zxung
Nothing about apples.
Straw man indeed. Unforunately, most people won’t notice.
straw man arguement: Colin Barr makes the statement Few expect Americans to find themselves out on the street corner soon selling apples and backs it up with a quote from Jim Griffin. I don’t agree but it was a well written piece.
(italics off)
The recession talk is in the air now. It is on the major msm financial sites such as forbes, business week, cnn money,ect.
If these sites are playing it up then the R is already here as they are usually big spinmeisters for the ‘all is well everything is contained’ line.
These recession fears seem overblown, given that inflation is contained, employment is high, and housing prices have barely corrected off their recent high levels.
MARKET MOVERS
Recession Fears Weigh Heavily On the Markets
By PETER A. MCKAY and KELLY EVANS
November 26, 2007; Page A1
Battered stock and bond markets are sending an increasingly ominous signal that a U.S. recession could be near.
The markets, however, haven’t swayed Federal Reserve officials and most private economists from their view that the nation’s economy can escape a downturn and get back on a steadier course.
The disparity between those two views of the economy — one growing bleaker, the other remaining sanguine — stood out starkly last week.
http://online.wsj.com/article/SB119602701188603294.html?mod=hps_us_whats_news
Investors fear new 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.
“Recession is getting priced in,” said Jan Loeys, economist at JPMorgan, adding that markets went into “virtual panic mode” last week. “Pressure is building for central banks to become a lot more active and vocal [this] week if they want to avert a collapse in credit markets.”
http://www.ft.com/cms/s/0/16e2b24c-9b93-11dc-8aad-0000779fd2ac.html
I am wondering if tomorrow is the time to buy the dip? Or is it better to keep one’s powder dry a bit longer? Because the stock market always goes up in the long run.
Economic and credit fears hit Wall Street
By Chris Bryant in New York
Published: November 26 2007 13:17 | Last updated: November 26 2007 21:39
US blue-chip stocks fell to their lowest level in seven months on Monday as heightened fears of a US economic slowdown and acute turmoil in world credit markets sapped further confidence from chastened investors.
A money market intervention by the New York Federal Reserve, a bail-out of two investment vehicles at HSBC and reports of heavy job cuts at Citigroup combined to depress sentiment. The sell-off once again gathered pace in the final hour of the session.
http://www.ft.com/cms/s/859a604c-9c1d-11dc-bcd8-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F859a604c-9c1d-11dc-bcd8-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
“I am wondering if tomorrow is the time to buy the dip? Or is it better to keep one’s powder dry a bit longer? Because the stock market always goes up in the long run.”
FWIW, I’m moving some money out of cash and into SDS (Ultrashort S&P500 ETF), with the intention of selling that sometime and 2008 and getting back into a S&P Index. I think that we’ll see an S&P around 1000 (30% drop) sometime within the next 6-8 months (highlighted by a single-day loss of 10% or more–which would be among the worst five days in the history of the market). Some event is going to trigger capital flight from US equities. Afterwards the market will surely accelerate upwards (a deflating dollar and low rates will make returning to a long-term upward trend a near certainly), but that will take a little while to take effect and reinflate the market.
I’m not saying bet all your investable assets against the US stock market in the short-term (I’m just doing this with a little less than 10% of my available cash), but I’m hoping to make a killing on the market correction and then invest into it’s lowest levels since 2003.
If you dollar cost average, then you should continue to do so. But if you’re looking to take a long-term long position, at the very least I’d sit on the sidelines for a few more months. And if you can handle the risk, seek to profit from an inevitable correction with a short-term short position.
But that’s just my $0.02.
Death of inflation is a dangerous delusion
By John Kemp
Published: November 26 2007 16:22 | Last updated: November 26 2007 16:22
“The Emperor’s New Clothes”, Hans Christian Andersen’s fairy tale about the fear of challenging mass delusion, is a story with resonance today.
Nowhere in economic debate does such power of perception play a bigger role than in the alleged disappearance of inflation. Central banks have switched the focus of public and media attention away from the full set of “consumer prices” to a subset that excludes some of the fastest-increasing items and therefore understates the true rate of price increases. The Federal Reserve, for example, focuses on “core inflation” – which excludes food and energy.
http://www.ft.com/cms/s/b267eaec-9c39-11dc-bcd8-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fb267eaec-9c39-11dc-bcd8-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
In cities and suburbs around Rhode Island, people who paid their rent and even signed leases are now being told to pack up and leave their homes because landlords have fallen behind on the mortgage.
The Mortgage Bankers Association reported earlier this year that, on average, nearly one in seven foreclosures nationwide are for properties where the owner does not live on the premises.
Nobody knows how many renters around Rhode Island are being forced out of their homes due to foreclosures, but lawyers, judges and real estate agents for lenders say the numbers are way up.
More than 800 properties in Rhode Island were repossessed by banks through foreclosure as of June, an increase of 380 percent from a year earlier, according to an analysis by LoanPerformance, a division of First American CoreLogic Inc., in San Francisco
http://www.projo.com/news/content/FORECLOSURES_TENANTS_11-25-07_H87U81P_v377.10b379e.html
.
Yup, when you’re auditioning landlords, you shold make the sign one of those permission to access their credit report forms.
Amen brother.
Housing-related businesses being torched?
http://tinyurl.com/2w7y2p
“Firefighters were called to the scenes of two separate fires that broke out overnight in Woodbridge.”
“Officials said that at about 11:45 p.m. Sunday, a fire broke out Meadow Farms Garden Center. Then about an hour later, a fire started at Playtime Pools & Spas, officials said. Firefighter were still battling the blaze at Playtime Pools at about 6:30 a.m. on Monday.”
“It’s unusual to have a fire at a commercial establishment in Prince William County. To have two, is extremely unusual. It is something that looks suspicious,” said Capt. Tim Taylor of the Prince William County Fire Department.
This just shows that you should follow the rule, “You should not panic, but if you do panic you should panic before everyone else does”. So if you are going to burn down your own business, you should burn it down before someone else gets the same idea and you don’t end up with multiple suspicious fires on the same night which the FD will investigate.
Hope everyone saw the article in the WSJ this morning about the MTG workouts. Wasn’t so much the subject of the article; more the examples they used in there… .Things that we always talk about here, and knew were going on, but never seemed to get discussed when the “poor homeowner” is put up for a MTG adjustment.
Lady bought the home for 105K in ‘85.
Last year got a MTG for 625.5K.
Refinanced her home 5 times over the past 5 years.
Used the proceedes of the most recent re-fi to pay off the 30K she owed on her white Lexus.
And, I am supposed to help these people? This is a perfect example of the housing bubble mentality, these people pulled out 1/2 a MILLION dollars in equity from their home… And now they can’t service the debt.. How is that my problem!? Had they kept their orginal loan, they would have almost paid it off by now, and they would have a monthly loan payment of about 5-600 a month. Instead they are paying 3-5K a month for their loans, and driving that fancy new Lexus…
Also, there is another women mentioned with a salary of 34K that got a MTG for 385,000. Another “HBB myth” about people getting morgages for 10X their income… Right there, page 1, in the WSJ for the world to see.
got link?
Unfortunately, no, I don’t have a link. I get the print WSJ; its on page 1 and is titled “Citigroup Feels Heat To Modify Mortgages”. Perhaps someone else knows how to get links from WSJ, I thought you had to have a login to get their stories?
Thx!
Link for non-subscribers (not worth much)
“How is that my problem?” I agree. It sounds like a personal problem to me, though I think she and the banks are both culpable. I, personally, didn’t indulge and have no interest in suffering the hangover. Not that that matters. We’ll all suffer one way or another.
link:
http://online.wsj.com/article/SB119603917642103489.html?mod=hps_us_pageone
tnx, Bob.
I read that (have a WSJ subscription. Well worth it!). It’s amazing that the reporters don’t’ ask hard questions.
I don’t think anyone with a HELOC should ever qualify for any “bailout” unless that $$$ was used to make a damaged house habitable again (and I’m not talking about granite countertops; I mean repairing storm damage, etc)
Now the saving/taxpaying class (the minority of people in the US) are subsidizing poor Lexus owners! Outrageous! But since these people are in the voting majority, there’s no help for us.
By my own choice, I no longer earn, save, or pay much in taxes. It was hard to make the change, as by nature I’m a hard working guy. I’m trying to get my savings spent before it’s confiscated.
Hopefully Ben will post the LA Times article this morning about the couple who make $70k a year and bought a $535k house in the canyon 2004. They have 3 kids and the wifey homes schools. They’re crying about not being able to afford health insurance. But they’ve remodeled and installed new granite counter tops (how do you spell re-fi). Made my blood boil. Why is it my problem that they chose to have three kids, chose to buy the big house, and chose to home school? But I’m supposed to have no choice about whether my taxes support their life style?
thanks - just needed to vent.
Here’s a link for the text of the complete article.
Hope everyone had a great holiday weekend.
My BIL bought DoubleWide at 18.
Did he say why??
The experts at BofA did it. It’s the biggest lender. He’s in it for the long haul.
Man, I got out on puts after the dip to $8ish. I’m surprised it’s still dropping like a rock. Looking for another entry point.
Well, if it was such a good deal at 18, it’s twice the deal at 9! Tell him to load up!
(At least, he should dump it in December and pick it up again 30-days later, if he still believes in it, so he can take a loss…)
The contained carnage is spreading everywhere:
But worries about the companies that insure hundreds of billions of dollars in muni bonds are rippling through to muni bonds and rattling investors. The insurers, which have exposure to risky mortgages, could see their credit ratings reduced. If that happened, the muni bonds they guarantee would be downgraded, too. Cities and states would find it harder to raise money. Projects would be delayed. Taxpayers could face higher taxes.
Miami-Dade County and Puerto Rico have postponed bond issues totaling $1.5 billion in recent weeks because of credit concerns.
USAToday: http://tinyurl.com/28z2×7
Link doesn’t work, at least not for me. But I get the gist. There was a report on the local news last night about Florida giving leases to foreign companies on toll roads and bridges. The toll on the Skyway bridge to St. Pete would double every few years. I’ll be danged if I’ll pay $5.00 to cross. As a taxpayer, that bridge belongs to me and my fellow Floridians. We’ve paid for it all these years. The pols are working overtime to figure out ways for us to pay for their incompetence and looting.
I guess there’s some truth to the “I have a bridge to sell you” jokes.
But don’t fret. By then, everyone will have an EasyPass or a SmartTag, and they’ll just take the fee out of your checking account, so you won’t feel the pain of handing over cash, doncha know.
In Washington State, they twinned the Tacoma Narrows Bridge-but only on the new span coming in. Now that’s more fair.
Oops me post before read. Toll is only on new bridge coming into Tacoma.
Just wait until the local governments lease out fire protection & emergency medical services to foreign governments.
And states pulling back on spending is bad because?
Found out over the holiday that my home town did a massive up date to the “downtown” area. Mostly changing the traffic flow, putting in brick crosswalks (?!?), building up new sidewalks and buying a special snow plough that won’t damage the new sidewalks. The funny thing is that it already had a nice town center - with more than adequate sidewalks and painted crosswalks.
On the other hand, some of the small houses in my old neighborhood are on the market for $220K - probably went for $350K plus at the peak. Our house was a 1400 square foot 3 bedroom with an unfinished basement, no garage and a small cement patio in the back.
RE: Cities and states would find it harder to raise money. Projects would be delayed. Taxpayers could face higher taxes.
Big article in Sunday BeantownBlob about the decrepit Chicago subway system. Billions to repair the deferred maintenance.
Meanwhile the high honcho’s of the transport authorities retire with mega-pensions and full paid health care until death.
It’s a complete sell-out.
$417K to $257K. But Dallas is fine, ya know, especially around downtown . . .
http://dallas.craigslist.org/rfs/489595115.html
A STEAL OF A DEAL!! $160,000 UNDER MARKET VALUE
Errr… God I hate it when they misuse the term “market value”. If it was 160K under market sweetie, your RE agent would have purchased it from you 10 seconds after you put it up for sale.
I wish I could smack the people who misuse this term. It’s one of those pet peeves, it just drives me nuts!
Second.
And I hate when people say they are nauseous when they meand they are nauseated too.
But they are nauseous - they just don’t know it.
Well, yes, there is that.
THANK YOU.
For years and years, I’ve been correcting people with “nauseated” when they say “nauseous”. Hi five, nauseated-brother.
I suppose they could have used the equally overused “instant equity”.
A matter of perspective:
http://tinyurl.com/yqztl6
Mike Luckovich cartoon
http://www.ajc.com/metro/content/business/stories/2007/11/25/foreclose_1126_web.html?cxntlid=homepage_tab_newstab
But for those looking to buy, Purviance said, now’s a good time.
It’s always a “good time to buy” when there’s a Realty Clown in the room.
I picked up one of those little housing booklets at the grocery store yesterday. Sure enough, each page had phrases like “great time to buy! Owners really need to sell!” or “House prices are dropping, now is the time!” or “Price reduced! Won’t go any lower!” or “bank owned! a Steal!”
My thanks to Ben and everyone contributing to this forum. Without you guys, I’d go friggin insane. You are making a difference.
Ten days ago….
http://philadelphia.craigslist.org/rfs/480665391.html
Post shooting in the area….
http://philadelphia.craigslist.org/rfs/489298429.html
Yes, folks, welcome to Killadelphia - $100 discount per bullet.
A 0.07% drop in price. Hold on, let me get my checkbook.
At a $100 per bullet discount that place’ll be free in no time.
I flagged it. Nobody is gonna sell a house via craigslist if my bitter renter war is to be won.
Alternative Fuels:
http://www.stockmania.com/index.php?showimage=99
With gas high and dollars low, the Sheeple family has to find alternative fuels to make it through the long cold winter.
Keep em’ coming…
I wonder how much a pawnshop is allowing nowadays for a 40 inch flat screen tv, that somebody needs a loan on?
$100-150?
Could somebody please explain to me what the deal is with the HDTV and having to get “converter boxes” for your old TV? I guess technology will figure out one way or another to make you pay for a new TV. I’ve got cable here where I’m renting, but apparently, if I go back to rabbit ears, I won’t be able to receive the signal or something like that.
HDTV is not the same as digital TV. HD stands for High Definition - literally the screen is much sharper than SD or standard definition.
Digital TV refers to how they broadcast the signal. Analog is the “old way” of broadcasting TV signals. In order to receive the new signals on an old TV, you need a digital TV converter. That signal then goes the TV which can be standard or high definition.
Why I have this info floating around in my brain I don’t know because we watch the stuff that comes in through Netflix.
My buddy has a HDTV. Piece of crap, if you ask me. The images freeze up all the time. He’s so proud of his HDTV and yet it is painful to watch.
We watch sports and the news. I’d rather not see Wolf Blitzer or Chris Matthews in HD, nor HD baseball players spitting, thank you very much. Blurry is better.
Over the air HD TV works great and is better than cable or satellite HD TV when you can get a signal (because it isn’t as compressed). They can cram two or three times as many channels into the same frequency space compared to broadcast analog.
Unlike analog, you either get the signal or you don’t. With analog the picture becomes increasingly blurry and fuzzy (but our eyes can still “decode” it). With digital the image is perfect until the receiver can no longer decode it. I find that by the time the digital signal fails I would no longer be interested in watching the analog signal anyway.
Over the air is great, why pay big bucks to the cable company and support big media/big government?
I’ve been watching over-the-air digital television (OTA DTV) and have not found that “you either get the signal or you don’t” is true. A very busy digital picture with lots of detail & movement will become pixelated (rectangular parts of the video will look weird) when the signal is marginal. As the signal deteriorates the pixelation becomes worse until the screen blanks out. This is harder on my brain to watch than a very snowy/fuzzy analog picture. My DTV receiver takes a very long time to switch channels compared to my analog receivers, this is apparently part of the digital technology. Other drawbacks are beard stubble, facial secretions, eyeball twitches, etc. on the currently fashionable technique of super facial close-ups. Next year we’ll probably focus in on a single bloodshot eyeball as TV news starts to resemble old “Far Side” cartoons.
On the other hand, the digital signals I get from my local stations which broadcast digitally are 100% crystal clear 99% of the time and are a vast improvement over the analog signals the same antenna picks up & sends to my receiver. I can resolve marginal signals by rotating my very large indoor antenna. My digital receiver will also burn DVD’s from digital signals. The DVD’s are nearly always excellent copies, as good as originally received unlike videotapes.
Another advantage is the reduction of radio frequency interference (RFI). My sister who lives in Albuquerque recently moved across town to another house. She is not a digital or cable subscriber. Albuquerque is a unique OTA TV market in that just about all the local TV stations broadcast from a mountain crest 1 mile above the city and in plain site of virtually every resident. This should be an ideal location for OTA reception. City residents should get excellent OTA reception using the cheapest TV antennas available. Sis’s new neighborhood has bad RFI, all her received analog signals are just ratty even though she can see the TV broadcast antennas from her window. She switched to a cheap Walmart digital tuner and now has perfect reception, no RFI, and several more channels to watch on DTV than are available to her on analog. She loves her DTV setup, which only cost her $150 over what she already had.
I’ll stick with my 12 year old 36″ Trinitron and $120/month cable/broadband/phone.
A few years ago I was thinking of getting one those. It appears that the industry is no longer making tube TV’s bigger than 27″ these days.
I also agree with how HD is overrated. Most of the sets, especially the ones that don’t cost a kings ransom, are noisy and display plenty of visual artifacts. I will continue to wait.
I’ll stick with my OTA DTV and $48/month DSL/phone service. I’ve got better things to do with the leftover cash.
Maybe it has to do with the size. I have a 19″ HD in my bedroom and the picture is amazing and I rarely have any problem. Discovery and shows with lots of outdoor scenes are the best. There was a series on the Queens Trust gardens in England that was a joy to watch. It is interesting to see some of the stars in HD - not quite as perfect as they look on analogue TV.
I hope you and everybody else here had a great Thanksgiving!!
In 2009 or so I guess all new TV’s will be HD, and to get HD on the old telly a box is needed. Originally it was my impression the old TV’s flat out wouldn’t work at all without them. Apparently, that’s not true. The old TV’s will work same as always, just without HD. My point is, who really needs HD, especially with radios??
Also, I’ve heard more than once that rabbit ears will actually pick up the HD signal, but I defer to others here who might know more.
For about ten dollars more I have cableHDdvr/internet/phone. Palmetto, you can’t be serious… Sporting events are unbelievable and with the additional content from Discovery and A&E you are really living in the dark ages…
“Sporting events are unbelievable”
Especially when the wide receiver is frozen in midair.
HD is a free service by our provider but I refuse to drop a nickel for a cheese dick plasma/HD blah blah TV when my old Trinitron works perfectly.
I always notice how great the HDTV pictures look in the stores when compared to the non-HD sets, but I don’t think I’d notice or care all that much if I had it in my living room. It’s like everything else - you pay all this extra money for luxury items, be it cars, HDTVs, fine wine, fancy dinners out, then you can’t do without them. I surely enjoy the initial rush of such things, but in the end, I find I become desensitized to the stimuli with a new “tolerable” baseline. There’s no quality of life improvement, just a passing excitement accompanied by a new higher standard.
Blano - depends a little on the signal in your area, but when we were experimenting in the lab, a home made rabbit ear antenna did get the best reception.
HD is nice, but i still think the pictures are better on the radio.
Thanks, warlock, lol.
Maybe this will help clear things up…
In the old days broadcasting TV was much simpler - you modulated the video signal onto a carrier wave and sent it up your antenna and out to the world. This is easy but very inefficient use of valuable radio spectrum.
The new digital TV broadcast system is much more modern (the technology is perhaps only 30 years old). We now have DTV (digital TV) as a method for sending you your television programs. Think of it as a pipe, and the TV station can stuff whatever they want down that pipe and into your TV.
HDTV is completely separate. HDTV is a collection of video formats that look really nice.
It just so happens that this DTV “pipe” that your TV station set up is big enough (err… efficient enough) to send HDTV signals to your TV set. So most TV stations have chosen to use this as an opportunity to broadcast in HDTV. There is one station here in Chicago that is instead choosing to broadcast 6 standard definition video feeds on their 1 DTV channel. Is that confusing enough? I can tune into channel 38-1, 38-2, 38-3, 38-4, 38-5 and 38-6 and get 6 different things to watch (none are worth watching). The Chicago ABC station broadcasts one HDTV signal and 2 standard definition signal on their 1 DTV channel. 7-1 is HDTV, 7-2 is a standard definition 24 hour news show, and 7-3 is a standard definition 24 hour weather/radar screen.
These converter boxes that are going to be sold do two things:
1) Tunes a DTV channel
2) If the content of the DTV channel is standard definition video, it sends it (untouched) to your TV. If the content of the DTV channel is HDTV video, it converts into standard definition video and sends it to your TV.
The FCC gave every TV station in the country a new channel to use for the DTV signal. Except for some extremely crowded TV markets, all of these new channels are in the UHF TV band, which is why any normal TV antenna can receive the DTV signals (you just need a tuner that can decode the signal). The VHF TV band is going to be empty when the analog signals are turned off - this is the spectrum that we are hearing about in the news that Google is going to be bidding billions to get.
In my area HD is built into cable box and doesn’t cost extra, but then I have DVR which is worth every penny (about $5/mo more). I record what I want to watch, watch when I want and fast forward through commercials.
“what the deal is with the HDTV and having to get “converter boxes” for your old TV”
The federal government has already auctioned off (or is in the process of auctioning off) the radio spectrum that is used for analog television broadcasts. Therefore. past a certain date, (2009? 2010? 2011?), no one will be broadcasting an analog TV signal in the old TV bands. You will need a converter to take the digital signals from the new digital TV broadcast bands and convert it to an analog signal.
The FCC is turning off the old way to transmit analog television signals. It is replacing it with DTV or Digital TV. This new signal will require a box to allow an older tv or TV which is only capable of receiving analog signals. If one uses a subscription service then they do not need to worry. Only those who receive via “rabbit ears” The older signal gets turned off April 7th 2009. They will give people a credit ($100) toward purchasing a digital converter box in order to smooth the transition. The FCC is taking back the old spectrum for transmission and will reallocate it for different uses.
As far as the HDTV bashers. I love my HDTV. I watch sports and nature shows in HDTV and if one goes to normal broadcast it looks out of focus. I agree some people should not be seen in HDTV but it is FAR SUPERIOR to standard definition!! 1080P is what one should buy in order take advantage of the full difference. (Yes I know very little is broadcast in 1080P yet but many thing will and over the life it will pay off-unless you are a sheeple who must consume and purchase a new one every few years)
So. how much subprime does Dresdner Bank really hold?
Nov. 26 (Bloomberg) — Allianz SE shareholders have a new reason to rue the almost $21 billion purchase of Dresdner Bank six years ago: the collapse of the U.S. subprime mortgage market.
Europe’s largest insurer is trading at the lowest valuation in four years on concern subprime losses at Dresdner will erode profit. Dresdner had 575 million euros ($852 million) of writedowns in the third quarter when the bank accounted for just 6 percent of Allianz’s total revenue, the Munich-based company’s reports show.
“Allianz is quite cheap at the moment, but investors are very suspicious that there are problems that we don’t know about,” said Adrian Darley, who helps oversee about $130 billion at London-based Resolution Asset Management and owns Allianz shares. “There are suspicions about Dresdner.”
Germany as a country, didn’t participate much in the world-wide 1st world mania known as the housing bubble…
But it looks as if their banks had no problem picking up the slack.
Isn’t is rotten to the core socialist Germany that has a 160 billion dollar trade surplus with we’re big bad and number one USA? Too funny…..
Put yourself in the position of Germany…
They’ve been standoffish about the war (quite rightly), and their overall opinion of our country has plummeted since 9/11.
Now, due to the Greenback Dollar diving, combined with their banks being waste deep, in the big muddy of murky finance…
It’s like a triple whammy on them.
–
November 26, 2007
“Dollar Displaces Yes, [Swiss] Franc Ss Carry Trade Favorite”
That was the headline on Boob-berg this morning. Another headline was:
“DOLLAR NEW YEN”
Do you need any better proof that the US nearing deflationary depression?
For you “Printing Money” enthusiasts out there, in the financial wilderness, all that “printed money” is being used by financial institutions to buy the US Treasuries, which in turn pushed the rates down and the currency lower, two requirements for a currency to be attractive as an instrument of carry trade.
Yes, “We are not Japan,” I hear you, because ‘we” would have far worse deflationary depression.
Jas
‘all that “printed money” is being used by financial institutions to buy the US Treasuries, which in turn pushed the rates down and the currency lower, two requirements for a currency to be attractive as an instrument of carry trade.’
I’m not sure that’s how the carry trade works. Why would they buy US paper? It would be more likely that they would go after Aussie notes., etc. Either way, the carry trade is a bad deal.
Hello Ben,
Two “requirements” for a currency to be attractive for carry trade are:
1. Low rate (low borrowing cost) to invest in higher-yielding currency
2. Weak currency that is expected to weaken due to low rates (because when you pay back the borrowed money with other currency, in which you had invested the borrowed money, it would cost you less).
Anyway, that is how the carry trade works – borrow in low-yielding weakening currency and invest in high-yielding strengthening currency.
Jas
and invest in high-yielding strengthening currency
So why does that equate to buying treasuries? They should short the Treasuries, and use the proceeds to buy high-yielding paper in another currency.
Dead right and if the Federal Reserve lowers the rates December, the dollar really tanks due to carry trade. It currently has a Sharps ratio of 0.20 which means it is more profitable than investing in US Treasuries, Vanguard or any other fund.
“So why does that equate to buying treasuries?”
I said that as the US rates go down speculators (carry-trders) BORROW in dollars. The bankers and financiers of NYC are buying short-term Treasuries with the “printed money” that they get from the Fed (in exchange for some of the toxic paper). They don’t want to loan the money to the strapped households, which they were able to do during the “good old days” 6-9 months ago and pass on the risk via securitization.
Jas
I’m still do not understand how the “carry trade” works. Jas, could you post a link to a more detailed, step-by-step description for non-financiers & non-professional investors?
–
“Jas, could you post a link to a more detailed, step-by-step description for non-financiers & non-professional investors?”
I am sure that a search will give you some info, e.g.:
http://en.wikipedia.org/wiki/Carry_trade
But, it is very simple mathematical equation that drives the carry trade between two currencies:
Short-term Borrowing Cost (%) + Expected Change In Currency (%) A
The basic idea of the carry trade is as follows. You borrow $12000 equivalent somewhere with very low interest rates so it only costs you 3%, eg. Japan. You use that to buy a higher interest rate security somewhere else - say the US at 4%. At the end of the month you book the $10 difference.
Part of the “secret” is that you do this with a leveraged account, so you actually borrow and lend much more than the $12000 on a relatively small part of your capital. (Yes, it’s not just the government that can de facto print money).
Systematically, the reason this makes money is that you are assuming the risk of a currency movement against you, the implicit assumption for it to work is after all that currency values are stable relative to each other. That’s what also makes it extremely dangerous for the naive - when currency markets break out, they seem to do so extremely rapidly.
this bodes well for rand, kiwi, and auzie
Thats right although the US is not Japan so I expect rates to go up here in the US as borrowering increases unless the US falls into a deep Recession and no one borrows except carry traders. And the FED eases. So the FED eases to help home owners and instead helps carry traders at investment banks, same banks that split up sold toxic mortgages to investors.
What I don’t understand, is how a currency has a yield? When people say a “higher yielding currency”, are they referring to markets which trade in that currency, like a swiss government security or something?
I thought that the carry-trade worked by borrowing in a currency that is associated with low interest rates to buy in a currency associated with higher interest rates. What matters, in this case, is not the value of the currencies, but the interest rates associated with each.
It means that financial institutions(hedge funds etc.), now prefer borrowing money in US$(than Yen or Swiss Franc), selling those dollars for higher yielding currencies ( or stockmarkets), knowing that they will pay back the borrowed money when the dollar will be cheaper.
–
None of the “helicopter drops” are reaching the households in financial distress, are they? They are all falling over bankrupters and fraudsters and not on their victims who would love to spend more and not default on their mortgages.
Jas
I view the loud proclamations of the need to help distressed households as a smoke screen for handing more dough over to the moneyed class.
–
Couldn’t agree more, Prof.
Jas
“which in turn pushed the rates down and the currency lower”
So you meant to say “inflation”, right? Dollar buys less, things “cost” more (in dollar terms), that’s INflation, not DEflation.
–
Corrected…
“Dollar Displaces Yen, [Swiss] Franc As Carry Trade Favorite”
Jas
Ok, the foreclosure graph has been seen by everyone here and everywhere else. Fine. I have a request: could someone please post the personal debt growth graph during that time. I strongly believe that credit cards, auto loans, and other types of personal debt will collapse in cohort with the adjustable rate mortgage crap. We will experience the collapse of all kinds of debt.
Roidy
I’m sure the rest of the World will let us slide on paying our debts, once the 3rd World becomes us.
“once the 3rd World becomes us.”
“Once”? It’s pretty much happened, although all the details haven’t been sorted out just yet.
Wow, I’m going to S. Fla. next week and may have to detour back through area south of Tampa to see just how bad it is. What armaments are suggested?
Kevlar for starts.
Drop by Oldsmar if you can. Try to get by Lake Cypress Circle in the Preserves at Forest Lake. I’d like to know what is happening.
Roidy
I was offline during most of the holiday - can you give a link to the foreclosure graph of which you speak?
http://www.smugmug.com/photos/136440158-O.png
Oh - I’m aware of that. That’s not a foreclosure graph directly though - just an ARM reset graph.
How many of you have noticed weather, unlike anything you’ve experienced before?
Earlier in the year, down in L.A., there was a windstorm that caused many power outages for up to a week. On the el lay times blog, one guy said he was driving on the 14 Hwy and the strength of the winds was such, that it broke his windshield, by causing it to cave in.
We had a lightning storm locally that was unlike anything i’ve ever seen, in California.
Flash lightning (like the flash from a camera) and bolt lightning that was cloud to cloud, not up and down.
Do tell what you’ve seen, in your neck of the woods…
Anyone in the Northeast wonder why there are still GREEN leaves on the trees at the end of November? They should have been brown and on the ground 4 weeks ago.
Yes, it was bizzare. In NYC, we had the last day to put leaves in brown paper bags for composting Saturday. I’d say about 2/3 of the leaves were down at my house, but only in the day or two before that. In the park, some trees are still green, most at peak color, few are brown.
Our dog got fleas. A while back I applied what I thought was the last dose of flea protection for the season. Well, the flea season lasted longer than usual.
You should use the once-a-month anti-flea pills. No side effects I could discern after over a decade of use. One of the greatest advancements in canine health care IMHO. Utterly eliminates the need for toxic flea baths, collars, house-deflea-ing, etc. Also, can be purchased in a monthly anti-heartworm pill. Another major advancement.
Off-topic, but FYI.
http://tinyurl.com/3ay3kx
The delay may be due to the increase in carbon dioxide rather than the warming caused by the increase in carbon dioxide.
Thanks for that post.
RE: Anyone in the Northeast wonder why there are still GREEN leaves on the trees at the end of November?
My best friend says it was a winter wonderland skiing at Stowe yesterday!
Dallas had snow on Thanksgiving day. In 78133 we had HUGE thunder when it was 38 degrees outside…. very odd.
very dry here in Northern California. we should have had much more rain by this time. the sierras have no snow yet.
No global warming here. Sean “I’m not gay” Hannity told me so.
“No global warming here”
The correct phrase is “global climate change”. That way, *any* deviation from “normal”, hot or cold, wet or dry, is attributed to man’s influence on the climate. Or didn’t you get the memo?
Does the cause matter at this point? There are screech monkeys still out there denying it.
“Does the cause matter at this point?”
if one is proposing a “solution,” i would surmise that the cause distinctly matters.
for example, nasa has only days ago reported that the counterclockwise gyre of the arctic ocean, which has only occurred since 1989 has quite probably been responsible for much of the disintegration of the arctic ice cap by distributing the ice into warmer waters.
now that pattern appears to be reversing, portending a prolonged, decades long period of arctic cooling along with a predictable increase in arctic ice.
yes, it’s been getting warmer recently, but i’d be especially leary of screech monkeys who propose grandiose solutions with no concern as their effectiveness — or effect at all.
I know. In seasons past (but certainly not last year), I was able to start skiing in November, even October. This year? Not a chance. I’ll be lucky to start in January.
Bring your boat and outboard. There won’t be any snow left if this keeps up.
I’ve attributed my noticing this to the media attention about global warming, but I’ve noticed here in the northeast that the sun has felt surprisingly strong this fall; sunburn strong.
from my recent reading, the deterioration of the ozone layer is a truly worrisome development, which was recently thought to be under control, but apparently has been seriously exacerbated by the exponential increase of air conditioners in india and china that continue to use chloroflourocarbons that have long since been banned in the developed countries….
this “sunburn factor” may be one of the most worrisome and nondebatable aspect of humans’ effect on the climate.
“Flash lightning (like the flash from a camera) and bolt lightning that was cloud to cloud, not up and down.”
That’s what Florida’s lightning is like. Maybe Cali is on the cusp of going tropical.
omigosh…
We are turning into Florida~
in SC the hickory in our yard turned yellow a full month later than usual.
I’ve seen worse Santa Ana winds back when I was a kid. As for lightning cloud to cloud, most lighting *is* cloud to cloud.
Are we about to get into a “global warming” discussion?
Oh my gosh, I grew up in So Cal. I remember as a kid 30 years ago 10 trees being blown onto our house during a wind storm. How about canoeing down Bristol street in 1981 past cars that were 1/2 submerged? It snowed one morning on the beach in Huntington around 1985. In 1986 I lived in an apartment near South Coast Plaza that was struck by lightning and caught fire one night during a dry t-storm.
That is just what I can remember, No the planet is not dying.
Have you ever heard of the dust bowl?
All my life I’ve experienced weather I’ve never experienced before. I think it’s called “now.” Remember, past experience is no guarantee of future performance.
Due to short term technical difficulties (and the resulting executions), the Mongo attack is temporarily suspended pending recharging and recalibration of the weather beams.
Mortgage nightmare scenario — a housing-led recession.
http://www.msnbc.msn.com/id/21921214/
However, I question how much of a nightmare it is. The unemployment rate quoted — 6.4% — would have been considered a dream come true when I was trying to get established in the labor market at the back end of the baby boom.
Slower labor force growth is a blessing for the unemployment rate. Much of the pain will be felt by immigrants and those who export to the United States.
Rather than uemployment, I think we’ll feel a decline in spending power and profits, and we’ve arguably had too much of both. It is energy that, in the end, can really hurt us, as it is a necessity rather than a waste.
Well the problem is that “there will neve be another recession,” has been priced into the equity markets.
A little diddy about unemployment. Employment statistics do not count illegal immigrant jobs. So, there are a lot more jobs out there then are reported. If we ever counted these jobs, unemployment would be closer to 2%.
With all do respect Roger, that’s BS. The BLS uses:
*Computer Modeling (Worthless)
*Life & Dealth Model
*Revsions
*Other make believe stats
* People working 2 jobs to make up for the 1 that paid anything.
Just look at the lay-offs, the outsourcing, the service sector jobs replacing real jobs, and tell me the BLS isn’t full of it. When doesn’t this nefarious pos government not lie.
Oh, and all those illegals working are being subsidized by all us taxpayers. Privatize profits and socialize costs. Btw, they aren’t illegal ‘immigrants’, they are outlaws/invaders.
I would trust the governments inflation figures before their BLS figures. Using the figures from the BLS and backtracking total employment, current unemployment, under employment and part time employment (Looking for permanent work). The current unemployment in the US is 9.3 - 9.5%.
Which is why “employment” has thus far been little affected by the downturn in construction. Proportionatly more illegals work construction than in the rest of the economy. If you’re working under the table and you lose your job, you stop buying stuff and contributing to the economy, but you don’t register in the employment statistics.
Get real. Assume unemployment rate is 4.5%, or 9mm out of a labor force of 200mm. Now assume, for the sake of argument that there are 20mm uncounted jobs being done by illegals. Unemployment would now be 9mm out of 220, or about 4.1%. You can jiggle the numbers around, but to get your unemployment rate, a very simple arithmetical analysis shows that you would need an illegal force greater than the legal one.
I think that a job in 2007 is very different than a job in 1960. My older son graduated from high school in 2003. Some of his friends have manual labor jobs in factories and warehouses. They are paid minimally by the hour and are sent home early if equipment breaks or work slows down. They have no benefits and little chance for advancement. Last week one his friends went to work at 6 am and was sent home because they had “enough” workers for the day. They make enough to buy a used car, and pay rent to mothers, aunts, and grandparents because they don’t make enough to live independently. When I was his age in Detroit my friends got jobs on assembly lines and steel mills that paid well enough that they could buy a little house and support a family. They were proud and happy. Times have changed for many.
My parents bought a house in el lay for $14k, in 1960…
It zillows for $684k, now.
REhobbyist,
That’s the rub. The blue collar jobs used to provide income and benefits sufficent to claim middle-class status for most union workers. now they count “jobs” as anything that pays minimum wage, with no benefits, as if there is no qualitative difference.
So the jobs creation number is always bogus–they just aren’t comparing apples to apples. At minimum wage, a single worker, even driving a beater car, can’t afford to live independently, let alone buy health coverage.
I have said this before, but I have never before known so many people who work multiple part time jobs (that add up to far more than 40 hours per week) because they can’t find a decent full time job. They also hustle with mutiple in home businesses: pet groomer, photographer, DJ, masseuse, you name it. Of course all these people are counted as gainfully employed, even if their hours are cut back or the home businesses falter. A man wrote to the paper complaing how 200 people appiled for a single $16/h full time job and the the county unemployement rate of 2.5% had to be bogus.
Pretty much right on. I don’t understand why some people feel that kids nowadays are spoiled living at home. Who wants to share a residence with your family and having to sneak guys/gals in and out? People live with their folks because the jobs don’t pay enough to live independently right out of high school. Even if you went to college, you don’t really make enough if you have student debt. And god forbid you don’t get a “college paying job” while having college debt.
As mentioned earlier, welcome the 3rd world. A hallmark of 3rd world “economies” is that there is very little room for independence or advancement, everyone is dependent on everyone else, and most of the social and economic structure is rotten and corrupt to the core…
“The unemployment rate quoted — 6.4% — would have been considered a dream”
Going from 7% employment rate to 6.4% means more and more people getting employed.
Going from 4.9% employment rate to 6.4% means people lose their jobs:
“Based on historical models, zero growth in the U.S. gross domestic product would take the current unemployment rate to 6.4 percent. That would wipe out about 3 million jobs from the economy”
And think what *that* would do to the housing market and consumer spending…zero economic growth would start looking *attractive* after that scenario (ie it’s a positive feedback loop).
“In Germany, where 20,000 wind turbines generate 5 percent of the electricity, advocates say wind will be critical to meeting the government’s goal of generating at least 20 percent of all power from renewable methods by 2020. But the industry’s growth is slowing for a variety of reasons.”
“Germany is running out of places to put the turbines because of restrictions on the location and height of the devices. And rising raw material prices are making wind farms more expensive to build.”
http://www.nytimes.com/2007/11/23/business/23wind.html?_r=1&ref=business&oref=slogin
Where oh where in the unpopulated Big Flyover, could we stick unsightly power earners like this, in our country?
how about solar fields in the desert as well! guess we’d rather spend our billions on wars and military hardware.
yeah its just inspirational whenever I drive through the wind farms in the Coachella valley. by all means ugly up the desert and the wilds so the beaches and cities can have energy.
ok i buy that. don’t wanna ugly up the desert with solar panels. personally i love driving through the windmills up near livermore in nor cal. then decentralized solar stations in hot urban environments ; put roofs of solar cells all across the south and southwest. still beats hell out of us spending billions of dollars on militarizing the heavens with lasers (that don’t work).
You know, they’re not making anymore land in this country. Why build the windmills when they’re only going to have to knock them down to accommodate all the desperately needed new housing developments?
There’s got to be a way to combine cell phone towers and windmills. Where else do you have 8 lanes of traffic going around 60 mph and cell phone traffic?
TBoone Pickens has selected the vast wilds known as west texas, where weather has two forms, windy, and really fricken windy.
Colorado and Wyoming have some pretty big windmill farms. A Dutch company that makes them (Vestas) is opening a factory out here and are hiring 600 people. Colorado has a new constitutional mandate to reach a certain percentage (I think its 20%) of energy from renewables by 2020.
and the funny thing is that the Netherlands is WAY behind in windpower thanks to our stupid conservative government that blocked all alternative energy projects for the last 15 years or so, and gave out huge subsidies for nuclear research and big powerplants burning palmoil seeds that are grown in former rainforest areas. Government is still fully on the coal+nuclear bandwagon, in one of the most densily populated first world countries
And that in a country that owes all its wealth andmuch of its land to wind power … If Vestas is still Dutch, it is only in name.
The training for their techs takes place in England.
Big windfarms in Eastern New Mexico (south of Tucumcari, and along I-35 north of Des Moines to the Minnesota State line.
Call it the “Wind Turbine Bubble”…….goes along nicely with the mad rush into biofuels
Everyone in the Plains states is trying to jump on the bandwagon. Of course, all the profit/benefit will go to the usual out of state interests, while us locals get to look at crappy, spinning propellers from horizon to horizon
“Where oh where in the unpopulated Big Flyover, could we stick unsightly power earners like this, in our country”
Do a quick calculation of how much land you would need. And how many batteries (we need power even when the wind doesn’t blow). And infrastructure. And maintanance. Do the calculations and let us know.
Ever driven across west Texas?
Shoot, just cordon off 40 square miles in the middle of Wyoming somewhere, say between Shoshone and Casper, and build some big power lines. I’m not sure much of anyone would notice!
(and I’m a native)
Foreclosure vultures
http://www.pacificariptide.com/pacifica_riptide/2007/11/foreclosure-w-2.html?ref=patrick.net
A question for you guys.
I was speaking to a co-worker about short sales and bank owned property. He stated that the banks may want to unload some property (with deep discounted prices) at the end of this year so that they can take a write-off on taxes.
Does this hold any logic with anyone here?
I’m not seeing it. The banks, if they unload property, will do so under regulator pressure. The quicker they unload, the faster they have to mark-to-market the rest of their holdings. The banks are generally colluding (or so it seems) with one another to keep all their book values up.
Imagine if their estimated asset value drops below the regulator’s demands. How do they overcome that mess?
Senior accounting student…so take with a grain of salt, I am not yet a practicing CPA.
Those assets technically should already be impaired for book losses, so there shouldn’t be much benefit in holding them for financial reporting purposes. Practice may very well differ, but given the situation in housing right now, I don’t see how a bank could really hold significant assets in, say, california without impairing them (that is, recognizing the loss in value) at the end of the year.
Further, tax payment is on a cash basis, so a “loss” in financial terms does not carry over to a tax savings. A tax savings would be gained only when the loss is incurred (i.e. the recovered property is sold for a real loss), not when it’s recognized. So, again practice may be different, but I could see there being some tax benefit to selling before the end of year. Also, this I’m not sure on, but I think the tax year for a company is also it’s fiscal year. So “year end” might be end of March (or some other month), not necessarily end of Dec.
I did some reading on FASB, and it turns out banks should recognize the entire loss, based on fair value of the asset at the time of foreclosure.
So, if a borrower owes 100k, and the bank forecloses while the property is only worth 75, the bank should recognize the 25k loss immediately. Further, if the value of the property decreases to 65 while the proprety is being held, the bank should recognize that loss as well (probably would be recognized at period end, not necessarily on a daily basis).
And is the appraiser that they use to deterine “fair value,” the same one who convinced them that a 816sq ft fixer upper in a marginal neighborhood was worth $485k in the first place? You never REALLY know what something is worth until you find somebody willing and able to pay you the money.
You never REALLY know what something is worth until you find somebody willing and able to pay you the money
And that should be considered. I’m not saying all banks are totally honest in this regard. It’s certainly the case that those values could be manipulated…that’s where theory deviates from practice. The thing is, for some things, like those “level 3″ assets that have been talked about, there are no markets to make a confident estimate of value…it just doesn’t exist. Housing on the other hand has a very active market. Determining the market price of a house is relatively easier to do. If the difference is 5k between carry and market, it might not get recognized, but for places where homes have dropped 100k, I think it would hard to justify booking that asset (at the point of foreclosure) at the same number as the outstanding (upside-down) loan.
I wonder what kind of audits/compliance banks are subject to that might uncover over-valued foreclosed assets…
Those assets probably are impaired on the books, but not by enough. “Fair value” is not always a simple thing. The price at which you can buy something is sometimes different from the price at which you can sell it, and sometimes that is different from the price at which you could sell it if everyone else decided to sell at the same time. The banks know this, and they don’t want anyone to sell right now. With no buyers in sight, that would cause “price discovery” of a sort that they definitely don’t want.
One thing about write-offs. You have to have income to write off against. If you expect in 2008 that write offs exceed income…. then you are better off writing off in 2007.
I face the same problem with my small business. Next year I intend to go into hibernation, but I will still spend (expenses), but not earn as much. If I spend 50,000 next year but only earn 25,000 then I can’t write it all off. But this year I have a 50,000 profit. I’ve concluded it is best to stock up now for what I need next year.
The banks may be in similar situation given that the first 1/2 of 2007 was still part of the “good times” (easy credit)
Corporations can take losses for current years against previous years’ income.
It’s a theory I’ve often heard in real estate guru seminars and investor group discussions. However, I can’t recall ever seeing any hard evidence of it, to any degree anyways.
Things could always be different this year with the housing collapse and all, but I’m not holding my breath.
None whatsoever. First, they’ve only got about 25 business days to make it happen, and they can’t book it ’til it closes. Also, since profits are down anyway, the last thing the banks are worried about right now is how to reduce profits/tax burden. Finally, there is the fallacy-of-management issue: bank management does not actually exist to make strategic financial decisions, but rather to organize internal systems (and occasional office parties).
“the banks may want to unload some property (with deep discounted prices”
From my experience with the RTC foreclosure in the 1990’s, the non-performing assets on the banks books are audited on Jan 31, not a normal calender year audit.
I’d love to see a thread dedicated to people’s personal answers to “surviving” the credit smash — maybe along with a simple synopsis of that person’s current financial situation (savings, assets, debt, income).
I’ve been speaking about the housing bubble since around 2004, so now I get a ton of emails from previous family, friends and clients asking me what to do. Generally I advance them to financial consultants, but many recall that I was outraged by what most financial consultants (commission-driven) were doing.
Here are the 5 categories of people I deal with, every day, in emails:
1. The retiree. House either paid off, or with a new mortgage with a fixed rate so low, their cash assets could pay it off but are generating profit over the interest (which is also deductible). They rely on pension, 401K, and SS payments to survive.
2. The young. Just out of college, or about to be, with massive education debt, no real world skills, and a few starter credit cards ready to balloon.
3. The family. 30-something mother and father, both usually working, with at least 1 kid. Mortgage is usually 4.5X annual income of both. Debt level is, on average, about 50% of annual income, on credit cards. Cars are always, always leased. Used to taking at least 2 annual vacations on credit. At least one kid is in an obnoxious, expensive daycare center.
4. The poor. I live in a poor town (on purpose) and go to a poor church (on purpose). Most of the poor I know have new TVs with cable, cell phones (for each family member), DSL, a car for each family member including teens, and usually only one bread-earner in the family. Most of these poor also have credit card debt equivalent to 1X annual income. Some rent, some “own” a home with an ARM.
5. The wealthy. My wealthy friends are most scared, mostly because they all have cash assets in USD that are crunching, along with businesses that have overhead that is not decreasing except in market share. Some of my wealthy friends fear losing $1m of equity in the next year, and one guy is fearful about the $2m house he bought (financed, 20% down, 4X income remainder!) that he has savings to pay for over a year or two, but then sees a bleak market outlook.
Similar to my True Mortgage Calculator applet (see my URL), I am writing a Flash-based applet that people can use to try to decipher the direction they should take.
The only one I have a consistent “feel” for is the family of 4. I’ve told them to SAVE (even though it means a depreciating savings account!) a cash equivalent of 2 years of the minimum debt payment overall, including cars, credit cards, etc. I’ve told them to STOP spending more than their means, even if it means shopping at ALDI. Once you have that 2 year padding, now it is time to either find a second job, or figure out a way to reduce your spending some more. Having a 2 year cushion is almost always enough to overcome up to 4 years of problems (this is due to the fact that you can still get low paying jobs to pad your payments past the 2 years). I’ve looked at 3 families income/expenses sheets, and all of them could save 2 years of minimum payments within 6-8 months, and 4 years of payments within 18 months, if their jobs hold out.
If we the bloggers want real props from the regular old media readers, we need to start proposing solutions for everyone, not just rants and concerns.
I can’t relate to any of those categories. I know we’re weird but we have a high income and live on a tenth of it. Save some, give the rest away.
That’s awesome.
No, most people wouldn’t live like we do. We don’t have fancy furniture or cars. I buy some art and things I want when I can get them cheap but most of it’s in storage. We have the bedroom set I got in college. Trust me. We’re weird. It’s more important to us to not have to work for anyone than to have things.
We do have fancy furniture — strong heavy wooden stuff we inherited from her grandparents, or bought at a funeral auction cheap. I love stuff from the 20s-30s (pre WWII) that can be re-upholstered yourself and lasts forever. We can barely move our kitchen table, and our dressers are heavier still. Note that we both HATE closets and tore them all out (they’re just a place to stuff clutter and buy too much to fill them out).
Our cars are both 7-10 years old (paid off) and well maintained. We do keep a third emergency SUV that is 14 years old and runs like a dream (200k miles) for heavy snow days.
Neither of us has had a W4 job in about a decade, but we love to consult for others. This year our range of hourly rate was between $11 per hour (local widow) to $180 per hour (fixed bid, finished way under hourly projection). If the person doesn’t pay, we don’t go back. Works well, and there is a TON of work out there. I hate hearing people talking about the lack of work, when I can find work within a 10 mile radius drive that pays at least $40 an hour (low, but pays the bills). After expenses, and numerous tax deductions (1099 is key), we pay significantly less taxes and overhead than people making 30% more than us as a W4 employee.
I’m not sure who said it first, but MOST people who hold “jobs” _are_ sheep — they don’t realize that they’re giving up deductions and savings in exchange for “reduced risk” of having an employer. It’s like third party pay insurance: when someone else handles the risk, you end up with little reward.
Well , you haven’t said anything yet to change my “awesome” attitude. I aspire to cheap furniture, a decent used car, a roof over my head and enough money to give a bunch away and do what I want.
Got the first 3, not getting far at the moment with #4, but it’ll come. The hard part is teaching my kids about “things,” but I think my daughter is catching on.
When we got some inheritance money we did buy some nice stuff. Had been living with hand me down junk forever. Shopped carefully and bought quality that would last a long time. Never understand people that buy new microwaves and stuff of that sort when what they have works perfectly well. We kept an eye towards “this is the last one I’m ever buying. Teaching kids is easy - start from day one teaching them the difference between need and want.
tx: We’re similar to you, I think, except we don’t do stock market trades at all. The only “investment” I have in US denominated bucks are 12 CDs that roll over each 6 months in a ladder formation. I started them when I was very young, and just kept rolling them over as a dollar-denominated security blanket. I know the value has fallen due to money inflation, but it’s easier just to roll them over every 6 months (sometimes changing banks if the rate is higher elsewhere).
Other than that, we live WAY below our means. What this has offered me is the chance to “invest” in businesses that were dumped due to specific market recessions, with good businesses run bad due to the owners overspending in their real lives. I’m a vulture, yes, but I take a lot of heat during market growth when I sideline myself. I lost $37 in the dotbomb, and I will lose maybe $15,000 in the housing bubble (bought this year, but the house is 1X my income and was a cash transaction) offset by use of the house over the next 18-24 months.
Just a consumer market note: My wife finished her library (she’s a book hound, preferably OLD hardcovers), which she did by herself at 5% of the lowest contractor’s bid price. The room is amazing. We needed one piece of furniture, preferably a loveseat, and went shopping all day Saturday looking for a deal. After 10 furniture stores, we found nothing we liked (price wasn’t a huge problem) until we hit a furniture liquidator. We found a loveseat (fake croc leather arms and back) that they were selling for $700. I checked Google, and saw that it was selling 2 years ago for $1500+. We made a $400 offer and were denied. We left, but I left my number for a counter-offer. The manager called back less than 30 minutes before they closed, and asked if I would take $500. I said “out the door, with free delivery in 2 days or less.” She accepted. When I ran back in to buy, my invoice number was 000000002. I was the second sale of the day. I paid cash.
Our tastes are like TX’s. After 30 years of marriage, we still have the same bedroom furniture that my sister gave us when she bought new 30 years ago. I painted it two years ago and it seems like new. We’d rather stay home in our house and read/watch TV than go out on the town. We enjoy cooking our meals. Vacations are spent with family in places like Yosemite or Big Sur. We have enough money to put the our kids and another sister’s kids through college. We could retire now, but it’s hard to give up good jobs. No desire for fancy cars and other stuff.
Like all of you, I live well below my means. Have a good job I like well enough. But each year I get grumpier
Might just one day want to quit.
We are totally weird, too. We should be category number 3 - but we’re debt free, have 2 paid off cars, have money in the bank, and take care of our kids ourselves.
Also strange. We set out to be semi-independently wealthy (able to live on one income even if we had two) and avoid debt and consumerism. One 11-year-old car, no air conditioning, no cable, lots of simple, home prepared food.
It worked for us. We each worked part time when our kids were young, spending valuable years with them. Now we have plenty of savings, money for charity, etc.
I wouldn’t judge the nation’s economic direction based on the people who post on this blog. We really are 180 degrees away, most of us. Some would say I’m as bizzare as someone who ran up all the credit cards and HELOCed all the home equity to live large. Stranger.
debt free. house almost paid for, drive 17 year old and 12 year old dare i say it, Volvos! own 3.5 acres of prime land in Hudson Valley.
Money in the bank, don’t buy food at supermarkets only farmers markets. Use bicycles whenever possible. take mass transit whenever possible. don’t buy stuff, just books and records.
I’m encouraging the leadership at my church to do Dave Ramseys FPU gig. Even though I haven’t done FPU myself, I listen to him every Sunday for the last 4 years and understand FPU so much that I don’t have a need to do it but I would facilitate it at my Church. We have a few debt slaves for elders so there is a whole lot of foot-dragging on doing FPU there.
There are some cultish aspects in Dave Ramsey’s stuff that make me edgy but I think his message is right on the money. I haven’t done FPU, either, but what I’ve seen on his website and heard on his radio I think he gives good advice to J6P in a fun, entertaining way.
He’s (still) a little blind about what is going on in real estate. His house buying recommendations are *very* conservative - no more than 28% net income for a 15 year mortgage. I don’t think he’s noticed that it’s almost impossible to do that anywhere in the country at the moment unless your income is >$75K per year.
Many of the readers of my private newsletter love FPU. Most who followed it are doing fine.
I have found homes available for 1X to 2X income in every market in the country — if you’re willing to accept a shadier neighborhood. If you have kids, I guess you’re SOL, but I travel at least twice a month to different markets and always find what I consider a “deal.” Yes, there will be some sweat equity needed, but all I look for is a good foundation, a good roof, reasonable upkeep, and lower taxes than the rest of the neighborhood. Our house was 1X our income (but 8X local income, on average), and I recently found 2 houses in better neighborhoods for 2X our income. On my recent visit to Savannah, I found numerous homes I’d live in that were around 2.5X my income, which is portable income so I could generally live anywhere. The key factor I see today is that MOST people can’t move because they are generally overpaid for their job, and unable to find work elsewhere. When I help people make a home buying decision, a key factor is not just “What is your income?” but “What would your income be if you had to change employers?” I’m also a fan of using raises and bonuses to pay down mortgage debt faster. I would never, NEVER look at a 30 year mortgage, either, which Ramsey seems to also avoid in his recommendations. Even 10 years sounds crazy to me, when you show the interest-paid comparisons.
Well…. one has to consider the typical Dave Ramsey caller. Usually they are a complete mess financially and a wreck in other matters too (spiritually, career, family). I never hear a caller asking how to get in a market. The callers are always asking advice on how to extricate themselves from a deep deep hole……. Kinda like your typical FB’er. LMAO… Dave presents some very hard choices for these people. Losing “stuff” always hurts but when put into perspective, it’s all meaningless. Most of these callers worship at the materialist altar and guys like Kudlow and Laffer are the voodoo priests. Dave cuts no slack but is very compassionate.
We had a fixer-upper with two small children. Neither my husband or I are afraid of work and have taught ourselves many skills that the population at large would contract out. We mad a small profit when we sold but my advise to any family with children is not tackle a fixer upper unless they are prepared to give up hobbies and television. Looking back, I would have rather spent the time with our kids.
I guess my point remains: Dave Ramsey gives great advise but there’s no practical way for J6P (especially with kids) at the moment to follow his real estate recommendations, even if 1 or 2 houses that fit the bill can be found. A 15 year amortization is very aggressive (and good) at any point in time but right now it makes prices look like what they are: insane.
I agree VT’er. He got his start in RE, specifically multi-family that CASHFLOWS. A primary residence doesn’t cash flow which is something Dave neglects to mention. I called in and got on the air one afternoon in late 2004 I think and made the statement that RE will fall hard by 50% or better. Dave went silent for 10 seconds and replied “So you think RE will rollover”…. My response was “cmon Dave, gimme a break”.
“…one break, coming up!”
Change!! Ain’t nothin’ stays the same…….
Unchained…. Anybody fortunate enough to see the REAL VH this fall? I had front row for Fair Warning tour in 81. Best concert ever.
RE: Anybody fortunate enough to see the REAL VH this fall?
Beantown Garden a month ago.
It was like bein’ 30 again.
Eddie & DD in great form.
However, sound mix was horrible. Same report from Montreal. Unacceptable for tix @ $150.00 & beer @ $7.00
Without Mike, it’s not the real VH.
(I missed seeing VH…I waited to hear the first reports before pulling the trigger, and then forgot about it until the day before they played DC).
True, but if you keep renting until you can follow his house buying formula, you won’t wind up with a half million or million dollar problem. There are still large areas of the country where people can follow that formula and buy houses.
That’s a great idea…..our church should do something similar, IMHO.
Great post, ABD.
I’ve told them to STOP spending more than their means, even if it means shopping at ALDI.
This is the best piece of advice for anyone to deliver, and most of the other pieces follow from this piece.
It is also the hardest to deliver well. Do you have success with this message? My experience is that somebody has to almost already know the message before hearing it from the outside.
If we the bloggers want real props from the regular old media readers, we need to start proposing solutions for everyone, not just rants and concerns.
Amen. Bitching is one thing, solving problems is way harder.
Actually, the wife and I organize “cheap buying trips” regularly with friends who would never be caught dead at the cheap stores. A few weeks ago, we took a friend of ours (who earns about $110k a year but can’t pay his bills) to his local ALDI and he ran into two co-workers there. I explained to him that the “embarrassment” of running into people you know builds pride, not destroys it, because you will finally come face to face with the reality in society. I always recommend hitting the thrifts stores and dollar stores for at least one reason: see what kinds of cars are parked out front. As we see more Lexus SUVs and Acuras parked outside of ALDI and Dollar General, people are more willing to accept that the mask most are wearing is just that: fake.
One of my closest friends finally gave up his $1800/month apartment in Chicago for a $600 unit just 2 miles away. I helped him eBay and craigslist more than 70% of his “possessions” at about an 80% haircut over what he paid. In 2 years, he will be debt free, working a $70k day job and an $8/hour job at a coffee shop on weekends. So far, he’s met many of his friends at the coffee shop who have admitted that they wished they could get a second job, but they’re too stressed and occupied over managing their debt to think about it. He’s gone from depressed to excited about getting things under control, hopefully before the ground falls out from under him.
My wife is excited by our recent budget cut (we cut an additional 20% out of our spending in October) because it means an additional 5 figures of savings next year. As the cash outflow decreases, the value of having years of savings (mostly gold and silver) makes life more comfortable. It also gives us the ability to help others who are truly broken enough to accept that they need help, and need to ask for help.
If I was immoral, I’d be the first one to offer a second chance credit card or open a used car dealer. There are many opportunities to profit from the credit crunch if you have cash assets. Thankfully, I want to be part of the solution, not more problems.
“He’s gone from depressed to excited about getting things under control”
*Everyone* should read the book “Who Moved My Cheese”…a silly title, but a *very* quick read, and totally necessary in today’s ever changing world.
RE: 5 categories
Where are all the divorced people?
We have 2 paid off cats.
Like many here, we spend way less than we make. Most of the remainder gets saved or invested in US $ denominated investments, so we have to take the inflation hit, until/unless we diversify out. Soon, we hope to go the way of TxChk and give more time/money to charities as well.
We make appreciably more than the national average, but we’ve become used to not buying “stuff” just because we want it, or just because it will impress the neighbors. We drive nice cars, bought at about 50% off because we buy “pre-owned”, and we drive them into the ground (about 200K miles for the American made ones). As we are renting, we can afford to go out to nice dinners every so often (with the kids, mind you), and take the whole family on nice vacations (again, including kids) several times a year…paid for in cash.
My wife is in a pretty recession-proof job, and I can do odd jobs and contracting should the need arise. We *still* have some real estate investments, but those are in total “lock down, storm shutter” mode, and if need be, we can jettison them for a 50% discount relative to similar properties (or so we hope).
Anyways, our family has fun together, and even if we were living in a one bedroom apartment, etc., we’d still be enjoying life and each other.
I hope that lesson is rubbing off on my kids.
The “family” category perfectly defines the folks who make up my world here in Folsom, CA. I’d probably add that the cars have to be SUVs, preferrably with large chromy wheels (especially for the soccer moms. I have no idea why.)
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.
However, they are expected to indicate that the Fed reserves judgment as to whether these increased risks will merit an interest rate cut in December. The two officials will almost -certainly make it clear that the US central bank is genuinely concerned about the risks to inflation caused by the weak dollar.
http://www.ft.com/cms/s/0/01274d9e-9bc2-11dc-8aad-0000779fd2ac.html
even as Airbus heads for a record-breaking year, its profits have gone into a tailspin, dragged down by the weakness of the US dollar. It’s a story that is worrying executives and investors on both sides of the Atlantic.
The weakness of the dollar may be great news for the European shoppers heading for New York but it is “life-threatening” for Airbus, its chief executive, Tom Enders, told employees in Germany. “The dollar exchange rate has gone beyond the pain barrier,” he said.
http://business.timesonline.co.uk/tol/business/economics/article2935804.ece
“However, they are expected to indicate that the Fed reserves judgment as to whether these increased risks will merit an interest rate cut in December.”
Mr. Market seems to have decided on a rate cut, but comments playing up indecision serve to calm Fed watchers by suggesting the risks facing the Fed are balanced. Indecisive remarks also justify the morning-after claim that the rate cut was a surprise, legitimizing a larger-than-expected bull run on Wall Street.
I guess it has to be posted (new video), even with the detractors and naysayers:
http://www.youtube.com/watch?v=XaxdUPNYj2s
Worthy of watching all the way through, IMHO.
I caught this video last night. Excellent, IMO.
I guess that they could build a planty in Alabama, or something like that. Of course Airbus is a big jobs program in the EU, so offshoring would be very difficult for them. And no doubt they have some very entrenched unions to deal with as well. If Boeing is smart they will wipe the floor with Airbus.
I heard today that Sarkozy just got back from China with some big Airbus orders in his pocket. Seems to me Airbus are complaining for nothing (like always, this company is a financial black hole for tax money, like most of these outfits).
Every small company in Europe is expected to deal with dollar devaluation, inflation and all the stupid new EU legislation themselves; if they get out of business because of government policies, bad luck. But the big boys have an unlimited credit line with the EU and national governments
LOL, some prankster got ahold of this one
http://dallas.craigslist.org/apa/489623033.html
txchick, Are you picking up any retail puts today?
test
Remember the story over the weekend about the Gilbert Mom who made the “buy my house” t-shirts for her kids? You should go back to the article and read the comments people posted. Very entertaining. Her web site was down by Sunday night. She bought the house in 2003 for 215K and now wants 339K. I feel like making up a t-shirt that says “if you want me to buy your house - lower the price”.
Welcome to the new paradigm of family values, Pimp my Kid airing weeknites at 8pm.
Do you recall what thread it was in?? I’m still catching up on my weekend reading. Thanks.
Here the link
http://www.azcentral.com/news/articles/1124desperate24.html
The thread is still up on the blog.
comments are truly entertaining
Puerto Rican beauty contests are hotly contested…
http://news.bbc.co.uk/2/hi/americas/7112916.stm
At least nobody put Nair into her shampoo.
Oh man, combo, you owe me a new laptop! BWAHAHAHAHA!
It’s not every day you hear about a bomb threat @ a beauty contest…
http://www.globalresearch.ca/index.php?context=va&aid=7426
“In light of the current market situation and in order to avoid undue over-acceleration in the widening of spreads, the 8-to-8 Market-Makers & Issuers Committee recommends that inter-bank market-making be suspended,” the ECBC said in a release.”
Note: This isn’t mortgage-backed junk that’s being sold, but highly liquid bonds that are usually easy to cash in. The ECBC’s action is a sign of pure desperation and indicates that credit paralysis has infected the entire euro banking system.
Reuters: “Due to general market conditions and the specific mechanics of the inter-dealer market making it even seems possible that inter-dealer market making will not be resumed this year.”
The mechanism for converting covered bonds into cash has broken down.
Gotta love it when hedge fund directors are pandering for a bailout. I wonder how the bets are hedged? Got Fannie?
November 25, 2007, 5:23 pm
Summers: “Odds Now Favor Recession”
Former U.S. Treasury Secretary Lawrence Summers says “the odds now favor a U.S. recession that slows growth significantly on a global basis.” Mr. Summers, in his Financial Times column, posted on the newspaper’s web site Sunday night, wrote that just 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,” he said.
The former Clinton administration official, now teaching at Harvard University and a managing director at hedge fund D.E. Shaw Group, offered three reasons for his current gloomy view:
…
http://blogs.wsj.com/economics/2007/11/25/summers-odds-now-favor-recession/
try and say:
“preponderant probability”
5 times fast.
Summers is running a preponderant campaign to help the GSEs ride to the rescue. If any R-can strategists are paying attention, they should stand in the way of this plan, as many D-ratic fat cats have long bets on GSE-led bailouts.
Interesting that you keep trying to frame this with the Republicans as the good guys, but that just isn’t the case. Both partys enjoy the GSE cookie jar and haven’t done a thing to reform these monsters. Look at the GSE political donations and who blocks what in the committees.
Ben —
I don’t disagree with your point; I just happen to notice that the loudest GSE-bailout proponents are D-rats, which leads me to suspect they are banking on passing one.
The problem is that the GSEs were SUPPOSED to be the sober designated drivers at this party. Now we discover that they’ve been sneaking vodka into their drinks.
Larry Summers himself is preponderant.
Main Entry:
pre·pon·der·ant
\pri-ˈpän-d(ə-)rənt\
Function:
adjective
Date:
15th century
1 : having superior weight, force, or influence
That MSM is reading Ben’s HBB for lead stories has become:
Preponderant!
With a writers strike the commentators here have become journalistic byline production factory workers…keep submitting your ideas!
Yahoo this morning:
More Features
* Ten Penny-Pinching Tech Ideas for 2008
* Your Career: Set Yourself Up to Rise
* Before You Holiday Shop, Be Credit-Card Smart
* Twenty-Five Gifts for $25 or Less
Expert Opinion
All Play and No Work Makes for a Poor Life: Ben Stein
Not everyone can be a self-help guru or a makeup artist to the stars, so it pays — literally — to know how to work.
Focus On Retirement:
Investing to Beat Inflation
Reuters:
Fed to pump funds into markets to ease squeeze
Dollar slips vs euro and yen on rate outlook
Gold sees 2-week peak as investors run for safety
Minorities hit hardest by housing crisis
Citigroup planning major job cuts: report
HSBC backs SIVs with $35 billion to prevent fire sale
Ex-U.S. Treasury head Summers says recession likely: report
I have a bunch of friends and the majority try to finance there lifestyle obsestion via credit, rather then face the reality that they can’t live like poeple on TV do….The reality is that it cost a lot more to live like the prev generation while wages have’nt gone up nearly enough to keep up, the gap is being finaced on credit…
It gets mighty hard to ignore elephants hidden under the rug once they have relieved themselves on the living room floor.
Seriously, I am very confused about the valuation impact of having devalued assets on or off-balance sheet. If Citi owns them, how does the accounting treatment materially affect the valuation picture, especially when the assets in question are the subject of a p. C1 WSJ article?
Citi’s $41 Billion Issue: Should It Put CDOs On the Balance Sheet?
By David Reilly
Word Count: 1,003 | Companies Featured in This Article: Citigroup
A $41 billion question mark is hanging over Citigroup Inc.
That is the amount, in a worst-case scenario, of potentially shaky securities the bank would need to bring onto its balance sheet. Citi has already taken billions of dollars of such securities onto its balance sheet and expects to take big write-downs on those holdings.
The fate of the $41 billion rests on the outcome of a debate going on in accounting circles over what constitutes a “reconsideration event.” Those who say Citi needs to put these securities, known as collateralized debt obligations, onto its balance sheet argue that because Citi acted over the summer to backstop some of them, its relationship with them changed, prompting a reconsideration event.
http://online.wsj.com/article/SB119604238679603556.html?mod=hps_us_whats_news
The problem is not the CDOs in the banks portfolios. The problem is the CDO liquidity “puts” that jeopardizes the banks.
From Bank of America’s 10Q
“The Corporation is obligated under the written put options to provide funding to the CDOs by purchasing the commercial paper at predetermined contractual yields.” total 13.2B for 2007 current est value of BACs losses from the liquidity puts $11.2B.
Current loss estimates from Citigroups Liquidity Puts = $22B out of $25B exposure.
There are an enormous number of Liquidity Puts in existence.
from Citigroups comments Nov 13
More news from Citi:
Citigroup planning major job cuts: report
http://tinyurl.com/yuk2lr
CNBC said that no exact number had yet been set, though some jobs were already being eliminated. It estimated that the cuts could total anywhere between 17,000 and 45,000.
Happy Holidays! Now get out.
“cuts could total anywhere between 17,000 and 45,000″
Citi is first up. The other ibanks will follow.
Remember the article in yesterday’s SD Union Trib about a crime wave in an Atlanta neighborhood facing a high number of foreclosures? I would love to know how many of those foreclosed homes were financed by CFC.
Where Countrywide Chief Is Finding a Life Preserver
By James R. Hagerty
Word Count: 860 | Companies Featured in This Article: Fannie Mae, Freddie Mac, Citigroup, Washington Mutual
When Countrywide Financial Corp. Chief Executive Angelo Mozilo needs cash to fund home loans these days, he doesn’t look to investment banks in New York or London.
He relies mainly on the quasigovernmental Federal Home Loan Bank in Atlanta.
The nation’s 12 home loan banks, though privately owned, were chartered by Congress to finance housing and benefit from a widespread belief the government would bail them out in a crisis.
They are playing an important behind-the-scenes role in the credit crisis shaking financial markets, providing funding where other creditors won’t go.
http://online.wsj.com/article/SB119603725035603459.html?mod=todays_us_nonsub_money_and_investing
How will CFC’s PR team spin this one?
Schumer’s Letter on FHLB Loans
November 26, 2007 2:10 p.m.
Sen. Charles Schumer, a New York Democrat, urged regulators to examine potential risks posed by a sharp increase in lending by the Federal Home Loan Bank of Atlanta to Countrywide Financial Corp., the nation’s biggest mortgage lender. The following is his letter to regulators.
November 26, 2007
Ronald A. Rosenfeld
Chairman
Federal Housing Finance Board
1625 Eye Street NW
Washington, DC 20006
Dear Chairman Rosenfeld:
I write to express my serious concern over the lending practices of the Federal Home Loan Bank of Atlanta, specifically in regard to the significant volume of advances made to Countrywide Bank.
…
I find these numbers alarming as reports continue to emerge about how Countrywide’s reckless and predatory lending practices were a leading contributor to today’s foreclosure crisis.
http://online.wsj.com/article/SB119610390093704160.html?mod=googlenews_wsj
This story has me really, really mad. An obsucre federal agency can give $51B to a psuedo-bank tottering on bankruptcy with no public discussion or disclosure. CFC is allready insolvent and will be bankrupt within a few months. The FHLB will be stuck with the CFC loans worth maybe 60 cents on the dollar. If the FHLB goes bankrupt, taxpayers are on the hook.
Just for perspective, the Katrina relief funds were projected to be $90B, and a year in Iraq is $150B.
For all of you opposed to a bailout, its allready happening behind closed doors.
What is wrong with our nation? GIve $51B handout to a bank notorius for predatory lending, that is on the brink of bankruptcy.
I was thinking about buying a 3-2 attached garage townhouse and wanted to get some opinions given the following, in 2001 it sold for 180K, there were were silmilar unit’s purchesed for 300K in 06-07 time frame. Currently it sit’s empty and has a list price of 259K, I was thinking of putting in an offer of 240K. At 240K I know I would be overpaying but adjusted for inflation over the 180K it may not be by much, should I pull the trigger?
HBBLurker - no, no, no, no, no. Wait until 2009 and buy a detached house with no HOA fees for $180K. Wait, if you have millions of dollars in cash on hand, go ahead.
Whats the hurry? I encourage you to pull the trigger….. when it’s time to strike.
If you can’t find a rental situation you like, why overpay? Write an offer for 180k and see what happens. I don’t know where you live, but you will kick yourself for overpaying, once the January freeze arrives, and folks are hobbled by resets ( another big wave hit in Oct. and it takes about 3 months for folks to fall behind) and any January cc bills and heating costs, along with property tax bills.
Patience, grasshopper.
Not much info here, HBB, but here are some general considerations:
1. Before you go making offers based on a previous sale, you better confirm that the previous sale price was consistent with other sales made at the time.
2. Where I live, the bubble started around 1998, so regardless of the comps, the 2001 price might be inflated.
3. If you know you’re overpaying, why would you agree to overpay? Is someone forcing you to buy?
I’d offer $180k
Thanks for all the comments guys, I’m in no rush, but I changed jobs about a year ago and thought I would temporarly move back in with my parents till I found a place I liked to buy…Well temperarly has turned into over a year, parents are ok with it, but I’v gotten used to having my own place so to speak, though going back to renting again seems foolish to some extent…I guess I’m thinking yea getting it for 180K would be great but it maybe another 2 years before sellers copitulate….I’m in the hudson valley ny area, which has basicly become an extended suburb of NYC, so I’m probablly gonna have to wait for NYC to bleed before any price reduction….
Sounds like you’re young and single. Why not rent? There is nothing foolish about that. If I wasn’t married with young children, man, I would be renting right now. Just the thought of maintenance being someone else’s responsibility is incredibly appealing to me.
“though going back to renting again seems foolish to some extent”
Not at all. Nothing foolish about saving so much money in such a short amount of time (by waiting a while longer to buy).
Be sure to study and understand the financial position of the condo association. Has the condo association saved for capital improvement projects or major future expenses (reroofing for instance). If not, you could get hit with unpleasant repeat assessments.
You will be able to get a condo/townhome for a lot less in a year or two. Keep you powder dry for now.
Back in the summer when the sub-prime woes first seriously caught Wall Street’s attention, one of the big concerns was its impact on hedge funds–especially because of leverage. But all through the latest carnage on Wall Street, there’s hardly a mention of hedge funds. All the attention seems to be focused on the financial institutions. Is there another big shoe waiting to drop?
It’s another day of bungee jumping on Wall Street…
http://www.marketwatch.com/tools/marketsummary/
This chart tells the real story of where the economy is headed…
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=TNX&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=7&freq=1&startdate=&enddate=&hiddenTrue=&comp=tyx&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013
TNX enjoys support at the psychologically-important 4 percent yield level…
http://www.marketwatch.com/quotes/?sid=11420
“enjoyed” the support… (The charts I posted earlier today have turned fugly!)
“In federal courts and on Capitol Hill, challenges are brewing to a key legal strategy President George W. Bush is using to protect a secret surveillance program that monitors phone calls and e-mails inside the United States.”
“Under grilling from lawmakers and attack by lawsuits alleging Bush authorized the illegal wiretapping of Americans, the White House has invoked a legal defense known as the “state secrets” doctrine - a claim that the president has inherent and unchecked power to shield national security information from disclosure, either to plaintiffs in court or to congressional overseers.”
http://english.pravda.ru/news/world/26-11-2007/101611-bush-0
Got a call fom a realtwhore yesterday, asking me if I saw the markdown of an old fixer-upper I had looked at a few months ago. #1 - it was marked down a week ago - do realtors still think that anyone relies on them for pricing info on houses?
#2 - when I told her that I was laying back to see where the market goes, she said that things are still going up in the area; that what the media reports doesn’t really apply to us here. Which is it, beb? Is the market still improving around here, or is it tanking like the media says it is? If it’s the former, why the eff are you calling ME?
That’s just bad salesmanship. “Prices are going up, except on the house that I called you about.” Sheesh.
If you can’t present a coherent pitch, get outta the game.
“what the media reports doesn’t really apply to us here”
New mantra from Realtor corporate headquarters, err, I mean the National association. I think each member is expected to have that phrase memorized.
I’ve spent time over the past few weeks to eliminate all exposure to housing and banking stocks. While i never bought any directly, there’s quite a bit of exposure to them in mutual funds, even the broad-market ones I’ve held.
For the 20% of my portfolio that I want in US Equities, i’ve been carefully hand-picking nice stable companies with low P/E and steady yields.
One stock that’s been doing OK by these “value” criteria (and up slowly but steadily over the past two years) is Kimberly Clark. I guess their business is doing well as FBs buy tissues to dry their tears!
Martin Weiss this morning predicts Countrywide as the next big bankruptcy.
A close relative works for them and everyone in the family seems to know her income for 2005 (170,000). She’s a 27-year-old graduate of a State college wih a run of mill business degree and went to work for Cwide in 2000-2001 time frame (talk about catching the sweet spot!). Bought a nearly new 3800 sq ft home in Sacto area in 2005. Also owns a townhome purchased in 2003. Drives a Lexus.
And these are the people who “deserve” a bailout.
Does Weiss’s prediction take this potentially devastating development into account?
Schumer: Loans to Countrywide need a look
Senator says troubled mortgage company is default risk for billions in loans from Federal Home Loan Bank.
November 26 2007: 7:22 PM EST
WASHINGTON (AP) — Sen. Charles Schumer urged a federal regulator Monday to examine whether loans to troubled Countrywide put at risk a network of regional government-sponsored lenders.
http://money.cnn.com/2007/11/26/news/companies/bc.apfn.countrywide.home.ap/?postversion=2007112619
I got a slick, glossy 2008 calendar from a Sunnyvale realt-whore. It had an “America The Beautiful” theme, with photos of American landmarks on every page.
And on the back of the calendar: “Printed in China”. I sent it back to the agent.
Tried to buy Ginger (food) from a chain store (”Lucky”) in Bay Area 1.69 a pound, broke it to see how it looked inside it had green strands. Went to nearby Indian store Ginger had mold on it 90 cents a pound. Both imported from China.
Drove to local farmers market picked up some reasonable looking ginger for 2 dollars apound.
What choice will we have except to buy poison from China & India.
The Globe and Mail, ‘Canada’s National Newspaper’, had a huge (4 sheets per side) glossy ad for condos and luxury homes in Florida this weekend. There has been a huge increase in FL RE ads in the Toronto print / RE media recently; not sure if this is an attempt to capitalize on the strong CDN dollar, weak FL RE market, or both.
PPT (alert)
I don’t believe or disbelieve in the PPT, but GSBear and Andrew had a nice discussion last week. Ergo I researched. Much of the info is from Nowandfutures.com
“The stock market is certainly not too big for the Fed to handle. The foreign exchange and government securities markets are vastly larger. Daily trading volume in the New York foreign exchange market is $130 billion. The daily volume for Treasury Securities is about $110 billion. The combined value of daily equity trading on the New York Exchange, the American Stock Exchange and the NASDAQ over-the-counter market ranges between $7 billion and $10 billion.”
…
“An appropriate institution should be charged with the job of preventing chaos in the market: the Federal Reserve….The Fed already buys and sells foreign exchange to prevent disorderly conditions in foreign exchange markets. The Fed has assumed a similar responsibility in the market for government securities. The stock market is the only major market without a marketmaker of unchallenged liquidity or a buyer of last resort.” … “The Fed could support the stock market directly by buying market averages in the futures market, thus stabilizing the market as a whole.”
Robert Heller Federal Reserve governor
Wall Street Journal
October 27, 1989
“…the Federal Reserve has the capacity to operate in domestic money markets to maintain interest rates at a level consistent with our economic goals”
Ben Bernanke, Fed Chairman, March 2007 to the Senate Banking Committee.
There is a lot of testimony from Federal Reserve members suggesting the influence of the PPT on the markets.
However, the ‘risk’ to the markets is
“Counterparty Risk Management Policy Group II”
A private group headed by Goldman Sachs, Bank of America, Citigroup etc. and sanctioned by the Federal Reserve
The purpose of this group is to directly influence the markets.
CRMPG: “It is acceptable market practice for a financial intermediary’s sales and trading personnel to provide their sophisticated counterparties with general market levels or “indications,” including inputs and variables that may be used by the counterparty to calculate a value for a complex transaction. Additionally, if a counterparty requests a price or level for purposes of unwinding a specific complex transaction, and the financial intermediary is willing to provide such price or level, it is appropriate for the financial intermediary’s sales and trading personnel to furnish this information.”
I recommend all that have an interest in PPT etc. going to
nowandfutures.com reading the data under ‘false data’ or google ‘crmpg’
Hoz — Your interest in this subject seems to be growing long after mine waned to ennui.
LOL,
I have never seen much (if any) effect of the “PPT”, however I try to keep an open mind to effects on the market from any source. CRMPG is much scarier to me than the PPT could possibly be. The CRMPG in effect means that security houses are trading against the customers as well as talking with each other about in house positions. This is not “open market”. Now wonder it is easier to make moneys in the 57 other major markets outside the US.
“The CRMPG in effect means that security houses are trading against the customers as well as talking with each other about in house positions.”
Doesn’t this violate U.S. securities law? If not, then I guess it is time to rewrite the law.
P.S. The U.S. does have securities laws, doesn’t it? (Not that this would matter much to participants in the “lightly regulated” hedge-fund industry or anything…)
Can anyone who understands please explain how this ‘fix’ works? Is it anything like the ‘0-interest until January’ financing offers on large appliances at Sears?
Fed Extends Loan Length To Counter Rate Rise
By Greg Ip
Word Count: 217
In an effort to offset upward pressure on short-term interest rates stemming from the recent turmoil in credit markets, the Federal Reserve Bank of New York said it would make loans extending over the year-end through special money-market lending operations.
http://online.wsj.com/article/SB119608730543403900.html?mod=hps_us_whats_news
The commercial paper market has stalled. The reason US Treasuries are up is a flight to safety from corporate debt. The Treasury department is trying to get moneys into corporate coffers, but the companies are mostly ’subprime’.
Is this standard operating procedure at the Fed?
Fed vows to head off funding crisis
By Paul J Davies and Michael Mackenzie in London and Ralph Atkins in Frankfurt
Published: November 26 2007 16:28 | Last updated: November 26 2007 20:56
The US Federal Reserve ramped up its efforts to head off an end-of-year funding crisis on Monday, promising aggressive measures to stop the money markets freezing up on December 31.
Promising to do whatever was necessary to stop overnight borrowing rates from shooting up at year-end, the Fed said it would ensure there was enough money in the system to keep the overnight borrowing rate at or around its target level – currently 4.5 per cent – around December 31.
http://www.ft.com/cms/s/5cd7d604-9c3a-11dc-bcd8-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F5cd7d604-9c3a-11dc-bcd8-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
RE: Doom and Gloom
Guess it runs all the way to the top.
http://www.drudgereport.com/flash9pb.htm
I’ll let palisades debunk the issues one by one.
You guys are concerned about a piddling little housing bubble, Roubini has his finger on the coming systemic financial crash, and Patrick has the really B-I-G picture, but don’t mention this messengers name.
–
3-Year US Treasuries Are Closing In On 3%.
Holy Pig!
Fed is “Printing Money” and long-term US Treasuries are going to be worthless (as per Dr Doomed, Marc Faber)? The guy has no clue as to how the Fed and the economy really work. All “Printing Money” enthusiasts need to learn the basics.
I expect rates in the US to head towards ZERO and the long-term US Treasuries to out-perform Scams for the 30-year period 1981Q4-2011Q3 by a very big margin, i.e., 3:1.
Scam Lovers are the biggest dupes in the world.
A UST bond lover for 15 years and a Scam hater for ten years,
Jas
PS: I have also loved gold and Swissie for the past ten years. Nothing wrong in having few mistresses.
(3-Year US Treasuries Are Closing In On 3%)
Not what the Fed wants. They’ve already lost control of long term rates. Short term rates?
–
Once one abuses enough one gets impotent and that is what is happening to the US Federal Reserve. Fed would have no choice but to follow Japan to 0% solution, I mean non-solution.
Jas
I’ve lost my cheat sheet of your special terminology. Consequently, I can’t understand this post.
Realtors say the Calgary market will go up in spring. 5.5 months of inventory on the market and climbing.
http://calsun.canoe.ca/News/Alberta/2007/11/26/4685944-sun.html
Question for the group: I just returned a phone call from someone who rang me while I was out over the weekend. Turned out to be someone looking to recruit people to part-time careers with Primerica.
Methinks that this is some sort of financial MLM that I’ve heard about before. The name kinda-sorta rings a bell.
Any feedback?
Sounds like a commission only gig selling insurance and other securities.
And that’s just what I wanted to do with my life!! (Not.)
It’s a sordid company, tied to Citigroup.
Wikipedia:
In December of 1988, Sandy Weill’s Commercial Credit acquired Primerica Corporation for $1.54 billion, retaining the Primerica name. At this time, the major businesses under Primerica Corporation included A.L. Williams, Smith Barney and Commercial Credit. On February 6, 1989 Primerica Corporation began trading on the New York Stock Exchange.
In December 1997, Primerica announced it was going to begin offering pre-paid legal through Pre-Paid Legal Services, Inc., at the time both subsidiaries of Travelers Group, Inc.[4]
In 1998, Travelers Group and banking giant Citicorp merged creating Citigroup (NYSE: C). Primerica and its affiliates continue to operate as subsidiaries of Citigroup, although the Travelers insurance business was spun off in 2002. Along with Primerica, other major brand names under Citigroup include Citibank, CitiFinancial, Smith Barney, and Banamex.
Thanks, Viewer. I won’t touch this outfit with a bargepole.
I don’t know about the rest but Pre-Paid Legal Services is a MLM.
–
http://money.cnn.com/2007/11/23/magazines/fortune/barr_recession.fortune/index.htm?section=magazines_fortune
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
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.
The latest evidence of the long-awaited consumer retrenchment: Chic discounter Target (Charts, Fortune 500) last week reported a weaker-than-expected third quarter, as sales of higher-margin apparel and home goods slowed. Starbucks (Charts, Fortune 500) reported for the first time that customer traffic in its stores declined in its latest quarter compared to a year earlier. Wal-Mart (Charts, Fortune 500) shares hit a six-year low in September after the retail giant posted another wan sales increase.
With consumer spending accounting for about three-quarters of U.S. economic activity, some economists say it is inevitable that the economy will stop growing at some point in the coming year, for the first time since the mild recession of 2001. “Right now, the question is how bad it’s going to get,” said David Rosenberg, chief North American economist at Merrill Lynch. “The question is one of magnitude.”
…
Anyone want to take a crack at this?
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_B/threadview?m=tm&bn=2422&tid=10163&mid=10169&tof=1&rt=2&frt=2&off=1
Why even bother…just smile and wave, boys, just smile and wave…
Low-risk trades put all others in the shade
By James Mackintosh
Published: November 25 2007 22:20 | Last updated: November 25 2007 22:20
Within the hedge fund industry there are some trades that are destined to live on in legend: Jessie Livermore’s claimed $100m profit from shorting the 1929 crash, Paul Tudor Jones’ prediction of the 1987 crash, from which he doubled his money in a month, or the $1bn profit George Soros reputedly made when sterling was forced out of the exchange rate mechanism.
But the forecast last year by a select group of hedge funds of a crisis in subprime mortgages has put even the most spectacular trades in history in the shade.
http://www.ft.com/cms/s/c4487440-9b7e-11dc-8aad-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fc4487440-9b7e-11dc-8aad-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F16e2b24c-9b93-11dc-8aad-0000779fd2ac.html
I dashed of this letter to a Contra Costa Time reporter after reading the story “Foreclosures ravage neighborhoods and communities”
Dear Sir:
How about a less biased, more neutral title for your article? I suggest “Delinquent borrowers ravage neighborhoods and communities.”
Foreclosures don’t just “happen.” It’s caused by someone not fulfilling his obligation to pay his mortgage.
Sincerely,
Reuven S******
and I got this reply. It seems that reporters don’t have a say in their headlines:
Good point, Reuven.
I’ll pass it on to the people who write the headlines.
Thanks,
John Simerman
Staff writer
Contra Costa Times
925-943-8072
Keep dashing off those letters! Little by little, maybe we can make the “MSM” avoid the bias that falling prices are bad, and that people who can’t pay their oblications are victims.
His reply sounds like a Bedbug Letter.
USD under 75
Hedge fund Lahde Capital earns 1,000% betting against subprime
http://www.bloggingstocks.com/2007/11/26/hedge-fund-lahde-capital-earns-1-000-betting-against-subprime/
Telecom guy too. Ha ha. They know all about disaster.
Gonna dive back in on the long side here at the close. Small position. Getting grossly oversold here. ES, Nas 100.
and getting longer after hours too. I like this entry a lot better.
Does this concern you?
Stocks slide despite Fed move on funding fears
By Krishna Guha in Washington, Paul J Davies and Michael Mackenzie in London and Saskia Scholtes in New York
Published: November 26 2007 16:28 | Last updated: November 27 2007 00:13
US stock prices and bond yields plunged on Monday as credit fears grew in spite of aggressive efforts by the Federal Reserve to head off a year-end funding squeeze.
Traders said investors were shifting out of equities for the security of government debt amid concerns about a fresh bout of financial turmoil that could spill into the real economy.
http://www.ft.com/cms/s/5cd7d604-9c3a-11dc-bcd8-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F5cd7d604-9c3a-11dc-bcd8-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Countrywide Canned?
The credit crunch has taken its Toll on a few firms…
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=tol&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=8&freq=1&startdate=&enddate=&hiddenTrue=&comp=fre+fnm+c+cfc&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013
I usually have a very strong stomach for roller coaster rides, but the market action over the past six months makes me rather queasy.
Schumer plays the nukular card against CFC…
http://online.wsj.com/article/SB119610390093704160.html?mod=googlenews_wsj
Perspective: US stocks are off 10% form highs (Dow, S&P). When is the psychology “correction”, and when is it “bear market”?
Oh, I have no doubt it is a nascent bear market. Finally! But you get some vicious rallies in a bear market.
Here’s an interesting one -
Google closed at 666.00 today.
I knew it!!!!
Sign of The Beast?
and the 30yr bond closed under 4.4
this bodes well for continued diaster of the highest order.
DAVID WEIDNER’S WRITING ON THE WALL
Divide or be conquered
Commentary: Citigroup must be broken up to create value
By David Weidner, MarketWatch
Last Update: 3:57 PM ET Nov 26, 2007
NEW YORK (MarketWatch) — Nine years ago, Sandy Weill closed what was considered the deal of an era: the merger of Citicorp and Travelers Group.
The deal was so big and so well received that investors pumped $43 billion into Citi’s market capitalization and helped send the Dow Jones Industrial Average to its first close above 9,000.
The creation of Citigroup Inc. (Last: C 30.70, -1.00, -3.1%) required Congress to rewrite financial-services rules that had served the country for more than six decades. Early on, Citigroup was the most profitable company on Earth. It was, as then-president Jamie Dimon was quoted as saying, “one of God’s great opportunities.”
It turns out only God is capable of running it.
http://www.marketwatch.com/news/story/citigroup-must-broken-up-create/story.aspx?guid=%7B17949869%2D1D01%2D4EFD%2D98C0%2D0C94BCE4C5ED%7D
Yawn…
Asian stocks skid in early trade, led down by Seoul, Tokyo
By Chris Oliver
Last Update: 7:58 PM ET Nov 26, 2007
HONG KONG (MarketWatch) — Asian stocks were down in early Asian trading Tuesday, led lower by sharp declines in South Korea on losses on steel maker Posco, while Japan’s Nikkei 225 tracked lower on softness in Canon Inc. and other exporters. Seoul’s Kospi index was down 2.8% lat 1,803.52 while Tokyo’s Nikkei was down 1.8% at 14,863.21 while the Topix index eased 1.9% at 1,438.92. Elsewhere around the region, the S&P/ASX fell 1.8% to 6,358.2 and New Zealand’s NZX 50 fell 0.2% to 4,067.154. In Seoul trading, shares of Posco fell 4.3%, Samsung Electronics eased 3.4%. In Tokyo, shares of Canon eased 2.3% while Nikon Corp fell 2.9% and banking giant Mitsubishi UFJ Group was down 2%.
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BF90684F9%2DB07F%2D46EC%2D8B50%2D2701203A8B4A%7D&siteid=mktw
I never knew bulls were carnivores. But apparently, at least under certain market conditions, they eat crow!
Builder stocks fall after Citigroup downgrade
By John Spence, MarketWatch
Last Update: 1:14 PM ET Nov 26, 2007
BOSTON (MarketWatch) — Home-builder stocks traded lower Monday after one of Wall Street’s more bullish analysts cut his stance on the sector and pushed back his expectations for a bottom in the housing market.
Citigroup analyst Stephen Kim downgraded his near-term outlook on home-builders and said that he doesn’t anticipate optimistic data on residential housing until the second quarter of 2008.
“While we continue to believe that long-term investors will do well owning the home builders over the next few years, the current overhang of resale inventory and subprime-rate resets appear to make historical trading and valuation analyses of limited utility for predicting near-term performance in the group,” he wrote in a research note.
http://www.marketwatch.com/news/story/citigroup-downgrades-home-builder-sector-stocks/story.aspx?guid=%7BBE5B1924%2DAC60%2D41A0%2D9228%2D101ECCA1BD80%7D
VIEWPOINT
Putting a cap on gushing inflation
By William Pesek Bloomberg News
Published: November 25, 2007
Welcome to the greatest party on Earth. It’s in the Middle East and it’s about $100 oil, though you wouldn’t really know it here in Dubai. It’s not just because oil is still a bit shy of $100 a barrel; it’s that this isn’t a public celebration. Gulf officials don’t want to appear ecstatic about trends threatening growth almost everywhere else.
Yet it’s a party nonetheless as the fuel - literally and figuratively - propelling economic growth and raising the region’s global influence continues to rise in value.
This silent party is unique for another reason: The hangover may already be under way even before the merrymaking reaches a fever pitch. As petrodollars fill government coffers and create new billionaires, inflation is becoming a worrisome side effect.
Consider trends in the United Arab Emirates, where surging property prices drove inflation to a record 9.3 percent last year. Talk to locals here and they will tell you that inflation, which is reported annually, feels higher than the official rate.
U.A.E. officials have been slow to take an obvious step that would cool things down: revaluing the currency, the dirham. It’s pegged to the U.S. dollar, which has fallen 13 percent against the euro this year. Standard Chartered says the six Gulf Cooperation Council nations need to raise the value of their currencies 20 percent to restore normalcy to economies.
They should do it immediately.
http://www.iht.com/articles/2007/11/25/bloomberg/sxview.php
119SPD put was in the money.
deep in the money calls:
spylf.x 32.15 2.28 31.15 31.40 200 11,834 (hint SPY 110)
250 million means something.
its losing half a billion dollars.
10 bucks on soverign bank means you get in for half what the Calpers paid.
golf clubs or money in the bank….
next year…. Im goin money in the bank.
no open interst on Calloway at 11.
when calloway golf is 11 bucks, Ill know the fixed incomes are pinting the shants.
40% drop, and Im a buyer, again, till then…..deep in the money calls, maybe….Im still not buying christmas till Cinco de Mayo.
except financials…….. big monkeys need to get the backs broken to teach a really serious lesson.
S&P 900, they pissed me off this time.
make silent the factories in China for the goods that are unnecessary for America. Test the “decoupling”, bring on the recession, deap and wide, inflationary requirements of the must haves run wild, and see how far and long you can go without the needs the diabolical masters have instilled as “wants”.
GE is august meltdown levels
GE @34 is everythings all good