The Beginning Of An Extended Decline
Some housing bubble news from Wall Street, Washington and the World. MarketWatch, “U.S. home prices were falling in every region of the country in September. For the first time in this housing cycle, prices in all 20 cities dropped from the previous month, with the biggest declines in the former bubble cities of Miami, Phoenix, San Diego, Las Vegas, Los Angeles and Tampa. Former boom towns in Florida and Southern California have now passed Detroit for the dubious honor of having the largest price declines in the past year.”
“The last time prices fell so much, it took more than eight years for home prices to return to their peak level.”
“‘We judge the recent decline in home prices to be the beginning of an extended decline,” wrote Drew Matus, an economist for Lehman Bros., who said prices would probably fall 15% from peak to trough nationally.”
The Sydney Morning Herald. “South-west Sydney has been confirmed as Australia’s worst area for mortgage pain. Six of the 10 worst postcodes for late repayments of mortgages are in that area, a study by Fitch Ratings has found. In Guildford almost 6 per cent of loans, by dollar value, are more than 30 days late in their repayments.”
“South-west Sydney has been frequently pinpointed as the centre of mortgage stress following the deflation of the housing bubble late in 2003.”
The Associated Press. “Germany’s state-owned KfW development bank said Tuesday it has nearly doubled its risk shield for IKB Deutsche Industriebank AG, a lender battered by its exposure the U.S. subprime lending crisis.”
“KfW, which is IKB’s biggest shareholder, said it raised the risk shield by 2.3 billion euros, to 4.8 billion euros, ($3.4 billion to $7.1 billion) on the basis of new information regarding the valuation of risks covered by IKB’s Rhineland Funding investment vehicle and because of a ‘dramatic worsening’ of market conditions.”
The BBC News. “Algeria has suspended the first ever privatisation of a bank in the North African nation. The delay is the first sign that the US housing woes have reached Northern Africa. The finance ministry said that the sale would resume when the ‘impact of the mortgage crisis’ became clearer.”
From Bloomberg. “Canadian banks join their global peers in recording costs tied to credit markets. Bank of Montreal, the country’s fourth-biggest bank, said debt writedowns, trading losses and other costs cut profit by C$275 million.”
The Edmonton Sun. “ATB Financial’s CEO Dave Mowat calls it a ‘major bump in the road.’ Alberta Finance Minister Lyle Oberg…is a little less optimistic. He branded the $1.2-billion hole in the government-owned financial institution’s books revealed this week as a ‘liquidity crisis.’ And as such, Alberta finance has quietly pumped in $800 million to paper over the cracks in the people’s bank.”
“‘This is all part of the subprime,’ Oberg said about the U.S. real estate crash and the financial meltdown it’s creating in its wake. Even though the depositors’ losses that ATB are admitting to so far are only 6.9%, Oberg fears Mowat may be low-balling the red ink after some Canadian banks made provision for write-offs of 25%.”
“Alberta NDP leader Brian Mason spat, ‘It smells like we’ve got a number of problems coming home to roost. There’s maybe over a billion dollars of exposure here,’ he continued.”
The Globe and Mail. “The market for non-bank asset-backed commercial paper has been all but frozen since Aug. 16, when issuers of ABCP reached the Montreal Accord, which aimed to shut down the market in order to find a fix. Valuations for paper issued by each of the 22 frozen trusts vary wildly, according to people working on the restructuring.”
“Apsley Trust is saddled with exposure to U.S. subprime and is in much rougher condition. In general, bond traders estimate the trusts vary in value from 60 cents on the dollar to 85 cents, but those estimates are based on skimpy public information.”
The Wall Street Journal. “Norinchukin Bank reported the largest subprime-related balance among Japanese banks, announcing Tuesday that it wrote down ¥38.4 billion, or $355 million, in investments related to U.S. subprime mortgage securities in the six months ended Sept. 30.”
“The bank, known for its huge assets and sophisticated investment strategies, also said the outstanding balance of its investments in subprime-related financial products totaled ¥476.7 billion after the write-down.”
“Norinchukin, which is not traded, said it had unrealized losses of 53.3 billion yen on its subprime loan-related assets as of Sept. 30. The bank had an additional 14 billion yen valuation loss in October on these investments.”
From Reuters. “Sompo Japan Insurance Inc said on Tuesday that its subprime-linked losses could reach 30 billion yen ($280 million). Sompo provides financial insurance guaranteeing payment of principal and interest on collateralised debt obligations (CDOs).”
“The total amount of CDOs that Sompo insures, including any subprime loan exposure, is 240 billion yen.”
“Bank of China’s shares slid on Tuesday after Temasek Holdings sold a $567 million stake amid market worries over the lender’s exposure to the U.S. subprime mortgage crisis.”
“‘I’m sure the whole subprime issue went through the minds of the Temasek officials involved,’ said Warren Blight, banking analyst in Hong Kong. ‘The whole market is expecting (Bank of China’s) provisioning to get worse — as for all the banks with subprime exposure.’”
“‘They know that (BOC) is involved in subprime mortgage. The question is why are they trimming their holdings now? Maybe the losses are increasing. Temasek knows more information than the average investor. Or maybe they think they’ve had enough profits,’ said Louis Tse, sales director at VC Brokerage.”
“A housing-market meltdown may be wracking the U.S. economy and shaking the financial markets, but in Asia, the question is how to cool things down. Many Chinese families are already deep into speculating on property, a main driver of the surging prices that have Chinese authorities worried that a bubble might be forming.”
“Li Ruoning, 22, in Shanghai…borrowed about $40,000 from her parents in central China for the down payment on a 645-square-feet apartment just five minutes from her job. What’s more, Li, who is single, says she would buy another apartment as an investment if she had the money.”
“‘I’m pretty sure that housing prices will not drop, especially with the best locations,’ she said.”
“Yi Xianrong, a prominent economist at the China Academy of Social Sciences, is one of those sounding the alarm. He contends that China’s housing loans are riskier than those in the U.S., because he said most loan applicants give false information about their assets and income.”
“‘I estimate that the large majority of mortgage holders would not meet the standards for even subprime loans,’ Yi said.”
“‘The Reserve Bank of India has been keeping a tight lid on banks’ exposure to real estate,’ said Ritesh Maheswari, a credit analyst with Standard & Poor’s in Singapore. ‘We don’t foresee large-scale defaults.’”
“‘I found prices rose too fast and I didn’t know why,’ said Sun Chunming, a technician at an online gaming company in Shanghai who bought an apartment in August. ‘But I was worried if I didn’t buy it now, I might not be able to afford one later.’”
“Citigroup Inc is selling up to 4.9 percent of itself for $7.5 billion to the Gulf Arab emirate of Abu Dhabi, giving the largest U.S. bank fresh capital as it wrestles with the subprime mortgage crisis and a search for a new chief executive.”
“Citi is paying a high price for the capital injection, the mandatory convertibles it is selling to Abu Dhabi pay a fixed coupon of 11 percent. That is well above the average yield on U.S. junk bonds of 9.4 percent, according to Merrill Lynch data.”
The Denver Post. “Latest market rumor: Citigroup plans to cut up to 45,000 employees. My guess is that thousands of Citigroup’s 320,000 employees need to go because the world’s biggest bank is steeped in worthless loans.”
“Charles Prince announced his resignation as Citigroup’s chief executive Nov. 4. Prince reportedly leaves Citigroup with more than $60 million in vested stock holdings and a pension. He’d already bagged $53.1 million in salary and bonuses over the last four years.”
“And he keeps all this dough despite the fact that Citigroup stock has lost more than 20 percent since he became CEO in October 2003, and the extent of its subprime losses, though now in the multibillions, has yet to be fully tallied.”
“John Holcomb, a professor at the University of Denver, who studies ethics and executive compensation, blames boards of directors for cutting contracts with executives that can’t be canceled without a lot of money changing hands.”
“Christmas is just around the corner, and thousands of people will be sitting in their cubicles, doing their jobs, praying that the pink slips don’t land on their desks because the honchos were paid handsomely to place big bets on shoddy subprime loans. Loans even a child might question.”
“Doesn’t anybody ever get angry? Yes, said Holcomb. But they don’t know how to direct it. ‘Rather than become energized with outrage, they have become paralyzed with outrage,’ he said.”
“So our nation’s top corporate executives keep bagging big bonuses even as they are losing our billions.”
“Countrywide Financial Corp. shares fell more than 10 percent in New York Stock Exchange trading after Sen. Charles Schumer urged the regulator of the Federal Home Loan Bank system to probe cash advances to the largest U.S. mortgage lender.”
“Schumer said he was alarmed by the volume of advances the system’s Atlanta bank has made to Countrywide, considering ‘the rapid deterioration’ in the credit quality of some of the company’s mortgages. Schumer expressed his concerns in a letter sent Monday to Federal Housing Finance Board Chairman Ronald Rosenfeld.”
“At the end of September, Countrywide had borrowed $51.1 billion from the Federal Home Loan Bank system — a government-sponsored program.”
“‘Countrywide is treating the Federal Home Loan Bank system like its personal ATM,’ Schumer, who heads the housing panel of the Senate Banking Committee, said in the letter. ‘At a time when Countrywide’s mortgage portfolio is deteriorating drastically, FHLB’s exposure to Countrywide poses an unreasonable risk.’”
“Countrywide has been aggressive in seeking to raise cash through deposits, partly because the company can’t rely solely on Home Loan Bank advances and partly because deposits can offer cheaper funding, CEO Angelo Mozilo said in a telephone interview on Nov. 19.”
“‘You can’t just get a charter and go in and borrow from the bank, and that’s it, that’s your franchise,’ Mozilo said. ‘You have to have a reliable source of deposits.’”
“Countrywide, which has announced plans to add 70 banking branches, will ‘do what we have to do to make sure the company is going to be OK’ when it comes to the rates it offers on certificates of deposits and other savings products, Mozilo said.”
“Fannie Mae and Freddie Mac will have to operate under the same federally mandated loan limit in 2008 as the mortgage giants did this year, the companies’ regulator said Tuesday.”
“‘While the house price survey data used in determining the conforming loan limit show a decline over the past year, as previously announced and consistent with the proposed new conforming loan-limit guidance, the level will remain at $417,000 for the third straight year,’ said James Lockhart, director of the Office of Federal Housing Enterprise Oversight.”
“On Tuesday, Stephen Blumenthal, a former deputy director of Ofheo, predicted that the agency will hold both Freddie and Fannie to 30% capital surpluses above the minimum level. Lockhart, he said, is ‘going to continue to stay the course.’”
“During a conference call, Blumenthal also said any hope for allowing either Fannie or Freddie to buy more loans to prop up the sagging mortgage market is ‘gone.’”
We are all Detroit, now.
“Former boom towns in Florida and Southern California have now passed Detroit for the dubious honor of having the largest price declines in the past year.”
‘The new-home market will deteriorate next year as the number of foreclosed properties for sale rises, D.R. Horton Inc. Chief Executive Officer Donald Tomnitz said. ‘08 is going to be worse than ‘07 for us and for the industry in general,’ Tomnitz said at a JPMorgan Chase & Co. conference in Las Vegas.’
‘The California and Florida housing markets continue to weaken and the Las Vegas market is ’soft,’ Tomnitz said. New home sales in Phoenix will probably get worse in 2008, he said.’
Res ipsa loquitor.
The thing now speaks for itself.
… and the MSM now speaks for this blog …
Jay Leno here: Exactly! Exactly!
Watch on the Rhein, in realtime.
“Germany’s state-owned KfW development bank said Tuesday it has nearly doubled its risk shield for IKB Deutsche Industriebank AG, a lender battered by its exposure the U.S. subprime lending crisis.”
“KfW, which is IKB’s biggest shareholder, said it raised the risk shield by 2.3 billion euros, to 4.8 billion euros, ($3.4 billion to $7.1 billion) on the basis of new information regarding the valuation of risks covered by IKB’s Rhineland Funding investment vehicle and because of a ‘dramatic worsening’ of market conditions.”
Banks Gone Wild
http://www.nytimes.com/2007/11/23/opinion/23krugman.html?_r=2&hp&oref=slogin&oref=slogin
IMO that’s a tad less interesting than ‘Girls Gone Wild’ …
Seems like we exported much of this subprime mess overseas. In the end, didn’t wealth just transfer from foreign investors and the US middle/lower class to the US rich? Could it be that some (who promoted national policies and/or created these complicated RE backed financial instruments) planned for all this?
This is a great editorial!
He nailed it. Everyone *else* (which means the 5% of the American Public who pay most of the taxes and have a savings account) will have to pay.
And since a huge segment of the population was part-of-the-problem, there’s no hope that our Government will do the right thing. In fact, every effort I’ve seen any state or federal government entity propose was designed either to keep house prices propped up, or give huge concessions and tax breaks to greedy (and in many causes fraudulent) borrowers.
Even though I probably won’t do this, because I’ll take a chance I can earn more money by not moving my business, my gut tells my my best option is to pack my things and move to Canada before the US confiscates the rest of my savings and earnings via taxes and inflation.
I’m staying…but I’ve stopped earning and saving. I’m gonna jump on the handout bus with everybody else. Hopefully this will accellerate the wheels coming off it.
I’m tired of feeling like an idiot for getting educated, working hard and living modestly. I’m gonna sit on my ass for the next few years.
This is one of the biggest “dangers” the US faces. They raise taxes, remove the Social Security cap, etc, and the small percentage of people in the US who actually pay taxes are the ones who can best afford simply to take a ‘retirement break’ for the next few years.
maybe that’s what I’ve been doing- I thought biz scked cause all my customers are broke…..
I understand how you feel, and to a certain degree fall into that crowd myself. Yet I don’t see it as one of the biggest dangers. In order to concern yourself with radiation exposure (you have to survive the blast). There are a number of hurdles we have to clear first.
Every time I bring up the AMT most people just laugh. I’m never too sure what they find so funny b/c I know many of them make more than I do. Right now the trick for the gov. would be how to pull that off. I mean with so many people now aware of the situation that caused it all?
One of our own internal reseach reports showed that while 70% of Americans own homes (30% do NOT!) I know, it sounds so simplistic. Of those that own, 35% do not have a mortgage. (Must be midwesterners?) Anyway, only half of us have a mortgage at all. A smaller percentage are subprime/Alt so in spite of a lot of bad news the good is that the renters and modest folks saved the day!
I hear ya’. I was on the other end of the equation, hurling insults from the peanut gallery for the last few years. I’d just been through ONE bubble and definitely decided to sit this one out, so it’s time for me to get to work. But I certainly won’t blame anyone that’s of a mind to put their feet up on the desk for this.
Besides, what good would it do to really crack the whip for promotions and bonuses in this env?
“I’m gonna jump on the handout bus with everybody else. Hopefully this will accellerate the wheels coming off it.”
You know, I sort of feel that way myself. Any tips?
RE: I’m gonna sit on my ass for the next few years.
Gotta tell ya Russ-I been doin’ it for 3 years now.
Once you get it right in your head and use the time wisely (like workin’ out-I’m back to my HS football playing weight & travelling to places you’d never have the energy to do otherwise)…it’s a pretty damn good life.
FTW
“make a living selling houses to each other”
How many times have I said THAT!? By August 2005 (just months from the peak) I thought that was already pretty obvious. But no, it’s not sustainable. I thoght there was another great quote from the Citi article:
“Loans even a child might question”
Even a c-h-i-l-d… might question. Let’s all stew on that for awhile.
before the US confiscates the rest of my savings
It won’t happen, unless your savings is in gold. They don’t need to “confiscate” your savings, they can just inflate it into their own pockets. If you save in gold on the other hand, they may indeed come take that one day.
Krugman has been right about so many things. Lately, he’s constantly quoting himself from two years back and pointing out that he told ‘em so.
Sweet revenge!
RE: my gut tells my my best option is to pack my things and move to Canada before the US confiscates the rest of my savings and earnings via taxes and inflation.
Why do you think the government is condoning the destruction of the dollar?
To keep you a captive tax slave.
Sure ain’t goin’ to Maple Leaf Land with a pocketful of greenbacks to be traded for doubled up Loonies now.
Krugman is almost always dead on. He’s a “liberal” that even conservatives can relate to.
Few of Krugman’s views AREN’T colored by partisanship.
While some of his analysis might be worthwhile the question will always remain wether he’s playing any particular issue “straight”.
wether(sic) he’s playing any particular issue “straight”
Krugman has been right. Again and again and again. The neocons have been wrong. Again and again and again.
The facts are the facts. The truth is the truth.
Something the neocons can’t fathom. So you have this poster trying to create a little limp spin. Pathetic.
Consider the source Spike. Jag told us he is a Christian and said “God helps those who help themselves” all in the same breath.
I happen to like Krugman, but I get the sense a lot of “conservatives” (quotes needed, depending on one’s definition of the term) would like to whip his nerdy lil’ ass.
He has a nasty habit of drawing connections between socio-economic and policy issues.
I wonder who gave them the P.I.N., Senator photo-op?
“‘Countrywide is treating the Federal Home Loan Bank system like its personal ATM,’ Schumer, who heads the housing panel of the Senate Banking Committee, said in the letter. ‘At a time when Countrywide’s mortgage portfolio is deteriorating drastically, FHLB’s exposure to Countrywide poses an unreasonable risk.’”
Feds should seize all cfc assets and liquidate them. (including assets of executives and directors)
Nouriel Roubini has some pointed comments on this issue:
http://tinyurl.com/2mq658
“The letter by Senator Schumer questioning the $51.1 billion that Countrywide borrowed from the Federal Home Loan Bank system (specifically the Federal Home Loan Bank of Atlanta) has finally revealed the little dirty secret - that was known only to a few insiders and was noticed on this blog a month ago – that Countrywide, the largest US mortgage lender, has received a massive stealth public bailout that has put at severe risk taxpayers’ money. Here is Countrywide - the premier poster child financial institution of the reckless and predatory lending practices of the last few years – getting in severe financial trouble because of its rotten lending practice in subprime, near-prime and prime mortgages – and whose CEO Mozilo is under SEC investigation for potentially illegal activities – now receiving a massive $51.1 billion of public bailout money with little official supervision of such lending. Mozilo is under investigation for his accelerated sales of Countrywide stock under a 10b5-1 plan. Mozilo has made more than $100 million on stock sales this year, while Countrywide shares collapsed more than 50%.”
“As the Schumer letter correctly points out the collateral against this $51 billion loan is mostly toxic waste subprime garbage whose market value is now much lower than the face value of such mortgages; so $51 billion dollar of taxpayers’ money has been put at risk with garbage as collateral for it.”
“A fortiori the same public takeover should have been done in the case of Countrywide, the poster child of reckless mortgage lending and of the current mortgage disaster. Instead, rather than kicking out a reckless CEO - whose actions are now under SEC investigation – and putting the lender under public control, Countrywide has been rewarded with $51 billion of public money that was provided in a stealth bailout operation while the current shareholders and incompetent managers are still firmly in charge of the bank.”
“The lesson of this sad and sleazy episode is that when profits are privatized and losses are socialized we get sleaze capitalism and corporate welfare that becomes public bailout of reckless lenders. All this from a US administration that hypocritically praises every other day the virtues of private markets capitalism. For all of us who do truly believe in free market economies where a variety of public goods are provided by governments and the financial sector is properly supervised and regulate this is not a capitalist system but rather socialism for the rich.”
“…All this from a US administration that hypocritically praises every other day the virtues of private markets capitalism.”
Slowly…American awakens from the “Brilliance” of the Bush-Cheney bumper stickers still shinning brightly on as$-end of Hummers.
“This is not a capitalist system but rather socialism for the rich.”
Roubini nails it on the head.
“…who said prices would probably fall 15% from peak to trough nationally.”
That is a brutal prediction, as a national average figure would naturally tend to mask truly massive drops in the most overvalued markets. All real estate markets are local, you know…
I think it could actually be much worse nationally. The LEAST bubbly markets are still 15% over fundamentals, and these account for a relatively small fraction of the total national housing. A simple weighted average, acknowledging that most people live on the coasts, gives us a very rough figure closer to 25% nationally.
Not in Wisconsin!!
http://www.madison.com/tct/business/258967
Kind of like the NAR, ‘predicting’ a fall after it’s already happened.
Where is Fun Yun? I can’t wait to see how he spins this. Cmon Yun, we know you’ve got some more hot air to blow…
“Where is FUN YUN?”
“FUN YUN”…
LMFAO!!!!
If you coined that Lost A., that’s the best I’ve seen in two years on this board.
Ben,
As I have pointed out numerous times here, the most impressively reliable predictions are those which predict what has already occurred, but which is not yet widely known to have occurred.
To figure out what will happen nationally, just look at teh historc norm price to equity ratio. Historically, on the national level median price / medain household income = 3. At the peak of the bubble, it was 5. It will return to 3.
So, if we don’t get wage inflation, we’d need a 40% drop. If we can manage a 25% wage increase over the next few years, then the house price drop may be closer to 20%. 50% wage increase and prices would only need to fall 10%.
Somehow, I don’t see that kind of wage increase coming.
A 50% wage increase will kill retirees and then the government will have another even greater problem on their hands. Retirees vote!
“During a conference call, Blumenthal also said any hope for allowing either Fannie or Freddie to buy more loans to prop up the sagging mortgage market is ‘gone.’”
Good. The FB’s ought to be shaking in their shoes. Add to this the fact that the secondary MBS market is pretty much shut down, and we may be back to banks actually having to keep mortgages in their portfolios. And that will mean down payments, cash reserves, strong FICO, income verification, etc.
And prices will crater.
I would think they would at least want to wait until legal issues (Cuomo subpoenas) and accounting issues (balance sheet mysteries) are cleared up before allowing the GSEs to buy more loans and prop up the market…
RE: And prices will crater.
Always said a house is only worth what a bank will lend against it.
20% down-750 FICO’s-3 years W-2’s….Wheeee doggies!
Look out below!
“Algeria has suspended the first ever privatisation of a bank in the North African nation. The delay is the first sign that the US housing woes have reached Northern Africa. The finance ministry said that the sale would resume when the ‘impact of the mortgage crisis’ became clearer.”
Algeria is one the most dangerous places to travel, for a westerner…
And they are afraid of us?
“Algeria has suspended the first ever privatisation of a bank in the North African nation. The delay is the first sign that the US housing woes have reached Northern Africa. The finance ministry said that the sale would resume when the ‘impact of the mortgage crisis’ became clearer.”
Algeria is one the most dangerous places to travel, for a westerner…
And they are afraid of us?
Norway, Algeria….the length of the tentacles is amazing.
Who had that famous quote about the housing bubble being guaranteed by a little old lady in a mud hut in Indonesia?
“And he keeps all this dough despite the fact that Citigroup stock has lost more than 20 percent since he became CEO in October 2003…”
We can dance if we want to
We can leave your friends behind
‘Cause your friends don’t dance and if they don’t dance
Well they’re no friends of mine
As I understand it, Citigroup gets a cash infusion from that Abu Dhabi bank by selling them convertible bonds that pay 11% interest. That’s higher even than most corporate junk bond rates today.
Hmmm, I thought it was against Islamic law to lend money except at zero percent interest.
they work around that. it’s as if Allah has a team of lawyers or seomething.
i get a feeling that things are a little more black and white with Allah though.
My guess is that Sharia only forbids Muslims from lending money at interest to other Muslims. Since plundering the unbelievers is acceptable, loan-sharking them probably is, too.
Also, there’s a whole body of law called “Sharia-compliant finance.” Basically, it uses sale-leasebacks and a number of other transactions whereby what is effectively a loan is characterized as something else. Et voila — no Sharia problems.
You fellows joke, but there’s a huge business out there for experts in Sharia law, as it applies to economics. They make a lot of money, believe me.
Abu Dhabi gets lots of virgins when CitiCorp dies, which then makes usuary OK.
Yeah, Dave. C’mon, man, open up, I think the cops saw me.
“ATB Financial’s CEO Dave Mowat calls it a ‘major bump in the road.’ Alberta Finance Minister Lyle Oberg…is a little less optimistic. He branded the $1.2-billion hole in the government-owned financial institution’s books revealed this week as a ‘liquidity crisis.’ And as such, Alberta finance has quietly pumped in $800 million to paper over the cracks in the people’s bank.”
Here’s why the thing is going to collapse. I’m more & more convinced of it:
“There’s maybe over a billion dollars of exposure here,’ he continued.”
*note: this is based on current valuations. All these banks that are holding this bad paper they are valuing it to the current market. Just imagine what this is going to look like 6 months from now.
It’s kinda like a Soufflé. You pull it out of the oven. It just…sinks.
Ah…so that’s what Snaith was referring to.
“Doesn’t anybody ever get angry? Yes, said Holcomb. But they don’t know how to direct it. ‘Rather than become energized with outrage, they have become paralyzed with outrage,’ he said.”
Here is the problem: top executive compensation is not set in a marketplace, it is set by the most rapacious union in the country. The executives sit on each other’s board. The more I pay you now, the more I can justify that you pay me later. It is a class with a class interest.
The problem is, that class is the only one with the expertise to sit on the boards. Who would you replace them with?
it’s a big club and you anre i aren’t in it.
george carlin
“The problem is, that class is the only one with the expertise to sit on the boards. Who would you replace them with?”
Monkeys?
Drug dealers…they know how to plunder while destroying their customer base.
lol… good one.
Egocentrical mental midgets???? Lots of brewhaha, no brains?
I agree with WT on the first part of his post. I think that most intelligent (slightly paranoid) people already do agree with it. But what to do about it?
But “expertise to sit on the boards” and run these companies?? These guys waste so much cash and get paid unseemly salaries and for what? CEOs used to make something like 30X the average salary. Now it’s something like 250X. I apologize for not getting the numbers exact. But you’re saying that Prince, The Tan Man et al. have done/do a 250X better job than you could have? Seriously?? You need a confidence boost. All of these grab-assing MBAs are not the best and brightest. A random number generator could do as well. Perhaps my belly-button lint?
“We are pleased to announce that the new CEO of Yoyodyne Enterprises is MrBubble’s Belly-Button Lint.”
Oh, and good thing that RE is different in China according to Ben’s post above!
This whole f*cking world is full of wastes of space using up my damned oxygen. Where’s the reboot button on this place!?
Sorry, not my usual chipper self. Tired of these liars and thieves and pigmen and banksters. Saw “The Lives of Others” last night and I don’t need a weatherman to know which way the wind blows.
All those experts were claiming there was NO BUBBLE while housewives and amateurs were here at the HBB detailing exactly how things would play out.
Think I can clear my schedule to become CEO and board member. Just know that my starting salary is $15 million…plus bonuses based on bogus numbers.
“He contends that China’s housing loans are riskier than those in the U.S., because he said most loan applicants give false information about their assets and income”
Exactly how is this different from the United States?
Gotta love the NINJA loans.
“‘I estimate that the large majority of mortgage holders would not meet the standards for even subprime loans,’ Yi said.”
Yeah, I really liked this statement too. And just how is this different than the US. I thought most subprimes had no standards.
It’s worse because they’re NINJA loans to actual Ninjas !!! No fun to foreclose on those guys !!!
Samauri FB ????
It’s true that housing prices in China are in a bubble, and will fall quite a lot.
However, as prices increased so did down payments - it used to be 10% down for many markets in China - now it’s 30%.
If you put 30% into a house, and it dropped in price by 50%, you’d probably stay in it even though you were underwater - the psychic pain is just too much to walk away from that kind of down payment (plus they borrow from friends, family, etc)
So the US is definitely worse than China in terms of chaos and bank losses to come. Now many parts of Europe on the other hand…
Countrywide opening 70 branches? Why don’t they just put new signage on Citi’s branches since w/ the 40,000 layoffs coming they’ll be available
How’s that for rearranging the chairs on the Titanic?
That means the MSM will have to buy 70 more news vans to cover “the run”.
See, economic growth!
staggering unbelievable outta this world …
Anybody want to invest in my idea…..locate a few small ebay stores across/next to all the huge 2000 room self storage facilities? Hmm rent or sell…those $100-200 a month fees add up quickly
RE: locate a few small ebay stores across/next to all the huge 2000 room self storage facilities
eBay Stores? Surely you mean grocery stores & pawn shops to serve all the dislocated and unemployed who will be living in those 2000 self-storage units.
ECONOMIC REPORT
Consumer confidence sinks to two-year low in Nov.
Conference Board index falls to 87.3 on worries about inflation, stock market
By Rex Nutting, MarketWatch
Last Update: 10:15 AM ET Nov 27, 2007
WASHINGTON (MarketWatch) — U.S. consumer confidence sank in November on growing concerns about the future, the Conference Board reported Tuesday.
The consumer confidence index fell to 87.3 from 95.2, well below the 90.2 expected by economists surveyed by MarketWatch. See Economic Calendar.
It was the lowest level and the biggest one-month decline since Hurricane Katrina in the fall of 2005.
The decline in November was driven by a big drop in expectations, fueled by higher energy prices and falling prices for stocks and homes. The expectations index fell to a four-year low of 68.7 from 80 in October, while the present situation index fell modestly to 115.4 from 118.0.
http://www.marketwatch.com/news/story/consumer-confidence-sinks-two-year-low/story.aspx?guid=%7BD59960C0%2DDC0F%2D464B%2D8BA4%2D304D445EF57A%7D
Cryogenic Financials, Ltd.
“The market for non-bank asset-backed commercial paper has been all but frozen since Aug. 16, when issuers of ABCP reached the Montreal Accord, which aimed to shut down the market in order to find a fix. Valuations for paper issued by each of the 22 frozen trusts vary wildly, according to people working on the restructuring.”
Trend ain’t yo’ friend if you are buying the dip today…
http://www.marketwatch.com/tools/marketsummary/
LOL
For any that are interested in “head and Shoulders” technical trading formations. Todays DJIA. Just an observation - so don’t jump on my A@@ jp.
True, PB, but on a longer trend, the Dow is in decline. It just hasn’t been able to get and keep its snout above 13,000 and now that we’re safely below by almost a couple hundred, we just might see Hoz’s 11,000 by the end of the year.
“True, PB, but on a longer trend, the Dow is in decline.”
That’s the one I meant to reference (”not your friend”)…
Oops, my bad. I thought you were just referring to today’s trading. Of course, pretty dumb on my part. One day does not constitute a trend.
Trends can be measured over different periods of time. At the time I posted that intra day chart, the minute-to-minute trend in all the major indexes was headed straight down.
But I concur with your point — that the long-term trend in the DJIA (measured over, say, a 30-year window) ain’t yo’ friend either.
But where are the precious metals heading? The Fed will no doubt cut rates repeatedly to stave off deflation…but we’ll still have deflation. What’s the play? I’m starting to be afraid there is no play.
PMs have done well in inflation and in deflation. Relax, have fun, sit back and munch on popcorn
http://www.minyanville.com/articles/index.php?a=15012
That is the best technical indicator I have beheld! Truly a masterpiece in conspicuous consumption. I knew Mr. t would make it big. Soon he might even be in the Sunday Crosswords.
“A housing-market meltdown may be wracking the U.S. economy and shaking the financial markets, but in Asia, the question is how to cool things down. Many Chinese families are already deep into speculating on property, a main driver of the surging prices that have Chinese authorities worried that a bubble might be forming.”
Chinese people love to gamble, and the only legal casinos are in Macao…
So they gamble on everything else, including real estate.
Yes, it sort of seems to me that China is highly imitative in its efforts to emulate other cultures and the products of other cultures. And when they do stuff like this, they go for it in a big way and don’t do it very well. China is headed for major burn-out meltdown, IMO, and it wouldn’t surprise me if it was worse than ours.
And when they do stuff like this, they go for it in a big way and don’t do it very well.
They don’t drive very well, either.
“China is headed for major burn-out meltdown, IMO, and it wouldn’t surprise me if it was worse than ours.”
So what is to become of billions of $$$ of foreign investment capital that flowed into China the past several years?
“So what is to become of billions of $$$ of foreign investment capital that flowed into China the past several years?”
Probably the same as the investment capital that flowed into US hedge funds.
Difference is in China it takes a 30% down payment on a first house, 40% on a second. It also helps when the people overall save 50% of their earnings. We used to do that once upon a time.
The Middle East to the rescue, Citi group lives on because of oil, Country Wide next in line followed by you get the point i think? Remember a few years back the term New World Order we are seeing the effects now of it.
America has $3 a gallon gas maybe $4 soon we are to be happy, they say most of the world pays $5, the powers to be in this country don’t really care about NO and Katrina, or wild fires in Cal or Detroit going broke matter of fact they worry these days about how a Chinese person will be able to afford a house, if Moscow can support more luxury car dealers and if and when London replaces NY as the financial capital of the world.
Get ready,made in China came to us so fast most didn’t know what hit us and more eyepopping is on the horizon, good old America is fast becoming yesterdays news as the rest of the world see’s it, i just think many Americans don’t want to see it or are so buried in debt they just don’t have time to see it?
They are still at it!
YOUR 720-800 FICO SCORE FOR $$$$$$$$$$ NEG. - $10000
Reply to: sale-490802383@craigslist.org
Date: 2007-11-27, 6:58AM EST
I AM THE OWNER OF A 3-YEAR OLD PENNSYLVANIA CORPORATION THAT NEEDS TO OBTAIN A BUSINESS LINE BUT DON’T HAVE A HIGH ENOUGH SCORE. WE CAN COME TO A TEMPORARY AGREEMENT WITH YOU AND MY COMPANY TO OBTAIN ONE. YOU WILL NOT BE LIABLE FOR THE LOAN AT ALL.I WILL PAY AT LEAST $10K DEPENDING UPON HOW MUCH OF A LINE WE CAN GET.
LET ME KNOW IF YOU’RE INTERESTED. THANKS! JOHN
$417,000
The Mason/Dixon Line
“‘While the house price survey data used in determining the conforming loan limit show a decline over the past year, as previously announced and consistent with the proposed new conforming loan-limit guidance, the level will remain at $417,000 for the third straight year,’ said James Lockhart, director of the Office of Federal Housing Enterprise Oversight.”
“For the first time in this housing cycle, prices in all 20 cities dropped from the previous month, with the biggest declines in the former bubble cities of Miami, Phoenix, San Diego, Las Vegas, Los Angeles and Tampa.”
Where in Los Angeles are they referring to? Prices in LA have barely budged. True, little is selling, but even prices in Compton haven’t yet fallen south of $500K for a starter home.
Expect for areas that shoudn’t have been priced high to began with you are right houses are not falling that fast example>
$1.3 million dollar house reduce $150k that orginally sold for 945k. the games continue in this country?
test
You passed with flying colors, Blano.
Glad you think so…however, my posts aren’t coming through and a prior one is gone.
You’re not alone. The HBB Post Eater has taken a liking to some of mine.
Now even the White House feels compelled to weigh in by uttering the dreaded ‘R’ word. (Never knew myself that houses can speak, but at this point in the housing bubble collapse, nothing seems shocking any more.)
White House says risks of recession have risen
Tue Nov 27, 2007 1:16pm EST
By Alister Bull
WASHINGTON (Reuters) - Recession risks have increased amid weakness in housing and financial markets but “real America” is still doing just fine, a top White House economic adviser said on Tuesday.
“Obviously, the chances of a recession are higher now than they were a year ago, but we still think it’s less than 50:50,” Allan Hubbard, economic advisor to President George W. Bush, told CNBC television during an interview.
“I don’t know what it is, but the bulk of the economy is doing just fine. We obviously have problems in the housing sector and we have problems in the financial sector, but … real America is doing just fine,” he said.
http://www.reuters.com/article/ousiv/idUSN2749251320071127
“real America is doing just fine”
I agree. The real Americans who rent or own homes with affordable mortgages and have no connection to real estate, building, lending or the financial sector generally are doing just fine.
Unfortunately, there aren’t all that many of us on this blog.
“real America” is still doing just fine, a top White House economic adviser said on Tuesday.
A lot or “real” America is not doing fine. Almost every night on our local news they’re pleading for food for the food banks. One lady in line said she used to donate all the time, now she’s in the receiving line. They said the lines have almost quadrupled and they’re running short of food to give out.
I use to donate to food banks, but I discontinued do to the influx of illegals using them, and other recent arrivals who really didn’t need the help. Its free, so they think its another entitlement.
I know I sound like a John Wayne type, but I only want to help fellow Americans, who are hurting.
Speaking of hurting, my Kaiser Permanente Individual premium goes up 28% in Jan. 08 (and we are healthy). Almost $900/mo next year for 2 adults. O U C H!
(Maybe we should become illegals and use the ER free.)
awaiting wipeout, one of the local food banks here in my area distributes bags of food once a week, mostly to illegals. As a matter of fact, there was a local fishwrap article a while back about how they had changed to composition of the food in the bags and added cornmeal, beans and rice, the better to serve their clientele. I couldn’t believe my eyes. I guess the illegals must have complained about the menu. More recently, someone stole their trailer just before the Thanksgiving this year, with all the food in it. Of course, this stirred the sympathies of “the community”, which donated generously to replace the stolen food, so the illegals batted a home run this year.
I think I’m gonna start lining up for my bag of free goodies every week. I’ll trade the illegals my cornmeal, beans and rice for some of the other stuff, just like when I wuz a pup and we used to trade goodies with each other in the cafeteria.
You do know that these hospitals and clinics bill the people they treat, don’t you? Whether they get paid or not is another matter; however, I know quite a few Americans who have no intention of ever paying………..
http://news.yahoo.com/s/bw/20071127/bs_bw/nov2007db20071120397008;_ylt=AsHm_domixKBvHQ3sNEfEdGyBhIF
You pay or YOU PAY. Loan sharking in the emergency room.
“real America” = the haves and the have mores
You’re doing fine if you hold enough crony contracts.
eCONomic advisor Hubbard
Went to the cupboard
To get poor FB’s a loan
When he got there
The cupboard was bare
So “real America” couldn’t “buy” a home
“Real” America?? So housing and financials is the “unreal” America that no one takes part in??
Can anyone here recall the last time anyone of these Bush cronys actually said something truthful? Just once? The denial and obfuscation of truth and honesty by these criminals is mind blowing.
Oh please, every admin denies a recession until it’s blatantly obvious.
Nope, mjh,
this contest is wide open. As exeter said, just name one issue on which the bush admin has been truthful. Go for it.
Go for it! You, too, can be a tee-vee star, yuk-yuk!
http://tampa.craigslist.org/rfs/491170400.html
INVESTMENT TRENDS; Apartment REITs May Gain; Housing, Mortgage Problems May Create Many More Renters
http://tinyurl.com/2o5×8u
But for every new renter it creates, it also creates a house that will be dumped back onto the market. Sorry, but the banks will not be able to carry millions of REOs for long enough for rent to pay back apartment investment.
Bottom line is, we overbuilt. That is bad news for rentals.
Future is Bright for Apartment Owners
http://tinyurl.com/36htdy
And, in Tucson, we consult Realtors, not blogs. See comments that follow this story. Among other things, you’ll learn that renting is still dumb.
Freedom of home ownership??? That was a new one (see comments). As opposed to the “freedom” of being able to up and move at will, I suppose.
There’s no freedom if you can’t even leave the house because you have to choose between buying gas or making the mortgage payment.
Freedom of not getting kicked out at end of lease vs. freedom to move at whim (or due to job change, etc.)
You rolls yer dice, and you moves yer mice.
Of course, if you can’t make your loan payments, renting starts to look pretty good…
Clear Prop!
“During a conference call, Blumenthal also said any hope for allowing either Fannie or Freddie to buy more loans to prop up the sagging mortgage market is ‘gone.’”
“Countrywide…will ‘do what we have to do to make sure the company is going to be OK’ when it comes to the rates it offers on certificates of deposits and other savings products,”
Yea, they can offer 10% CDs to raise fast capital, then the government (taxpayer) can bail out the CD holders and Countrywide (through the FDIC) when the ‘bet’ doesn’t pan out.
I’m *for sure* going to get in on this scam…I’m pretty sure that even interest is guaranteed (?)
The government (FDIC) does not guarantee interest.
I took a class for my CEU’s, and it was an Ex-FDIC employee teaching it who said that the $100K insurance was not real. He wished the depositors luck getting dollar for dollar coverage, should a few of the biggies go. He had a grim outlook for anything FDIC.
I read in a periodical, that the ratio was so low, that advertising it was morally bankrupt and nefarious. Does anyone have any feedback or knowledge about this scenario? Do tell.
Does the FDIC guarantee the part of principle grown due to the reinvestment of interest?
Yes.
As to the other question: If you want to be certain your money is backed by the government, buy Treasuries. The FDIC is the TSA of the banking industry. It’s just there to get you back on the plane.
>(FDIC) does not guarantee interest.
Thanks, I was probably thinking of the insurance on Fannie, Freddy, or Ginny…?
From the story:
“Fifteen of the 20 cities tracked in the index have seen prices fall in the past year, led by Tampa, Fla., with an 11.1% decline, followed by Miami with a 10% loss and Detroit with a 9.3% loss. Indeed, eight of the 20 cities recorded their largest-ever year-over-year price declines in September. ”
We’re Number One! We’re Number One! Yea, Yea.
Go………..Team!
$8 Billion shot to hell on dodgy USA Loans in Japan, this thread alone.
“Even Larry Summers Predicts Doom: A Dollar the Size of a Postage Stamp”
http://www.counterpunch.org/whitney11272007.html
Here’s the link to Larry Summer’s column:
http://tinyurl.com/2y4c6c
“Citi is paying a high price for the capital injection, the mandatory convertibles it is selling to Abu Dhabi pay a fixed coupon of 11 percent. That is well above the average yield on U.S. junk bonds of 9.4 percent, according to Merrill Lynch data.”
If it costs Citibank essentially 11% to borrow where do they get that 11% from ? Charging more for loans they make in return ? Wouldn’t this be a harbinger of 12-13% loans in the near future ?
Forget about it being 11%
It is the present value of the funds needed to keep Citigroup in business ’til the end of the year.
In exchange for the funds, it is a discounted stock price of $25/share. $31.78/share X11% X 2 - this is at a time when Citigroup may not be able to pay any dividends to its common shareholders. A high price to pay for the shares IMHO, but it does give 9.9% ownership. That is important.
No wonder that Primerica guy was calling me yesterday. Guess Citi’s trying to bring in dough any way it can. So, why not have its MLM division try to hook some new recruits?
BTW, I declined the Primerica guy’s offer.
Yes it gives them 9.9% ownership on the back of the US tax payer. Pretty neat illusion. Devalue (BB) the dollar by lowering rates, artificially create the need to raise the price for a barrel of oil which in turn raises the price for gas at the pumps and then have the Arabs use the windfall profits bail out American banking.
So to recap the situation…Americans have no savings, massive debts, depreciating homes, lousy health care, crumbling infrastructures, and are facing the prospects of looming retirement as a nasty recession bears down upon them.
In an alternate universe…
Hillary Clinton gets the health care bill passed in 1993. Everyone now has health care guaranteed, as do the rest of the industrialized world. Al Gore is President in the election he actually won. 9/11 never happens because our once-working intelligence agencies stop the plot because Gore was actually reading the daily briefings they put out. The towers in NY are still there. Thousands of people still alive and well. Iraq war never happens. Several hundred thousand Iraqis are still alive. Several thousand American G.I.’s are too. Saddam is still an asshole that nobody takes serious. Gore puts focus on environment like he did the Internet. Result is gas is still around $0.99 a gallon like it was when Clinton was president. Kyoto implemented. US dollar is as strong as it was in 2000, when you could buy 1.4 euros instead of .60 euros. Budget surpluses continue as they did for most of the 90’s. The extra cash was used to shore up Social Security, which is now is excellent shape. Housing is still affordable at around 3 times annual income. The world thinks Americans are as cool as ever.
And this blog does not exist.
Yo, momma, the Clinton prosperity was another big bubble - ya know, the dot-bombs, helped along by Greenspan.
Come to think of it, we are living in a nightmare…
so much bs, so little time……
joe momma,
it’s heartbreaking to see what we’ve been reduced to, and to think what might have been with honest, competent leadership.
And all of this is news to who? Geez…the manic mainstream media reporting all of this like it was never expected by anyone…but wait! I knew this was going to end badly all the way back in 2003….but nobody wanted to listen then…
Too bad for them…I wonder if Chuck Schumer will be stepping in to stop the repossesions of the cars of these same fools because they were duped into buying more car than they could afford.
I guess I picked a bad week to quit sniffing glue.
LOL.
“Algeria has suspended the first ever privatisation of a bank in the North African nation. The delay is the first sign that the US housing woes have reached Northern Africa. The finance ministry said that the sale would resume when the ‘impact of the mortgage crisis’ became clearer.”
I have a question: While the experts are blaming the US subprime fiasco for the ongoing credit crunch, aren’t they forgetting that the bubbles in Europe and Asian RE markets are also waiting to go bust in the coming months and years? In other words, will we really be out of this mess in a few short years? My guess is that the ‘impact of the mortgage crisis’ will not become clearer anytime soon, what do you think?
Depending on the collective thinking on this blog, we (my wife and I) are going to plan our RE purchase. Currently we are renting saving a huge amount of money each month. We were earlier thinking that late 2008 may be about time to pick up a good deal. Is that too early?
US subprime is just the first wave hitting the beach in this storm. There will be many others to follow, but it will always be known as the “US Subprime” Storm, being first gets you noticed.
I’m thinking about renewing my old Mother Earth News subscription - you know, all those articles on ‘Goat Farming for Fun and Profit’ and ‘Make Your Own Menstrual Pads’.
Yeah, a bit early.
“Is that [2008] too early?”
Neil — I think that question is worthy of its own weekend thread, because the answer keeps changing. In the old-server days, we jawed about whether 2007 would be the bottom and a decent time to buy. I believe that was has waylaid many of us is the banks’ and Wall Street’s collective determination to keep as much bad-asset news buried as long as possible — to outrun or end-run the accountants so that they do not have to fully reveal the losses they’ve sustained in terms of real market value of the MBS/CDO/SIV paper, and even worse, IMO, the toxic sewage flowing through their off-books “conduits.”
It is likely that our government and others will be complicit in this, though I do not understand how any large public accounting firm can fail to either note the above elephant that even Billy Bob now sees or to add such disclaimers to the financial statements as to render them useless for investors.
That gets me to your question. My wife and I, too, planned to do serious house-shopping later this year or next year. But renting continues to be such an extraordinarily good value relative to owning that, financially, it is foolish for us to buy anytime soon. Each of us has a different set of factors influencing our decision — mine is old age and grandchildren. If I wait too long, it will be too late to enjoy that house of my dreams. Yet I cannot stand to throw money away on ownership (hows that for an “about-phrase”?).
In my case, I think the answer will be to build. Materials prices are way down, land prices are down and falling and builders are hungry, with excellent subs available. Now I just have to figure out how to learn enough that I don’t get screwed in the process.
Chip,
you might be interested in the Shelter Institute in Maine–they run hands-on classes on how to build, in one and two week sessions.
Various topics, and they’ve been around for 30 years or more.
http://www.shelterinstitute.com/. It’s on my to-do list.
Spike — thanks very much for the tip.
RE-Shelter Institute
Here’s a tip S66…Take the Shelter Institute with a grain of salt. I contracted out my first house to a Shelter Institute graduate.
Hippy-dippy designs can leave you holding some incurable functional obsolescences which the “market” will severely penalize you for.
Proceed with caution.
hd74man,
i’d love to hear more specifics. I respect your expertise.
RE: Materials prices are way down, land prices are down and falling and builders are hungry, with excellent subs available.
Hope you got a fair sum of cash on hand.
With the way the market is, your project will never comp out.
Banks will not rely on the Cost approach for an estimate of fair market value.
Direct Sales Approach will in all likelyhood discount your expenditures by 10/20%.
People will take a 2/5 year old home vs. new to get that discount.
If the banks want an Income Approach due to tightening regs you will be totally screwed.
If you have a good relationship with a small local lender who keeps all their mortgages in houses none of the above may matter.
FHLMC Grasping for a Life Saver?
AP just announced that FHLMC cut its dividend in half and is looking to sell $6.0 billion in stock. This amount is very close to the $5.7 billion in capital that Citi will receive (net of the 11% interest paid back to the investors).
Is $6 billion the magic number that saves a large, financial institution? Will petrodollars move from Treasuries to high-risk equity investments in problem financial institutions? Do investors believe that these small amounts are enough to do the trick?
Tin-foil-hat, but interesting theory.
Oops, think I misunderstood your point.
$6 billion is just a drop in the barrel, IMO.
Notice how this was released AFTER the market close:
4:28[FRE] Freddie Mac cuts quarterly dividend 50% to 25c
4:28[FRE] Freddie Mac to offer $6B in non-cumulative preferred stock
oops, lets get the drumbeat going for a rate cut. Make it a full point.
Voz — that’s what it looks like to me, too. I’m wondering about the Arabs. Could that UAE buy-in have been a way not just to keep Citi from exposing the depths of its losses based on FASB this or that, but also to say to the Fed, “don’t drop rates?” Why? Because they are desperate that oil not be headlined at $100/bbl. Why? Because that is the “sensational” price that will foster public outcry for alternative energy sources *even at taxpayer expense*. Iran and Venezuela don’t care, the former just to be evil and the second because Chavez is a nut. But the Arabs care a lot. Their security depends on an orderly oiil market and predictable revenues and not-too-much exploration for new sources and not too many nuclear plants, etc. All just IMO.
Should have clarified that $100 oil is a whole lot easier to reach if the dollar is dropping. Hence, the desire for the Arabs to halt the dollar’s depreciation.
Wonder too if there is a tie in with Prince Walid in Saudi Arabia, who was really pissed off about losing so much money in Citi this year.
Wonder too if there is a tie in with Prince Walid in Saudi Arabia, who was really pissed off about losing so much money in Citi this year
———————
This was the first thing that popped into my mind.
Having worked for & with some fairly wealthy people from the ME, it would seem entirely possible that this might be some sort of “favor” — expected to be returned at some point in the future.
Uhmm….I’m sorry but a 15% decline in housing prices is not a catastrophe. 15% on the national median price of $220K? That’s still too much money for most of the overpriced garbage in the USA. Maybe if the median falls back down to 100K, then I might consider it a crisis. $7.5 billion is not an economic meltdown. Maybe for a small town of 10000 yeah, but not on the scale of the USA. That’s maybe $24 per person in losses. I don’t think that even with the pisspoor financial skills of most Americans that this would make or break a lot of households (unless you’re living on the edge). $1 trillion may get my attention though.
My thoughts exactly…. Original projections were for $40-80 billion in losses on flat housing prices. Now projections are for $400 billion or so in losses on a 15%-ish decline in housing prices.
And, what are the losses on 40% decline hat is backed into the affordability cake, or worse if household income drops because we’re entering a recession? And worse, worse when we realize that these things over correct to the downside.
How much the housing stock in the USA is worth, I am not certain. I assume that the housing stock is worth $19 trillion USD if you go by 2006 prices. A mere 15% decline on that would be $2.87 trillion. Judging by the data I have, it’s possible that we’ll see initial declines of 40% - 60% nationwide. That’s a minimum of $7.6 trillion USD. That’s $25200 per person, or $63000 per household. That is more than what was lost in the dotcom meltdown. I am also estimating that the DOW will go back to the 8000 - 8500 range. That would be a loss of around $4.5 - 5 trillion there, an additional $41600 per household on top of the housing losses. Does anyone here think that we can take a $100K plus loss per household? I don’t know if I would call that a recession.
I, for one, would be happy to write a check for $100K if it meant 10-year treasuries would go back to 5% and all US Equities won’t lose 40% of their value!
For the stuff I have that’s left in US stocks, I moved out of broad-market index funds and into a hand-picked set of solid value stocks with decent yields. Even broad-market index funds have too much exposure to the banking industry (and retail, which I generally avoid when picking stocks individually, no matter what the retail climate.) I’m hoping that will protect my savings a bit. It’s not like I can just move the money into bonds! They’re paying nothing.