December 7, 2007

Weekend Topic Suggestions!

And send in your housing bubble pics to:

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Comment by txchick57
2007-12-07 04:30:40

I got this email yesterday from a patent attorney acquaintance. The dollar debasement and other issues are starting to invade the consciousness of ordinary people who don’t spend their days writing about it on blogs.


I hope everyone is doing well. I just ran across a political piece
that everyone Must see. Go to the site listed below, and scroll down
about half way down the page to the Ron Paul ad. This is what I have
been talking about!

E*** K***
Registered Patent Attorney

International clients call 817-
International clients fax 817-

Comment by kckid
2007-12-07 09:49:34

Capitalist democracies around the world should be very concerned about the level of socialism being discussed at the United Nations’ climate change meeting in Bali.

Not only are international hands being extended to collect funds from countries like the United States in order to help poorer nations deal with a problem that might actually be disappearing since global temperatures peaked in 1998, but climate change is also being used as a means of stripping intellectual property rights from companies that have created new more eco-friendly energy technologies.

If such a power-grab for the so-called benefit of the downtrodden actually comes to pass, capitalism as we know it will cease to exist.

Comment by oc-ed
2007-12-07 10:40:23

We can only hope that the folks who are scurrying to keep J6P cozy and ignorant of how much of a mess this is continue to be ineffectual in the face of this meltdown. And that somehow, someway more and more sheeple come to grasp and understand the reality and magnitude of the fast approaching financial sh*tstorm in time to make a difference with their votes and spending. I have a sense that > 90% of what consumers consume is unneeded and/or of very poor quality. I also tend to believe that far too many of we the people are too lazy to see how bad this is.

Comment by are they crazy
2007-12-07 15:56:23

OC: No one forces the public to be or act ignorant. People choose to be blissfully ignorant. They choose not to read a variety of information or to research further. With the internet, there’s not much excuse for not knowing what’s going on anymore. People won’t grasp the severity of what’s going on until it hits home. My prediction is by about February people will catch on. When the holiday credit card bills are in, they can’t refi to pay all the maxed ones off, the rates and fees go through the roof and they can’t maintain their ignorant lifestyle. Most people don’t even know the difference between need and want any longer and most of them don’t need 90% of what they buy.

Comment by Ben Jones
2007-12-07 04:37:30

For the woe-is-me dogpile:

‘In an effort to stanch the nation’s subprime loan crisis, the Bush administration announced a controversial plan Thursday to freeze interest rates for certain borrowers for five years. One irony of the Bush plan is that it resembles more sweeping ideas proposed by some Democratic presidential candidates.’

‘Despite a rollout that featured the president, top Cabinet officials and banking regulators promoting the plan, by day’s end many experts - as well as those on the front lines - were still scratching their heads about how the program actually works and who qualifies.’

Comment by txchick57
2007-12-07 04:41:03


How long will this take to end up on Steve Colbert or Leno.

Comment by Ben Jones
2007-12-07 04:44:01

“Some readers are impressed with the Bush administration’s mortgage freeze plan. More are not. Here is a sample, edited for space, of comments registered Thursday on

Let the bubble pop. Blowing more air into it now isn’t going to help.

- Shams Shirley, 46, Oakland

Yet another effort to pass the buck to the next administration (like the war), or next generation (like the debt).

- Brian Backus, 43, San Francisco

Just looking the other way and letting the homeowners going to foreclosures or even bankruptcy is not the answer. There are many people [who] have been affected by the real estate meltdown and there are more to come. Families are being broken apart.

- Brian Nghiem, 47, San Jose

Bush and Paulson put together a good balance. They encouraged the banks to do what they would have mostly done anyway because they do not want to own houses. The bankers and investors are going to get less interest than they thought. If the borrowers fall behind they still go to foreclosure. Congrats on a well thought out program.

- John Hellner, 54, Springfield, Ill.

What’s next, the U.S. credit card bailout?

- David Maxwell, 64, Covelo (Mendocino County)

As another would-be homeowner who opted to keep my money in savings until I could afford the house I wanted, I have no sympathy for the greedheads who got these ARMs thinking they’d flip for profit when the rate reset, driving up costs to insane levels. You play with fire, you deserve to get burnt if you burn those around you.

- Christine Beatty, 49, Los Angeles

I don’t think it is to anyone’s advantage - the banks, the homeowners, the tenants, the neighbors - to have people thrown out of their homes and the properties sitting vacant.

- Malcolm Carden, 61, Piedmont

If this plan works at all, it will delay some defaults for a while, [and] may limit the hit to financial companies holding these loans. I doubt Bush/Paulson (or Hillary for that matter) care much if the borrowers default in 5 years and then go back to renting and have their credit ratings damaged. They want to decrease the pain on Wall Street and limit the probability that it will spill over into the “real” economy.

- Brit Harvey, 53, Berkeley

How about we start hunting down those who exploited fair business boundaries for their own profit, and let prices collapse to a level affordable to those of us who won’t overstep our purchasing power, not to mention bringing to justice the very same folks who have in effect so badly damaged our future business relationships with the rest of the world?

- Anderson Vitous, 46, Concord

C’mon, get over the fact that your friend got to buy a house and you didn’t. Do you seriously want to witness the devastation to the economy as a whole, yourself included, just to be able to say ‘I told ya so?’

- Wally Greenwell, 46, San Francisco

Interesting quote by Mortgage Bankers Association spokesperson buried in [Thursday's] article (’US Foreclosures Hit Record’): “But there also has been some spillover into fixed-rate mortgages held by homeowners who need to sell for personal reasons but can’t because they live in depressed housing markets …” I expect everyday situations will eventually outweigh the subprime issue. People need to move at various stages of life for various reasons. Many are now, or soon will be, frozen in by declining prices. Hunker down for a very LONG crash.

- John Hugunin, 47, Larkspur

Several years ago, when the stock market was hot, I foolishly made some risky investments. I think it’s only fair that now the Bush administration bail me out. Also, I stupidly locked in a low interest rate on a bank CD in 2003. The Bush administration needs to lobby the banking industry so that they’ll “reset” my CD at current higher rates. One more thing: A number of years ago my wife & I decided to have children. They are now teenagers. I wonder if there’s a way Bush’s people can help me with that ill-advised decision?

- John Keller, 59, Menlo Park”

Comment by txchick57
2007-12-07 04:49:16

Yeah, this will have an immediate impact. LOL. BTW, how could there possibly be 226K subprime loans in DFW? I thought it was cheap here and there was no bubble!

It’s unclear how many Texans mortgage plan could help

11:18 PM CST on Thursday, December 6, 2007

Analysts are unsure how many North Texas homeowners might qualify for help under the plan announced Thursday by President Bush.

It’s not even clear exactly how many subprime mortgages actually exist in Texas, said Jim Gaines, an economist at Texas A&M University’s Real Estate Center.

First American LoanPerformance, a San Francisco company that does research for the mortgage industry, estimates the number at 707,000, including some 226,000 in the Dallas-Fort Worth area.

But it’s uncertain how many of those would qualify for help under the terms of Mr. Bush’s program.

“The problem is, we don’t know,” Mr. Gaines said.

“That’s the simple answer.”

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Comment by kckid
2007-12-07 10:05:39

Don’t you think that this whole housing issue is one of reality vs. perception? The reality is that many of the the people have negative net worth but perceive them selves as doing just fine because of all the possessions they surround themselves with. The reality is they don’t own the possessions but they perceive them as if they do. My car, my house etc,. this is their reality. I think the realists see it for what it is and it drives them nuts. The perception is that government will make every thing just fine. The reality is probably something else. How I perceive something I guess is my reality.

Comment by Ben Jones
2007-12-07 04:50:14

‘Ed Skebe of Manhattan Beach would agree that even if some people were duped by shady mortgage brokers or loan officers, many knew they couldn’t afford the homes they bought and rolled the dice anyway in hopes that the boom had enough life left to shower them with profits.’

‘They hurt everyone. They drove the prices up,’ said Skebe, a 61-year-old program manager at an air-freight company, who said the booming housing market prevented him from trading up to a larger home. ‘It’s hard for me to believe that someone didn’t realize they couldn’t afford a $600,000 home.’

‘The worst potential consequence, critics say, is if the government’s actions prop up a housing market that easy financing helped inflate. That, they say, would delay the eventual day of reckoning when property values finally settle at their natural levels, keeping many would-be buyers locked out of the market in the meantime.’

‘I’m not asking for Armageddon,’ said Matthew McGuinness, a 43-year-old television writer living in Hermosa Beach. ‘I’m just saying, let the market go to where it should go.’

‘Housing and finance experts sympathize with such arguments. ‘I definitely see where these people are coming from,’ said Tracey Seslen, an assistant professor of finance at USC’s Marshall School of Business. ‘

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Comment by P'cola Popper
2007-12-07 05:17:16

CNBC received an avalanche of emails about the plan and if those idiots are to be believed 80%-90% were vehemently against the plan and any bailout. A few of the emails were read on air and based on the emails read it sounded like CNBC was flooded with a bunch of HBBers. Maybe there is hope yet.

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Comment by kerk93
2007-12-07 12:21:49

The collective lack of knowledge of the meaning, use, and value of money has put our Union in this position.

The blame, in a constitutional republic, lays at the collective feet of the people. Money is one of the cornerstones of a system of governance like the US enjoys. Without a monetary system where the people control the value of their money, there is no liberty (free from arbitrary authority). All subjects are at the mercy of the body that determines how much we will pay for food, energy, stocks, bonds, real estate, etc. (Fed attempting to debase currency by lowering rates).

Yes, for those who take the time to educate themselves, there is great monetary benefit to be had. Simply study the past to predict where the new money will enter the economy first. However, that is not the system that was founded, nor is it the system that is sold in the media.

The primary way to rectify this situation is through an expansion of knowledge. It appears we, the collective people, are slowly bringing this expansion of knowledge to fruition. The important question is if it is rapid enough to make the changes to restore the constitutional republic as the pace of the crisis quickens (ref. the intervention for mortgage rates)?

Comment by oxide
2007-12-07 05:24:11

“Families are being broken apart.”

Renting a smaller place will bring the families closer together!

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Comment by are they crazy
2007-12-07 15:44:56

What utter BS - we never owned until my oldest was long gone (16 yrs between my 2 girls) and the youngest was 15. But I can tell you it was our home that all the kids hung out with always. How the hell does so-called owning a house do anything to enhance a family? If that were so, why hasn’t the divorce rate gone down when homeownership goes up? Families break apart because of a variety of reasons, starting with when times get tough self centered greedy people bail on each other. Yeah, yeah, pressure, stress and problems, but that’s when you’re supposed to draw closer and help each other out - what is with this lazy ass society.

Comment by jim A
2007-12-07 05:43:36

The basic question is: Are you more worried about the popping of the current bubble, or the prevention of future bubbles? Policies that mitigate the effects of our current crash are diametricly opposed to those which seek to prevent another bubble. Do you try to make it possible for FBs to refinance out of foreclosure, or do you try to limit the stupid financing?

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Comment by Professor Bear
2007-12-07 08:17:43

This is a terrible time for a writer’s strike, IMO. If not for the strike, the housing bubble would have definitely been featured on The Daily Show by now.

Comment by speedingpullet
2007-12-07 14:03:31

Are they back on air yet? I’m jonesing for my Daily Show fix…

Comment by are they crazy
2007-12-07 15:36:51

Oh how I miss the days of the original SNL - you know they would have gone hog wild over this one.

Comment by joeyinCalif
2007-12-07 04:48:46

The way it was released does have some of the markings of a trial-balloon. The idea can’t have been hatched in secret, having time to get the bugs worked out, so it’s immature at best.

Experts are still weighing in on it’s effects assuming various unknown conditions and limitations.. and who knows.. maybe even bloggers ideas are contributing to the plan as govt lurkers keep tabs..

Comment by Ben Jones
2007-12-07 05:01:38

‘U.S. Treasury Secretary Henry Paulson’s plan to prevent as many as 1.2 million people from losing their homes by freezing interest rates on subprime adjustable-rate mortgages will bring no benefit to the depreciating housing market.’

‘At best, it may stop some of the hemorrhaging of the housing market, but it doesn’t necessarily turn things around,’ said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies in Cambridge, Massachusetts. ‘The fundamental problem with housing is oversupply.’

Comment by Ben Jones
2007-12-07 05:06:33

‘Many technical details of the mortgage-relief plan have yet to be clarified. It is unclear whether unpaid interest will be forgiven or added to the principal balance of the mortgage – what is known as negative amortization.’

‘If the plan calls for negative amortization, homeowners may end up owing more than they originally borrowed. That could lead to trouble down the road in refinancing or selling without taking a loss.’

‘Housing prices haven’t hit bottom, and we don’t know when they’re going to hit bottom,’ said Mark Riedy, executive director of the Burnham-Moores Center for Real Estate at the University of San Diego. ‘Unless you think housing prices are coming back fairly soon, these borrowers coming back with a delayed reset are going to find their mortgage principal balance is higher.’

Oh, yeah, this is something to worry about….

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Comment by JP
2007-12-07 05:14:06

If the plan calls for negative amortization, homeowners may end up owing more than they originally borrowed.

Wow, what a great way to deal with this crisis! *eyeroll*

Comment by joeyinCalif
2007-12-07 05:20:23

This thing will sink when JJ has a million-FB march on Washington demanding much more than a rate freeze..

Comment by Ben Jones
2007-12-07 05:35:43

‘A senior manager at the world’s biggest bond fund criticized a federal mortgage rescue plan as short-sighted and said US home prices may not hit bottom until 2010. US home prices may fall as much as 30 per cent from the market’s peak in some areas and likely won’t trough until 2009 to 2010, according to Mark Kiesel, a portfolio manager at Pacific Investment Management Co.’

‘The question is, do we do it (real estate market adjustment) over a period of two to three years, or do we do it in 10?’ Mr Kiesel said in an interview, referring to an adjustment in U.S. property prices.’

‘Japan chose 10, and that didn’t work so well.’

Comment by targetdrone
2007-12-07 07:09:10

Five years on this plan equals the rest of this election year and all of the next pres term, so the re-election year wont have to deal with it.

Comment by Professor Bear
2007-12-07 08:20:03

“and all of the next pres term”

Small wonder HC was so quick to voice her approval.

Comment by Professor Bear
2007-12-07 13:46:22

“The idea can’t have been hatched in secret,…”

I suggest it is too early to even say if it hatched.

Comment by aNYCdj
2007-12-07 07:31:36

It make PERFECT sense, just like Medicare Drug Prescription Program with that “Donut Hole my mom has to pay for!

Comment by mrktMaven FL
2007-12-07 08:38:36

I can only reiterate what I said yesterday. The real issue is rising and record breaking foreclosures. At this juncture, the housing crash is like a rapidly unfolding natural disaster. It cannot be stopped from wreaking havoc. It’s a national disaster with global consequences.

Consequently, you cannot fault the administration for trying to get ahead of the burgeoning political foreclosure firestorm. It does not want to be accused of doing nothing while 2 million or more families are thrown out on the streets. It had to act.

Comment by Kid Clu
2007-12-07 13:22:16

I think the plan will actually make things worse. The market for MBS was dismal already. Now I imagine it will cease to function unless much higher interest rates are paid by all future borrowers. This in turn will cause housing prices to drop even more than they would have if the bubble had been left to collapse on its own.

Comment by JP
2007-12-07 04:37:43

We might as well have a weekend discussion on the bush pseudo-bailout. (It will be spread over the all the posts otherwise…)

The abbreviated summary of positions so far:

1. “Bailout will accomplish nothing and is just political positioning.”
2. “If retroactive modification of mortgage contract occurs, new loans will dry up.”
3. “Bailout is interfering with the free market! I’m leaving the country”
4. “FHA and appraisers will conspire to keep prices artificially high, believe you me.”

For my own point of view, I think it’s 1. Initial reviews of phone calls to the toll-free number seem to consistent with this view.

Comment by KayLaw
2007-12-07 04:55:19

Your #4 interests me because I wonder who will do and pay for the appraisals. I’m also interested in who (other than politicans, banks, Wall Street, etc.) will actually be helped by this plan.

I’m far more upset by Bush’s plan to let people off the tax hook when they walk away from their houses. It means someone could get a no money down loan, then a Hel, buy a bunch of toys, (or PMs) then just walk away with the booty and not even pay taxes on a thing. Right?

Comment by JP
2007-12-07 05:10:50

No, worse than that. I’m a biz owner, and I need to hire a COO. I offer to pay him only a small salary, but also give him a loan for a house as part of the package. I then let him walk away from the loan.

Presto, tax-free executive compensation.

Comment by Professor Bear
2007-12-07 08:39:15

Sounds like you have thought up a new version of options-based executive comp…

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Comment by JP
2007-12-07 09:44:02

And my version wouldn’t be taxed at all, if loan-forgiveness becomes non-taxable.

Comment by Salinasron
2007-12-07 16:49:09

I’m worried that without some type of penalty here that when we near a bottom these same people will be running in buying up property and starting a bidding war on it once again. They surly need to be locked out of the market with at least a 20% down payment.

Comment by joeyinCalif
2007-12-07 05:43:59

5. “Since the rate of home values falling is underestimated, all bubble-buyer mortgages will be upsidedown before the plan has a chance to go into effect, and zero people will qualify. The plan is then discarded”

Comment by Professor Bear
2007-12-07 08:44:52

“all bubble-buyer mortgages will be upsidedown”

This doesn’t matter; as long as the upside-down mortgages represent “unrealized losses,” the fact that they are upside-down can remain a closely-held secret. IMO, this is one of the key purposes of the bailout: to help avoid price discovery. This is the same purpose the Superfund SIV would serve for CDOs (Collapsed Debt Obligations).

Comment by bizarroworld
2007-12-07 04:50:16

The housing bug is not as contained as hoped by many MSM talking heads.

`Decoupling’ Debunked as U.S. Collapse Infects World×9

“Initially the impact of the subprime crisis was on the U.S. directly, but what we’re seeing now is a more insidious paralysis of credit conditions moving across different markets and economies,” said Brian Hilliard, director of economic research at Societe Generale SA in London.

“The American consumer is the big gorilla on the demand side of the global economy,” Roach said. “As the slowdown goes from housing to consumption, we’ll find the world is not as decoupled as it thinks.”

As housing market conditions worsen, the big gorilla won’t be thumping his chest as loudly.

Comment by aladinsane
2007-12-07 04:53:07

An important thing to discuss should be the foreigners that are being saddled with our debt…

A Dutch bank just ponied up $7.6 Billion, because nobody wanted to Tango, @ any price.

Comment by LongIslandLost
2007-12-07 05:07:31

Foreigners are not “saddled” with our debt. Some foreign banks made stupid (and possibly predatory) loans and are now surprised that a gardener can’t afford to pay an $800k note on a $400k house. Lots of US banks did the same thing. I rather enjoy watching them hang.

Comment by aladinsane
2007-12-07 05:16:40

It’s the other way around…

They’ll watch us hang~

Currencies are like professional sports teams, in terms of rating.

The Dollar is the Miami Dolphins, (0-12) to the rest of the 1st World being the New England Patriots. (12-0)

And we owe all our future draft picks and then some, to the Pats.

Our team isn’t looking to be going to the payoffs, this season.

Comment by Frank Giovinazzi
2007-12-07 05:07:19

Doesn’t the latest Bush plan just sound like more propaganda in wartime?

As in, can’t let the people lose hope until a) we figure out a way out of this mess, or more likely, b) it works its way out of the system?

However, I will also ask the others on this board — don’t you think the message about price is finally starting to break through the noise?

I am seeing it in almost every article, way down sometimes, but they are starting to get it. I think the next wave of coverage will get around to lowering prices, especially in the cold, slow winter.

Comment by Ben Jones
2007-12-07 05:17:43

‘don’t you think the message about price is finally starting to break through the noise?’

I do, and I’m pretty stoked this morning because it looks to me like this thing has blown up in the bubbles face and caused people to refocus on affordability and responsibility.

Comment by txchick57
2007-12-07 05:46:02

Has any media called you since the news came out yesterday?

Comment by Ben Jones
2007-12-07 05:50:19

No, I think the media is afraid of the HBB. We cut too much to the chase. Plus, they fear blogs in general.

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Comment by Arizona Slim
2007-12-07 10:20:12

Why do they fear blogs? Because we’re cutting to the chase, and they can’t because they’re beholden to their advertisers?

Comment by Matt_in_TX
2007-12-07 19:01:13

I used to laugh at TV and radio interviews where a housing bubble “cut-to-the-chase” type subject started to make points and the interviewer started to clear his throat and twitch and make other “the producer is yelling in my ear to get the tinfoil guy off the air” motions until they just abruptly cut to commercial…

Comment by Groundhogday
2007-12-07 06:43:04

Agree completely. Given the fallout over this minor plan, politico’s like Hillary will have tread carefully from this point forward. The backlash has been phenomenal.

The media were also very quick to dissect the BS this time around. Perhaps they are learning something after all?

Comment by bluprint
2007-12-07 10:52:17

don’t you think the message about price is finally starting to break through the noise?

It seems to be the case. Additionally, I was actually a bit startled when, during his announcement of this non-plan, Bush mentioned people who (I’m paraphrasing) “simply bought houses they couldn’t afford.” Normally in politics, everyone is a victim, but he actually indicated that perhaps at least a portion of our “housing crisis” was due to bad decisions.

That concept was mentioned a few times on CNBC during the post-speech discussion. I was glad to hear it, and hope that it becomes a larger part of any national discussion of this issue.

Comment by KayLaw
2007-12-07 05:10:39

A couple of times today I’ve seen people refer to the freeze as Paulson’s and Hillary Clinton’s plan. What’s up with that? Don’t they mean Paulson’s and Bush’s plan?

Comment by P'cola Popper
2007-12-07 05:11:27

In the spirit of Hoz’s most interesting post yesterday about the “ski resort” in his area I propose a thread about HBB’s favorite “off the beaten path” vacation spot or thing to do in their respective area.

Not sure if I will ever make it to the upper midwest for skiing but as a ski fanatic I bookmarked Hoz’s link and if ever in the area will be sure to visit. Although I ski quite a bit in Austria most of my ski days have actually been in off beat ski places in Russia that are a bit “rough”. Thanks Hoz!

Comment by txchick57
2007-12-07 05:15:22

I’m looking at those MA puts now.

Comment by P'cola Popper
2007-12-07 05:27:38

I will make my decision after the FOMC meeting in order to get a lower risk trade. If they cut .25 I will jump on immediately. If they cut 0.5 I will keep my powder dry and wait for the rollover.

Do see some reason to pick it up before the FOMC?

Comment by txchick57
2007-12-07 05:47:40

No, I’m looking not jumping.

Although the xmas retail reports aren’t looking too swift.

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Comment by joeyinCalif
2007-12-07 05:54:30

The mall was almost empty yesterday at noon.. 50% off is a popular theme. But I don’t shop much so i dunno if it’s normal or not.
Had a very nice choir.. one kid waiting to see Santa.

Comment by aladinsane
2007-12-07 05:40:12

I’ve been skiing for 30 years and just got a Randonee set-up a few years ago, and have been skiing the Sierra backcountry, through the trees, up and down…

Randonee bindings allow you to switch from touring, to downhill and you put on skins when climbing.

I’ve always skied @ resorts where it was groomed packed powder, and you’ve got to be on your toes in the backcountry, skiing Mother Nature groomers…

Comment by P'cola Popper
2007-12-07 06:32:06

Interesting setup.

I’ve met a few of the Telemark guys in Austria from time to time but can’t really see the advantage when going dowhill although the loose heel is pretty helpful when you need to hike up or across for some distance. I’ll have to check out the randonee bindings–sounds like a good compromise/solution.

I have very little experience with packed powder having first learned to ski in Russia— a severe lack of grooming equipment or if it’s available they are afraid to use it. Even the piste is off-piste!

Comment by aladinsane
2007-12-07 12:39:11

Telly skiing is incredibly graceful, when performed by an expert…

Like poetry in motion.

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Comment by P'cola Popper
2007-12-07 16:33:46

Telemark is interesting and different.

I would love to go on a ski safari where you camp and ski through the mountains which sounds like what you are doing in the Sierras.

Comment by bill in Maryland
2007-12-07 10:43:06

Aladinsane, you have the wisest approach to skiing. You do not have to pay for a lift ticket. Nor do you have to wear the $2,000 ski outfits. I haven’t skiied for over 10 years (mostly at Mammoth Mountain and Sierra Summit in those days). My dad thought I should just carry wads of paper money with me and burn the money as I was skiing down hill. I always wished I had the skill to do backcountry skiing in the Sierra Nevada.

Comment by ahansen
2007-12-07 09:41:59

On Saturday nights in Lamont we all get a kick outta scorin’ a few sixpacks then goin’ over to the the truckstop on Weedpatch Hwy an’ watchin’ ‘em change them really BIG truck tires….

That and heli-ing Mt. Aspiring in SNZ in late August.

Comment by CA renter
2007-12-07 05:40:17

Regarding the bailouts, here are some of my concerns:

1. The FHA expansion — to guarantee/insure loans to people who have no hope of every paying them off. Who pays? I’m guessing it’s us (taxpayers).

2. State & municipal tax-exempt bonds to refi existing loans. Again, isn’t this just another way of cleansing the banks’ balance sheets & shifting the burden on us (the taxpayers)?

3. Who is going to pay for all the “debt counselors,” appraisals, etc. to determine who does & does not qualify for these plans? Beware of the $5 BILLION Hillary fund.

Personally, I don’t care if lenders use their own resources to refinance or change the terms of their own loans. That’s their business.

However, I’m getting really, really pi$$ed about having MY money used to bail out the FBs that have kept us out of the housing market all these years. Why am I forced to rent while all these a-holes are using **MY** money to stay in their artificially-inflated homes?????

Comment by bluprint
2007-12-07 11:09:21

State & municipal tax-exempt bonds to refi existing loans. Again, isn’t this just another way of cleansing the banks’ balance sheets & shifting the burden on us (the taxpayers)?

Not necessarily.

According to Bush, there are bond programs in place to help first time buyers, he wants to expand the program to allow refinancing. By “expand the program” he means from a federal taxation point of view, he would change the law to allow local gov’s to issue the tax-exempt bonds for additional use (there are regulations regarding for what purpose bonds like that can be issued).

The thing about gov. bonds, is that earning from them are tax-exempt. The effect is to provide a lower interest rate to the borrower (the person issuing the bond) than would otherwise exist in the market. So for example, lets say a government wants to issue bonds (which means it is getting a loan from bond buyers) to pay for some infrastructure. Since the bond income is tax-exempt, investors are willing to accept a lower than normal interest rate, because the difference in interest between the gov. bond and what they could get for equivalent-risk bonds in the private market is offset by the tax exemption. This is advantageous for the government, because they can get borrow money at a lower rate than other entities.

Here’s the interesting part. Governments can confer this benefit onto others. For example, lets say a local government wants to attract a business who is considering expanding. That government can issue bonds for the business. The government in this instance doesn’t really take on any risk. The business has to “service” (pay the interest on and repay the bonds when they mature) the bonds like they normally would, and the investors get paid from the business. If the business defaults, the government doesn’t gaurantee the bonds, so the risk for the investors is the same as if they had bought the same bonds from the same business in the open market. The only difference is, since the government issued these bonds as conduit bonds, the bonds receives the tax-exempt status. This provides the business with lower-cost capital than they could get on their own in the market.

I don’t know how these mortgage/bond programs work in practice, but I am assuming they might be arrranged in a similar manner (does anyone know of a city that does this? we could investigate how it works). The gov. issues conduit bonds, probably participates in servicing them somehow (accept payments from borrowers and distributes the bond payments), but doesn’t gaurantee them. So the risk is the same for investors but the tax exempt status of the bonds give the borrowers a little discount on the cost of capital.

Comment by Kid Clu
2007-12-07 14:06:31

Similar bonds are already issued in most areas for apartment builders (requires a certain number of units be set aside for “affordable housing”–apartment owners are subsidized for these units) and for “first time home buyers “to “purchase” a home from a local housing authority at a subsidized interest rate and/or purchase price People who can afford to put food on their table don’t qualify for these programs. All these programs have done is bring riff-raff who shouldn’t have been living there in the first place into apartment complexes and lower middle class neighborhoods. All the new bond re-fi program will do is keep the people who had not worked hard enough (or at all) to qualify in the real world to own a home in a home at the local taxpayers expense.

Comment by Peter T
2007-12-07 12:45:21

1. Yes, if FHA exhausts its insurance fund, it’s the US treasury who has to pay, i.e. us.
3. I am happy to pay a few billions to all the counselors who tell the FB that they can’t afford their “investment”. It should have a sedative effect and provide some education after the fact. On the other hand, a full blown housing “bail-out” by congress is not possible without many billions or even trillions (resulting in a further depreciating dollar). That is the real danger, see also 1.

Comment by hwy50ina49dodge
2007-12-07 05:42:48

Lucy: “The Court is in session”

Sally: “I want my lawyer!”

Snoppy: (wearing sunglasses handing a long legal document to Lucy)

Lucy: “What? you request a 6-10 month bankruptcy delay due to new Federal guidelines & laws… you request that Sally be allowed to stay in the home until such determinations by the court?”

Snoopy: ( handing a note to Lucy )

Lucy: “What? you want a class action suit filed as you have more than 750,000 pending clients?”

Sally: “Your Honor..please don’t let them smart suited bankers throw me to the curb…it’s Christmas and… I have a needy bird to care for!”

Woodstock: (laying on his back…coughing)

Charlie Brown: “Oh good grief!…doesn’t anyone remember what Christmas is all about?”


Comment by hwy50ina49dodge
2007-12-07 06:01:28

Lucy: “Attorney for the Defendant…I see no legal references contained in this petition?”

Snoopy: ( handing a newspaper & note to Lucy )

Lucy: “What? …you read about the new laws in the newspapers…Mad magazine is not recognized by this court! What? …you want me to Google it? You stupid beagle…I hold you in contempt! By the way… I remember you now…you where on the side of the Solicitor General in the Presidential vote fraud down in Florida in 2004…you and that other big nosed lawyer, Spike….bailiff cuff him!”

Lucy: “I want Judge Judy!” :-)

Comment by jim A
2007-12-07 06:47:33

I have two issues with the plan. Remember that woman from a florida local government the other day who was all “they can’t give us less than all the money we put in.” How difficult would it be for some lawyer get a bunch of billable hours from her and her ilk, getting a class action started against the securitizers and/or servicers if they follow through on the plan.

It still seems maddening vague. Estimates of the number of people elegible are all over the map. Often in politics the way to get agreement is to vague it up enough that everyone thinks (or at least can claim) that they’ve gotten what they want.

Comment by simplesimon
2007-12-07 07:32:59

elections are coming-find out where your local reps stand on this mess. (if they go off on a tangent about competing Globally-cross them off the list to vote for) As far as i know they were voted in to represent us..the people-the majority-not minority. when their interests lie elsewhere they need to go. If they dont agree with bailout stuff-stick the petition in front of them.

Comment by kerk93
2007-12-07 12:44:17

Not exactly, and our knowledge of our system of goverance has contributed to this monetary crisis.

Each member of Congress, officer of the Judicial branch, and officer of the Executive branch takes an oath to support the Constitution-no more and no less. Their power is strictly limited to those enumerated in the Constitution.

Senators are supposed to be the check to ensure state sovereignty, and the House is supposed to be the check to ensure the people’s sovereignty. However, it has certainly become a culture that is typified by the mentality of, “What can my Representative or Senator acquire for me or my state at the expense of someone else or someone else’s states.”

The government had nothing, other than the system and powers created by the people. One of those powers was taxation, and it originally had to be apportioned based on their representation. It forced people to be involved because their money (tangible commodity money at the time) was being taken and it was done in an overt manner.

Now, the representatives and senators can promise the world, and folks pay for it through a much more furtive tax (inflation).

I don’t mean to offend whatsoever. However, what you mentioned would be a democracy (where the majority rules). We don’t (or at least constitutionally speaking shouldn’t) have that. We have/had a constitutional republic. A substantional portion of what is done in Washington, by all three branches, violates the Constitution (the Supreme Court can most certainly make unconstitutional rulings). The checks among the branches have virtually vanished. It would appear the last remaining check is the people, as the states appear to have gone passively in the night as well.

The fix is through education. When enough of the people realize what we had, the prosperity only it can create, and demand a return to only the powers enumerated in the Constitution, we will begin the trek back to a constitutional republic.

Comment by Maria
2007-12-07 08:53:55

Is there way to promote HBB, so that J6P knows that?

1)Real estate does not always go up.
2)Ownership of the house is not for everyone.
3)Owning a house is not investment but and expense.
4)Renting is not bad.
5)Use there brains before listening to Realtors.
6)Do not use home equity as ATM.
7)Buy what you can afford.

Comment by Arizona Slim
2007-12-07 10:22:04

We could set up a tee shirt store on Cafe Press… The above sentiments would make pretty good slogans for such a store.

Comment by Peter T
2007-12-07 13:04:10

> 7)Buy what you can afford.

I don’t like that slogan, because it is too close to the old mantra:
“Buy as much as you can afford.” with the understanding, of course, that housing goes up, always, and that more invested money gives you a larger absolute return. I would rather follow: “Buy less than you can afford.”

> 4)Renting is not bad.

Yes, indeed, but as a slogan it’s too defensive. “Renting is good.” or “Renting a house is better now than renting money to buy a house.”

Comment by Professor Bear
2007-12-07 14:57:00

“what you can afford” = house priced at less than 120 times monthly rent of comparable housing

Comment by Matt_in_TX
2007-12-07 19:03:36

Unless the rent is a Craig’s list rent ;)

Comment by Professor Bear
2007-12-07 08:57:42

The U.S. economy has gone topsy-turvy.

December 7, 2007 10:53 A.M.EST
Jobs report shows strength
UMich survey shows confidence lowest since Hurricane Katrina

Main Entry:
1top·sy–tur·vy Listen to the pronunciation of 1topsy–turvy
probably ultimately from tops (plural of 1top) + obsolete English terve to turn upside down
Date: 1528

1 : in utter confusion or disorder
2 : with the top or head downward : upside down

Comment by Professor Bear
2007-12-07 09:31:46

Great news from the FT:

The pressure is off for the Fed to cut interest rates next week.

US job gains ease pressure on Fed
By Daniel Pimlott in New York
Published: December 7 2007 15:06 | Last updated: December 7 2007 15:06

The US economy continued to add jobs last month, although employment fell in construction, real estate and financial services, suggesting that the housing downturn and credit crisis remain contained.

The rise in jobs signals a slowing but not collapsing economy, reducing pressure on the Federal Reserve to drastically cut interest rates when it meets next week.,Authorised=false.html?

Comment by WT Economist
2007-12-07 09:35:53

Here’s my question: will foreign investors think twice about investing in ANYTHING in the U.S. as a result of this debale.

Per Bloomberg, investing in the U.S. is already a joke.

Comment by ahansen
2007-12-07 10:14:36

Yeee-HAWWW! We’re finally getting some much-needed rain up here…the grazing was getting pretty dismal.

This topic suggestion is based ONLY on my observations from outskirts of the Central Valley/Bakersplat.

Beginning around 2002, a huger-than-normal influx of Mexicans moved into the area to join their cousins’ and uncles’ construction-related crews. For the first two or three years, much of the money they earned was sent back to families in Mexico. But the boom fed upon itself, and pretty soon most of that money was being spent here in the Norte. Families were reunited. They needed cheap fast housing—like the ones they were employed in building—and developers were glad to oblige. There are still signs in Spanish plastered all over Arvin advertising zero down houses (tr: “From the 100’s” $1100/mo.)
How much of the bubble was by design…to capture and keep money in the US?
Or did it just evolve to the point where the Bu$hies HAD to encourage their “ownership society” (which sounds eerily Orwellian given that Georgie was likely consciously referring to illegal alien “ownership” at the time) to keep folks from overrunning the parks and parking lot privies and inadequate low-income housing?

What percentage of now-defaulting mortgages were made to illegal aliens? Anyone?

Comment by aladinsane
2007-12-07 11:42:16

I have many friends that are national park rangers, and one asked me last summer, “How is it that I keep seeing Mexican-American families of 5 kids in brand new Chevy 4×4 Tahoes, @ campgrounds?”

All the wizards of finance needed was somebody to initiate the fraud of bad loans-we are seeing now, by “buying” a high ticket item, be it a house or a new car, by a lawful or unlawful citizen.

They needed somebody with a pulse, nothing more…

Comment by Kid Clu
2007-12-07 14:29:40

They can afford the brand new Tahoes because they hide their income so as to pay little or no taxes, get food stamps, get housing subsidies, get utility subsidies, and get free health care at the local emergency room.

Comment by Kid Clu
2007-12-07 14:18:45

What percentage of now-defaulting mortgages were made to illegal aliens?

Don’t know the answer, to me the big question is : Why does Georgie’s gubment allow illegals to GET a mortgage???

Comment by liz & smudge
2007-12-07 10:30:13

I think we could take the bailout plan much further!

I propose that we start criminalizing saving money. Deadbeats who choose to live within their means and not accumulate debt to feed the corporate machine should be penalized with either heavy taxing, imprisonment or at the very list be put on a “list” somewhere. Perhaps some sort of blacklisting could be used until savers stop fooling around and get in the game. The higher your FICO score and lower your debt could be worked into a community service program. Savers could be monitored like a probation system.

Maybe we could making renting illegal if you fall into a certain income bracket.

Just my thoughts for making America EVEN BETTER!!!!


Comment by Professor Bear
2007-12-07 11:11:56

“saver’s prison”

Comment by hubrispie
2007-12-07 13:32:28

No need for that. Inflation is the penalty for saving money. The government comes and takes a little bit of our savings each day, very covertly so that most of us do not really know it.

Comment by Peter T
2007-12-07 13:32:32

In a way, saving is already pretty heavily taxed. Interest from savings is treated as income and not as the compensation for inflation as part of it surely is, and it is taxed as income.

Comment by Professor Bear
2007-12-07 13:44:49

The MSM financial news seems laden with doom and gloom going into the holidaze.

Consumer sentiment 2nd worst in 15 years
‘No reason now for things to improve,’ analyst says

Comment by Professor Bear
2007-12-07 14:35:54

Beware the law of unintended consequences.

White House plan may hurt mortgage investors
Resets may be frozen unnecessarily, denting value of mortgage securities
By Alistair Barr, MarketWatch
Last update: 4:08 p.m. EST Dec. 7, 2007

SAN FRANCISCO (MarketWatch) — Add another group to the list of those concerned about the White House plan to salvage the mortgage market — investors.

The proposal could end up damaging the market because interest rate resets on some home loans may be frozen unnecessarily, to the detriment of investors, experts said on Friday.

The plan also introduces a new element of political risk into U.S. mortgage markets, which could make investors more wary, increasing the cost of home loans over the long term, others said.

Comment by Professor Bear
2007-12-07 14:51:10

Deadpan irony…

A rescue plan that is worth the price
Published: December 7 2007 19:33 | Last updated: December 7 2007 19:33

The US government’s attempt to stem the growing housing crisis by getting lenders to freeze loans to troubled subprime borrowers is a far from perfect scheme. It involves arbitrary judgments, rewards for reckless behaviour and variations of contracts. But it is justified by the extreme circumstances.

The package negotiated with lenders by Hank Paulson, the US Treasury secretary, is aimed at preventing a further wave of foreclosures over the next two to three years as floating-rate mortgages taken out by subprime borrowers reset to higher rates. Some 1.8m Americans who bought houses they could not afford fall into this category.,Authorised=false.html?

Comment by are they crazy
2007-12-07 15:52:47

I would like to see a weekend topic: If money or job was not an issue, where in US would you prefer to live and why? Note: it seems the idea of “weekend” topic gets kicked in the butt because we end up discussing it on this thread instead of on the weekend - is that what you intend, Ben?

Comment by black swan
2007-12-07 19:38:43

Where in the world would you prefer to live if neither money nor employment was an issue?

Comment by Professor Bear
2007-12-07 18:16:29

Can anyone think of other ways besides this suggested method to deliberately qualify for a teaser freezer?

Talk of gaming White House mortgage plan emerges
Experts worry borrowers may stop paying bills to qualify for reset freeze

By Alistair Barr, MarketWatch
Last update: 7:01 p.m. EST Dec. 7, 2007

Comment by Professor Bear
2007-12-07 18:17:46

Here is the caption on the marketwatch link to the story:

7:01 PM today
How to game the White House mortgage program: stop paying bills

Comment by Professor Bear
2007-12-07 18:19:08

There are also some choice comments below the story, such as this one:

by consultant 24 minutes ago

“Wow, talk about dumb and dumber, buy a house you can’t afford and then trash your credit so you can continue to live there………..

Then again, if we let all of these morons foreclose, China will come in and buy the forclosures and Americans will wake up one morning living in a country owned by China. so much for terrorism.”

Comment by Professor Bear
2007-12-07 19:14:48

Boy does this smell like a program to help low income illegal aliens in houses they cannot afford…

One of the main criteria for qualifying for a reset freeze is the FICO score, which measures how well a borrower has repaid debts in the past (the higher the better). Borrowers’ income does not have to be checked. See analysis of program.

To qualify for the fast-track program, borrowers must have a FICO score of less than 660 and it can’t have increased by more than 10% since they took out their original subprime mortgage.

Because income isn’t checked, some experts worry that borrowers who might otherwise be able to afford higher payments will try to lower their FICO score to qualify for a rate freeze.

The message here is to get your FICO score down,” Mark Adelson, a structured finance expert, said. “Don’t pay some bills, but keep up with mortgage payments.”

Comment by Professor Bear
2007-12-07 19:22:19

Next week’s social engineering project to benefit investment banks…

Rescue Fund Takes Fire Out Of SIV Sales
By Diya Gullapalli
Word Count: 660 | Companies Featured in This Article: Citigroup, Bank of America, J.P. Morgan Chase

The effort to recruit the world’s biggest banks to participate in a massive rescue fund of troubled debt investments is officially kicking off.

On Friday, money-management firm BlackRock Inc. signed on as the adviser for the rescue fund, which is designed to salvage the structured investment vehicles, or SIVs, at the heart of recent credit-market turmoil. “Syndication” has begun, the term for banks approaching other financial institutions world-wide to commit money to the fund.

Comment by are they crazy
2007-12-07 20:05:37

Here’s another question I’d like to see discussed: Why do people that move to a new area feel the immediate urge to buy a house - even if the house they already own hasn’t been sold? Why don’t people rent when they move to a new area? It takes at least a year to get to know a new area and decide where you really want to live, and also if the new job is going to work out. What is the big F*ing rush?

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