Bits Bucket And Craigslist Finds For December 10, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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Pulling Back…
http://online.wsj.com/article/SB119707327901017729.html?mod=todays_us_page_one
There you go. Empirical evidence that boob jobs are directly tied to MEW.
sooo.. go short on perkies and long on hangers? I will miss the housing “peak”, if ya get my drift..
LTD’s 5 year chart looks kinda bubblicious..
http://tinyurl.com/2bd667
Is a “hanger” what I think it is?
I’m short silicon and botulism.
You know botox=botulism toxin. Which part of that EVER sounded like a good idea?
Here I had been thinking it was the drop off in home sales that left fewer Realtors able to afford boob jobs. Who would have thunk that MEW would have been a factor?
Don’t worry. Abu Dhabi investors will soon start funding all western boob jobs. They already own our asses, they might as well buy into some boobs while they are at it.
–
Sagging asset prices lead to sagging assets. Artificial props are temporary.
Jas
Okay Jas - actually cracked me up. Thx.
Headline: Housing Bust is a Bust for Busts
Or even more pithy: Bust Bust
This story fits well with what I’ve been trying to identify as my next home run trade. It would seem that high end consumerism stocks will be hurt really badly going forward. The trick is to find that ideal company with outstanding debt fueled growth these last few years.
Starbucks and BMW come to mind. Others?
How about the public private equity companies, Blackstone, etc.
Blackstone and KKR overpaid like veryone else. The Gov’t made money cheap so you had way too much money chasing after a few crappy deals.
This is the same problem VC’s had in the late 90’s with dotcoms and are having again now with Web 2.0 horseshit.
in case you didn’t see this yesterday
http://www.youtube.com/watch?v=fi4fzvQ6I-o
Best Buy (BBY) though the street likes em, WHR and other durables manufacturers, the makers of HD TV’s that do only big screen stuff may get hit as the money dries up, eateries have been mentioned recently, high end anything may fall as less people feel “wealthy”.
TX, Thanks for that link. ROTFLMAO!
I missed that yesterday, thanks for the repost. That might be the best thing I’ve ever seen, ever.
I’m not saying things are getting tough in California, but…
A woman had her dow cornings repo’d last week.
Actually - this makes me think. We all know that in many communities, housing is a depreciating asset. Also, houses need a lot of maintenance and you have to pay taxes on them. However, silicone breast implants are permanent and will remain intact through the centuries. No one has to pay taxes on huge boobs even though they are quite an asset. So, taking out a HELOC to get a boob job may not be a bad investment.
Sad to say, but IMHO, the best ROI for a women in many areas is a boob job and a gym membership. If that tight bod and 36Ds help land a high income husband, the 10K you spent on both can return millions overnight.
but you have to be smart enough to defeat the prenup
re: roi on boob jobs
so true! a good boob job certainly encourages a man to invest his hard assets!
What a great wake up this am, guys. Humor and wit is a great way to start the day. It will be interesting to see what happens to life when the masses are forced to live within their means.
Boobs are a depreciating asset too.
I recall seeing those of Farrah Fawcett in a PB video when she was like in her 50s. They were much appreciated!
very true! dont’t the larger ones depreciate faster then the small ones?
more like sagging asset.
I’d call them a sagging indicator.
They aren’t even bothering to trot out the “you became sub-prime ” argument anymore:
——
Brad Tober of Buffalo, N.Y., recently got a notice that Capital One Financial Corp. was replacing the 9.9% fixed rate on his credit card with a variable rate of about 19%. The 21-year-old college student said he hadn’t paid a bill late or done anything that he anticipated would lead to a higher rate. A spokeswoman for Capital One attributed the change to “business and economic” factors.
Credit cards are licensed usury.
Next they’re sending Vinny and Guido out to collect payments for their new mandatory credit ensurance program - you give us money, and we ensure that we don’t break your legs.
Well… Yes. That’s why the companies are all based in Delaware or South Dakota, the two states without interest-limiting anti-usary laws.
Re credit card companies and their “change to “business and economic” factors”
Credit card companies might not be making record making profits this year. The old-fashioned, solid business practice generated profits are below them. “Joe Schmoe pays his bills every month” will have to make up the difference.
I got a letter from my credit card company (FIA Card Services) telling me they were going to change my contract to increase the APR up to 29% unless I wrote them back saying I rejected the change. Of course, you have to read the paper they sent you to see that, and you’re not allowed to call, you have to write.
And if you write, they have the right to cancel your account (IIRC, we received a similar notice from another CC).
From the article: The number of vision-correction surgeries appears to be falling as well.
I suppose this is the result of fewer house flippers “master-debating” over their latest housing triumphs. See, Mom was right about the perils of touching oneself. How’s it feel on the other end now, FBs?
I’ve been kicking around getting the surgery, but i’d miss waking up blurry eyed.
Hey if you drink enough… But the thing with eye surgery is that it’s like computers or the current housing market: every year it gets better and cheaper, so it’s easy to put it off.
I am seriuosly looking into this very soon.
Firstly, get any elective surgery done post haste. You don’t to be under the knife of a surgeon who just got his notice that redemptions to all his investments were frozen. This will happen in the near future. The only doctor who’s hands should tremble is a gynocologist.
Secondly, removing one more thing from my monthly budget will be a albeit minor but positive step.
The Booboisie was beginning to bore me…
When I was alad, only so many women had busted assets.
Silicone Loan?
We now know the consumer is being assaulted from many directions. Stagnant wages, increasing job uncertainty, falling benefits, rising health insuarnce, rising grocery bills, rising fuel bills, increasing debt service to cover.
Most of us were smart enough not to leverage our future on the dotcom bubble, but it looks like the bankers got us on the housing bubble. In exchange for a few years of driving nice cars, granite countertops, and some nice vacations, the banks get our house and a larger percentage of our income stream for the next thirty years.
Not a bad trade off, if you are a bank.
yeah… those evil banks practically sneak up behind you, reach into your pocket and leave money in it.. they have no scruples.
Agreed. No bank put a gun to my head and told me to borrow money. Liberals love to blame the business and not the greedy home buyer who lied about his income.
True, but I am a liberal and it makes me want to vomit when people here blame the bank, federal or local, for the house borrowing by the sheeple. Fed is now trying to play the cards dealt by our consumer economy but YOU CHOOSE if you put your money in the game.
‘when people here blame the bank, federal or local, for the house borrowing by the sheeple.’
Last time I checked, people here are free to form their own opinions, without regard to your delicate stomach. If you want to prevent a housing bubble, which of these two is more likely to succeed: 1. Pass a law against stupidity and greed, or 2. try to make the existing checks and balances of lending and finance function properly?
“Fed is now trying to play the cards dealt by our consumer economy but YOU CHOOSE if you put your money in the game.”
The poor Fed is quite the innocent victim of the hand this tough consumer economy has dealt it.
Most people aren’t good at finance. They aren’t able to a current-value assessment accounting for substantial risks factors never before seen in this country. They are forced to rely on the advice of bankers, mortgage brokers, and realtors. When all of the above are either lying or self-deluding, who should take the blame?
It’s like aerodynamic safety assessments of airplanes. Most people can’t do it, but they still want to fly. The solution is to have good regulations enforced by people who *can* do the assessments. The way to stop this kind of problem is to block the crazy stuff with regulations, not punish the general population for not having expertise they lack ability or time to get. You simply cannot expect everybody in the country to have the equivalent of a B.A. in accounting with a minor in modern history.
“They are forced to rely on the advice of bankers, mortgage brokers, and realtors.”
If this is correct, then you are saying in many more words than necessary that our country is financially doomed.
Liberals? Seems to me that it’s the opposite. The big disappointment for many of the GOP ilk is that after years of screaming for small government and personal responsibility, they are the ones pushing bailouts the most. Sure the libs care about the little guy, but it’s the others that are pushing to bail out big business.
“Liberals love to blame the business and not the greedy home buyer who lied about his income.”
I’m from a far right family and live in far right county. Believe me, Bill, you don’t have be a liberal to blame big business. Come on you’re smart enough to know its not that black and white so please don’t start up w/the partisan sh** storm again.
far right country…..grrrr….new keyboard is messin’ me up.
ca, you need to be reading this blog for a long time to understand why it always appears that way with bill.
Nobody forced you to borrow money.
Welcome to the wonderful world of crybabies.
Truly, you are missing the point. No one is extolling the virtues of those that borrowed money that knew they couldn’t afford to pay it back.
HOWEVER
if a bank f*^ks up, it has its rich uncle Ben to give it money on terms unavailable to anyone else in society. If you screw up, the bank owns your house and a big percentage of your income for the next thirty years.
Its simply about a level playing field.
yup.. If you screw up, it can be very costly.. owing money is not the worst that might happen.
Its simply about a level playing field.
ok.. lets level it out.
Instead of borrowing from some huge multi-billion or $Trillion company that has resources and services far beyond any borrower, borrow it from an entity of equal status and privilage.. lets say.. mom and dad.
Now the borrower can default on the loan and mom and dad are broke and the borrower is broke. Equal distribution of misery. That’s much better..
“Its simply about a level playing field.”
Agreed. Especially now that Paulson’s teaser freezer has been so carefully crafted to protect the lenders and blow smoke at the forever screwed FBs. Calling it “Hope Now’ is an especially Orwellian touch.
Joey -
You’re changing he subject (”borrow it from mom and dad). The question is whether it’s right to allow Joe Taxpayer (the Fed) bail out the banks for bad business decisions, whereas the average homeowner gets no bail-out for the same bad judgment. Might as well legalize loan sharking, right? Because in a capitalist society, it’s money that controls, and if you ain’t got any, you deserve to be stomped on. Puhlease, Joey, get civilized.
Mikey.. if you’re saying that money is power, i agree.
If you’re proposing that there was ever a time, or that there will ever come a time when the above is not true, i disagree.
btw, mikey .. as far as debtors being bailed out by govt, there’s something called bankruptcy whereby borrowers are legally relieved of their debts.
Mikey.. if you’re saying that money is power, i agree.
No, Joey, that’s not what I’m saying, as that statement is obvious. What I’m saying is that because there is such power in wealth, it corrupts. Thus, the rules get changed by those in power for the benefit of those who already have power, and the little guy just trying to get by on a salary and ignorant of the corruption, gets beat up.
As for bankruptcy, there’s corporate bankruptcy as well, but the government is protecting the banks from that;not so the average Joe. Better stay healthy, Joey: it’s a cold world that you and others like you are perpetuating.
mikey.. lemme give you a piece of advice.
Do not work hard.. save and invest.. or wealth will come.. and you’ll be corrupted.
Well the PRIMARY check on the ability of the financial industry to persuade people to sell themselves into debt peonage is bankrupcy protection. Really it is only ability of the insolvent to void their agreements through bankrupcy that serves to disincentivise banks from lending to those who will never be able to pay back the principal.
“btw, mikey .. as far as debtors being bailed out by govt, there’s something called bankruptcy whereby borrowers are legally relieved of their debts.”
Which was conveniently made harder in 2005. Funny that.
It’s a harsh, cold world. The rich control it and that will never change unless we pick up guns and force people to our will, which I am not suggesting we do. Although via Daniel Shays, we did a Constitution, so who knows. The rest of us just have to manage the best we can in this world, where most middle-class jobs are being jettisoned offshore as fast as they can.
Joeyin Cal said: mikey.. lemme give you a piece of advice… Do not work hard.. save and invest.. or wealth will come.. and you’ll be corrupted
You see, Joey, I don’t work hard (that’s how I’m able to f* around here all day, lol), I do make a lot of money, but I’ve kept my morals and integrity, and realize that my success is a result not just of my own smarts, but of many fortuitous circumstances.
You seem to think that most people are playing the game of life as you do: working the system to your own advantage. Most people aren’t playing the game at all; they’re just getting up and going to work to make enough money so that they can feed their families, put a roof over their heads and maybe get a few extras. Good people that become victims by virtue of their disinterest in playing financial games.
Agree with all your posts, Mikey.
(and another fortunate, **lucky** –little bit smart — person who does not have to labor hard, but still understands that it’s the laborers who make this country great — not those of us who sit on our collective a$$es, making money off their work)
Most of us were smart enough not to leverage our future on the dotcom bubble,
Did anyone see this part of charliebrown’s post?
I don’t think he’s playing the victim. So many times it’s been mentioned on this blog that the Street thinks your money is its money, so why all the hate on charlie?
I agree, phillygal. I think he was taken too literally here.
hate? there’s no hate.. Banks lend money.
When a reporter asked the FB why he borrowed more than he could repay from banks, the FB replied “Because that’s where the money is”.
Agreed, phillygirl.
Charlie is speaking generally, of the numbers of Americans now trudging the Road to Serfdom. Been said here many times how many of our fellow citizens have sold their futures for overpriced houses and assorted consumer junk.
So, welcome Charliebrown.
Wow, good WSJ article about this bust vs. S&L crisis
http://online.wsj.com/article/SB119724657737318810.html
How can the authors say this is not a severe as the S&L crises or the dotcom bubble?
Housing in the US alone is a $20 plus trillion dollar asset classs.
If Housing falls simply back to where it was on 2000/01, we would wipe out about $10 trillion dollars of wealth. That would put it on par with the dotcom crash and much bigger than the S&L crises.
However, that isn’t the real problem. The issue this time around is that there is so much debt out there. After the dust settles, not only will trillions in wealth evaporated, there will be trillions in debt perculating.
They agree with your $20T number:
House prices are down by 0.5% to 10% now, depending on the measure used. If they fell 30% — what it would take to restore their historic relationship to inflation, rents and incomes — $6 trillion worth of housing wealth would be wiped out. Measured against the size of the U.S. economy, that is less than what was lost in the stock market between 2000 and 2002.
Their number for the tech meltdown is therefore $12T across the equities market.
Whoops, more coffee required. 12T should be greater than 7T.
Now add in the debt remaining on the crash in value and the derivitives on the debt.
If you can add higher than 12, you will reach a number that is a multiple of 12.
You may want to put some caffine in your coffee.
Now add in the debt remaining on the crash in value and the derivitives on the debt.
And ignore the margin and the derivatives on equities?
You may want to put some
caffineliquor in your coffee.Greg Ip , Mark Whitehouse and Aaron Luchetti are mopes with little or no idea of how few moneys were lost in the dotcom collapse. The entire world market in fungible stock securities today totals $50T or so. In 2000 when the NASDAQ was at its peak, the NASDAQ total valuation was $3T. In 2002 its total valuation was ~$1.5T. Of the total only 20% was margined. The total US stock market in 2000 per Wilshire 5000 was ~ $13.5T and dropped to 8.5T of which only 10% was margined. Todays total valuation of all US listed stocks is $14.8T. The US residential housing market is ~$20T and is margined at 50%.
The authors ignore the fact that the US stock market made an unprecedented run from 1995 to 1999 of 400%, many mopes caught the run and a 50% drop (which did not occur) still left them with a 100% gain on their investments.
Now we are in a situation that has taken the average residential housing margin from 37% to 50%. That is an exceptional loss in a rising market.
The original article claimed only that a $6T housing loss is less than the total amount lost in the 2000 bust.
Hoz calculates that $5T was lost in the bust using only the Wilshire 5000.
Since the Wilshire 5000 is not entirely complete, we can therefore guess that the authors includes those equities not in the Wilshire 5000.
One of the posters above wants to throw in debt and derivatives. Housing leverage will be probably less than margin, derivatives will be greater for equities.
Was there anything wrong in the above statements?
JP,
My point was you cannot lose moneys you never had. The 2000 stock market collapse was immaterial to the 65% non investors. Housing effects everyone. The realized losses from the housing bubble collapse have already hit $400B and the losses are just starting.
eggsactly. Plenty of people were taking paper losses in the dotcom crash. . . . the market caps were ephemeral and no way no how could they be completely liquidated at those levels.
housing valuations is WAY different given the fact that MORE than half this total valuation is completely borrowed money (in general the less money you owe on your place the older, and lower valued it is).
It drives me crazy when they call it housing wealth. If the prices dropped 30% there would be exactly the same amount of housing as before. People going more into debt isn’t wealth, and that’s all the “housing wealth” really is.
Wow. Amazing bit of clarity there…
The WSJ is trying to put a positve spin on everything, because their jobs are depedent on shilling up the stock market, just like the realtors try to shill up real estate.
How can the authors say this is not a severe as the S&L crises or the dotcom bubble?
This article is just about subprime. I have only seen one article in the WSJ dealing with alt-a, and that was just dealing with Countrywide.
If/when the alt-a blows up in a year, and there is no jumbo-loan secondary market reestablished by then, then this will get a lot larger. I have not seen a good estimate on what that would look like, though.
I saw a graph in the Chronicle this Sunday that showed the amount of new mortgages every year from 2000 to 2006 in total value. they were concentrating on the subprime but I was stunned to see that in 2003, the total value peaked over 4 trillion , whereas in 2000, the total value was around 1 trillion. When 20% of the total value of the market is traded/created in a single year for a supposedly illiquid investment, that is stunning. And that was before the subprime factor started rising significantly.
But who DIDN’T refi between 2000 and 2006? In 2000 I had a 30 year fixed at 7/625%. By 2003 I had refinanced to a 15yr 4.875%. It’s really only people in the last 10 years or so of their mortgage who SHOULDN’T have refinanced. Of course nobody told all the idiot brokers hired then that an industry that size could only be supported in a world of falling, not stagnent rates.
WSJ is just slinging the mud. Makes me wonder if Rupert Murdoch is short out there on anything.
Tom — I agree with you. My interpretation of MSM reporting on the bubble is that its primary purpose is to roil the markets. First it is “Buy, buy, buy!” then it is “Sell, sell, sell!”
The resulting turmoil plays well into the hands of the titans of Wall Street, who can milk volatility for all it is worth. Mom and pop dollar-cost-averager, who only understand how to go long, get left holding the bag with devalued pensions and savings.
Here comes the political pressure from Wall Street for more bailout measures. Step 1: Paint the picture as another S&L crisis (a situation which could only be “fixed” by dumping massive banking-industry-created bad debt on the back of the U.S. taxpayer).
The trouble with the Paulson plan
By Clive Crook
“….An evidently reluctant Mr Paulson took fright at the gathering storm and decided that he had to act. The unavoidable consequence is that the administration now owns the problem in a way it did not before. As the housing slump worsens, as it seems bound to, and a chill once more silences the hope in voters’ hearts, the measures announced so far will be deemed (even more than they have been already) unfair and inadequate. It will be too late then to say: “This is none of our concern.”
From now on, every mortgage foreclosure will be seen as proof of the policy’s failure - and partly the administration’s fault. Merely to address the most obvious anomalies in the new arrangements, more comprehensive and more generous assistance seems likely before long. In other words, the massively distorted and mismanaged US housing-finance market is going to get more so. And taxpayers had better prepare to be mugged.”
Financial Times
http://tinyurl.com/2jcvlo
No single tactic will beat the subprime crisis
By Wolfgang Münchau
“…The scheme, as it stands now, will not do anything to prevent a sharp economic downturn - but it might just help prevent a downturn becoming a depression. But even in the US, where there is a risk of an outright recession, a monetary over-reaction would be a serious mistake.
One reason is that monetary policy may not be as effective as regulatory and fiscal policy. For monetary policy to be able to bail out distressed borrowers would take cuts in interest rates of the order of some 200 to 300 basis points. And that would only work for those borrowers that can refinance immediately….”
Financial Times
http://tinyurl.com/2dhlj5
As much as none of us likes the “plan,” the administration and Paulson had to put something out there or they’d be accused by the sob sisters of ‘not caring’ about the poor al la Katrina. If the plan keeps or postpones congress getting involved, I’m all for it.
“The home has long been the bedrock asset of most American families. Now, its value has become the biggest question mark hanging over the global economy and financial system.”
We have been repeatedly assured that ’subprime is contained’ and that the American economy is doing just fine. The only logical conclusion is that the WSJ editors are severely overstating the gravity of the situation.
“Now its value has become the biggest question mark…”
P.S. If there are truly 17 m+ vacant homes in the U.S. (a figure that has appeared in fairly recent MSM articles) and only 114 m or so U.S. households, isn’t the main question one of by how much U.S. housing is overvalued?
According to the Census Bureau, the homeowner vacancy rate is 2.7%. This includes second homes, but I don’t think it includes builder inventory. 4M seems like a more believable number.
Perhaps. I Googled around a bit and could not find any reference to that 17m figure. But it sticks out in my mind as a figure that I read in a MSM article this past year (probably somewhere in the blog archives, but I have no inclination to search for it…).
http://www.census.gov/hhes/www/housing/hvs/qtr307/q307tab1.html
“In a matter of months, though, much of the promise of the new financial architecture — together with its underlying assumptions — has proven to be a mirage. As house prices fall and homeowners default on mortgages at troubling rates, the pain has spread far and wide.”
Is it too early to suggest at this point that this ‘new financial architecture’ will go down in history as one of the worst ‘innovations’ ever to catch on like wild fire in the global financial marketplace?
And the WSJ writers hide the gravity of the situation by insinuating the damage from debt securitization is contained to housing. I take the impression from all I have seen and read in recent years that the debt securitization cancer has metastasized far beyond the U.S. housing market, and has rotted the very foundations of the global financial system.
I like your last 4 posts Professor Bear ,and all the other ones you provide daily .I don’t know how anyone can deny at this point that a contraction is coming because real estate values are bogus and will fall . It wouldn’t be so bad if the debt people could pay ,but they can’t or won’t in the long run . I agree that the cancer spread out world wide ,,,amazing ,,,all because of a debt instrument backed by faulty inflated home values .
Excellent analysis.
Not much by way of analysis here. I am simply saying what nobody on Wall Street dares to point out.
Ya gotta love Volcker’s take on the situation at hand. Is there any chance he could come out of retirement for a bit to take a second crack at crisis management?
The new financial system — shifting risk from banks to securities markets — has worked “pretty well” up until now, says former Federal Reserve Chairman Paul Volcker. “We’re going to find out if it works well for a major-league crisis.”
Symptoms of an economic depression
http://www.latimes.com/news/printedition/opinion/la-op-fraser9dec09,1,1306484.story?coll=la-news-comment&ctrack=1&cset=true
Excellent article! Thanks, HHP.
What an idiot. This guy thinks the Keynesian regulatory state was responsible for creating a “panic-proof” economically, and it’s only those rascally free-market Republicans who caused problems. That is so asinine, that I don’t know where to begin…
Both political partys are ‘Keynesian’, and have been for decades, IMO.
I agree. Further, the Keynsian school would be naturally favored (over the Austrians) in politics, since Keynes essentially supports centralized control of the monetary system while the Austrians see central control as disruptive.
Ben, I saw you post the other day about starting an Austrian club (if I could call it that) rejecting the Keynsian school while you were in college. I started college in the mid-90’s, and was fortunate enough to have mostly Austrian/libertarian teachers (I have a Comp. Sci. degre, got an economics minor because I enjoyed the subject matter). One was Dr. Walter Block, now teaching at Loyola and a senior fellow at the Mises Institute. This was at a small school in Conway, AR. If Austrians had reached me in this location, I take that to indicate the Austrian school is become widely accepted. The fact that the Keynsian model seems naturally “pro-policitian” troubles me, and while the Austrians may find traction in academia, I am concerned they might never (in my lifetime) become mainstream, politically speaking.
austrian schoolers suffer from incorporating unfeasible ideas into their economic ideals.
“We are all Keynsians, now” — Nixon
it’s the LA Times.. what did you expect? He even pins some blame on Reagan.. ah.. the good old days..
This guy is a shill for the Democrats
My thought exactly.
If we were truly in a depression, the U.S. stock market would have corrected by far more than it has thus far. In fact, the headline indexes are barely off their recent highs, indicating a continued expansion. In fact, it appears the stock market may have reached a permanently high plateau. (Sorry, couldn’t resist throwing in that last line…)
UBS writes down $10 BILLION. Stock market skyrocketing!
http://tinyurl.com/2295gb
Singapore and a Middle East Investor come to the rescue (of UBS)
Ha! Gotta love this buffoon.
http://bigpicture.typepad.com/comments/2007/12/subprime-so-wha.html
I am trying to find some good reading. We all here were able to see the “bubble for what it was well before the MSM started to acknowledge it. What book shaped your life in regards to economics/ money / stocks etc that gave you the “AH HA now I get it” moment?
I just wonder what happened to my life that I am up at 4:30 a.m. reading the WSJ and looking at index charts.
I am guessing you are in survival mode as many of us are scouring all the information possible to add clarity to the future market conditions in order to preserve what we have and hopefully make retirement a little easier!! I know my thirst for knowledge has increased recently as market volatility has gained.
Actually, I’m an obsessive who does not need the money I am going to try to make today. LOL
Much better to be obsessive about making it than about spending more than you make like most Americans, IMO…
That’s called a happy problem.
LOL
I for one am grateful that your willing to share with the rest of the class. It’s 7am on the east coast and I’m still blurry eyed…
Need coffee..
“I just wonder what happened to my life that I am up at 4:30 a.m. reading the WSJ and looking at index charts
I wake up at 4 am california time to see the roiling oil, gold, and foreclosure news. Then I drift off when they do the billionaire lifestyle segments.
No one book does it for me, everything I read and hear and see about me has an input.
But it’s not just the time I spend reading, hearing and seeing that’s important; it is the amount of time spent THINKING about what I read, hear and see that has the greatest impact concerning these “AH HA” moments.
reading and thinking about it AND being skeptical about everything you read, hear and see…
LOL! I’m sure many HBB’ers can empathize, Tx!
UBS…
http://biz.yahoo.com/ap/071210/switzerland_ubs.html
Uuuubs…
They had to raise equity from someone in Singapore and an “unnamed investor” in the middle east. Pretty soon the muslim world will own everything.
Many of you adore the Swiss, financially, Time to re-think.
This is Swiss Miss # 5, loss-wise from this debacle.
More than any other country’s mis-fortunes, methinks.
“Rent or sell” is on the yahoo front financial page:
http://tinyurl.com/266kzp
My favorite quote: “I’d rather have syphilis than tenants.”
I’d rather have syphillis than deal with a FB landlord.
Agree. I rent a 6k sq ft house on the ocean for less than the cost of the taxes and insurance but the landlord is such a pain in the ASS that I am moving out and probably buying before I should (finanacially speaking). BTW, I can relate to your obsessive but don’t need the money. LOL. well put.
Dave Ramsey show last night. He talked with a 46 year old caller from Malibu. The caller has a house “worth” $1.2 million. He just lost his job paying $250,000 per year. He only has about $150,000 in stocks / retirement. He realistically thinks he can find a job paying $100,000. Even the shill Ramsey says that is not enough. I wonder if anyone else saw this. I was half listening after that point but I think Ramsey advised the guy to sell his stock and try to keep the house, rather than try to sell the house. He owes $910,000 on the house.
Bass ackwards to have most of your money in real estate than in stocks / retirement.
Another caller and her husband from Sacramento. They are stuck in a $500,000 house worth much less. they have $30,000 in the bank they use for poker!
This is the American public these days. Stupid, stupid, stupid!
He just lost his job paying $250,000 per year. He only has about $150,000 in stocks / retirement. He realistically thinks he can find a job paying $100,000.
Why is he settling for less? If someone is making X, I’d assume they want to find a new job making X+1. Taking a more then a 50% paycut is drastic.
He realizes he wasn’t worth the $250k to begin with…
What do you do to earn 250K a year? Mortgage broker ?
Probably an executive VP at a larger firm.
Don’t count out film and TV. With the strike going, a number of people have taken pretty big hits lately. Would also explain the possible 100K job. Could be going from, say, prime time TB writer to reality producer? With the dearth of jobs out there, he’d be lucky to land that.
Brokers, in the boom, can make seven figures if they are very good. I’m guessing he is one. If he was an executive, then there is a high possibility he can get paid over $150,000. Now if he says he can get $100,000, then he was not a VP.
250k salary jobs aren’t easy to replace, especially if he’s competing with others who have lost their high-paying jobs. If he realistically can find a 100k job to replace it, he’s still better off than most. (Depending upon what kind of crazy debt he’s built up.)
I don’t know about others, but I will no longer hire people like this. A few years ago a large shop near us was paying $10-15/hour more than the going rate for toolmakers. Needless to say they folded and left 25 toolmakers mad at the world. We hired one and even though the guy said things like “I know I was overpaid”, etc he was ruined and always made remarks about his paycut when he was asked to lengthen his stride. He is making even less somewhere else now.
“This is the American public these days. Stupid, stupid, stupid!”
I’m wondering about this. Is this a perception fostered by the media, politicians, and corps? Are the “stupids” just a sort of vocal and visible minority while the silents majority suffers for the stupidity of a few? I have observed that the worse off someone is, the more arrogant they tend to be. At all levels of income and society. Therefore, more visible.
I am a part of the American public. I have, on occasion, done some really boneheaded stuff, but I like to think I’ve learned from my mistakes.
airheads rise to the top, form a froth, are skimmed off and dropped onto Cops, the front page or the jerry springer show.
I posted about this today, actually. I generally agree with Ramsey, but I also take a more “moral” look at paying debts that a lot of people do, it seems.
On my blog, I recommended:
1. If you really have equity, sell the home, and use the “profits” in a savings account to rent a smaller home or condo.
2. If you don’t have equity, but the difference between the sale and the mortgage is less than your stock value, sell enough stocks to sell the home, and use the stocks to rent (smaller home again) until you get a job, preferably 2 if possible.
3. Only if you have no equity should you use your stocks to pay for your mortgage, while also working hard to get a job that more than covers your cost of living.
The containment appears to be spreading:
Subprimes Force UBS to Write Down $10B
http://tinyurl.com/22rk3n
“Conditions in the U.S mortgage and housing markets have continued to deteriorate, and we have updated our loss assumptions to the levels implied by the current distressed market for mortgage securities,” the company’s chief executive, Marcel Rohner, said in a statement.
And in response to this significant negative surprise, contrary to guidance given just 3 weeks ago…
UBS shares are up 2%! Supposedly they have “drawn a line” under their mortgage difficults. Right. At least until the next writedown in January.
Bernanke Claus
http://www.stockmania.com/index.php?showimage=109
Will pigboy be “surprised” when he gets his present?
I doubt it.
Nice job! Let’s see what happens.
“As recently as the middle of November, UBS had predicted a profit for the fourth quarter despite ongoing speculation about its subprime holdings.”
The degree of obfuscation practiced by all the financial companies headed by the most self-serving managements, should give a pause to all the investors. The smart ones will stay away at least till March-April 2008. Let this all play out.
Have you forgotten that share prices generally go up after financial companies throw the kitsch-and-sink into their balance sheets?
Everyone who thinks every shoe is on the rack, raise your hand!
The new buzzword on brokeroutpost is FHA. They are all trying to get FHA certified but the word is that it takes up to 6 months for it to happen.
“FHA certified”
What does that mean?
Capitalist on the way up and socialist on the way down.
You have to be a FHA certified underwriter in order to underwrite FHA loans .The same people who underwrote or processed the sub-prime slime loans now want to underwrite the FHA loans .Go where the money is going to be .
So are you saying the plan to turn the FHA into a govt-sponsored subprime lender is still in full swing? I guess it makes sense — since subprime was such a smashing success in the private lending sector, I am sure it will be an overwhelmingly-smashing success if the govt takes over the biz.
A friend of mine who is an appraiser told me six months ago that he was becoming FHA certified because thats where the future loans would be made. I believe FHA allows a 3% down payment. The federal govt. will pick up the slack thru FHA and federal home loan banks.
Countrywide already borrowed all the money at the fed home loan banks.
They are trying to eliminate the 3% downpayment requirement.
Sub-prime FHA loans for everybody!!!
The petition has almost 7000 signatures now.
I am finding it very hard to reconcile what is going on the credit markets with the current level of the stock market.
Put on your tinfoil hat and try again.
Me, too, WT. But then again, with regard to PB’s tinfoil hat comment, it would appear that the fix is in somewhere.
Your explanation is “non-tinfoil” by my classification system, and you may well be correct. As I pointed out in a post above, one interpretation for today’s gloom-and-doom WSJ front page report is that it serves to legitimize bailout measures that would dump Wall Street’s bad debts onto the laps of unsuspecting bagholders on Main Street.
I know, I know… there are no moneys for bailouts, etc. But since when has a lack of moneys stopped politicians from adding to the credit card tab?
You aren’t making any sense. The WSJ publishes stories intended to excite people because their business is selling papers and web site clicks. Not only is there no money, the outstanding debts are at least one and a half times the GNP if not much larger, so there is no way to print or charge or make up that money without crashing the entire system. There is simply no truth whatsoever to be had from your ideologically inspired projections. To be even more specific regarding your “since when” hypothetical, the “pay-go” rules have put all kinds of agendas in knots including the medical care for kids thing and the ongoing AMT debacle. The truth is always more interesting, complex, and relevant than mere ideology.
“…so there is no way to print or charge or make up that money without crashing the entire system.”
You are the one making no sense. Do you bother to occasionally read what the MSM is saying before posting?
———————————————————————
ECONOMIC PREVIEW
Fed expected to lower rates despite raging inflation
By Rex Nutting, MarketWatch
Last update: 12:01 a.m. EST Dec. 9, 2007
WASHINGTON (MarketWatch) — In a glorious bit of timing, the Federal Reserve is expected to cut interest rates on Tuesday for a third straight meeting, just days before government data are released showing some of the highest inflation rates in decades.
That’s all you need to know about the Fed’s balance of risks: Policymakers are much more worried about the illiquid credit markets and the possible hit that the credit squeeze could have on the economy than they are about the risks of inflation breaking out.
“Don’t look now, but while we’re in the midst of an easing cycle, the U.S. is facing a 4% inflation rate,” wrote Avery Shenfeld, an economist for CIBC World Markets. “But for now, none of this matters, as both bonds and the Fed are focused on the credit crunch and its growth threat.”
http://www.marketwatch.com/News/Story/Story.aspx?column=Economic+Preview
This junk is even worse than “real estate always goes up”. First you assert that a WSJ article is a political ploy when it is obviously a newspaper and click sales ploy, then you assert that there is always more money when there obviously isnt, and when called on these obvious falsehoods all you can come up with is a reference to rates. Do you not care about the subject at all? Sure, the Fed can take rates down to essentially zero, in fact they might, and what that means is that we will come much closer than otherwise to duplicating the Japanese experience of the nineties. Nothing that you are asserting has any actual support in fact. The WSJ article is just another WSJ article, the rate adjustment is just another rate adjustment, the collusion you see is an illusion, and there is no bailout, just you going on about your ideology. If you have some evidence then present it, otherwise you are just making assertions.
“If you have some evidence then present it, otherwise you are just making assertions.”
Those who live in glass houses should avoid throwing rocks.
“I am finding it very hard to reconcile what is going on the credit markets with the current level of the stock market.”
That is because the stock market runs on social mood, not facts. We are still in the mania mood, but it looks like the mood is shifting or will soon shift.
Your explanation ignores the role of the credit crunch in constraining the availability of individual investor moneys to fuel stock market blowouts (like the one in progress this morning).
PB,
Though I’m losing money on short positions, this is “buying time” for me (more short positions).
Even though the PTB manages to shoot the markets to the moon, they have been much more volatile of late & at some point (???) all of this will affect the stock markets, IMHO. (right???)
I know, I know…”stock markets always go UP!!!”
Real Estate agents reputations at a new low?
http://news.bbc.co.uk/1/hi/business/7133635.stm
Responding to news that management plans to reward shareholders with 250 M$ when profits are dropping due to fuel costs… cash available because of sacrifices made by employees to pull it out of bankruptcy over the last several years.
“Greg Davidowitch, president of the Association of Flight Attendants’ United branch, called the UAL “managers’ actions…those of ‘unscrupulous real estate agents.’ “
From Ben Stein on Yahoo Finance:
http://tinyurl.com/2tnxbc
Tarnished Parachutes
“In the meantime, let me switch gears and talk about moral responsibility. It’s now clear that some of the major players on Wall Street were making fortunes bundling junky subprime mortgage instruments and selling this garbage into the financial markets. The heads of some of the major brokerages and investment banks approved of this conduct and reaped the rewards when the market was hot — i.e., when the market was fooled by what was being sold.
Now some of these people are being fired. But when they leave, they get immense pay and benefits packages that would leave the rest of us speechless if we got them for good conduct.
There’s something drastically wrong when a conspiracy of men and women can do this kind of damage to the financial well-being of the nation and get away with it. On a local level, hundreds of thousands of borrowers were sold on mortgages with terms they barely understood. Now some of them will lose their homes. As far as I know, punishment for this sort of misconduct is barely meted out at all.
A Broken Ladder
What’s going on? Why aren’t laws against fraud being enforced? Why do people get away with fleecing their neighbors down the street — and their “neighbors” throughout the entire country — without any sanction? What sort of system allows someone to leave an executive position rich after defrauding people to the tune of billions of dollars?
Where’s the legal process here? Where’s the basic accountability? Do we believe the ladder of law has no top and no bottom (as the Bob Dylan song goes), or do we simply assume that if a prosecution is complex we’ll just let it slide?
Something very wrong is happening.”
“But when they leave, they get immense pay and benefits packages that would leave the rest of us speechless if we got them for good conduct.”
All right! Ben Stein has a meeting of the minds with the blog community!!!
(What’s going on?)
Three kinds of people are getting richer: top executives, retiring public employees with rich pensions, and senior citizens in general. Everyone else is getting poorer.
The executives control one political party and corporate boards, the public employees with seniority control the other party, and today’s seniors, who don’t seem to care about their own kids, are pandered to by both. And they are raping the country, grabbing all they can with both hands and leaving as little behind as they can.
And the pensionless, health insurance less, two-tier contract victim working Americans have tried to keep up with the ostentatious spending by borrowing. Nice try.
“…and senior citizens in general.”
You can soon scratch group three off the list, IMO.
Senior citizens are eating it on food costs and health costs , home utilities ,and some are eating it because of lower yields on savings.
Believe me ,I talk to senior citizens all the time ,and they are eating it because of fixed incomes in a inflationary trend .
Exactly my point. Private pensions are not indexed for inflation. Thus the War on Savers takes a disproportionate toll on retirees.
I am having flashbacks at the moment to shopping with my mom at the supermarket during the 1970s, and hearing the old ladies gasp out loud over the price of bread. This is where loose monetary policy takes its toll. The AARP ought to be up in arms about now, but apparently their leadership is asleep at the wheel (at least economically speaking).
Three kinds of people are getting richer: top executives, retiring public employees with rich pensions, and senior citizens in general. Everyone else is getting poorer.
When you don’t know what you are talking about, silence is the best option.
The median household income of those over 65 is $24,509.
So where are all these ‘richer’ seniors and ‘rich pensions’ for public employees?
Median household income for 55 -64 is $50,400.
Median household income for 45 - 54 is $61,111
Median household income for 35 -44 is $56,785
Median household income for 30 -34 is $48,896
Median household income for 25 -29 is $41,722
Yep, all those ‘rich’ seniors and pensioners…….
Between 1972 and 2001 the wage and salary income of Americans at the 90th percentile of the income distribution rose only 34 percent, or about 1 percent per year. So being in the top 10 percent of the income distribution wasn’t a ticket to big income gains.
But income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent.
Yep - all the fault of those seniors and public employees with ‘rich pensions’ (which, BTW, public employee pensions were always the + part of the equation of public employment since wages were alwasy less for public employees than private employees with comparable education and skills.)
Oh - and please do find someone to talk to about your unsubstantiated hatred of anyone older. Odd. Do you hate your mother or is it your grandfather?
Bush isn’t going to prosecute anyone. It might “damage” business.
IMO he is just as corrupt as the rest of them.
I was looking over the comments on this one. I agree that Ben Stein apparently owns too many houses to be credible on housing issues.
What I noticed was a lot of negative waves toward politicians. I’m wondering whether they woke up and found a new non-standard aggitation-block emerging (The I-used-to-think-I-was-doing-OK-but-now-I’m-scared group). The problem is that the other big group that is stirring is diametrically opposed to this one (The I-did-everything-right-and-prudent-but-I’m-still-scared group). Or call them Scylla and Charybdis.
Over the last few weeks I have really started to notice price inflation for food at the grocery store. Lettuce and tomatoes were up 10% to $1.89 a pound; Ben & Jerry’s ice cream was $4.49 a pint! Deli meat was $5.99 a pound; even my favorite Velvetta & Cheese has shot up from $1.52 to $1.67 overnight. I also buy cans of Tuna from Target to feed to my cat. A can went from .52 cents to .59 cents a few week ago. An increase of .07 cents may seem small but that’s a 13% increase in a one week period! I’m sure there are a million reasons for the price increases but this is getting a little out of hand.
Other things have increased in price too: Clothes at my favorite retailers, new video games are now priced at $59.99 instead of $49.99. I want to renew my cell phone plan. I get 1000 minutes for $49.99 but my plan is about 4 years old and is tied to my old phone. My carrier, Verizon, offers no comparable plan - they charge $49.00 for 400 anytime minutes or $59.99 for 700 minutes??? My local utility ComEd increased electricity prices 22% this year. Natural Gas prices to heat my home and cook my food have shot up every single year since I can remember. Don’t even get me started on gas for my car. I bought my car in Feb ‘04 and it cost me a little over $30.00 to fill my tank. Now it costs me almost $50.00. Same gas, more money out of my pocket. Even beer is more expensive. I used to be able to buy a 12 of Bud for $5.99 on sale but now the sale price is $7.99. Leinie’s used to be $5.49 for a six-pack and now it’s $6.49 on sale! Don’t even get me started about the price of a six pack of Guinness draught.
My point is that all the things which I buy are going up in price - food, clothes and fuel. Fortunately, I rent, and there is no way he’s going to raise my rent in this market. So that’s a price constant. The only thing that’s going down is my private student loans with an adjustable rate. The LIBOR has been trending down over the last few months (although it’s been going up over the last few weeks) so my monthly payments are going down. Well, the minimum monthly payment goes down but I’m paying as much as I possibly can, which translates into more money paying off interest.
But what’s the point if we’re just going to inflate our way out of this mess?
It might be time to teach the cat about Substitution bias and how it affects the CPI
>
I would say that its been over the last two years. We have been “downgrading”: less steak (and beef in general) and more chicken and pork. We also are going out to eat a whole lot less than in the years past. Whereas we might have gone out to a sit down chain restaurant 4-6 times per month its now only 1-2 times per month.
Fed expected to lower rates despite raging inflation:
WASHINGTON (MarketWatch) — In a glorious bit of timing, the Federal Reserve is expected to cut interest rates on Tuesday for a third straight meeting, just days before government data are released showing some of the highest inflation rates in decades.
That’s all you need to know about the Fed’s balance of risks: Policymakers are much more worried about the illiquid credit markets and the possible hit that the credit squeeze could have on the economy than they are about the risks of inflation breaking out.
Don’t look now, but while we’re in the midst of an easing cycle, the U.S. is facing a 4% inflation rate,” wrote Avery Shenfeld, an economist for CIBC World Markets.
http://tinyurl.com/2yrw78
Get rid of the cat. They kill all of the native birds and small animals and worse; they carry Toxoplasmosis which can cause neurological disorders like the one that is evident by this statement “I also buy cans of Tuna from Target to feed to my cat.”
Yeah, I don’t actually feed the cans to my cat; My cat eats the tuna inside the cans. Nevertheless, the cat lives indoors and doesn’t kill any native birds or small animals.
“…and worse.”
Humans?
Waaaay OT, but do not feed your cat Tuna, for the love of god. Please just stop. Anyway, I have been noticing the same things as you mention, and have wondered why nobody at work, in the family, has really brought it up!
It’s his life and his cat, who are you to tell you he shouldn’t feed his cat tuna if he wants to???
cuz feeding a cat a lot of tuna isn’t good for his health (causes kidney problems, I think - it’s not the mercury scare). Best is ground rabbit, but just poached chicken and such is good too. I mix real meat with canned food and hope it’s a decent compromise.
I don’t think that a teaspoon of tuna a day is all that harmful to cats. No worse than that garbage they call “Iams” complete with by-products and cornmeal.
On the good side, even though the cost has gone up a little, our every-three-weekly supermarket load now fits into a single cart a whole lot better.
if you are feeding your cat people tuna, it’s not good for cats to eat that exclusively - it’s ok for a treat, but if that’s all they eat they get serious malnutrition.
The Washington region, once considered immune to the unfolding mortgage crisis, has experienced a surge of loans gone bad in recent months. It’s an alarming sign that even an economy with plenty of well-paid government contracting jobs could not avoid the credit crunch that’s plagued more-troubled regions of the country.
http://www.washingtonpost.com/wp-dyn/content/article/2007/12/09/AR2007120901197.html?hpid=topnews
As expected - the outlying suburbs - Loudon, Prince William, Stafford counties - are taking it the worst. Prince Georges - a close-in, and largely black county, is doing better than I thought. Perhaps some degree of redlining by people pushing refis actually helped PG county. But really, the main driver is the higher percentage of new housing still going up in Loudon, Prince William and Stafford.
It’s a two-fer in the Post today. Columnist takes Paulson plan to task
http://www.washingtonpost.com/wp-dyn/content/article/2007/12/09/AR2007120900909.html
Now Paulson’s predicament is reversing itself. Having been prevented from acting on his chosen issues by Washington’s constraints, Paulson is being forced by Washington to act on something he might rather leave alone — the mess in the financial and real estate markets. He is being pressed into action partly because the mortgage meltdown threatens a recession and partly because the pain will be especially acute in election battleground states such as Florida and Ohio. At the end of his spell in government, Paulson’s legacy will be determined by a question that he never sought to pose: When fate handed him an issue on which he was required to lead, did he lead constructively?
Stock market version of Challenger…
http://www.marketwatch.com/Quotes/?symb=NDX
Fiscal Challengers: Go With Throttle Up
Everything is turning very green this morning, providing further evidence to bolster my point that the WSJ is blowing smoke when they play up the severity of the crisis at hand. There is no way that stock market investers would be so bullish if the situation were truly as dire as their lead article today suggests.
So when it comes plunging down does it incinerate like Columbia?
It’s not coming down. This bull is immortal. Buy stocks now or get priced out of the market forever!
The parallels with the Challenger disaster are large.
Institutionalized ignoring of risk due to over reliance on past successes, shouting down the nay-sayers, …
Who from HBB wants to play Richard Feynman sticking the O-Ring into the icewater during the 2009 investigation? Which congressional crony will be trotted out to play the Rogers role?
This one’s gonna make you scream:
The Washington Post finally admits we have a regional foreclosure problem. I posted my thoughts at NoVA Bubble Fallout but to recap:
“The Washington region, once considered immune to the unfolding mortgage crisis, has experienced a surge of loans gone bad in recent months.”
LOL. Immune!
Then they quoted John McClain from CRA-GMU (our local economic pontificator central, with homebuilders on the board). Two years ago he predicted 15-20% increases in prices in the outlying suburbs of D.C. for 2006-2007. Today he’s quoted as saying: ” there were plenty of people engaged in speculative activity . . . people were buying and flipping, buying and flipping.”
McCain, Retsinas, Yun, Swonk, the gombas from George Mason U, all are identical in lacking the integrity to correct their previous cheerleading. Everyone one of them wrongly predicted a rising housing market, a goldilocks economy and even in the face of a downturn, “containment”. Zero credibility or integrity from any of them.
Some of these people basically lie for a living. What do you expect?
Makes you wonder how they look at themselves in the mirror in the morning.
The money must matter a great deal to these folks.
Just had a meeting at work where a big wig gave us a “less is more” speech. Who needs pensions, you’ve got 401(k)s { nevermind that used to have both }. And pay raises? Nuh-uh. You’ll be getting bonuses when things are peachy-keen, otherwise all you’ll get is your inflation ravaged base pay. But tdon’t worry, eventually we will achieve parity with the 3rd world, and the plunge will stop (he really said that).
As Deep Throat once said, “follow the money.”
Swonk is the worst !!
Whether this cartoon from the Washington Post is amusing is immaterial, the point is the comic strip is in existence.
Tom Toles Cartoons
Monday, December 10, 2007
http://tinyurl.com/awy2d
An xmas song, dedicated to all of the Mr. Freeze’s out there…
Mr. Snowman (male voice: “Yesss?) bring us a scheme
Give the FB’s a chance to keep their American Dream
Give them some numbers that appear like Fibonacci
And lots of financial pseudo celebrities, chased by paparazzi
Mr Snowman, find someone to hold the bag (someone to hold)
Would be so nice to conclude the housing bubble, before we’re too old
So please turn on your magic scheme
Mr Snowman, bring us, please, please, please
Mr Snowman, save our American Dreams
http://www.youtube.com/watch?v=n-c66SJPuUI
Dec. 10 (Bloomberg) — Societe Generale SA, France’s second-biggest bank by market value, will bail out its $4.3 billion structured investment vehicle after losses related to the collapse of the U.S. subprime-mortgage market.
Societe Generale will take on assets including $387 million of bonds backed by subprime mortgages, the Paris-based lender said in an e-mailed statement today. The company rose 1.6 percent to 108.19 euros ($159.25) as of 1:35 p.m. in Paris.
All is well, all is well.
Realtors’ Forecast Bucks Common Wisdom
http://tinyurl.com/3axzjr
“Despite over-exaggerated negative coverage on the housing conditions, many local markets are actually seeing price increases,” Yun said at a press briefing. “Mortgage availability is improving”
When were realtors ever considered wise?
When things are going badly it’s over-exaggeration, but when housing goes bubbly, people get 125% loans for 0 down, housing prices increase 10% a month, and people buy without seeing a property it’s normal? Yunny should not be one to ever mention over-exaggeration about housing, since he is the one that constantly over-exaggerates the positive aspects of housing.
We’ve past the point where housing sales pessimism is as ubiquitous as the “grow two more inches” emails that fill our spam filters.
–
December 10, 2007
Morgan Stanley: “Mild Recession Is Now Likely”
Breaking news on Boob-berg minutes ago. Merrill’s Rosenberg has already said that “hard landing is here.” Folks, when two top Wall Street firms say recession is likely we are in one already.
I have already said that we have been in a recession for couple of months. This will be no ordinary recession.
Jas
Show me your hard landing in the stock market. All I see in today’s price moves is green, green, green. If gloomsters were correct, then stock market investors would be dumping shares about now.
http://www.marketwatch.com/tools/marketsummary/
Alas PB, the stock market investors are caught in the miasma of an interest rate cut. The disease is rampant. An economic disconnect from reality, The credit insolvency is worse today than in August. Rumors are a swirl that Citigroup will be taken over by 1)JP Morgan 2) MidEastern investors 3) China’s sovereign fund 4) Blackstone 5) pick your company. Like JP Morgan doesn’t have enough problems. UBS dribbles out 10B in writedowns and “the worst is over” syndrome occurs? This is a beached whale. It is just the start of the 2nd inning.
Breaking: BofA just froze a $12 billion money market fund.
I don’t see how any of the factors you mention could possibly stop a bull market like the one currently underway.
You keep making those comments and I hope I’m correct in assuming that you’re being facetious. Am I?
“If gloomsters were correct, then stock market investors would be dumping shares about now.”
Why should they dump? Real estate *professionals* in the NAR say that “the battered housing market is on the verge of stabilizing”, so it’s all up from here. Don’t I feel like a dolt for not buying recently:
http://biz.yahoo.com/ap/071210/housing_forecast_realtors.html?.v=4
“The trade group’s chief economist, Lawrence Yun, cited job growth and the replacement of subprime lenders to borrowers with weak credit with government-backed loans as reasons for the improved outlook.”
“The Realtors group also said the median price for U.S. existing homes — the point at which half sold for more and half for less — will sink by 1.9 percent to $217,600 this year and rise 0.3 percent next year to $218,300.”
Spot on. The housing and stock markets have bottomed out. There is no cause for bailouts nor further rate cuts going forward, now that the major U.S. asset markets have started generating wealth effects once again.
A local bank, Bank of the Sierra is offering up juicy rates on CD’s, #3 in the country behind CFC and Merrill Lynch…
I’m curious why a little fish would offer up 5.14%, when a t-bill will get you about 3%?
http://bp1.blogger.com/_nSTO-vZpSgc/R1xSECpbxYI/AAAAAAAABqs/YH9mQxJ4xhY/s1600-h/high-cd-rates-3mo-2007-12-09.png
The street conjecture is that smaller banks are going to be allowed to go under. Most construction loans were made by small banks and the construction loans are now defaulting. In an attempt to stay solvent, the smaller banks now offer higher rates on CDs. Interest is not guaranteed by the FDIC.
Depends on how much risk the bank takes and sees. They dont hold on to contruction loans very long and once the land is built on, they must get a new loan. My wife works in the buisness and yes its slow as heck, but they look at the market and what the builder is going to build and determine if that is a good investment. They reguire lots of assets as well. Again, some banks differ though.
Bank of The Sierra is all over the Inland Empire (northern territories)
YIKES!
“…Figures compiled by the Federal Deposit Insurance Corporation and released last week show that both midsize and small banks had construction loans outstanding that were greater than their total capital. A decade ago, such loans were equal to only a third of capital for those banks…The problem, if it comes, is not likely to affect big banks as much as smaller ones. Banks with more than $10 billion in assets have lower concentrations of construction loans now than they did at the end of 1989. But banks with less than that amount of assets are more than twice as dependent on construction loans as they were then…”
New York Times
Dec 8
http://tinyurl.com/3bh5er
current default rates are 3%
Any bank or lender that didnt use discretion will be srewed, simple as that. Maybe they are “allowing” small banks to go under so we can have only BofA, Wells and Citi to do our banking deeds. Maybe the Fed should start up the First Bank of US and we would only have one bank for all. Insured by taxpayers of course………
How about the mopes that have moneys in Bank of America’s money market fund that was closed today?
Or Citigroup up for sale?
There is no bank immune in the US.
WTF?????
Realtors’ Forecast Bucks Common Wisdom
Monday December 10, 10:42 am ET
By Alan Zibel, AP Business Writer
Trade Group Lifts Outlook for 2008 Home Sales, Insists US Housing Market Is Stabilizing
WASHINGTON (AP) — Bucking conventional wisdom, a trade group for real estate agents on Monday said the battered housing market is on the verge of stabilizing and inched up its outlook for 2007 and 2008 home sales.
http://biz.yahoo.com/ap/071210/housing_forecast_realtors.html?.v=4
“Joel Naroff, chief economist for Commerce Bank, said the U.S. is 12 to 18 months away from a “normal housing market” in which sales are growing and prices are rising or stable. Furthermore, he said the trade group’s 0.2 percent revision to its sales forecast should be taken with a grain of salt, given the difficulty of projecting with any certainty.”
“Normal” housing market in 12-18 months - yeah, sure.
“Despite over-exaggerated negative coverage on the housing conditions, many local markets are actually seeing price increases,” Yun said at a press briefing. “Mortgage availability is improving.”
More fertilizer from Yun.
Anybody see this opinion piece in the Sunday SF Chronicle?
Interest rate ‘freeze’ - the real story is fraud -Sean Olender
Sunday, December 9, 2007
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/12/09/IN5BTNJ2V.DTL&hw=12%2F9%2F07+mortgage&sn=004&sc=828
But unfortunately, the “freeze” is just another fraud - and like the other bailout proposals, it has nothing to do with U.S. house prices, with “working families,” keeping people in their homes or any of that nonsense.
The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.
The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.
And, to be sure, fraud is everywhere. It’s in the loan application documents, and it’s in the appraisals. There are e-mails and memos floating around showing that many people in banks, investment banks and appraisal companies - all the way up to senior management - knew about it.
“The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.”
I don’t buy this. The stock market would definitely be tanking today if the situation at hand were as bad as suggested by this unfounded opinion.
Imagine this…
Both San Diego and Los Angeles are in the midst of a drought without quit, (we got a couple of feet of snow last week in the High Sierra, yay!) and their erstwhile leaders told them to start using less and what happened?
“July and August were the second and third biggest months for water use since the San Diego County Water Authority started keeping monthly data in 1975. Water consumption dipped in September and October, the latest months for which data are available, but that was expected during the transition from summer to fall. For the first 10 months of the year, the cumulative total was up by about 6 percent from the same period in 2006, and it was the highest in at least five years.”
http://www.signonsandiego.com/news/metro/20071210-9999-1m10water.html
“Despite the mayor’s June 6 plea for a 10% reduction, water use in the city remained largely flat through October, compared with the same period last year, according to records from the city Department of Water and Power.”
http://www.latimes.com/news/local/la-me-water10dec10,0,1791288.story?coll=la-home-center
What will over 20 Million people do, when they get their 90 day notice that water is running out?
San Diego just had their second round of heavy rainfall this past weekend (including 6 inches of fresh snow on Mt Laguna). Drought, schmout, we are setting up for a wet rainy season.
It rained exactly twice the entire time I lived in San Diego.
ha ha…
Your water comes mostly from the Colorado River and State Water Project.
One is Mussel-ridden and drought hampered, (go take a trip to Lake Mead and see for yourself) and the other one Smelts like a rat, the No Cals wanting that Delta water for themselves.
http://www.water-ed.org/watersources/region.asp?rid=10
And thanks to a three-inch fish (the Delta smelt), there is a bit of a drought in the State Water Project source of SoCal liquidity. This is just wacko.
I’m loving the front page article in the WSJ today, it even comes with charts.
“U.S. Mortgage Crisis Rivals S&L Meltdown
Toll of Economic Shocks May Linger for Years;
A Global Credit Crunch”
Link
Favorite Quote:
“”The 2007 capital markets are littered with corpses of the people who thought [subprime bonds] were a good buy at 90, 80, 70, 50, 40, 30 and 20 cents on the dollar,” says Mr. Gundlach, a mortgage expert since the 1980s.”
The 2000 capital markets are littered with corpses of the people who thought [pets.com stock] was a good buy at 90, 80, 70, 50, 40, 30 and 20 cents on the dollar
The song remains the same…
For anyone who has been paying attention for longer than I have (Sir Hoz?), has the Fed always used stock market inflation as a monetary policy instrument, or is this a Greenspan-era “innovation”?
I guess this might offer a hint…
http://www.investopedia.com/terms/g/greenspanput.asp
However, I would argue that Greenspan put is a misnomer. The policy should properly be termed “R-can taxation.”
Only since Mr. Volker. 1980-1981
At that time it was determined to use “asset valuation” as a monetary policy. In 1994, to further enhance asset valuations, the Federal Reserve, under Mr. Alan Greenspan, targeted housing as an asset. It was even questioned at the March 22, 1994 Federal Reserve meeting whether these actions would lead to artificial asset bubbles. In the August 2005 Jackson Hole meeting, Mr. Greenspan referred to the 25 year policy of “asset bubble formation”.
Hoz –
Could you please refer me to a link on the FRB web site that corroborates what you are saying? I am sure this is an official part of Fed policy, right?
A jopurney backwards through time
“One of the things that Greenspan said at the Jackson Hole conference—and I want to leave you with this thought, because I think it’s a good one—is that during the last two decades, 25 years or so, we’ve lived through what has been a period of rolling bubbles, with money moving in and out of asset classes, bubbles forming when the values in that asset class become overvalued, then moving out to a different asset class….”
FDIC
2006
http://tinyurl.com/35uuct
1994
“When we moved on February 4th, I think our expectation was that we would prick the BUBBLE in the equity markets. What in fact occurred is that, as evidence of the dramatic shift in the economic outlook began to emerge after we moved and long-term rates began to move up, we were also clearly getting a major upward increase in expectations of corporate earnings. While the stock market went down after our actions on February 4th, it has gone down really quite marginally on net over this period. So what has occurred is that while this capital gains BUBBLE in ALL financial ASSETS had to come down, instead of the decline being concentrated in the stock area, it shifted over into the bond area. But the effects are the same. These are major capital losses, which have required very dramatic changes in the actions and activities on the part of individuals and institutions.”
“So the question is, having very consciously and purposely tried to break the bubble and upset the markets in order to sort of break the cocoon of capital gains speculation, we are now in a position—having done that and in a sense succeeded perhaps more than we had intended—to try to restore some degree of confidence in the System.” pg 41
and from Ms. Kathy E Minehan (Boston Federal Reserve president in 1994 became pres July that yr
“We recently held a meeting of the Bank’s Academic Advisory Council which, as you all know, includes two or three Nobel Prize winners and people from Harvard, MIT, Yale, and so forth. The discussion focused on issues related to productivity growth, labor market tightness, and ASSET MARKET BUBBLES. The group was lively, to say the least. But some consensus was reached on the need for action that might take the wind out of asset markets, even in the absence of tighter monetary policy, perhaps through increased margin requirements or increased supervisory oversight on credit extended, particularly in the day trading operations.”
and from the same pdf
“..Home equity loans and mortgages in general because of their
tax favored status have reached levels that clearly suggest that the funds are being used for consumption purposes and not simply for buying new homes. They may also be used to fund tax sheltered investments, which have also reached new record shares of total saving. 1n addition, at the end of the year margin debt hit a level es a ratio to disposable personal income not seen since the month after the Chairman joined the Board of Governors, and we know what happened shortly after that!…”
http://tinyurl.com/ptw3d
caution 63 pg pdf
Enjoy, well worth the read on how we all got the Joshua
I think our expectation was that we would prick the BUBBLE in the equity markets.
Two questions, first when he says “equity” markets, I guess that’s primarily stocks? Are bonds considered part of “equity markets”?
Second what happens when there is a “bubble” in a bond market? Does a bubble in a bond market indicate bonds selling at higher premiums and forcing yields down?
He is referring to stock markets while saying “equity markets”. Generally bonds are not considered part of the equity market.
A bubble in the bond market is lower yields relative to fair value. The US treasuries for example have a captive bidder keeping yields artificially low and the prices of bonds high. The captive bidder is the Social Security system. Obviously the Social Security system is a mess and will only be captive buyers until 2015.
“Wars are not paid for in wartime, the bill comes later.”
Benjamin Franklin
Here is fresh evidence from the NAR that the housing market has bottomed out. No further bailouts or rate cuts should be necessary, as the invisible hand is bringing back the housing market just fine without the crutch of unnecessary govt intervention. There is far greater cause for optimism at this moment than there has been all year — a bottom is definitely at hand.
Glimmer of hope for US housing
By Daniel Pimlott in New York
Published: December 10 2007 16:35 | Last updated: December 10 2007 16:53
An indicator of future home sales in the US rose for the second month in a row in October, providing a glimmer of hope for the struggling housing market, according to data from a leading real estate body.
The two months of rises in pending homes sales comes after record drops in July and August.
…
The National Association of Realtors pending home sales index rose 0.6 per cent in October, after rising by an upwardly revised 1.4 per cent in September, the National Association of Realtors said. Economists were expecting a 1 per cent fall in the index, which is a measure of the number of contracts signed for home purchases, but before the transaction is closed.
http://www.ft.com/cms/s/0/afbc37f4-a73c-11dc-a25a-0000779fd2ac.html?nclick_check=1
Well, we have plennnnnnnnnnnnnty of water up here in WA at the moment. Wow. I went out to do some volunteery stuff over the weekend down in south Thurston county. It’s horrifying. Entire farms washed away, all the stock drowned. Me’n some friends are going to see if there’s anything to be done about the Christmas situation for the kids, how that is going, if it’s needed. Every farm child should get to spend Christmas Day watching their poor old hard-working dad sit on the front room carpet trying to assemble a complex machine, and eventually he throws the socket wrench across the room and cusses up a storm, and then the mom comes busting out of the kitchen to shout angrily about teaching the kids bad words and even on Christmas day which makes it even worse.
For, verily, that is the true meaning of Christmas.
Good for you, Olympia.
This is sad, but my understanding is that these flood plains have been mapped and their threats understood for decades and there was even a project that would have spared Interstate 5 from all of this, but failed because of politics and money. People that want to live and farm on flood plains need to get the Corps of Engineers to wreck the environment or accept things as they are. The main disaster here was people betting on floods not happening as they have in the past. As with the Mississippi it is only a matter of time and dollars lost before people start moving away from areas that flood.
I used to go up to Chehalis every summer in the 80s. It wasn’t your average flood-plain type place. . . apparently it was a freak storm that overloaded the watershed.
Two reports released this week show Iowa’s economy going in opposite directions….
“You could argue we’re in a period of confusion,” Iowa State University economist David Swenson said.
larger companies are more optimistic than companies in general.
The bottom line, he said, is that an economic slowdown is coming and nobody really knows when it will arrive or how bad it will be.
Creighton University economist Ernie Goss, the lead author of the Mid-American Economy report, said larger companies are more optimistic partly because they are more closely aligned with the global economy, which is doing better these days than the American economy.
http://qctimes.com/articles/2007/12/10/news/state/doc4759929a19295320451488.txt
Record foreclosures, highest in the State, in one of the biggest industrial areas in Eastern Iowa, also record fires.
Freezing ice is such a joy, you never know when it will really hit, or how bad it will be, one thing is certain though, local TV and some people running scared about it and trying to scare others. When the power goes out, I learn what it must be like for the “rich” living in some of those absent owner condos. Campin’ in the house.
“Painful price to remodel is still worth it - Unlike the nation as a whole, renovations pay off at resale in Seattle”, Seattle PI, Dec. 9, 2007
http://tinyurl.com/yttqyn
the P-I is the most pro Real Estate paper I have ever seen. Just wait till the regional job powerhouses start laying people off; WaMu is already happening.
Question for TXChick/Hoz or anyone else who cares to way in…
I’m going to invest about $2500 more in the SDS (Ultrashort S&P500 ETF). Would you recommend:
a) this afternoon or tomorrow morning before the rate cut
b) tomorrow afternoon right after the rate cut
c) a few days/weeks after the cut
d) dollar-average (note: twice the commission of $7)
My exit strategy is to sell if it goes down 20% or up 60%. Any advice would be much appreciated, so it’s not crucial to absolutely time the top. Still, if there’s an obvious time for when you think the market will peak this week, please let me know.
Thanks!
I would rather be late and know I am right than premature and get stopped out on a suckers rally. I believe Tx is expecting a 1/4 rate cut; what if it is 1/2% ? or as Mr. Gross is hoping for 3/4%? The ensuing rally stops you out and then the market crashes. That sucks. Nothing worse than being right and losing.
If I may ask, why SDS over the other ultrashorts?
You mean versus other indices (NASDAQ, Russell 2000) or sectors?
Personal comfort, I guess. Up until earlier this year, I was invested in vanilla S&P500 Index. I’m 90% confident that there will be a major market correction in 2008 like we saw in 2000/01. But honestly, I don’t feel as though I understand tech (or the dynamics of NASDAQ) well enough to know if their correction will be more or less than the large-cap stocks. It’s my lay opinion that the Russell 2000 will be hit harder than S&P500, but again I’m just not comfortable with how it moves. And the Dow isn’t diversified enough being in only 30 companies.
Likewise, I don’t feel comfortable making any sector bets (although SRS, ultrashort commercial real estate, is awfully tempting). This fall is my first independent experience with a short position, so it just seemed prudent to stick with the devil that I feel that I know the best: good old S&P500.
Thanks for the advice, Hoz. I think that I’ll take it and look to buy sometime tomorrow afternoon.
My husband and I went shopping this past Saturday. We live in West LA. We went to Century City and Westside Pavillion. We were both surprised that the mall was not crowded…there wasn’t a big Christmas rush. A new store that opened up in Century City was very slow — not one single person in line. A salesperson I spoke to said it’s been a slow day.
I went overboard for holiday shopping this year to make up for not doing much last year. I’m happy about it. I will pay off all my credit cards by Friday next week.
Advice wanted
I’ve been lurking on this site for a while.
I would appreciate some responses from the well-informed posters here.
Family and I are considering buying a first house in Modesto, CA. (you can save the Modesto jokes, they are well-deserved and I’ve heard them before) We thought about it a year ago but thankfully held off. The question is, how much longer (if at all) would you recommend we hold off? Example: There is a 2-year old Centex house (3000 sq ft, decent size yard compared to other new developments) on the market for $362,500. I know for a fact the exact same house, with exact same yard, sold for over $600,000 (!) less than 2 years ago. Comps in the neighborhood were going for over $500K less than 1 year ago.
In a vacuum (not taking into account the current ‘buyers market’ and the anticipated glut of new inventory as a result of new ARM resets) getting this house for 340-350K would be a good deal IMO, with a 30 year fixed we could handle the payment as we have 2 good incomes.
However, I would be terrified that the house would continue to lose value and that a year from now I could have got it for $280K or thereabouts. (I don’t think this will happen but that’s why I’m asking you folks). I understand that some of you are of the “if you buy a house now you’re crazy” mindset, and thats OK. If you think that, tell me how low you’d expect this house to fall…
This is just an example of a house we are considering. Houses in the 2500-3000 sf, $310-375K range are a dime a dozen in Modesto right now.
If you were me would you look now? If you would wait, how long would you wait. I don’t want to rent forever. I am not moving to Wyoming or Nebraska either. When we buy, we are buying here. Your serious consideration is appreciated.
Modesto is insanely overpriced at $300k and up. Go back to mid-1990s numbers and add in the inflation numbers you agree with to see just how distorted this market is. Homes like those you talk about that should probably be closer to $200k. If you don’t mind throwing away $100k or so to own right now, then go for it.
I would mind throwing away $100K. And what homes “should” be selling for (near $200K) is one thing. But do I think that homes like this will ever dip down nearly that low? Doubtful. You are talking about a $1000-1200/month payment on a 30 year fixed. If the extended recession/depression many here predict actually occurs, maybe in 3 years prices would be that low. Do you disagree? And then I’d have to duck bullets from both 1) the irate neighbors who bought in 2005 (some of them can afford these payments) and 2)the new breed of renter who would come in to a de facto McMansion ghetto.
In any case, I’m glad I didn’t/wasn’t in a position to buy 2 years ago. I do appreciate the feedback.
Shooter,
I lived in Visalia a few years back. I watched entry level homes climb from $100K to over $300K in the space of 4 years. Now, these same homes have dropped all the way to $180K.
The point is, the mainstream media–and even personal thoughts–may have balked at prices dropping so fast a couple of years ago. But it has happened.
The party is getting started my friend. Sit back and enjoy. I know you want to buy a house for your family; I want to for mine, too. But not enough to subsidize some jerk’s retirement. That is the thought that keeps me from buying. I will not pay someone a ridiculous amount of money just because they held a non-producing asset like a house for a few years. Prices will continue to fall…there is nothing to stop it. Lenders are tightening money despite interest rate cuts. Soon, a 20% downpayment will be required to buy…this will alleviate 80% of demand right there.
You’ve held out this long. Wait another 2 years and save another $100K. After all, you’ll be feeling regret if you pull the trigger too soon and see your next-door neighbors paying half what you paid. People are living that right now.
Monitor the area you wish to buy weekly, if not nightly. Get a feel for each property listing, keep track each time its list price is lowered etc.
Get the “sold” prices. Look and learn. There’s certainly no hurry necessary right now.
I just watched a story on 20/20 about Nikki Catsouras (the troubled girl who got into a horrific “on purpose” (can’t call it an accident when you’re 18 and speeding in a stolen –borrowed without permission– car) and got decapitated, and photos of it went out onto the internet.
Her parents, which I expected to feel sympathetic for, came off (to me) like jerks. “This guy looks like a Realtor(TM)” I said to myself when I saw him speak.
Sure enough, he was a realtor! (TM)
While I think sharing the photos for entertainment value is distasteful, and we need to be careful about gloating over these things. we should be more thankful that the people in the car she hit and the people working in the tollbooth she hit into were unharmed. I’m sure they’re not shedding too many tears for Nikki.
Here parent’s lawsuit against the CHP is also nonsense because the accident happened on public property, the victim was breaking the law, and she endangered others. A photo of a public event (that involved everyone on that road), photographed by the government belongs to the public.
Anyway, back to “on topic”. But if you catch the story, see if “Dad” (the realtor with the Porche) looks like a realtor to you!
Perhaps the market for SIVs assets is more liquid than originally perceived?
Citigroup offloads assets from SIVs
By Paul J Davies in London, David Wighton in New York and Adam Jones in Paris
Published: December 10 2007 22:04 | Last updated: December 10 2007 22:04
Citigroup has slashed the size of its struggling off-balance-sheet investment funds by more than $15bn in two months through quiet side deals with some junior investors, according to people familiar with the business.
http://www.ft.com/cms/s/e35b3628-a769-11dc-a25a-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fe35b3628-a769-11dc-a25a-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus