Bits Bucket And Craigslist Finds For December 14, 2007
Please post off-topic ideas, links and Criagslist 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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Crash into 2008… No way, the NAR just said they had found their bottom. This lying MSM is just trying to scare folks… : -)
http://www.bloomberg.com/apps/news?pid=20601103&sid=aFGRVkX98Hzw&refer=us
“`The whole thing has deteriorated faster and further than we or anyone else had anticipated,” said Ron Muhlenkamp, president of Wexford, Pennsylvania-based Muhlenkamp & Co., which has about $2.5 billion under management and holds shares of mortgage lender Countrywide Financial Corp. and homebuilder Ryland Group Inc.”
Correction… You never anticipated this slowdown, there were a few people that have been warning about coming problems for several years.
Many of us here do not have 2.5 billion under management, and we figured “the whole thing’ would deteriorate. So Ron, wanna explain how your expertise justifies your management fees?
That’s what really gets my goat. I know some of the executive management in the builder ranks and they’re incompetent morons for the most part. I don’t know any financial industry movers and shakers personally, but from what I’ve read with a few exceptions they fail to impress as well. So what is it that justifies their exorbitant salaries?
Obviously it’s a matter of who you know, not what you know. But it’s gotten way out of hand to the point where I question if those on top know anything.
RE: That’s what really gets my goat. I know some of the executive management in the builder ranks and they’re incompetent morons for the most part
What this debacle graphically points out is that the hiring structure for legions of businesses is really geared to the hackneyed, “it’s not what you know but, who you know” and whose azz you’ll kiss, or for the ladies…well I wont’ go there-inferences allowed.
No longer are the best and the brightest running the show.
This also baffles me. How can so many of these “professional” money managers have missed this so completely when so many here saw it coming so clearly and so long ago? Either they are as dumb as nails or they knew and have been gaming the system. In either case this class of people have done a great disservice to their clients and many more.
And how is possible for the MSM to so completely ignore the bears who have been trying to raise the flag on this train wreck for many years?
Bloody idiots.
Both sets of people are my top candidates for multiple JTree Insertion Awards. exnav will be more than happy to do the honors.
The dumbing down of America has truly come home to roost…
Funny - it’s actually deteriorated quite a bit more slowly and less far than I anticipated.
Not surprising given that “leaning into the wind” has morphed into “leaning into the correction”…
Paul in Jax, I read your handle too quickly… caught it as “Paul in Jail”. I tried to piece that together with your comment and got some interesting ideas…
Reminds me of the time I mis-read the store clerk’s name tag. Said “Stan”. Poor fellow.
Speak of mistakes: I have a mother in law who is extremely religious and does not curse. She has some good friends ‘Chuck and Fran’ and was introducing them to another acquaintance in her church. Well she swapped the first letter and has been mortified since. Of course her family won’t let her live it down and I still chuckle when I think of her saying this.
Lies, Damn Lies, and Government Statistics
“In 1983 the Bureau of Labor Statistics was faced with an awkward dilemma. If it continued to include the cost of housing in the Consumer Price Index, the CPI would reflect an inflation rate of 15 percent, thereby making the country’s economy look like a banana republic. Worse, since investors and bond traders have historically demanded a 2 percent real return after inflation, that would mean that bond and money market yields could climb as high as 17 percent.
The BLS solution was as simple as it was shocking: Exclude the cost of housing as a component in the CPI, and substitute a so-called “Owner Equivalent Rent” component based on what a homeowner might rent his house for.
The result of this statistical sleight of hand was immediate and gratifying, for the reported inflation index quickly dropped to 2 percent. (This was in part because speculators needed to offset their holding costs by renting out their homes while their prices skyrocketed, thereby flooding the market with rentals, which pushed down the cost of renting a house or apartment.)
While the BLS was correct in assuming that this statistical ruse would fool the average citizen into believing that inflation was only 2 percent (and therefore be willing to accept a meager 4 percent return on his bank savings), what is remarkable is that the ruse also fooled the bond traders, and apparently continues to do so, leading analyst Peter Schiff to describe these supposed savvy bond traders as the “hormonal teenagers of the capital markets.”
The current subprime credit crisis can be directly traced back to the BLS decision to exclude the price of housing from the CPI. It is now clear that the “benign” inflation figures reported over the past 10 years in no way reflected the skyrocketing rise in home prices, with states like California experiencing annual home price increases of as much as 30 percent annually. With the illusion of low inflation inducing lenders to offer 6 percent loans, not only has speculation run rampant on the expectation of ever-rising home prices, but home buyers by the millions have been tricked into buying homes even though they only qualified for the “teaser” rates that quickly escalated to unaffordable levels. As long as home prices continued to skyrocket, buyers could refinance based on the increased value of their equity as collateral, but once home prices stabilized and even declined, many families were forced into foreclosure.”
[url]http://mwhodges.home.att.net/statistic-wizardry.htm#Housing[/url]
This doesn’t strike me as entirely unreasonable–after all rental vs purchase IS fairly fungible/exchangable. All of us currently renting who can afford to buy are living proof of this! If the two de-couple too significantly, some of us will vote with our wallets by switching from one group to the other.
Here is some more “wizardry” for you inflation watchers.
FSU Editorial: “The Invisible Hand” by Rob Kirby 12/13/2007
“We’re only halfway through the housing shock,” said Ethan Harris, chief U.S. economist at New York-based Lehman, the fourth-biggest U.S. securities firm by market value. “It’s just a matter of time before the weakness spreads to the rest of the economy.”
How do these guys come up with this crap?
We went skiing yesterday and there wasn’t much snow, and only a couple runs open, but it was a beautiful day…
We cruised through Clovis on the way home and saw more new housing projects than you can shake a stick at, along with every vacant corner pimping said developments. One corner had 6 different builders represented.
The Central Valley is so woefully overbuilt, it’s going to be a disaster for oh so many.
“it’s going to be a disaster for oh so many.”
At the risk of be castigated as a gloom and doomer by the economic screech monkees, I no longer speak pre-tense. It IS a disaster for many right now. Prices ARE falling right now. Not will be. Not might be. Not in the future. NOW.
Every other homebuilder sign offered up a “free” in-ground swimming pool, if you’d only sign on the dotted line…
Report from Charlottesville, Virginia;
In my neighborhood alone, within a 10 minute walk of my house there are at least 15 houses for sale, 4 for rent, and 2 of them vacant, presumed abandoned. At one of the houses I spotted a realty agency sign 6 months ago, which was subsequently replaced by an FSBO sign followed by a sign advertised a “lease to own’ scheme. Then a “For Rent” sign was added to the mix. let’s see…”For Sale”…”For Rent”…I suppose the next sign will be “Foreclosure.” Also of note, on the Downtown (pedestrian) Mall here in town, Ryan homes had a prominent sales office on the east end of the mall for the past year, advertising all of their local developments (of which there are over a dozen). Walking past the office a few weeks ago I noticed the place was dark, with a sign taped to the front door stating the office was closed until some time in January 08. I got 50 bucks that says they don’t open in the new year at all.
SubKommander Dred
Interesting that in the NY Times graphic posted by AnnScott a couple days ago Charlottesville area showed low (14%) level of subprime, much lower than counties immediately to north or west. I would assume that areas of east and south C’ville which have always been the dregs but got bid up in the bubble are getting slammed back to reality, as well as the absurdly expensive developments in exurbia, such as the Crozet area. But I’ve got to believe the U. area and nice sections in north and west side of town are hanging in. Any thoughts on that?
Is the neighborhood atmosphere and safety holding up?
In the darn development I live in there is only 1 foreclosure ,and guess what, its right in front of me .The owners of this house in default were investors and they made money off of one flip in the development and were going for the second when the market turned .In spite of making money off the other flip and putting nothing down on the house across the street from me. The utilities have just been turned off and they left a top window opened.They are also burning the landscaper but he doesn’t know it yet . The grass will start to die now and I have to look at this eye sore . Are the FB Gods getting even with me because I don’t buy their victim story?
Also, every builder this side of the rockies built for investors and baby boomers ,unqualified buyers ,etc. ,without regard to the fact that baby boomers don’t all retire at once ,and speculators get out of the market the minutes they can’t make appreciations quickly.People ask why the builders kept building . Because builders knew that they could get a loan for anybody that wanted one ,and lenders would give them money without enough skin in the game also .
The eye sores and financial damage these greedy speculators will cause, along with the lenders that sponsored their crimes is mind-blowing .The crimes that were committed during at least the last three years of this housing frenzy are not victim-less crimes . There goes the neighborhood comes to mind ,but its happening all over the Nation .
When I think about all the vacant homes ,including the one in front of me ,that are wasting away in America ,while millions got priced out of the market by this absurd run up, I want to scream .(rant off)
“oh so many” - they are still better off than they were in Mexico.
Who gives a sh*t! We’re better off with them back in Mexico. We need to round ‘em up and drive them south like a bunch of cattle.
Joshua Tree Justice-
I second your comment. I caught 3 Spanish speaking thugs, stealing toys out of the Marine Corp Toy Drive Bin. I intervened.
Rounding them up is too expensive, and they’ll just come back. Trying to keep the illegals out is like hearding cats.
AZ is on the right track! It is about the JOBS!!! Seriously lock down the jobs, like we were PROMISED during the “one-time only, we promise” amnisty of 20 years ago.
Lock down the jobs and they’ll go home on thier own!
‘Paul in Jax…
In response to your comment above, in the immediate downtown area the higher end houses (IE old money folks) seem to be keeping it together, but even here, I counted 3 properties that have been on the market for at least 6 months, one of which is now empty. As for other areas of Charlottesville, I see a lot of those pesky \”For Sale\” signs and even more \”For Rent\”, this in a college town that is halfway into it\’s academic year. Anectdotally, on the a Blue Route Bus (university transit service) some months back I overheard a conversation between some some to be graduating Darden Business School twit and his girlfriend. It would seem when he started business school a few years back, he had every intention of becoming a mini- Trump (minus the hair) upon graduation, and while still a graduate student bought some POS townhose for an awful lot of money. Now facing graduation (IE lots of School loans, in addition to his overpriced mortgage obligation) he hemmed and hawed in answer to her question about him selling it off now that he was graduating, and boasted about how he\’ll be able to rent it out for a lot of money to undergrads. Now, I\’ve seen what the typical undergrad(s) do to houses around here, and while I have met a few that are respectful and decent, most just totally trash the place with almost nightly keg parties. Somehow, I don\’t think being a landlord is going to work out to well for this guy, particularly when he finds the rent he can charge is nowhere near what his monthly note is. In addition, I have more than a few medical students and residents (physicians in training) who thought they would jump start their careers and pay some of their horrendous medical school debt by…you guessed it…buying overpriced homes a few years ago in order to flip them once they graduated or finished their post-doctoral training. It\’s amazing how completely clueless these otherwises highly educated folks are regarding the housing market and the unsustainable increase in the price of real estate. One woman I spoke with a 3rd year medical student, when I casually mentioned to her the meltown in the real estate and mortgage business that is ongoing, had absolutely NO IDEA (Jim Cramer impersonation here) of what was happening, despite having bought a house with several of her classmates some years back. She looked like a 5 year old child that had been told there really was no Santa Claus. Yes, this is all going to end…is ending…badly.
SubKommander Dred
EXACTLY….!!!!
ow, I’ve seen what the typical undergrad(s) do to houses around here, and while I have met a few that are respectful and decent, most just totally trash the place with almost nightly keg parties. Somehow, I don’t think being a landlord is going to work out to well for this guy …
I was an undergrad there, and I can vouch for the rapid destruction of C’ville housing.
My last landlord (for a house on 14th St.) was a wealthy lady who lived outside of town. Even then, I remember feeling pity for her … in terms of all the headaches and mess-making on our parts.
Dred - My parents live in Earlysville (NY transplants who moved in 1999) and I am shocked every time I go there how much building there is YOY. Have they broken ground on those ‘luxury condos/townhouses’ by the new Target on Rt 29 yet?
Majisto;
No, in point of fact the only going on up there by the Target is weeds growing in the large patch of dirt they left behind after destroying the forested glen which had previously been there. That happened back about 2005, and they still have yet to build anything. Oh yeah, they put in a Chick Filet, Starbucks and Whole Foods in the shopping mall next to Target, so 21st Century consumer culture appears to be making a valiant last stand just north of town.
SubKommander Dred
I didn’t realize they were relocating Whole Foods from a little bit south on 29. I will be anxious to check it out when I’m down there for Christmas. Real shame though that they cleared all that nice forest and now it’s just a lot of weeds.
Thanks for the update, Dred.
I’m not sure the sheeples will bite for a ‘free’ pool anymore. I think the herd is now awake, and staying away from the cliff.
Peter Schiff’s (Euro Pacific Capital) Weekly Radio Show
http://europac.net/radioshow_archives.asp
doesn”t matter, if they don’t jump off the cliff they will have to be pushed by hyperinflation and other central bank interventions.
Paul in Jax…
In response to your comment above, in the immediate downtown area the higher end houses (IE old money folks) seem to be keeping it together, but even here, I counted 3 properties that have been on the market for at least 6 months, one of which is now empty. As for other areas of Charlottesville, I see a lot of those pesky \”For Sale\” signs and even more \”For Rent\”, this in a college town that is halfway into it\’s academic year. Anectdotally, on the a Blue Route Bus (university transit service) some months back I overheard a conversation between some some to be graduating Darden Business School twit and his girlfriend. It would seem when he started business school a few years back, he had every intention of becoming a mini- Trump (minus the hair) upon graduation, and while still a graduate student bought some POS townhose for an awful lot of money. Now facing graduation (IE lots of School loans, in addition to his overpriced mortgage obligation) he hemmed and hawed in answer to her question about him selling it off now that he was graduating, and boasted about how he\’ll be able to rent it out for a lot of money to undergrads. Now, I\’ve seen what the typical undergrad(s) do to houses around here, and while I have met a few that are respectful and decent, most just totally trash the place with almost nightly keg parties. Somehow, I don\’t think being a landlord is going to work out to well for this guy, particularly when he finds the rent he can charge is nowhere near what his monthly note is. In addition, I have more than a few medical students and residents (physicians in training) who thought they would jump start their careers and pay some of their horrendous medical school debt by…you guessed it…buying overpriced homes a few years ago in order to flip them once they graduated or finished their post-doctoral training. It\’s amazing how completely clueless these otherwises highly educated folks are regarding the housing market and the unsustainable increase in the price of real estate. One woman I spoke with a 3rd year medical student, when I casually mentioned to her the meltown in the real estate and mortgage business that is ongoing, had absolutely NO IDEA (Jim Cramer impersonation here) of what was happening, despite having bought a house with several of her classmates some years back. She looked like a 5 year old child that had been told there really was no Santa Claus. Yes, this is all going to end badly.
SubKommander Dred
Mortgage Stripdown Bills. I swear I feel like I just woke up and it was 1991 again. Jumbo Cramer had hair and gas was $1 a gallon.
http://www.creditslips.org/creditslips/2007/12/more-on-the-h-1.html#more
Will rock music turn good again? Maybe G’n'R will get back together.
nah, i predict a 14th generation ska revival.
Neil Young in concert last night. Screw hip-hop.
personally, I cant decide which is worse.
Wow.
I should clarify - Neil Young was good - till he became an activist. But I guess they all do when their creativity runs out .
He didn’t make a single political statement last night and the electric set was incredible. I saw him for the first time in 1986. At age 62 he was better last night than I’ve ever seen.
He was damn good in 93 on his unplugged tour.
Hmmm… Zepplin on Monday, Neil on Friday.
What year is it again?
Check out my name….I think Louisiana Zydeco music will be the next big thing…just the right kind of danceable music for us old folks. And there are all of 2 of us dj’s who play this music in all of NYC
Don’t mess with my tout tout.
Hahah. I lived in New Orleans for 9 years.
Zydeco had a big surge in the early 90s. It’s been “discovered” already.
No actually there are so many new bands, its a prefect alternative to the boring old fogey classic rock stations.
Go ahead watch the videos, click on my name, its some vids i shot here in the big apple
Gosh, I’d settle for some of that old classic stuff right now just to get away from this dumb holiday music.
Would have loved to see a CCR concert again. Too bad one of the brothers is dead.
Really loved their music in my pre teen and teen age years. Cosmos Factory was my favorite.
Would have loved to see a CCR concert again.
I saw John Fogerty here in Vegas a couple years ago - excellent show.
In fact, it was so good and got the crowd so wound up that the headliner - John Mellencamp - got pissy with the crowd because he wasn’t getting the same response.
RE: Will rock music turn good again
Rock is still good…go to a Tom Petty or a Springsteen show sometime.
However your point is well taken.
The sun is fading.
rock rules. 70’s classic zep, deep purple. areosmith, Old beatles, Genesis, its all good. Some 80’s pop -techo new wave dance tunes good as well. All 70’s- 80’s stuff good except disco. Oh yes, forgot to throw in Police and Rush
It’s only $58 B…b…b…illion!
Citigroup Rescues SIVs With $58 Billion Debt Bailout
http://www.bloomberg.com/apps/news?pid=20601103&sid=aB3bZb6F3628&refer=news
so, if I understand correctly … $hiti takes the SIV’s on its balance sheet, gets a $60B or so behind-the-green-curtain perpetual loan from FED (and ECB?) and now everything is well and contained?
Atrociti
LOL. Very clever.
Love it.
http://www.unanimocracy.com/images/atrocitibank.jpg
The question is will Citi put the SIV’s paper up as collateral for the FED loan and then intentionallly default. ie the FED is essentially buying the SIV paper at full wish list price with printed dollars.
My point all along has been ,”Why are the Feds taking any wish price junk paper for these so-called short term loans ?” Make those loans into long term loans and charge high interest rates for them so these lenders can write down their losses . I think the plan is to transfer some of this junk paper to the Government-Backed programs ,but they didn’t have them set up yet and they need to change the loan guidelines first (to easy money again ).
Why doesn’t the MSM question the Feds policy of lending against junk paper ,as well as not raising rates in a inflation cycle ? If the intent of the Feds is to keep lending institutions solvent ,than short term lending isn’t the answer .Just picture Countrywide Funding waiting to offload their junk ,while the Tan Man is begging for liberal lending guidelines and bailouts for investors and owner-occupied loans and loan amounts of 1 million .
my call is citi’s exposures are all known now. they can float the “we will look into whether a breakup of the company make sense” idea. this would put a floor in all financials and probably the market as a whole. im just wondering if paulson would make the annoncement or not - he he
Sounds like it is possible to turn a toad into a prince after all?
We already turned Prince into a toad, didn’t we?
Apparently these toad-prince conversions are a two-way street.
kiss and make-up?
Leigh, My lovely Wisconsin lass
Although you shall now win the bet! I still lose (as do us all) the Federal Reserve is giving Citigroup 85% of par for each CDO that has “no market price available” in the new TAF bailout.
http://tinyurl.com/yu2y83
One of the funnier collaterals the Federal Reserve is accepting per the spread sheet is “Subprime Credit Card debt” at 60%. This debt is trading at 40%.
despite what our Ben says, this all smells like a huge bailout, doesn’t it?
It is tiresome having to point out details to the paranoid.
‘Loan Facility’
It is a loan. Temporary. Short term. The fact that they assigned some arbitrary value to the collateral doesn’t bother me. Citi has many $billions.
If I use my credit card, have I been bailed out? And weren’t you guys fusing that the SIV thing was a bail-out, and it’s no longer on the table? These are desperation tactics by the PTB. Did you expect less?
The fact is, there is a huge squeeze coming at the end of the month. No one knows what these securites will trade at afterward, but it won’t be what it is now. Probably higher. But a year from now?
And BTW, house prices are still falling. Isn’t that what matters?
But what will be the interest rate? If these new Fed loans are at 150 BPs below Libor then it’s a direct subsidy with created money.
My friend, bad paper being monetized is the risk. It is possible (not today - not enough US Treasuries in hand) for the Federal Reserve to supply “like paper’ when the loan is paid back. The like paper in the past has been US Treasury bonds.
the 20 billion ECB loan facility seems to be available for at least 6 months; I’m sure they are going to roll it over if required, they did the same with most of the previous loans that were provided initially for a week and later turned into loans of 2-3 months duration (haven’t heard about these loans lately, cannot imagine they were all paid off).
yes, the SIV superfund bailout did not happen, but what we have now seems not much different - looks like taxpayer money is even more at risk this time.
And another thing - to extract the “bailout” permanently the borrowers would have to default on the Feds. Excuse me? How dumb do people think these CEOs are? That would ensure a one-way trip to Gitmo. Even if the Dems take over and shut Gitmo down, they’ll make an exception for that. You don’t **** with the feds.
There’s a small bailout entailed in a reduced interest rate from what the banks could get if the collateral were properly valued. But it’s small, and the principal WILL be repaid.
bad paper being monetized is the risk. It is possible for the Federal Reserve to supply “like paper’ when the loan is paid back. The like paper in the past has been US Treasury bonds.
Let me get this straight… So, lets say Citi gives Fed $10 billion “worth” of subprime collateral (that actually should be worth lets say $5 billion). When Citi later “repays” the loan, the Fed substitutes good paper for bad, and instead of worthless collateral it will give Citi back $10 billion Treasury bonds?
Nice switcheroo for Citi. Is it possible though? And why would the Fed do this? What will they do with the worthless paper? (I.e., how can they push it down to taxpayer?)
Comment by Ben
“The fact is, there is a huge squeeze coming at the end of the month. No one knows what these securites will trade at afterward, but it won’t be what it is now. Probably higher. But a year from now?”
“Squeeze” or specifically “short squeeze” has become one my least favorite words/phrases. I thought we were out of the woods for a big rally after 12/11.
Anyone else see a significant rally on the horizon? If so, based on what?
Thanks
No
RE: this all smells like a huge bailout, doesn’t it?
I agree…the moles are tunneling furiously.
No offense to Mole Man.
Can anyone explain what Basel II is?
Thanks
From what I understand basel II helps banks determine how to measure their various risks and how much capital they have to keep in reserve, based on those risks. Basel is the city in Switzerland where they make all these rules.
Basel II brings risk based leverage ratios into bank regulation. What it means is that a bank can hold all the G-7 treasury paper they would like (leverage ratios require that they put only a very small percentage down), but very little equity (leverage required is nearly 100%).
In terms most here will be familiar with Imagine if every brokerage had different margin terms, so at one brokerage leverage on NYSE stocks is 4:1, but leverage on Nasdaq stocks is 2:1, and options are 1:1. While at another one leverage on your portfolio is 3:1 (no matter the assets). Basel II plays a similar role to the Fed which sets the minimum requirements for all brokers.
Thanks for the input DD and Bluto.
It’s where the gnomes of Zurich hang out to create new accounting regulations.
Don’t worry. Joe Kernan has assured investors that (C)iti stock has a floor under it at $28. All is good. Just ask the shills at CNBC.
Assuming the rest of the 1T off balance sheet isn’t a half off sale.
It’s very indicative of the fact that we are nowhere near the bottom in the financial stocks,” said Kirby Daley a strategist at Societe Generale’s Fimat division.
He added that there was a lot more to emerge, “both in terms of write-downs and in terms of exposure beyond sub-prime”.
This is from a strategist whose own bank just put SIVS on it’s balance sheet
Citigroup makes $49bn SIV rescue
Hey, if nothing else, CIti seems to have the contract for the federal government credit cards. My card for travel expenses is with Citi.
Of course, I think I can go to prison if I put personal stuff on it, so there is a limit as to how much income those can generate.
Affordable Communities!
http://news.yahoo.com/s/bw/20071213/bs_bw/dec2007db20071211596083;_ylt=AqX5jaRQ2h8JzyQXNoXo0eSs0NUE
Inflation On
http://www.stockmania.com/index.php?showimage=113
An exciting new product from the Federal Reserve.
Applied to 30yr treasuries, too. Watch long rates go back to 6%.
How high will Jumbo mortgage lending rates go?
10 is a nice round number. (just guessing)
If your guess is correct, then McMansions are severely overvalued at 10 percent or even 30 percent off the 2005 bubble peak.
If the 30yr breaks 114, 110 is in the cards. That would put us back to the sep highs of 4.9%. Long term rates have put in a triple bottom on the charts.
http://finance.yahoo.com/q/bc?s=%5ETYX&t=my&l=on&z=m&q=l&c=
McMansion bubble peak in your neck of the woods - Rancho Bernardo/Rancho Penasquitos/Carmel Valley - I’m guessing about $350/sq ft. Can these things really sustain at even $250/sq. ft.? I don’t see how, no matter what interest rates do. Is it too doom-and-gloom to guess that they have to get back to the $150/sq ft range (or a haircut, let’s say from $900K to $400K) before this is over? I don’t think so - $400K looks like a lot more rational price to me than $650K.
C’mon, you’re just insulting them with those ridiculous offers.
“…$400K looks like a lot more rational price to me than $650K.”
I don’t claim to know where prices will bottom out, but I can say there is no way local incomes can support the large number of recently constructed McMansions in 131 “New Home Communities” around SD county generally priced north of $500K. Most people I know who can actually afford a home priced over $500K are already comfortably housed in homes of their own, and are not the sort who are going to try and catch falling knives.
Jumbos are priced about 1 point over conventional. What are the odds that balloons to 2 points?
Naples Area Board of Realtors is once again releasing their numbers for all to see:
http://www.naplesnews.com/news/2007/dec/13/nabor-resume-publicizing-monthly-sales/
NABOR to resume publicizing monthly sales : real estate : Naples Daily News
So, I decided to cancel my American Express because the fee thing just irked me too much. Also, with the limit on my other card (it is a Mastercard and Visa, but they both hang off the same line of credit) over $20K, I can’t imagine needing the “no limit” feature. I’ve spent the last few months using up the bonus points.
Called and got some kid - possibly India, but if he was he had had a LOT of accent training - who offered the no-fee blue card, but said that the few bonus points that were left couldn’t be transferred if I cancelled the card first and then let the blue one be issued in 7 to 10 business days. Magically, the 10 business days would have been up the exact same day I would have ceased to be eligible to have 100% of this year’s fees cancelled. So I told him no - why risk paying a fee just to preserve the very few points that were left?
When I said no to the blue card, he got a signal he had to transfer me to someone else. It took a very long time to get the transfer - a lot of people would have hung up assuming that they had been cut off. I stayed. The woman who took over, said that the young man was completely wrong about the points going away. Evidently I really have 30 days to transfer the points. So I made her cancel the card, take off the fees, and issue the new one.
I took the new one because I can see the usefulness of having at least one card that isn’t attached to the one credit line. If I have to report either the M-card or Visa missing, it probably cuts the other one off as well. And I’m sure I have a lot more leverage if they don’t take all the fees off the other one, if I am still a customer. I took her name and ID number.
Oh, and this is the real kicker. When I told the woman that I didn’t blame the young man for the mistake - after all he was just reading his script, she claimed they didn’t have a script. They just learn as they go along. A call center without scripts? They just learn as they go along and don’t have standardized answers? Right, pull the other one.
Shreded the gold card last night. Felt good. I wonder if I will now get a new flood of platinum offers. They should stop now that I’ve said I don’t want to pay fees, right? I think Am Ex is going to be very disappointed with the lack of exercise the new card gets.
Heading to New York this weekend to visit brother, sister-in-law, baby niece and see a silly musical with some people from the office (cancelled card fees completely offset the price of the ticket and then some). Think I’ll do a 5th Avenue stroll too, and maybe hit the Strand. I miss New York.
You have to be kidding - you pay someone to have a credit card?
Not anymore. When I was just a wee gal, I got taken in by the whole Am Ex thing. It happens. You can’t even begin to imagine how unsophisticated my parents were about money - not stupid, just unsophisticated. My father has an MBA and he still didn’t know about the change in business model for mortgages until I explained it about 9 months ago. He still thought banks kept the mortgage loans they made on their books.
The points thing is quite a trap - 6 months ago I had $900 worth of points on the card. I believe a large reason I had so little trouble with the customer support people was because they could see I had used up the points in a systematic way, indicating that this wasn’t an impulsive decision, but one that I had already made a long time ago. If it looked like an quick decsion, they would have given me a much harder time.
I just cancelled my Amex Gold as well, last weekend. They gave me a really hard time for doing so. After a really unpleasant discussion, they close it. They also wanted to know what other credit cards/Banks I was operating with. They were really angry with me because I did not provide them with that information either.
Confirms my suspicion that accepting the no fee card made my transaction easier. I actually told them that my other card is with USAA. There is no way they can compete with the service I get from them. As a matter of fact, when I said it there was a brief moment of silence and then on to the next issue. They didn’t even try to argue.
There is a good chance that the customer service people get pay incentives for not letting people cancel one card without taking another. I hope you got the name and ID number of the person you dealt with in case the transaction doesn’t get processed. A lot of people might be willing to lose your paperwork if it means keeping a bonus.
I still have my old green AmExp card that my company gave me many years ago. When I retired they just assigned it to me. I use it for everything, pay it off every month. Lots of people do this rather than deal with cash. And if you travel (as I do), you’ve got to have some kind of card. The real trick is NOT accumulating charges, that I never do (can’t with this old card though).
We’ll be heading down to Dyker Heights, Brooklyn this weekend to eat at our favorite diner and look at all the Christmas lights. Life is good here if you find a decent school for your kids, live in a place with a short transit or bike commute, and don’t buy at the peak of a bubble.
I’ll play Grinch. The more you stay away, the older you get, the bigger a pain NYC is. After this trip, you’ll miss it less.
I love NYC, and accept that it is expensive. It’s trying to fly in in and out that’s the problem. Unless you’re arriving or leaving before 10am you can pretty much expect a two-hour delay from any of the three airports.
It is very expensive. Sleeping on the couch of a family member and taking the bus from DC ($35 round trip) eases the pain considerably. The bus can get stuck in traffic, but the ipod (free with westlaw points) should make that much less painful. God, I am such a cheapskate. I borrowed a bunch of CD’s from my uncle over Thanksgiving and put another 4 gigs of music into the ipod - total cost? $15 for the insured return shipping.
polly,
have you tried the train, it’s my favorite way to get to DC from nyc, and it arrives midtown, so you can skip the cabs and just walk or subway to your destination. Really, i enjoy the ride.
Polly,
You’re not a cheapskate, but a good steward of your money. Be proud of your parsimonious behavior. You didn’t take advantage of anyone, you just know the value of a $1.
Stewards don’t steal, everything else is fine ok.
Comment by polly
2007-12-14 07:38:03
… God, I am such a cheapskate…
Good. Then you’ll have more money for the important things: beer, and pearls, and candy, and tulip bulbs, and shoes.
Love the train. I take it when I go to NYC for business. But it is way more than $35 round trip. And the bus company just started a pick up point at a metro station one stop away from me. Bus drops off right outside Penn station so the New York end convinience is the same.
I think this bus company had a huge surge in business when gas prices started to go up. With the gas and the tolls you couldn’t drive for that cost. Two people would come out a bit ahead, but not by that much.
BlueCash from AmEx will pay you 5% back on groceries and gas (and 1% on everything else) after you charge $6k in a year. No fee.
I know a lot of people on this blog are great at gaming the credit card system by putting lots of bills and all sorts of other small purchases on their cards and using the cash back features. It just isn’t my style. I like cash. I take out a set amount (what I consider two weeks of allowance) and use it for most everyday purchases. If I need more in less than two weeks, it is time to figure out why I am spending more. It is a way to simulate a budget on small purchases without actually following one or writing down every cent - which my mother still does.
The USAA cards pay a small cash back reward without any minimum purchase amount. It is enough for me.
I”m with you on that. I don’t use plastic other than my debit card which has a Mastercard logo on it.
Same here. I would rather miss out on the “bonuses”.
If you are coming to New York City you better make sure you have cash. There are a lot of bars and restaurants (non-chain) that won’t take credit. Try buying your whiskey at the White Horse with plastic. No way. I can just see the scene. “We don’t mind if you drink yourself to death Mr. Thomas but you have to pay cash for your whiskey.”
Somebody questioned my contention that real men carry cash. Go to a bar with some buddies and check out the look on the bartender’s face when some fool whips out a credit card to pay for one beer. It’s an embarrassment for mankind. Further proof of the pussification of the American male.
I agree with that. California and Florida are the worst for people paying with CC for tiny transactions. No matter what the ads try to say, paying with CC takes longer and holds up people - therefore it can be a little rude. And if you do use a credit card at a restaurant, at least be a sport and leave the tip in cash.
And what is with those ads that make it look like life is a party until some poor shlub tried to pay for anything - like a newpaper or a cup of coffee with cash? Are they ads for a credit card or a debit card? I bet the barkeeps get horrible tips when people pay with cards too.
Oh, and while I am ranting about ads, gentlemen, if all your kisses begin with a box from Kay Jewlers, leave her. Not only is the relationship over, but she didn’t have very good taste to begin with.
“Not only is the relationship over, but she didn’t have very good taste to begin with.”
ROFL! exactly! They are like the Sears of jewelry - ewwww. Mr. Gwynster has orders that if has to get me anything, it had better be coming from Fred or Harry. At least then it will actually have a resale value.
Those “cash is for losers” commercials with a white hot passion. I guess they constantly have to figure out new angles to recruit more inmates for the plastic prision.
Those commercials are among the many things that engender the usual “this country/society is so f******-up” thoughts.
“Somebody questioned my contention that real men carry cash. Go to a bar with some buddies and check out the look on the bartender’s face when some fool whips out a credit card to pay for one beer. It’s an embarrassment for mankind. Further proof of the pussification of the American male.”
I agree that paying for small items (especially drinks) with plastic is silly, but I don’t see how that has anything at all to do with gender.
I carry the same card and do the same thing. I used to use a Chase Shell Mastercard because I always need gas. I run about 1.5 - 2K a month on the card with bills and crap and pay it off at the end of the month.
I was 2 seconds late paying one month so I got charged interest (no late fee cuz I yelled at them). The next month, all my charges had interest on them because I was 2 seconds late the previous month.
Well Chase has only seen the residuals of what I cant charge to Amex now
About 20 years ago Chase “lost” a payment I sent them for $1700 — the highest monthly CC bill I’ve ever had. It later turned out they had actually credited it to someone else’s account. Fortunately I detected the missing payment before it was actually due, and made good on my payment by paying it a 2nd time. Fortunately I had the savings to cover the extra payment. Then I found out the bank I had drawn the check on had “lost” the canceled check. Weeks passed & the check was eventually found & mailed back to me. It had been torn in half and taped together. It was not endorsed, just had a time stamp on it from the bank. There’s no legal requirement for a check to be endorsed. Several more months passed with discussions between me, Chase & my bank before I was fully refunded the duplicate payment I had made. The interest I had lost on my $1700 was not reimbursed. I canceled both my Chase credit card and the account with the offending bank. I have zero tolerance for such stupidity by any financial institution.
Two years ago I went to my local CU and requested that they lower the credit line on the card to $300 because I wanted a low credit line on a card that I might use for internet purchases. They became indignant and said they could only lower it to $750 and raised the interest rate from %9 to %15. Last laugh was on them since I always pay it off so I didn’t care if they raised it to %30. Note, it had nothing to do with credit worthiness.
Except they probably would accept the fraudulent charge above your limit and then charge you a fee for going over. It is a whole new source of revenue for them.
“The Iron Rice Bowl”…
http://biz.yahoo.com/ap/071214/china_us_business.html
We decided long ago that we couldn’t compete with Asian rates of pay, and China is plumbing the depths of the Orient, looking for Asians that will work for even less than their own citizenry…
The supply of workers with useful skills is not infinate. Rising wages means more local demand. There is a possible good intermediate and long-term economic scenario if global population growth stops, and is not replaced by a painful decline.
The short run doesn’t look so good, however.
you can see this very clearly in Europe where ‘low wage workers’ are coming from different countries every few years, because of the growing EU and more wealth in the countries that joined recently and where connected to the ECB’s credit spigots. First it was people from Italy and Spain, the Balkan, Turkey; later we had those from the Czech Republic and (former) Eastern Germany. After that came Poland (90’s), but now some workers from Poland (we have more than 100.000 of them in our small country) are getting an attitude and no longer work for nothing. So companies and politicians are looking to get workers from Hungaria, Rumania etc., probably Albania and the Baltic states are next on the list … sooner or later the EEC is running out of cheap labor slaves. At the same time, about one million Dutch people are on social security or another state-provided income because they are ‘unable to (find) work’. It’s about time politics delves into that cheap labor pool …
The problem is natural resources. Long before we reach the end of slave labor we will run into the problem of not enough resources ie oil nat gas, minerals, ect. The globalist model does not factor this in.
The miners in Africa are not pleased with their Chinese owners.
‘We decided long ago that we couldn’t compete with Asian rates of pay, and China is plumbing the depths of the Orient, looking for Asians that will work for even less than their own citizenry”
That is odd because china has a lot of desperately poor peasants/folks who flock into the large metropolises to work .
The city of Guangzhou(Population 5 MILLION) gets around 1 million + daily inflows of workers/commuters from the poorer provinces who do the labor/manufacturing jobs.
1.3 billion people and china cannot find available labor within it’s own population to do it’s jobs? Amazing!
There’s a definite pecking order to Asia, not unlike Europe or the Americas…
Vietnamese would be to the Chinese, what Mexicans are to us (rough approximation, very rough)
Re: the finite supply of Chinese workers:
Yesterday they were talking about Paulson’s trip to China on CNBC. One of his goals, they reported, was to increase the use of credit cards among the Chinese.
Didn’t a poster once explain here the Chinese place a greater priority on education than material wealth? Maybe the PTB will have more success setting up a student loan credit struture for Chinese workers. That would kill 2 birds w/one stone.
“Yesterday they were talking about Paulson’s trip to China on CNBC. One of his goals, they reported, was to increase the use of credit cards among the Chinese”
The chinese are savers and basically very thrify with spending money and do not use CC’s like we do. To them having huge amts of debt on CC’s is a sign of weakness and very shameful for the Men . This may not be the case in such really expensive westernized cities as Hong Kong but i would be surprized to see widespread use of CC’s in the traditional mainland areas of china , which still cling to traditional values such as saving, which is so passe here in US
Have no fear; these friendly folks are offering “Lowest labour cost in Asia” and “Highly qualified and motivated personnel”.
http://www.korea-dpr.com/business/
Interesting take on the bubble (title: Money Pits):
http://www.lewrockwell.com/french/french65.html
CONSUMERS, PREPARE TO DIE…..BANKERS DON’T WORRY
WE CAN’T LOWER RATES BECAUSE OF INFLATION…..HOWEVER, BANKERS, WE WILL FLOOD YOUR ACCOUNTS WITH AS MUCH CASH AS YOU NEED TO FORCLOSE ON THE HOMEOWNERS AND BUSINESSES
I think you are on to something. This “liquidity” that falls from helicopters has a mysterious propensity to land on bank balance sheets.
Professor, how long do you think this plan has been planned?
Could the helicoptor be an Apache and we are in its sights?
Surge in Gasoline Prices Pushes Consumer Inflation Up by Largest Amount in More Than 2 Years
http://tinyurl.com/23jfx6
The Labor Department said its closely watched Consumer Price Index rose 0.8 percent last month, the biggest one-month increase since a 1.2 percent surge in September 2005, when the country was hit by rising energy costs in the wake of Hurricane Katrina.
Core inflation, which excludes volatile energy and food prices, also accelerated in November, rising by 0.3 percent, the biggest increase in 10 months.
Core Inflation also excludes housing and medical. Our individual HMO plan, goes up 28% in 2008, $900/mo is the new rate. That’s some hefty inflation.
‘Core Inflation’ -Another worthless statistic from our nefarious government.
Mine (high-deductible) goes from $5/mo to $7.50. That’s still 50%. Oh well, I don’t have a mortgage or a car payment or a heating bill, so what am I worrying about.
passthebubbly-
I wish we were in your shoes, but even with no debt (us too), I am sick of paying for the illegals in So Ca. Factor in all the real reasons for a substantial healthcare increase, and 28% is still insane. $900/mo for two healthy adults is absurd. I could be driving a MBZ (if being pretenious was my thing).
OMG, I thought that was for a family of four or more! Any way you could find cheaper insurance?
What an absolute rip-off!! Sorry to hear about that.
As house prices decline, maybe the gov will re-include housing in CPI ?
definitely, in Europe this is a proposal that is on hold until the bubble bursts; I am sure they will include it in the CPI calculations (instead of rents) at the most convenient moment.
still more STAG then inflation
Les Miserables; wheat costs drive bread cost higher:
Sara Lee Corp., the maker of Ball Park hot dogs and its namesake frozen pies, is raising bread prices in North America for the second time since September to counter higher wheat costs.
“We increased prices by 5 percent in September and we are doing it again at this moment,” Sara Lee Chief Financial Officer Theo de Kool said Wednesday. He declined to say how much Sara Lee is raising prices this time. “I haven’t seen adverse effect on volumes.”
http://tinyurl.com/2rfy7p
Sara Lee Chief Financial Officer “Theo de Kool” said Wednesday.
Wow, some of the names that have come across this blog in the past few years have been something else.
european inflation surges:
DUBLIN, Ireland: Inflation in Ireland rose last month to 5.0 percent — the highest rate in western Europe — on the back of higher fuel and food prices, the government’s Central Statistics Office reported Thursday.
The rise from October’s rate of 4.8 percent increased Ireland’s long-standing run as the price-rise leader of western Europe dating back seven years, when inflation peaked here at 7.0 percent.
Only new euro-zone entrant Slovenia, with 5.8 percent inflation, has a higher current rate than Ireland within the 13-nation zone that uses the European common currency. Inflation throughout the euro zone is averaging 3.0 percent, itself a 6 1/2-year high that reflects global rises in the cost of oil and agricultural goods.
http://tinyurl.com/2mpvxt
I think it is similar in most of Europe; in Netherlands official inflation is still below 2%, but that is only because rents are a huge part of the CPI, and most rents are under state control (heavily subsidized, and maximum increase this year 1.5%). In most EU countries, food prices and energy are up 10-20% from last year; even the 5% number sounds suspicious.
but hey, we already know the central banks don’t give a damn about inflation and will keep pleasing the Wall Street crowd instead of their citizens (well, probably they are also pleasing the debt slaves because they enjoy low rates and can live beyond their means a little longer).
I’m not sure the MSM, or many readers here, understand the definition of “inflation.” So many people have capitulated to the government’s definition of it. Even the dictionaries are using the government’s definition of inflation. It’s very frustrating. I truly believe that we must all try to switch our use of the word to only mean what the Austrian School says it means: inflation/deflation should only be a term used to express changes in monetary supply. If we all do this, others will quickly learn the fraud of the Federal Reserve (and fractional reserve banking), and the only tool the Fed has: create (usually) or destroy (rarely) money.
Inflation, and deflation, define one thing — the creation or the destruction of money. They don’t define the prices going up or down. The words used when prices go up is “prices go up.” When we use inflation to signify monetary price increases, we dilute the true perpetrators of that monetary price increase: central banks, and banks without full reserves backing deposits and loans.
Inflation, or the creation of new money, has the long term side effect of causing prices to go up in some markets. Prices going up is not inflation, it is an effect of inflation of the money supply. If you want to say prices have gone up due to monetary expansion, don’t call it inflation, call it “a price increase solely due to too much money being counterfeited legally.”
defining inflation as prices going up or down does not work anyway, because there are always prices that are going up AND other that are down at the same time (how convenient for government, because this makes inflation impossible by definition). I agree that inflation is really expansion of the money supply; now the tricky part is what money supply (M1, M2, M3) …
collateral damage:
The national surge in mortgage defaults is claiming more victims than just the thousands of subprime borrowers facing the prospect of losing their homes.
Social service agencies say homeless rates are on the rise not only as families lose their own homes to foreclosure but also as renters are evicted after their landlords default. Financial analysts warn that state and local governments will soon feel the pinch of sharply reduced property tax revenue. And counselors say divorces and reports of abuse are rising as families burdened by impending foreclosure take their stress out on one another.
http://www.msnbc.msn.com/id/22246203/
Not to be too gloomy, but I wonder if the housing bust and associated financial collapse are a cause for this disturbing trend:
CDC: Suicides among middle-aged spikes
http://tinyurl.com/2qkb8a
In 2004, there were 16.6 completed suicides per 100,000 people in that age group. That’s the highest it’s been since the CDC started tracking such rates, around 1980. The previous high was 16.5, in 1982.
1982 and a poor economy ring a bell.
I mentioned the other day that **anecdotally** there have been more suicides in our area than in past years (San Diego area).
There certainly could be some correlation.
wives beating up husbands
Who to owe?
People try to put nothing d-down (Talkin’ ’bout my generation)
Just because we got no money around (Talkin’ ’bout my generation)
Things they do look awful c-c-cold (Talkin’ ’bout my generation)
I hope the bubble dies before I get old (Talkin’ ’bout my generation)
This is my generation
This is my generation, baby
Why don’t you all f-fade away (Talkin’ ’bout my generation)
And don’t try to dig what we all s-s-say (Talkin’ ’bout my generation)
I’m not trying to cause a big s-s-sensation (Talkin’ ’bout my generation)
I’m just talkin’ ’bout my g-g-g-generation (Talkin’ ’bout my generation)
This is my generation
This is my generation, baby
http://www.youtube.com/watch?v=i0XknwXqLDo&feature=related
you’re poet and don’t no it
“I’ll go out and plug a few civilians”
“you’re poet and don’t no it”
… but your feet show it. They’re Longfellows
I heard this one from Knopfler for the first time recently…
They’re driving long nails into coffins
You’ve been having sleepless nights
You’ve gone as quiet as a church mouse
and checking on your rights
The boss has hung you out to dry
And it looks as though
they’ll punish the monkey
and let the organ grinder go
You’ve been talking to a lawyer
Are you gonna pretend
that you and your employer
are still the best of friends?
Somebody’s going to take the fall
There’s your quid pro quo
They’ll punish the monkey
They’ll punish the monkey, yeah
They’ll punish the monkey
and let the organ grinder go
Here comes a policeman
He won’t be sidetracked
He’s asking about a smoking gun
He’s after the facts
It’s a quiet life from here on in
You’ve dropped your poison cup
The telephone is ringing
But you’re not picking up
Time’s up, Sir Lord Flunkey
And everybody knows
they’ll punish the monkey
:
and let the organ grinder go
RE: Punish the Monkey…
Great tune isn’t it?
I just heard it just a couple weeks ago, and ordered the CD.
Imagine sounding dated because you bought some music on a compact disc.
http://www.minyanville.com/articles/CIBC/index/a/15207
Down 100 pts, time for the invisible man to start the buy program.
He’s not really invisible — you just didn’t notice that curtain in the back of the room…
Mr. Market sure looks like he wants to keep dropping past 100 pts on the DJIA…
Ya gotta have faith in the wizard, expiration week coming up.
Maximum pain is at 147 on the SPY if you believe in that theory.
I wouldn’t be shocked to see a run back to 150. OI is still over 440k in the dec 1500 strike (p/c). Funny how the djx stopped at 13,400 and reversed.
Today’s strike price appears to be set for DJIA = 13,400…
Floor level of DJIA = 13,400 is holding firm…
Whose job is it to contain stock market selloffs to 1 percent? I though trading collars were eliminated?
10%
http://www.nyse.com/press/1190976728663.html
Methinks Mr. Market just punched the invisible man below the belt…
They are betting on an expiration surprise. And if they don’t get it, maybe another crybaby selloff?
Internet sales lousy. There goes my AMZN thesis.
Amazon.com fell 97 cents to $91.43. EBay, the largest Internet auctioneer, dropped 28 cents to $33.81.
Internet sales from Nov. 1 through Dec. 11 increased 19 percent to $20.5 billion, Reston, Virginia-based ComScore said yesterday. Online sales in November and December may rise 20 percent, a record low for the industry, and slower than the 26 percent pace a year earlier.
U.S. retailers may report the worst sales growth since 2002 this year as higher fuel and food costs discourage spending during the holiday gift-giving season, the National Retail Federation said.
But I thought higher food and fuel costs didn’t count? The Fed doesn’t count them so why should we. Oh that’s right we are the ones that actually get to pay the bills.
U.S. retailers may report the worst sales growth since 2002 this year as higher fuel and food costs discourage spending during the holiday gift-giving season, the National Retail Federation said.
No, higher fuel and food costs ENCOURAGE spending — on fuel and food. Which means less to spend on other retail products.
A friend is worried… he manages the servers for a web site (fortune 500 company)… and they aren’t hitting the numbers for sales.
I think we’ll see “growth.” Just less growth than inflation.
Got popcorn?
Neil
Bought longer-dated puts for AMZN and GOOG not too long ago. Could very well expire worthless. But could easily pay off big if those ridiculous P/E ratios are finally called into serious question.
Who would have thought we’d be given the gift of another internet stock bubble?
– No recession is imminent.
– Inflation is heating up.
– Time for the Fed to focus on its core business of containing inflation?
Economy holds ground
November numbers offer no clear signs to guide Fed policy
By Vikas Bajaj
NEW YORK TIMES NEWS SERVICE
December 14, 2007
PAUL SAKUMA / Associated Press
(A Costco customer shopped for beef this week in Mountain View. The Commerce Department reported that retail sales increased by a better-than-expected 1.2 percent last month.)
Maybe the American economy is not going to keel over, after all.
Government reports released yesterday showed surprising resilience in the broader economy, even as the financial system and the housing market continue to weaken. Retail sales rose 1.2 percent in November and even housing-linked areas like furniture and building materials were up.
Wholesale prices surged, indicating strong demand and raising cautionary flags about inflation, and a weekly report found that new unemployment claims fell by 7,000, suggesting a healthy job market.
http://www.signonsandiego.com/uniontrib/20071214/news_1b14economy.html
December 14, 2007 9:47 A.M.EST
BULLETIN
DOW INDUSTRIALS SUFFER TRIPLE-DIGIT DECLINE AS U.S. EXCHANGES OPEN
Gasoline, more fuel inflation
Consumer inflation running at fastest pace in more than two years
Gasoline costs pressure consumer prices, as clothes, drugs and airfares also spike. Data could limit capacity of Fed to trim rates.
http://www.marketwatch.com/
Whipsawing our way into stagflation…
Time to dust off those WIN buttons? (Whipsaw Inflation Now)
subprime mess now in plastic:
There are early signs that card issuers may need to cut back on their free-lending ways after the holiday shopping season. Delinquency rates on cards have spiked in markets such as Detroit and Las Vegas, where housing prices have fallen the most, according to Equifax (EFX) and Moody’s (MCO) Economy.com—a warning to card lenders that they aren’t insulated from the housing bust. Buyers of card-backed securities—the industry’s prime source of capital—are suddenly demanding higher returns. In a possible hint of things to come, Discover Financial Services announced on Dec. 3 a $442 million writedown on its Goldfish credit-card business in Britain.
http://tinyurl.com/22dqv3
Practically everyone we know was using their “home equity” to pay off credit cards.
Again, something HBB’ers could clearly see coming while the fiddlers continued playing.
“Gloomy retail season
The two busiest shopping days of the season loom in the United States: December 15 and December 22, the last two Saturdays before Christmas.
Yet soft retail sales growth for October and November does not augur well for the holiday season, and suggests that consumer spending — the main engine for US growth — will be disappointing during the fourth quarter. With rising gasoline prices and consumer confidence continuing to lag behind last year’s levels, research firm ShopperTrak is predicting a 2.5% drop in foot traffic this year.
Excluding gasoline, automobiles and building products, sales have been almost flat after factoring in inflation. The pullback is broad-based, as turnover has declined at department stores, music and bookstores.
The slide in consumer confidence has been abetted by a renewed oil price surge towards nearly 100 dollars per barrel and recent rounds of abysmal housing sector data. Consumer confidence will continue to take a battering as long as the housing sector remains in freefall. While some retailers are optimistic about their prospects over the festive season, retail sales growth is likely to be soft.”
Oxford Analytica
World News
http://tinyurl.com/24ecgt
The lure of ‘Made in America’
“Weak dollar, costly crude mean foreign companies are looking anew at U.S.
LONDON (MarketWatch) — Forget about China, the U.S. is the new hot spot for global firms looking for lower production and transport costs, increased supply-chain flexibility and a crack at wooing the world’s most demanding customers.”
Huh? When did that happen? Even with the dollar dropping I’m not sure how our costs became cheap virtually overnight.
Minimum wage in the Euro nations is 7 EU … a huge price advantage to use the qualified workers in the US.
in EU there is no minimum wage requirement if the workers work for a foreign company (from a country where minimum wage is lower), except for some sectors that are protected like the homebuilding industry in my country. In my area most of the ‘new companies’ last year where registered by people from Poland. Not that they are such awesome entrepreneurs, this is simply to get rid of minimum wage and other requirements about working hours etc. These people work for sometimes just a few euros per hour, effectively they work for Dutch companies that get most of the revenue - but they will not be hired directly because then the Dutch labor/wage requirements would apply.
Wow, an institutionalized underclass. You have reinvented the caste system.
US companies essentially do the same thing with illegal alien labor, particularly in agribusiness and meatpacking … no?
ET,
I don’t think it is the same but I understand your point. Imagine the outcry if we changed the law to allow illegals to work here, but at less than the minimum wage for citizens.
US companies essentially do the same thing with illegal alien labor, particularly in agribusiness and meatpacking … no?
It’s not just a minimum wage phenomenon. US companies do the same with H1B visa holders for cushy white collar jobs. At my bank, there are 2-3 consultants per each full time employee. Most of the consultants are H1b-ers supplied by an external company. Wages are suppressed for all.
“…These people work for sometimes just a few euros per hour, effectively they work for Dutch companies that get most of the revenue - but they will not be hired directly because then the Dutch labor/wage requirements would apply.”
This is exactly how the US education system works for Adjunct teachers…it’s an economic “tool” and “they” are quite adept at using & expanding it. Someday maybe…Americans can get a “free” degree via Google, no parking & no student loan to pay for the “latest” class texts. Hey, maybe Ben could get some $$$$$$$$$ for his HBB blog 101 accelerated course on: “How to buy a house, even if you are stupid” or ” Homeownership without the Joshua Tree effect”
Perhaps the US has already been cheap for a while, but nobody was sure if it would stay that way long enough to justify the investment? If so, suddenly increasing overseas investment in the US would suggest the whole world is becoming much more confident that the US has financially screwed itself long-term.
“The size of the US asset-backed commercial paper market has shrunk for an 18th consecutive week, reducing this important source of funding for financial institutions to its lowest level in two years.
For the week ending on Wednesday, the amount of outstanding ABCP declined $10.3bn to $791bn. …”
http://tinyurl.com/2aut6x
A fairly nice analysis of the Paulson/Bush plan in the New Yorker Magazine
Paulson’s Plan
by James Surowiecki December 17, 2007
“….Although the plan will provide real relief for at least some homeowners, it’s more like a Band-Aid than like the major surgery that some of the hype makes out. That’s because at this point interest-rate resets are just a small part of the mortgage-market problem. Postponing rate resets doesn’t change the fact that too many people spent far too much borrowed money on houses with prices that were far too high, and that they are now stuck in homes that they can’t really afford and can’t sell. Even with the interest-rate freeze, foreclosures will keep rising. More important, problems in the credit markets are no longer limited to subprime loans; rather, they involve a wholesale reëvaluation of risk, fuelled by a deep sense of distrust in the way the financial system rates and values assets like mortgages. For these problems, there’s only so much that even the government can do. In 1907, J. P. Morgan was able to come to the rescue not just because he could get all the people who mattered into one room but because he was facing a clear problem with a clear solution. Those were the days. ”
New Yorker
http://tinyurl.com/2slbsj
“Postponing rate resets doesn’t change the fact that too many people spent far too much borrowed money on houses with prices that were far too high, and that they are now stuck in homes that they can’t really afford and can’t sell.”
That pretty much sums up the reason that the teaser-freezer won’t do much to help homeowners avoid eventual foreclosure.
P.S. James Surowiecki rocks! I highly recommend this book to anyone who is amazed that this blog could successfully predict falling home prices when REIC experts missed it completely (aside from a few outliers):
http://www.randomhouse.com/features/wisdomofcrowds/
Interest rates were generally falling in 1985-89 with a 3% unemployment rate when housing crashed in Austin, TX due to over speculation and supply. Freezing the rate won’t help much when you are $200K or $400K underwater…it takes a little time to go from denial to acceptance then capitulate. I expect a lot of capitulation in 2009 even with frozen rates.
I expect frozen rates to worsen the crash, as it will be awfully hard to unload your falling knife if there are no lenders making home loans.
Heckuva Job, Bernanke! Is the Fed the new FEMA?
By Daniel Gross
The commonalities:
1) An obvious failure to prepare for the sort of cyclical event that was predictable and plausible and would disproportionately harm poor people and minorities.
2) When the deluge came, the Bush-appointed leaders of both entities, like their counterparts in relevant Cabinet agencies, failed to recognize the severity of the problem, even in the face of mounting evidence.
3) In both instances, the failure to respond in a timely manner was aggravated by a post-debacle misdirection of government resources.
4) In both instances, the combination of incompetence and neglect in the face of disaster drove emotive cable TV news divas to on-air meltdowns.
http://tinyurl.com/2cdlwt
Slate
Crisis is Opportunity
This is an ancient Chinese motto.
http://www.formosa-translation.com/chinese/c/czz162.html
“drove emotive cable TV news divas to on-air meltdowns”
I’m not sure I would consider Cramer to be a ‘diva’…
Cramer’s rant was in retaliation for his Wall Street connections who are not in any kind of pain as of yet, and will probably all survive to trade another day.
A. Cooper’s rant took place after living for days surrounded by death, hunger, thirst and people being driven to the limit.
FEMA is superior, since it itself did not create the storms that devastate the poor.
From the article:
“(The Lifetime Achievement Award for Irresponsible Finance will be awarded next year at a ceremony in a foreclosed McMansion in the suburbs of Phoenix. Thus far, Greenspan and Countrywide Financial CEO Angelo Mozilo are generating the early buzz.)”
Citicorp
http://www.minyanville.com/articles/C/index/a/15212
Reading Citicorp, I flashed back to the ’70s!
Not fair, I was almost young again.
I think he is correct about the risk, I think he is wrong about inflation/deflation.
euro down more than 2 cts on the dollar today, they sure blew many stops at the 1.45 euro/dollar level. Party time for the ECB burocrats, let’s see what we can do for our big friends at Airbus
I wouldn’t worry; this is a counter-trend dollar rally. The trend for the buck is down.
I wouldn’t be so sure. The euro is even more inflated than the dollar right now, IMO. Sure, the dollar trend is devaluation with respect to itself a few years ago, but exchange rates are obviously relative. The euro is also much devalued compared to itself a few years ago, and the market is later to catch on to that than they were to catch on about the dollar (just as the market is later to catch on about the EU housng bubble). The result is that the euro is likely overvalued versus the dollar, not undervalued.
ECB isn’t going to cut rates the way Fed has, and will.
Rate cuts will make very little difference at this point.
NEW YORK (Reuters) - More than one in five U.S. homeowners expect their home to fall in value in the coming year, a Reuters-University of Michigan consumer survey said on Friday.
The survey found 21 percent of the 1,168 surveyed see a fall in prices, with those heavily concentrated in areas that have already seen values decline, the survey’s director Richard Curtin said in a statement.
Even homeowners that expect gains in prices over the next five years are becoming less optimistic, the survey said. The 60 percent that expect higher prices see a mean increase of just 2.9 percent, which is down from 3.9 percent six months ago and fails to keep pace with inflation….”
http://tinyurl.com/2xmpee
An interesting note in the article is that “The survey is the latest evidence that the U.S. housing slump, now in its third year, will linger longer than expected.” Third year?
interesting to know that at least 80% is still in denial and yes, that suggests there is more pain in the pipeline. But pretty good score compared to europe, where probably 99% is still sure that the value of their home will go up at least 5% or so (inflation plus the homeowner entitlement) every year.
How’s this for the use of a home equity line of credit:
(Money Magazine) — Kerri and Mike Miller have a spending problem. Three of them, in fact.
There’s 12-year-old Kate, a seventh-grader who covets a pair of $160 boots, prefers clothes from American Eagle rather than Target and recently got a $300 cell phone.
There’s nine-year-old Landon, who has a voracious appetite for video games. And their youngest, four-year-old Claire, will soon start taking ski lessons (cost: $224, not including equipment).
All three kids attend summer camps that run about $60 a day for each child. And then there’s the cost of babysitting ($200 a month), preschool ($4,000 a year) and braces ($3,000).
Even with Mike’s six-figure salary in commercial finance, the Park City, Utah couple’s ends are nowhere close to meeting.
“I look at how much money we spend and I think, ‘Where is it going?’” says Kerri, 44, who is a stay-at-home mom.
It’s not all going to the kids, of course: Mike and Kerri have their own indulgences, like the hot tub they put in last year.
The home-equity line of credit they opened two years ago to pay for home improvements now often serves as a safety net when they come up short at the end of the month. The balance is almost $50,000.
“We’ve seen that go up and up and up,” admits Mike, 48. Meanwhile, aside from the $300,000 in Mike’s 401(k), the couple have almost no savings. And that means no emergency fund and not a dime set aside for the children’s college.
What a load of human waste. Al of them.
Kids learn from their parents; if you raise consumers you get consumers. Methinks the little Winthorpes will look back on the pre-teen time as golden years if the future is as bleak as it seems.
Personally I would straighten them out by renting them to a Gap clothing sweatshop; a few 20-hour days chained to a sewing machine with breaks for moderate whipping and water will teach them the value of money. But that’s just me.
“Mike’s … salary in commercial finance…no emergency fund.”
Commercial finance, and no emergency savings, ehh? We’ll have to ask Mike in a year “how’s that working for you?”
Sadly that family’s spending doesn’t even seem that shocking compared to what I’ve witnessed locally. The list didn’t even mention every other month family vacations, spa visits, or the blow out parties for every age group (i-pods as party favors for a 10 year old’s b-day!). The guy who provides 15 minutes of class B fireworks for his wife’s b-day from his hilltop home entertained the town again this year. The 12 year old that was given $600 fun money for her weekend in NYC seemed a bit over the top for me.
Now these families could be swimming in cash or swimming in debt. But after reading what’s going on nationally, I’d place my wager that many of them are digging themselves into a financial hole they’re never coming out of w/o a brush w/bankruptcy. A dark cloud is going to snuff out the party-on atmosphere.
They levergaed their house to the kilt. They maxed out their credit cards, now they are borrowing their future earnings with Payday loans. When will the madness stop!!
http://tinyurl.com/2tzsxx
After they bleed the 401k dry
whoops - should be tagged to tellall’s post.
Already started.
Hardship withdrawls from 401k’s are spiking.
Isn’t that how Casey kept himself afloat for a while and then even they cut him off?
If you are having to hit a Payday center, you are beyond saving IMO.
They levergaed their house to the kilt.
Faith and Begorrah!
Report from Republic, MO
This is a suburb of Springfield, MO in SW MO
Starter new 3bd 2ba homes that were selling for $110K a year ago are now listed at $100K.
Ooof! Dollar shorts are getting crushed. How much is this priced into the multi-nats and are they hedged?
Dollar bounce will not break 80 on the index. You have my guarantee, a la Jas Jain.
I think 85 is a better target, more resistance at that level. (80 would trip a lot of stops)
Permabulls in Denial
http://www.thestreet.com/s/kass-permabulls-remain-in-denial/newsanalysis/investing/10394559.html?puc=_tsccom
Mmmm, burger!
D’oh…
Still not the time to buy housing stocks
Fri Dec 14, 2007 11:02am EST
By Ellis Mnyandu
NEW YORK (Reuters) - Investors looking to profit from U.S. housing stocks will have to be patient.
Even though they have sunk to multiyear lows, strategists speaking at the Reuters Investment Outlook 2008 Summit said they still aren’t worth the risk.
They warn the housing slump is far from over and that the ongoing credit crisis would hinder any sort of a recovery.
“It’s a bit premature to go and buy them,” said Milton Ezrati, senior economist and market strategist at Lord Abbett & Co. “There is still bad news out there.”
http://www.reuters.com/article/InvestmentOutlook08/idUSN1453057820071214
After the Money’s Gone
By PAUL KRUGMAN
Published: December 14, 2007
“…In past financial crises — the stock market crash of 1987, the aftermath of Russia’s default in 1998 — the Fed has been able to wave its magic wand and make market turmoil disappear. But this time the magic isn’t working.
Why not? Because the problem with the markets isn’t just a lack of liquidity — there’s also a fundamental problem of solvency…..”
http://tinyurl.com/yoebn4
New York Times
Why is solvency a problem when you have a printing press? I am so confused about this, I may have to read up on macroeconomics to get a better understanding…
These “helicopter drops” are so far all temporary repos, not permanent repos.
On the FHA housing legislation that just passed the US Senate:
“The legislation will help the Federal Housing Administration “be a source of salvation for those families who were tricked into unaffordable loans,” said Sen. Charles Schumer, D-N.Y.”
Sen. Schumer, I believe what they were “tricked” into were unaffordable HOMES, not loans…and they were often “tricked” by friends, family, the US “ownership society” government, and themselves.
“…Housing and Urban Development Secretary Alphonso Jackson said. “Keeping a roof over the heads of families is the best gift Congress could give the American public this year.”"
Again, I have to ask: to ‘keep a roof over the heads’ of people who bought more house than they could really afford…couldn’t they RENT? Or do rentals no longer include roofs?
Would be a shame if it turns out Schumer and friends just fooled lots of low income hhs into financially bleeding themselves to death trying to pay back a loan on a home they cannot afford?
Does FEMA have any trailers left?
Or do rentals no longer include roofs?
ha!
My rental has a roof. And guess what, if it gets broken, I won’t have to pay to fix it.
RE: Again, I have to ask: to ‘keep a roof over the heads’ of people who bought more house than they could really afford…couldn’t they RENT? Or do rentals no longer include roofs?
FHA/HUD will set up a finalized program pegging participants house payments to their income.
A $2500k a month payment will be sliced and diced so the deadbeats pay $500 and the taxpayer ponies up the balance-just like the Section 8 and low-income senior citizen apartment who get a $1200.00 fair market rental for $300.
I’m gonna hurl. How do I get off of this bus? When will it be simply too much of a burden for the tax payers to carry?
Who is John Galt?
The Dow in terms of Gold:
http://www.chartoftheday.com/20071214.htm?T
Schwarzenegger Will ‘Declare Fiscal Emergency’ In Weeks
Gov. Arnold Schwarzenegger said Friday he will declare a “fiscal emergency” in January to give him and the Legislature more power to deal with the state’s growing deficit.
Schwarzenegger made the announcement Friday after meeting with lawmakers and interest groups this week to tell them California’s budget deficit is worse — far worse — than economists predicted just a few weeks ago.
The shortfall is not $10 billion, but more than $14 billion — a 40 percent jump that would put it in orbit with some of the state’s worst fiscal crisis, those who have met with him said.
http://tinyurl.com/2rkshf
He’s got my vote as this century’s arty ex-pat Austrian strongman leader.
On Bloomberg today, they were talking about all the Europeans boosting the NYC economy with their Euros. I could swear they said that Bloomingdales was offering discounts to people with non-U.S. passports.
What’s with that? I’m not a xenophobe (in fact I married one who is now a U.S. citizen), but If I lived in NYC, I think I would boycott Bloomingdales and spend my devalued dollars elsewhere.
Senior discounts bug me enough (age discrimination), but at least I get a kick out of my 81 year-old dad being able to ski practically for free (which he does about 10 times per season). Discounts based on national origin somehow just don’t seem right…what if the discounts were only for those with U.S. passports?
Edit above to say “…(I married a foreigner who is now a U.S. Citizen)…”
(Wouldn’t want better half to think I called *him* a xenophobe).
I gotta say, I don’t care a bit. I don’t shop at Bloomies, but if tourists want to spend there, and add to the sales tax revenues, let them. I use the internet–I look for free shipping and skip the sales tax.
Sung to the tune of Chestnuts Roasting on an open fire.
Traffic backed up on the 405
Beemers honking at South Coast
High maintenance blondes with their credit cards dive
into the frenzy with the most
Everybody knows that housing prices don’t go down
As Gary Watts is heard to say
Learah is gone, he was oh such a clown
The liars left are Yu and LAY
They say “the gov will bail us out”
They’ve got a plan to freeze the interest, twist and shout!
At Fascist Island their spending without a care
because the money is falling from the air
And so I’m offering this simple phrase
to debtors and those sad FBs
Although it’s been said many, times many ways
Get real suckers, you’re screw*d.
In Detroit: Hundreds line up for 84 hour/week, 366-day jobs in Iraq. “The ‘Mine Resistant Ambush Protected (MRAP) Vehicles Job Fair’ was seeking more than 500 workers: welders, heavy mobile equipment mechanics, production controllers, administrative assistants, supply technicians and quality assurance specialists.
It’s the first time the U.S. Army TACOM Life Cycle Management Command, along with Macomb Community College’s Workforce Development Institute, had hosted this sort of job fair in Metro Detroit. It was prompted by the state’s poor economic condition and its workers’ automotive skill set.
Michigan’s limping economy is “a driving factor to make this opportunity,” said Tim Tarczynski, deputy chief of staff for personnel at TACOM’s Life Cycle Management Command. “When an economy is down, we have more opportunities to get qualified applicants. We’re looking for committed people to deploy MRAP vehicles and to work on those vehicles with the soldiers in Iraq.” “
I know this OT but I am dying to the what is “FB” means??
F*cked Borrower or Buyer