Bits Bucket And Craigslist Finds For December 17, 2007
Plese 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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Hold Tight…
http://news.yahoo.com/s/ft/20071216/bs_ft/fto121620071125128661;_ylt=AlQ3KZaMsnD0kCurVMb.5Ov2ULEF
While I don’t doubt the central banks’ ability to create such inflation for the reasons given, I don’t see how it can save the U.S. housing market in any appreciable way. There is just no way, for example, that FBs can hold out for the eight years (assuming their UK model were applied to the U.S.) the writer predicts that jacked-up inflation would need to bring nominal prices in line, nor can I imagine why the majority of them would want to. That’s longer than the credit-trash from bankruptcy. It seems that the alchemy they are trying to perfect is the artificial holding of home “ownership” at a higher percentage than historical fact and human nature will support. Some folks are, in the words of a buddy of mine, “BTR” - Born To Rent.
In the U.S., the prospect of juiced inflation can appeal only to those who would expect a commensurate increase in income and who assume that tax brackets would be adjusted accordingly. But how is that increase in income likely to come about, in the current economic climate and relative to the majority of earners in the country?
–
Chip, my editorial below addresses some of the issues.
Jas
Chip,
You posted yesterday that Ghawar had already produced oil equivalent at 100% recovery to a cube 19×19x19 miles.
19 miles is a touch over 30 kilometres, or 3 x 10^4 metres.
So 19 x 19 x 19 cubic miles is 27 x 10^12 cubic metres.
A barrell is 150 litres, or 0.15 cubic metres, so that’s 180 x 10^12 barrells.
Putting it another way, 180 trillion barrells or a touch over 5000 year’s world consumption at 2005 rates.
Possibly the cube is 1.9 miles on a side, rather than 19.
Stuart Staniford of the oildrum.com put out an excellent analysis of Ghawar’s depletion status in May 2007. It’s really hard to know for sure what’s happening in Saudi, but I thought this was really extraordinary sleuthing. It’s a bit on the technical side, but considering that virtually everthing about our modern society depends on cheap oil, it’s worth reading.
Depletion Levels in Ghawar
Excellent. Thanks.
The writer is a computer security guy, for gosh sake. Pls. check my link below — gobs of geophysicists.
Anyway, I sent this link off to Aramco for comment.
ozajh - very sorry that I am reading this late Monday night. Will look at my notes and try to find a place to post to you tomorrow. Worst case, it will be here, albeit “post-dated.”
Ozajh – (also posted this in Dec. 19 Bucket after your post about baseball and lawyers) — replying to your correct observation yesterday that I must have gotten something wrong with my note about the Ghawar “cube of oil.” I should have read my notes rather than try to remember them. This is the quote, from an article on the topic, that I should have posted:
“Alone to have produced the amount of oil to date that (Saudi Arabia’s) Ghawar field has produced would have required a cube of fossilized dinosaur detritus, assuming 100% conversion efficiency, measuring 19 miles deep, wide and high.”
The quote is attributed to Dr. J. F. Kenney. He apparently is one of the very few Western geophysicists who taught and worked in Russia and studied under Vladilen Krayushkin, developer of the Dnieper-Donets Basin. Here is one of many references to his work:
http://www.csun.edu/~vcgeo005/Energy.html
Very sorry about the misleading math. The point for which it was posted, which remains valid nonetheless, was that fossil detritus cannot possibly have been responsible for the vast amount of oil that has been and continues to be discovered.
Unfortunately, this means that I have been unmasked as the guy behind the quant math that hedge funds used to market all those handsome MBS CDOs.
Groan — “Dec. 18 Bucket”
Greenspan alluded to that fact on This Week, this attempt at price fixing (by congress) is a drastic mistake. I’d apply that to the PPT intervention, too. The markets are headed for a major correction.
You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.
Abraham Lincoln, (attributed)
16th president of US (1809 - 1865)
“You can fool some of the people all the time, and those are the ones you want to concentrate on.”
George W. Bush
You can fool all of the people some of the time, and those are pretty good odds.
“There’s an old saying in Tennessee - I know it’s in Texas, probably in Tennessee - that says, fool me once, shame on - shame on you. Fool me - you can’t get fooled again.”
words of wisdom, from what passes as our leader.
“Victory means exit strategy, and it’s important for the President to explain to us what the exit strategy is.”
* On Kosovo, Houston Chronicle (April 9, 1999)
’ssshrubery
lol, Hoz.
lad, I think George would tell us what his exit strategy is as soon as he learns how to pronounce “exit strategy”.
Oops…
Analysts Botch Profit Forecasts On Home Turf
By Scott Patterson
Word Count: 528 | Companies Featured in This Article: Morgan Stanley, Bear Stearns, Lehman Brothers Holdings, Goldman Sachs Group, National City, PNC Financial Services Group, Citigroup, Merrill Lynch
Wall Street’s stock analysts have been blindsided yet again.
In perhaps one of the biggest analyst lapses since Wall Street made darlings out of such 1990s Internet companies as Pets.com, most of the Street’s researchers missed a chance to call the problems now taking place in their own backyard.
In July, analysts surveyed by Thomson Financial expected banks and brokerage houses in the Standard & Poor’s 500 stock index to post third-quarter earnings increases of 9% from a year earlier — even as evidence mounted that the housing market and takeover boom were in jeopardy. The actual third-quarter result: Profits fell 27%.
http://online.wsj.com/article/SB119784943559032555.html?mod=todays_us_nonsub_money_and_investing
Bonuses all around!
I assume the stock market will rally from here, since all the bad news is priced in?
“There is just no way, for example, that FBs can hold out for eight years …”
The knifecatchers will save us. The exhausted FBs will sell out to the knifecatchers who will become the new FBs who will end up selling out to a new batch of knifecatchers and so on until the bottom is reached.
The knifecatchers will spawn from the BS generated by the NAR and their lackeys in the MSM.
The knife catchers will be looking to catch the bottom of the price move; The NAR will convince them the bottom is near and that they should commit their money. This new money will serve to dampen the decline, to make the decline a mirror image of the ascent.
Praise the knifecatchers for they shall save the day. Also, praise the NAR for they will persuade the knifecatchers to do so.
And praise the Fed for its economic stimulus to encourage more overbuilding of McMansions. There should be plenty of McMansions to go around before this mess ends.
A car in every McMansion, and a chicken FB in every plot.
The knifecatchers will spawn from the BS generated by the NAR and their lackeys in the MSM.
I don’t know if they’ll be successful, but they’re trying. One of the commercials I heard during a game yesterday had to be from the NAR - I couldn’t see the screen - I had to assume it was the NARcysts because no particular Realty was mentioned.
There was the calm narrator voice laying out the facts and conclusion:
-Interest rates are at historic lows
-Plenty of options in the market
ergo, Now’s a great time to buy
Feh.
“The knifecatchers will save us. The exhausted FBs will sell out to the knifecatchers who will become the new FBs who will end up selling out to a new batch of knifecatchers and so on until the bottom is reached.”
How many knifecatchers are out there? Somehow I can’t imagine multiple rounds of knifecatchers especially if one assumes that an KC catches the knife only once.
Just a matter of time… we are on the way…http://en.wikipedia.org/wiki/Image:Inflation-1923.jpg
At least finally somebody distinguished between liquidity and solvency. Not only do banks not have the cash in the checking account to pay the Visa card, they just don’t have enough cash, total, even if they sold off the plasma, the Esclade and the house.
Now if only somebody would distinguish between a “subprime” mortgage and the “non-fixed pay that everybody took advantage of and it just happens that the clock ran out on the subprimes first” mortgage…
The difference is between the technical definition of “subprime”, which is a really low FICO score (below 620 IIRC), and the natural meaning, which is “a loan that isn’t a prime *loan*”. A prime loan IMO is a loan at a fair rate to a borrower with good credit able to pay and who put down a decent down payment. By the natural definition “subprime” is probably a majority of recent mortgage originations. Expect the industry to blur the category as much as possible for as long as possible because a fair accounting means death for most companies involved in American mortgages.
At least finally somebody distinguished between liquidity and solvency. Not only do banks not have the cash in the checking account to pay the Visa card, they just don’t have enough cash, total, even if they sold off the plasma, the Esclade and the house.
Is there any way of calculating this? Could it be true that if you took the sum total of all unsecured and HELOC debt it would exceed the bank reserves? So if everyone wanted to simply pay off everything—assuming the funds were magically shared equaly amound everyone–everything would simply go out of business?
That’s scary!
This paragraph was especially interesting:
(discussing UK housing price trend line slightly above inflation since 1950). (My emphasis)
—-
Homeowners and mortgage lenders are always clinging to the hope that there may have been a structural shift. But even then, it is not at all clear whether such a shift would necessarily raise the position or the slope of the trend line. For example, an increase in housing supply or some regulatory restriction on credit may well lower it.
—-
Why can’t I get that image of Slim Pickens riding the nuke to ground zero out of my head?
The image I have in my mind is from Blazing Saddles, where Governor Petomane and Attorney General Hedley Lamarr plot on doing something, anything, to save their phoney-baloney jobs.
Money Illusions
December 17, 2007; Page A20
Groucho Marx once asked, “Who are you going to believe, me or your own eyes?” Too bad Groucho doesn’t work at either the Federal Reserve or on Wall Street, where economists have been predicting that slower economic growth would lead to a slowdown in inflation. They should have believed their own eyes.
As any American who has shopped for groceries or gasoline can tell you, prices are rising. That was confirmed last Friday in the official figures for November, with overall consumer prices jumping 0.8% from a month earlier. That was the largest monthly gain in two years, and 4.3% higher than a year ago. The report for producer prices was equally as alarming a day earlier, rising 3.2%. The producer price index is up 7.7% in the past 12 months, on a seasonally adjusted basis.
…
http://online.wsj.com/article/SB119786250709733105.html?mod=googlenews_wsj
“Who are you going to believe, me or your own eyes?”
“Who are you going to believe, me or your lying eyes?”
http://quotations.about.com/od/funnymovieandtvquotes/a/grouchomarx1.htm
Nice use of the quote, regardless.
–
My latest editorial on economy/debt/inflation:
“Reckless” Lending By Central Banks and Its Consequences
http://www.safehaven.com/article-9034.htm
Enjoy!
Jas
“The mortgage debt-push was a premeditated and fully thought out process.”
Lawyer food. “No more Ramen, Millie!”
“The mortgage debt-push was a premeditated and fully thought out process.”
America’s ###### bankers have swindled the world! Absolutely 100% scripted!!
I imagine that debt reduction through default has a more severe effect on economic downturn than voluntary debt reduction.
–
Yes, we agree. Debt plays the central role in our system.
Jas
When oil was at $60 you said it was going to 30; it went to 99.
You say oil demand in China doesn’t drive the price; it does at least as much as a declining dollar does (oil is priced in dollars). China is the worlds’ third largest oil importer now and still they have supply shortages. No organization predicts Chinese oil demand to drop. See below:
Booming demand for energy from China and the Middle East will drive global oil consumption up 2.5 per cent next year despite the growing threat of a recession in America, according to the International Energy Agency (IEA). The Paris-based energy watchdog said yesterday that it expected global crude oil demand to grow by 2.1 million barrels a day in 2008, 200,000 barrels a day higher than its previous forecast.
http://tinyurl.com/2pxlr2
Household debt may have a direct link to home prices but that is not the case with the price of oil. Oil is demand-driven, supply-constrained, combined with a falling dollar and going higher.
–
It is nice to have fans here, but where do you get my oil forecasts? I don’t make oil forecasts very often. Regardless, I make long-term forecasts. Oil WILL be below $40, most likely in $20-30 range, during the 2008-10 depression. Can you wait that long before you bring my oil forecast again?
Jas
Your oil forecasts, from your signature link go back to at least 2006; from your article in 9/2006 you say oil will go to $25. And from Jan 2007 article ‘Is commodities bubble getting buried under housing bubble’ we find this:
“..And the same should be the case for the bursting of the Commodities Bubble. We will know that the dye is cast when the crude oil goes below $40 a barrel ..”
Can I assume you didn’t follow your own predictions by selling short oil in 2006 and 2007? You would have lost at least 50% by doing so.
–
No, I don’t speculate in any commodities except GOLD. Gold is a currency as far as I am concerned.
Jas
I humbly disagree with you. If the US had not printed dollars at an average rate of 14% over GDP for the previous 6 years, I would agree with you. If instead of looking for singular instances of deflation in a declining economy and were to look at global purchases of commodities and commodity transport, there is world wide inflation produced by excess US dollars.
IMHO the problem with the deflationist scenario is the world wide surplus of dollars chasing scarce raw materials.
It is still a world wide party. Not for the US. To get a glimmer of what is going on, check out Golden Destiny’s weekly report on new new ships ordered. This weeks 80 new cargo include 54 bulk carriers, 16 tankers, 6 liners, 2 containers and 2 special projects (1,850 DWT(AHTS) 2 UNITS ORDERED BY TIDEWATER INC. (USA) AT REMONTOWA GDANSK SHIPREPAIR (POL) PRICE UNDISCLOSED DELY 2009 (OPTION TWO MORE) - the only ships ordered by anyone in the US.
Until new ship orders drop, there is no reason for the world wide party to end. One does not order billions in ships without shipping orders.
Follow the moneys.
__________________________________________________________________________________________________________________________
Nice forecast Jas. The only thing keep oil price suspended is the hot air from 2 groups:
1) Peak oil believers, many of whom have a financial or ideological motivation.
2) Pseudo-Christians who cry oppression by Mohammed the boogeyman and want a religious war.
If it were only those two groups, Jas would be correct - oil would drop. e.g. D&D average world wide tax now requires selling price of $70/bbl - this helps create an artificial floor. Oil has to many things influencing its price to be the merely attributed to supply and demand economics. Possibly the single biggest influence on price is the tax placed by hungry for money governments.
Nice forecast Jas.”
If you liked his forecast that oil was going to $25 two years ago (oil was $60), you will love it now (oil is $90).
As to ideology, you seem steeped in it, with your rant against ‘pseudo-Christians’. In which group do you place the International Energy Agency, whose link I posted above predictiong increased global energy consumption? Is this Paris-based group an evil neocon cabal?
We can agree to disagree watcher. I believe I’ll be vindicated.
“2) Pseudo-Christians who cry oppression by Mohammed the boogeyman and want a religious war. ”
Huh?
Do I have to be fluid in leftist to understand how this has anything to do with the price of oil.
It’s said such elementary concepts have to be explained.
Watcher, some people have a different view of the economy than you have, and Jas is just sharing his view. I happen to agree with Jas, but that’s almost beside the point. Since we’re talking about events far in the future, we are only guessing based on what we see as the most relevant pieces of information. You obviously put greater emphasis on other pieces of information, data we see as less relevant. Can’t we just share our views without ad hominem attacks (or bogus claims of busted forecasts)? Relax. It’ll be a long time before we know whether either of us is correct.
I have no problem with peoples’ opinion, but when they use words like ‘guarantee’ and make specific predictions for only a few months out (Jas has been calling for an imminent recession for at least two years, see his links), I feel such history can be brought up. Results matter.
I also challenge you to point out where I made an ad hominem attack.
The ad hominem attack was focusing on the person (and an alleged failed prediction on his part) instead of responding to the idea presented. I tried to make this clear in my comment.
I challenge you to point me to where Jas guaranteed what the price of oil would be right now. I don’t read every comment every day, so perhaps I missed it.
I challenge you to
watcher did indeed make an ad hominem attack, which along with over-emotional comments, discredits whatever point watcher was trying to make.
Travel back with me to the gas crunches of 1973 and 1979…
At the time there was not one private individual in China that drove a car, precious few in the Soviet Union and a small number in India.
Things Change.
yes, things change. One thing that changes is the oil underneath the ground. Fact: It decreases. The other change is that demand has increased. Tens of millions of Indians and Chinese have gotten off their bikes and bought cars. The peak oil deniers just refuse do the math. Dumb of them.
By the way, I just found a coin on the floor. I picked it up. On one side of that coin was a FB (in our jargon, a F’d buyer). On the other side? Somone who refuses to believe that oil is a finite resource. We have those fools on this blog. They are the fools equivalent to the FBs we all ridicule. Go figure.
The fallout continues:
Economic Woes Dampen Online Holiday Sales; Growth in Internet Spending Slower Than Last Year
http://tinyurl.com/28jpe9
Fulgoni noted that the subprime mortgage meltdown, slumping housing values, higher gasoline prices and an uncertain stock market are affecting shoppers at different income levels. But he noted that consumers in lower-income segments appear to be the most hurt, as reflected by the sluggish growth in their rate of online spending.
His insight is almost useful.
The most useful insight came from Heather Johnson.
“I actually started a savings account that I was putting money in twice a month,” she said. “So I saved up enough to kind of budget what we were going to spend on our families.”
She offers the real solution to our runaway overspending, a budget.
on bloomberg they said internet sales were down due to harsh weather - WTF ?
Maybe they think the midwest ide storm caused enough power outages to account for the decline?
Or snow/sleet/rain is magic - it has consumer demand dampening powers just like it has winter coat dampening properties. Jeez. Everyone knows that…
That’s ice, not ide. Sorry.
Have to go out and deice those intertubes, or something.
I’ve said it before, and I’ll say it again: this time, the Recession/Depression/Hyperinflation, etc. won’t be televised. They’ll do everything in their power spin the numbers even as the problems loom over us and are in plain sight of all.
Greenspan wants to GIVE money directly to those defaulting on mortgages.
“Two ways to help homeowners directly would be to reduce taxes or to give cash grants similar to those given to disaster victims. ”
http://www.nytimes.com/2007/12/17/business/17greenspan.html
How about every penny of his ‘idea’ comes out of the pockets of the mortgage brokers and the oh-so-cretive Wall St. idiots who caused the problem?
–
“Two ways to help homeowners directly would be to reduce taxes or to give cash grants similar to those given to disaster victims. ”
Comparing bad borrowers to disaster victims? It shows that he is morally bankrupt and I don’t think it began after he stepped down.
Jas
Hey Easy Al, Why not call out the National Guard and have them ride through neighborhoods throwing out bundles of $100.00’s.
Why can’t this old puke just stay the hell home.
“How about every penny of his ‘idea’ comes out of the pockets of the mortgage brokers ”
Or his own pockets?
The National Guard has helicopters……..
To think Greenspan was once an objectivist and part of Rand’s “inner circle.”
Ayn is rolling over in her grave.
–
It is more a question of intellectual dishonesty, a necessary qualification for the top jobs. Someone needs to collect and post Greenspan and Bernanke’s quotes in chronological orders to see how dishonest they are.
Jas
I think Greenspan acting exactly like a Randian as Fed Chief. He refused to regulate the home loan industry and let the market and the individual take action.
Liberals and progressives believe that regulation is necessary. Conservatives and libertarians think the markets take care of them self and are self-regulated.
Nice strawman you got there ed…
Ben,
I based what I said on what I have heard over the last few years about the markets. I’ve seen politicians like the President and pundits on places like CNBC talk about letting the markets regulate themselves.
I wasn’t attacking conservatives and libertarians, I thought I was stating their belief, though in an admit tingly oversimplified way.
I do see Greenspans policy as coming out of his Randian background.
If i have misstated this difference (I didn’t mean the regulation/non-regulation split to be black and white between total and none what so ever) then I retract my post. I would rather let libertarians state their position and not sound like I put up a strawman argument.
In no way, shape or form to we have anything resembling “unregulated” markets. Even if greenie is “hands-off”, that means nothing in regards to the level of actual regulation in our “free” markets.
One example of an “unregulated” market is an armed robbery. The victim is free to hand over his money or his life.
Amen, Ed. Privatize the profits, socialize the losses. The new libertarian mantra.
Do you get the feeling that Al is speaking tongue in cheek? I think he’s laughing at the American public (including congresscritters and presidents).
He - correctly - pointed out the ONLY ways to help the FBs. What he didn’t bother telling us was that he knows it is totally ridiculous to push either of these alternatives.
That’s left as an exercise for the pupil. Unfortunately the pupil, J6P, won’t be able to figure it out and will soon start clamoring for the humvees to roll down the street spewing out $100 bills.
interesting point but Alan Greenspan knows the value of a soundbyte; he was and is the master of greenspeak….throwing it out there like that to MSM appears more calculated to me
Do you get the feeling that Al is speaking tongue in cheek? I think he’s laughing at the American public (including congresscritters and presidents).
I think you’re on to something. Because he used the word “political”.
To paraphrase,
“You’re looking for a political solution? Honestly, as far as I can tell, the only way to solve this through politics is to simply give people money. Does that sound attractive?”
I was thinking along the lines of food stamps, soup kitchens,converting McMansions to low-cost apartments, etc. I don’t think that’s what he means, though.
You would have to drastically reduce taxes to make up for the jump in mortgage payments. Someone whom makes $60K a year pays approx $10K in taxes after deductions (this is a very approximate value). So, in order to really help, this person’s tax burden would have to be pushed down 60% or more, which isn’t going to be politically popular. This tax break would have to last for years or else, you’re just delaying the pain. That’s not fiscally possible unless we are going to run up more deficits.
Greenspan is suggesting a direct taxpayers bailout for a victim . How would one qualify for this hand out from the government ?
While I abhor his idea, it does prove that at least he understands the nature of the problem. Banks can no longer create more money at this point through more debt. The only way to keep up the inflation game now is to give cash to consumers directly.
More shopping bad news:
http://tinyurl.com/295bhy
Retailers Face an Ominous Holiday Sign
Sales of women’s clothing, a traditional pillar of the holiday shopping season, are unusually bleak so far this year, according to a major credit card company, an ominous sign for the retail industry.
One more bit of good news:
http://tinyurl.com/yqj2p4
The teetering government-bond market
But at the back of investors’ minds, there must be one big worry for 2008. The dollar has been declining in recent years, making Treasury bonds far less attractive for international investors. If inflation is rising as well, and the Fed is not acting to stop it, it may be very hard to persuade those investors to buy Treasuries without far greater compensation. That could require a sharper fall in the dollar, a big rise in Treasury yields, or even both.
It’s starting to show up. “U.S. 3Q financial inflows slow to $93.4B vs. $152.8B” What happens when the outflow starts?
Not sure, but it looks like we could be there in two years according to that stat. :0
test
CNBC, otherwise known as Bubblevision, is touting a survey today that says the consumer is holding up his/her end of the bargain this Christmas, with spending figuring to rise 6 percent from last year.
What a bunch of baloney. I went on their web site and took the survey. When the survey asks a question about home values in the next year, here are the choices given in the order they’re given. Prices will: Stay the Same, Rise 1-9 percent, Rise 10 percent or more, Decrease, or Don’t Know.
That’s right. You get essentially three bullish choices, and one bearish choice. How about Decrease 1-9 percent and Decrease 10 percent or more? This is rigged questioning. It’s no wonder that when Steve LIES-man went on the air, an overwhelming majority of respondents said their home values in the next year would rise or stay the same. They touted the lumped-together total of Increases and Stay the Same.
CNBC blows.
– Judge Smales
“You’ll get nothing and like it!”
Good catch.
Wierd….Their “published Resullts” are totally different form the time when I took the survey. The current results show overwhelmingly americans more pessimistic about the economy and overwhelmingly see their house value decline. Look like they pulled the trigger too early on the survey.
There may be no moneys but at least there is available cash to bail out the housing market, at least according to one expert’s opinion.
Greenspan Favors Government Bailout for Homeowners (Update1)
By Steve Matthews
Dec. 16 (Bloomberg) — Former Federal Reserve Chairman Alan Greenspan said he favors spending U.S. government money to bail out mortgage borrowers who risk losing their homes because they can’t make payments.
Greenspan, speaking on ABC’s “This Week” program aired today, said cash bailouts, while creating a larger budget deficit, have the advantage of helping homeowners without distorting property prices or interest-rates on mortgages.
“Cash is available and we should use that in larger amounts, as is necessary, to solve the problems of the stress of this,” Greenspan said. “It’s far less damaging to the economy to create a short-term fiscal problem, which we would, than to try to fix the prices of homes or interest rates. If you do that, it’ll drag this process out indefinitely.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=ae4kKgk4O4Ks&refer=home
Note to Mr. Greenspan: you are not the Fed. Chairman anymore. Please stop making suggestions that involve spending other people’s money.
I believe that Mr. Greenspan is in the consulting business these days, which means his job description includes selling the most expensive solution no matter how appropriate.
I have an even better idea! Let’s just up the homeownership rate to 100% by giving one (or having one made to order) to everyone who does not currently own a house. No moneys would need to be printed or spent, as there would be a direct transfer of houses from their currently vacant status into new owners’ possession, and hence there would be no need to create a short-term fiscal problem. And the alleged problem of millions of currently-vacant homes would be instantly solved.
Now that would certainly solve the massive inventory problem out there!
Or in selected areas, give everyone 2.
Cash is available
This would be cash from past Federal Budget surpluses, I presume.
we’ve never had a surplus -always in debt
I see.
So where exactly is this “available cash” Mr Greenspan is referring to then?
You know, those Fed printing presses…..
The surplus? Why, it’s any money you happen to have in a banking account anywhere… oh, and your income as well. Should have been a smart “consumer” and lived in debt with nothing in your name since that’s what they are encouraging!
–
Jefferson left office with a surplus. Although, he himself was always in debt to London bankers. If you read detailed history of 1770s, our system was set up so that people will not have much power over the govt (because people were too “unruly”!) policies and to protect the creditors.
Under capitalism the capitalists, especially, the creditors, rule!
Jas
This is so stupid!
Homeowner A is behind on his mortgage. He gets a bailout. Now he’s current. But he couldn’t aford the damned place to begin with, so in six months he’s delinquint again. How many bailouts does it take?
Homeowner (term used loosely) is behind on five mortgages. Do we bail out 1 - or all 5?
I’m not behind on my mortgage. How do I get mine?
“I’m not behind on my mortgage. How do I get mine?”
Step 1: Lower your FICO score to subprime level.
Step 2: Demonstrate inability to pay your mortgage.
Presto-chango: You are now a bailout-worthy home owner!
Greenspan is a financier first and foremost. He will say and do what is best for the banking and lending industry.
He recommended borrowers take out ARM’s in a rising interest rate environment in his famous speech of a few years ago (Someone said that was not at all what he said, that it was taken out of context. Not so - I posted the link to the speech on this very blog and it was not difficult to read. He clearly recommended this, no if’s and’s or but’s). What that does is push interest rate risk on the borrower, off of the lender. Sometimes it pays off, sometimes it doesn’t.
Direct cash payments to homeowners, 10’s or 100’s of billions of dollars worth, will benefit the financiers and the real estate industry by keeping the asset values inflated.
Greenspan is well connected at the very highest levels of government and finance. He is floating a trial balloon here. The response it gets will determine whether it proceeds through congress.
Hopefully, the policy will be thoroughly discredited. But, it will benefit a lot of people, powerful individuals and lobbies. At the cost of more government spending. Which itself is a meaningless abstract to many, if not most, people. So, it may well be the next step.
Public money to bail out bad financial decisions by a relatively small number of people will seriously undermine the viability of the markets by leading to more and more bad decisions down the road.
I say, let the people who made the absurd buying and lending decisions reap their rewards, don’t warp the markets leading to further and prolonged crises down the road, and don’t take my money, which I’ve been managing prudently, avoiding buying the million dollar house with I/O’s and Option Arm’s and whatever other insane lending product was out there, to bail out the irresponsible people who did do these things.
“It all about the inflation stupid”
A gov. check, credit etc. is cash back is into the economy. This is all about infaltion.
Sorry:
“It is all about the inflation stupid”
P.S. Not directed at anyone, just a statement about Greenspan.
Greenspan suggested that FB who are delinquent on their mortgages should be given cash.
I think that is a Great idea!!
Give them their first month’s rent a a couple of hundred dollars to rent truck to move.
Foreclose on the houses and sell them to those who “can” repay the mortgage.
Seems like there is a good chance this gloomy premarket news might create a great opportunity for contrarians to buy the dip today…
INDICATIONS
U.S. stock futures drop on inflation, growth fears
By Steve Goldstein, MarketWatch
Last update: 5:45 a.m. EST Dec. 17, 2007
LONDON (MarketWatch) — U.S. stock futures on Monday were pointing to another downbeat session as Moody’s Investors Services said it could lower bond insurer credit ratings because of subprime losses and as former Federal Reserve Chairman Alan Greenspan warned about the possibility of stagflation, when prices rise at the same time the economy cools.
S&P 500 futures fell 9.4 points at 1,469.00 and Nasdaq 100 futures fell 10 points at 2,083.75. Dow industrial futures declined 77 points.
U.S. stocks closed sharply lower on Friday, as rising inflation dismayed investors already concerned that credit-market turbulence may prompt a recession. The Dow industrials fell 178 points, the S&P 500 lost 20 points and the Nasdaq Composite fell 32 points.
Former Fed chairman Alan Greenspan warned on Sunday in televised interviews of the specter of stagflation and said there was a 50-50 chance of a U.S. recession.
http://www.marketwatch.com/News/Story/Story.aspx?column=Indications
sustained break of 1460 would probably cause a waterfall under the Nov. low at 1407
Txchick57,
How does that work? How do you know those numbers? I mean why is 1460, huh er 1460? Why is 1407 the level through which DJIA moves if it moves through 1460? I keep seeing these types of analyzes in various places but have no idea why the levels are what they are.
Roidy
P.S. I do know that the WS types on CNBC don’t care about anything but their money. The stuff I see on that channel is inhuman and sad.
I new the Hang Seng was headed for a 1k point down day, wouldn’t be shocked to see that for the dow.
HSI down close to 1000 points! Looks like no country’s markets were feeling too confident this am. (9:25 EST)
This may have been posted before as it is an oldy but I just came across this the other day. Quite funny.
“What kind of bear are you?”
http://wallstreetfollies.com/beartypes.htm
No. 4 mostly, some No. 2
Heh, very entertaining. I guess I’m a 401K bear. I do have some in a cash account, but it’s a PITA to trade the downside in a cash account. So I’m long on some stocks I’d rather not be long on for much longer…
lots of folks waiting till after the year to sell….its gonna be too late.
funny how that happens, eh?
December 17, 2007
Housing industry looks to Congress for help
Kent Hoover Washington Bureau Chief
The housing industry is counting on help from Congress to prevent a tidal wave of foreclosures that would further depress residential real estate values.
Foreclosures already are at record highs, but they could explode over the next two years as monthly payments on 1.8 million subprime mortgages reset at much higher interest rates. The Bush administration brokered a mortgage industry plan to streamline modifications and refinancing of these loans, but even it concedes more needs to be done to help families keep their homes.
Legislation pending in Congress would increase the size of mortgages that could be insured by the Federal Housing Administration and reduce down payment requirements. This would enable many homeowners to refinance subprime mortgages into FHA-backed loans with better terms.
Mortgage crisis
1.8 million subprime loans are scheduled for their first interest rate reset in 2008 and 2009
200,000 of these loans are already 90 days or more past due or in some stage of foreclosure
1.4 million of these loans that are current may not remain so after their interest rates reset
Source: Federal Reserve Board, Federal Deposit Insurance Corp.
Subprime mortgages were offered to borrowers with poor credit scores. Fueled by demand from Wall Street investors, who bought securitized packages of these loans, subprime lending boomed until borrowers started defaulting on these mortgages.
The House passed FHA reform legislation Sept. 18 by a 348-72 vote, but Sen. Tom Coburn, R-Okla., blocked Senate consideration of the bill Dec. 6. The bill was brought to the floor under an unanimous consent agreement, a streamlined procedure commonly used in the Senate. Coburn said it was “naive, irresponsible and reckless” for the Senate to think it could fix the housing crisis by “rubber-stamping” a bill without giving it “proper scrutiny.”
“This bill is not the proper response to the housing crisis,” he added, because it “makes taxpayers liable for billions of dollars in loans that may default.”
http://www.bizjournals.com/extraedge/washingtonbureau/archive/2007/12/17/bureau1.html
(1) Going from a 3% to 1 1/2% down is no big deal. On a $300,000 house, it is a difference of $4500 - not exactly mountains of equity.
(2) Raising the limit from $362,000 to $417,000 is a difference of $55,000. Yawn.
Now it is the same as Freddie, Fannie and the VA (which does, and always has, done 0 down loans.)
(3) The lending standards apply.
(a) Must appraise and on a refi, appraise for more than the pay off on the existing mortgage
(b) Income/debt ratios and caps of 30-31% of gross for mortgage, taxes and insurance and 40-41% of gross for all fixed debts including mortgage costs.
How many FB’s can qualify under those standards? (Hint: the correct answers are not - many, a lot, the majority or nearly all of them.)
Amendment Would Let FHA Insure $700K Loans
September 12th, 2007 | FHA, Fannie Mae, Freddie Mac, Mortgage News
http://www.consumermortgagereports.com/amendment-would-let-fha-insure-700k-loans/
Exactly. And then everyone else will “need” to increase their limits to match. And then the government will “need” to hand out toxic loans, insured by the tax payers. And then the housing Bubble will be “fixed” by way of making all the responsible people pay for it!
Going to 1.5% tells me something is broken here as 3% has worked for quite some time. Perhaps wages aren’t keeping up or the push to have the consumer spend versus save is the most desirable route. Raising the limit makes sense from an inflationary point of view, though the bigger question - is $55,000 a good number?
This does not sound very Purdy…
Canadian asset bail out falters
By Bernard Simon in Toronto
Published: December 16 2007 22:01 | Last updated: December 16 2007 22:01
A panel seeking to restructure Canada’s frozen asset-backed commercial paper market is struggling to persuade more than a dozen Canadian and foreign banks to provide billions of dollars in back-up funding for the securities.
The committee, headed by Purdy Crawford, a prominent corporate director, failed to meet Friday’s deadline for an agreement on restructuring terms, or to provide details of the assets held in 21 frozen trusts, or conduits. One trust has been restructured.
http://www.ft.com/cms/s/723f6a78-ac04-11dc-82f0-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F723f6a78-ac04-11dc-82f0-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Things are not looking very “Purdy” in Canada….
AFX News Limited
Indian shares crash tracking global meltdown
12.17.07, 6:13 AM ET
MUMBAI (Thomson Financial) - Indian shares closed lower as indices crashed in late trading on Monday, tracking the meltdown in global markets and other Asian markets.
Asian shares extended their losses as the Wall Street slumped Friday over concerns of inflation accelerating in the US, which could make it difficult for the US Federal reserve cut rates further.
‘The markets are down due to meltdown in global markets. Indian markets can’t be decoupled from the happenings around the globe,’ Rajiv Sampat, director of Mumbai-based Parag Parikh Financial Advisory Services Ltd said.
The Bombay Stock Exchange’s (BSE) benchmark 30-stock Sensex fell 769.48 points, or 3.84 pct, to 19261.35, its second-biggest points fall in a single day, while the National Stock Exchange’s S&P CNX Nifty, which registered its biggest points fall in a day, dipped 4.27 pct at 5,789.20 points.
http://www.forbes.com/markets/feeds/afx/2007/12/17/afx4446545.html
–
What happened to the global decoupling?
My forecast is that India Goats are slated for slaughter.
Jas
AFX News Limited
Asian stocks fall with Wall Street on concern inflation may brake Fed easing
12.16.07, 11:05 PM ET
SINGAPORE (Thomson Financial) - Stock markets across Asia fell Monday, catching up with losses on Wall Street Friday on concern that accelerating inflation in the US will make it difficult for the Federal Reserve to continue to cut interest rates.
Consumer price data released Friday showed US inflation rose to a two-year high of 0.8 percent in November, an ominous reading at a time when the economy is slowing.
‘Higher inflation in the US will reduce the scope for more interest rate cuts. That’s why investors are not so happy,‘ said Francis Lun, general manager at Fulbright Securities in Hong Kong.
http://www.forbes.com/afxnewslimited/feeds/afx/2007/12/16/afx4445837.html
I would appreciate it if anyone would comment on Cat’s post yesterday regarding the 5-page executive summary of Bush’s mortgage bailout plan. I am particularly interested in the requirement that the eligible mortgage has to be included in a securitized pool. What the hell does that mean? Are these notes stamped on their face WAS INCLUDED AT SOME POINT IN TIME IN A SECURITIZED POOL? Does this really mean that a bona fide purchaser for value can’t foreclose?
it means BUSH is about 2 % less socialist than hilary/dodd/shumer
where’s Volker ?
Got back from NYC last night. Spent a chunk of Saturday afternoon just walking around (Macy’s, over to 5th Ave and up the whole thing to 79th and across the park to the Upper West Side). I haven’t done a really long walk like that during the serious shopping season since I moved to DC three years ago. There was plenty of activity. Typical feeding frenzy in Zabar’s. Lots of people walking around with packages. Many walked “like tourists” - believe, to a New Yorker there is a difference. I didn’t notice that an over abundance of the folks with packages were speaking languages other than English. So, seemed like a fairly typical pre-Christmas weekend.
But there was a noticeable increase in the number of homeless people. And it wasn’t just that it was cold and so you noticed them more since they were all in the few inside spaces. There were tons of people outside too. I lived in Morning Side Heights before it became a pure extension of the Upper West Side and I have never seen it that bad.
The pain has already hit at least one population segment of NYC.
Ron Paul Raises $6 Million in 24-Hour Effort
Dec 16, 11:58 PM (ET)
COLUMBIA, S.C. (AP) - Republican presidential hopeful Ron Paul’s supporters raised over $6 million Sunday to boost the 10-term Texas congressman’s campaign for the White House.
Called a “Money Bomb,” the goal was to raise as much money as possible on the Internet in one day. The campaign’s previous fundraiser brought in $4.2 million.
At midnight EST, donations were over $6 million, according to the campaign Web site. Those donations are processed credit card receipts, said Paul campaign spokesman Jesse Benton. Benton said the median donation is about $50 in the fundraiser, which was the idea of Paul supporters who are not officially connected to the campaign.
Trevor Lyman, a Paul supporter who is traveling the country following the Ron Paul blimp, said the date of the fundraiser coincides with the 234th anniversary of the Boston Tea Party.
The Ron Paul blimp is an aerial billboard emblazoned on one side with “Who is Ron Paul? Google Ron Paul.” The other side reads “Ron Paul Revolution.” The blimp, another grass-roots effort, was in Chester, S.C., on Sunday, and organizers hope to get it to New Hampshire before the Jan. 8 primary there.
—
On the Net:
Ron Paul: http://www.ronpaul2008.com
I sure hope that this is tin foil nonsense!
http://www.prisonplanet.com/articles/december2007/121407_assassinating_paul.htm
I donated a few weeks ago. Received an e-mail this weekend asking me to possibly donate again. Against my better judgement, I went ahead and donated again. Sometimes you just have to have faith I suppose. I don’t have faith in the current system which drove me to make the choice. Ron seems to be a bit of an extremist, but I think he needs to start out in an extreme state as there will be push back to “meet in the middle” when the time comes to attempt change.
I just watched the 30 min. show they’re going to play in Iowa. Ouch, that would never fly in the big cities or blue states. I hope someone is on that.
Do you have a link?
http://www.ronpaul2008.com/video-network?channel=1&video=105
The #1 problem for RP is his stance on abortion, IMO.
I agree with most of what he says, but most women would not support someone who’s so adamant about his anti-abortion stance.
Disclaimer: I do not like abortion & am fortunate (very lucky) never to have been in a situation where that choice had to be made. However, it is NOT my business, nor anyone else’s what a woman can do with her body.
Very big issue for many, many women; and a deal-breaker in many cases.
Yeah, I’m sure they’re aware and that it was specifically created for Iowa, etc.
Most money ever raised by a candidate in 1 day? Ever? Serious? And the mainstream media is spamming our TVs with who right now? Certainly not Ron Paul. Biased are they?
Home
Statement of Senator Hillary Rodham Clinton on Senate Approval of FHA Reform
By newsdesk - Posted on December 17th, 2007
December 14, 2007 — “Before the full scope of the subprime mortgage crisis was realized earlier this year, I called for an overhaul of the Federal Housing Administration to meet the needs of America’s working families and provide a real alternative to the subprime and predatory mortgage industry.
The reforms I’ve laid out in my FHA modernization bill, The 21st Century Housing Act, and elements of which are included in the Senate FHA bill include:
* Allowing the FHA to make investments in both personnel and its information technology infrastructure to help meet the market demand for affordable mortgage products and work more efficiently with mortgage lenders and borrowers.
* Increasing the FHA’s mortgage limits which will help create more home buying opportunities, especially in high cost-of-living states like New York, so that working families don’t get priced out of their own neighborhoods.
* Allowing the FHA to develop responsible mortgage products.
I am pleased that the Senate has taken action to enact these long overdue reforms and provide some real relief to struggling families caught in the middle of this housing crisis. I urge swift action on this issue and I urge the President to sign meaningful FHA reform into law as soon as possible.”
Source: Senator Hillary Clinton
http://www.allamericanpatriots.com/48739293_statement-senator-hillary-rodham-clinton-senate-approval-fha-reform
Curse her forever.
We all know full well that “responsible mortgage products” means “sell toxic loans to people to get them in debt and then have the taxpayers take the hit when they default while we, the crooks in charge, collect big fees and campaign contributions.”
Yeah, how about LOWER PRICES for a change, instead of more toxic loans!?
Lexington
The cracks begin to show
Dec 13th 2007
From The Economist print edition
http://economist.com/world/na/displaystory.cfm?story_id=10286068
(Read the article just posted to fill in the censored bits…)
“To put a brother in there by himself is to set him up for crucifixion,” he said. But he could not resist adding a kicker. “Bxxx [Cxxxxxx] is every bit as black as B@r@ck—he’s probably gone with more black women than B@rx@k.”
Hillary is a tool. I hope everyone who read that crap will take it upon themselves to ensure that she does not become our President, lest they not complain if she does get elected!
Allowing the FHA to make investments in both personnel and its information technology infrastructure to help meet the market demand for affordable mortgage products and work more efficiently with mortgage lenders and borrowers.
Dude! You’re getting a Dell!
AFX News Limited
Euroshares fall in opening trade on tight credit markets, subprime woes UPDATE
12.17.07, 4:47 AM ET
(Updating with full report)
LONDON (Thomson Financial) - Europe’s leading exchanges fell in opening trade as concern over tight credit markets and the extent of subprime-related writedowns in the financial sector continued to undermine sentiment.
http://www.forbes.com/markets/feeds/afx/2007/12/17/afx4446343.html
Voluntary today, is not yet mandatory.
Would, “them damn revenuers” be making a comeback? Any movie I ever saw about the 1930’s had, “revenuers” taking the common mans’ stuff. Lucky for us, Iowa has found a way to increase county revenue, going after delinquent traffic fines.
http://www.qctimes.com/articles/2007/12/17/news/local/doc476604a0275fa182239033.txt
From the local TV station I learn the free money is back.
There is just enough money for 100 homes in a lower-ish income area. A person can get a loan to fix up houses, agree to live in the house for five years and then the loan becomes a gift. If the city makes inspections, if the city foregives payment, how is that not renting from the city and does that make the city a landlord?
Incrementalisim on the march.
‘How much is missing: Estimated at $450 million by the Iowa County Attorney Association’
Hmmm, amnesty for everyone.
Subprime Crisis May Spread Further-Swiss Regulator
Mon Dec 17, 2007 3:02am EST
-Subprime crisis to hit Euro banks in ’08
-Bush says economic fundamentals are good
-Wall Street sinks on credit turmoil
ZURICH (Reuters) - The subprime crisis is not over yet and could spread to other credit markets, making it important that banks have a strong capital base, a Swiss regulator and prominent member of the Basel Committee said.
“The danger is not over yet. The subprime crisis could spread to other credit markets, such as in the fields of credit cards, consumer credit, car financing, student loans or commercial credit,” Daniel Zuberbuehler, head of the Swiss Banking Authority (EBK), told newspaper NZZ am Sonntag in an interview published on Sunday.
http://www.reuters.com/article/bankingFinancial/idUSL1654838520071217
Also in the NYTimes today, Bronx Is Burning:
Marcia is not in the holiday mood this year. She is not putting any Santas, reindeer or lights outside her house. She is probably not going to have many presents inside. There will be no home improvements anywhere. The fact is, she does not know how long she can even call the place hers.
A little more than a year since she bought her Bronx home for $535,000 with no cash down, she is facing foreclosure. Even if she could scrape together the $7,500 to catch up on her overdue mortgage payments, other calamities await: an interest rate that will rise in coming months and a huge balloon payment hovering in the distance like a financial Hindenburg.
http://www.nytimes.com/2007/12/17/nyregion/17citywide.html?_r=1&oref=login
(A little more than a year since she bought her Bronx home for $535,000 with no cash down, she is facing foreclosure.)
She put nothing down, so she has nothing to lose! Greenspan et all want to bail out the investors. Marcia would be better off walking away, getting a “do over” on the her credit history, and buying in two years for $300,000.
Marcia, a nursing home aide who declined to give her last….
Nursing home aide? We are talking $9-10 an hour tops. It is one of THE worst paying jobs around.
$20,800 or so does NOT buy a $300K house - forget a $500K.
$300K needs at least $90,000 a year.
So nursing home aides either need to get paid more to afford NYC or leave.
That is one of the consequences of the obsession with getting the lowest priced goods and services. Sooner or later the employees can not afford to live where they work - or at least not without subsidized housing.
She probably makes more that $10 an hour. I know RN’s start at around $70K on Long Island. Granted there’s a big education gap between the two. Neither of these two groups could afford a house costing that, however.
RN’s make that kind of money over here too, but nursing homes aids are not RNs. Not by a long shot.
I think that a lot of this nonsense (low paid people buying homes they have no hope whatsoever of affording) might be because once upon a time semi-skilled, working class Americans could live a lower middle class lifestyle. This often included a modest home, and I’m guessing that “Marcia” probably grew up in such a home.
I am reminded of the Fountain Valley (OC, CA) neighborhood I grew up in the 60’s. The neighbor next door was a produce clerk at the local supermarket (Vons). Another neighbor was a postman. You get the picture: no engineers, accountants, marketeers, MBAs, etc. Just working class folks who maybe went to the CC to take some trade related classes. Of course now to be able to afford those 50 year old houses requires a 150K income. I haven’t been back to the old neighborhood in decades (it was right next to the Fountain Valley elementary school (if its still called that). I wonder who lives there now?
I just Zillow’d the old neighborhood. It appears that the old elemantary school (which was on the corner of Talbert and Bushard) is no longet there. The High School is still at its old location, across the street from the old elementary school location.
What about the second guy- the “police department employee”?
“For good reason. When a financial squeeze forced him to refinance last year, he traded a $505,000 30-year fixed mortgage at 5.6 percent for two subprime loans totaling more than $600,000 with adjustable interest rates that will go up to 10 percent or more next year. He has not missed any payments, but the monthly installments he can afford to pay are so low that he now owes more than when he began.”
How do you think he’s affording that payment?
It’s so unrealistic. I know people want to own a home, but if you’re making $60,000 a year you can’t buy a home that costs $500,000. You just cannot.
And there is no way to “save” these people. Even freezing the loan isn’t going to save them.
They have to be allowed to be foreclosed on so the system can cleanse itself and prices can drop.
It’s so unrealistic. I know people want to own a home, but if you’re making $60,000 a year you can’t buy a home that costs $500,000. You just cannot.
And 60K is a decent salary. Moer than most people make. It just goes to show how out of whack things got, and consequently how desperate the working class became.
Colorado,
I agree 100% with what you are saying. Middle-class people were once able to buy a modest home in a working/middle-class neighborhood.
They were only buying homes they “should” have been able to afford, and would have, if not for this credit bubble.
It’s amazing to me that so many people can’t understand the relationship between too much credit & rising prices (i.e., by trying to make things “affordable” they’ve accomplished the reverse).
Rescuing Sprite: A Dog Lover’s Story of Joy and Anguish
http://www.amazon.com/Rescuing-Sprite-Lovers-Story-Anguish/dp/1416559132
For those that have lost a pet. The reviews are very good.
Just ordered it…Thanks…
SUBPRIME SURVIVORS
FHA MORTGAGES AID BORROWERS IN NEED
By RICHARD WILNER
President Bush’s plan to freeze interest rates on distressed mortgages received much fanfare earlier this month, but the less wellknown FHA Secure Loans could save nearly twice as many homeowners.
December 16, 2007 — As mortgage delinquencies continue to expand, a bill that would help financially-strapped New Yorkers was passed in the Senate on Friday - but needs to be reconciled with the House bill as lawmakers and President Bush haggle over how it should be structured.
The Senate measure would raise the ceiling on home prices covered by the Federal Housing Administration Secure Loan to $417,000 from $363,000 - which should help out thousands of additional area homeowners. The House measure pegs the limit at $500,000.
In fact, the FHA program, introduced in August to much less fanfare than President Bush’s rate-freeze plan worked out earlier this month, could end up, after the congressional overhaul, helping 200,000 more beleaguered homeowners than the rate-freeze plan.
The FHA program has been a smashing success - more than 43,000 families saved their homes in a little more than three months.
“The FHA Secure Loan program is better than the rate-freeze program,” said Gregg Marcus, the managing director of Somerset Mortgage Lenders, a 28-year old mortgage banker based in Melville, “because it offers a permanent fix.”
http://www.nypost.com/seven/12162007/business/subprime_survivors_109220.htm
The permanent fix is that the default risk is passed to FHA Secure loan programs .Are the loans being made to credit worthy borrowers on property that has a correct appraisal ? Funny how all these so called credit worthy borrowers with high property values in a declining market were not able to obtain financing before . Talk about the new sub-prime lender in town .
BINGO!!!
This IS the bailout.
Japan big banks reluctant to pay for subprime fund
Mon Dec 17, 2007 5:44am EST
By Nathan Layne and Taro Fuse
TOKYO (Reuters) - Japan’s top three banks are expected to resist a request to put up a total of $15 billion for a U.S.-led subprime rescue fund, a move that could further cloud prospects for the bailout plan.
http://www.reuters.com/article/businessNews/idUST13111720071217
Things that make you go hmmmm.
Ben Jones predicted this surprise in December 2004!
Viewpoint December 17, 2007, 4:01PM EST
Subprime: A Predictable Surprise
Michael Watkins on how the subprime crisis provides another textbook example of the theory of predictable surprises and how to prevent the disasters they bring
http://www.businessweek.com/managing/content/dec2007/ca20071213_764745.htm?chan=top+news_top+news+index_managing
IT off?
AFX News Limited
UBS expects further subprime writedowns of 4.5 bln sfr in Q1 - report
12.16.07, 2:21 PM ET
http://www.forbes.com/markets/feeds/afx/2007/12/16/afx4445376.html
The People’s Pottage…
http://www.lewrockwell.com/orig8/fuller1.html
My name flashed tonight as a contributor on the Ron Paul 2008 website.
MSM on Ron Paul Record
http://www.stockmania.com/index.php?showimage=114
I strayed a little bit from my typical subject matter today.
If elected, maybe RP could break up the MSM monopoly which facilitates propaganda campaigns?
Or at least we could have a Professor Bear channel!
He’d probably love to, after fighting tooth and nail against the blackout/exlclusion crap being waged against him right now.
Yo, ho, haul together, hoist the Colors high….
wheat hits new all-time high:
Dec. 17 (Bloomberg) — Wheat rose above $10 a bushel for the first time, bolstering prices for other grains and oilseeds and stoking inflation.
Chicago wheat futures rose as much as 30 cents, or 3.1 percent, to $10.095 as dry weather threatened crops in Argentina, adding to concern the world’s farmers may not be able to grow enough to meet demand for bread, pasta and livestock feed. Rice also gained to a record, while soybeans reached the highest in 34 years and corn was its costliest in nine months.
http://tinyurl.com/33kfem
Other commodities hitting all time highs:
Milk
Strategic Metals (Rare Earths, Cobalt, etc.)
“…Rising prices for grain are expected to push income from the country’s two million farms to a record $87.5 billion this year, up about 48 per cent from 2006, according to a US Agriculture Department (USDA) forecast…..”
New tractors with seat belts, built in cooler, A/C and IPod. Do I buy a John Deere (made in China) or a Kubota (made in Carolina)? (Rhetorical)
What the USDA does not tell you is that the US is a net agricultural importer. Illegal agricultural imports are not included in official numbers.
wtf - deere made in CHINA?
China slowdown more worrisome than subprime
17 Dec, 2007, 0327 hrs IST,George Smith Alexander, TNN
http://economictimes.indiatimes.com/Interviews/China_slowdown_more_worrisome_than_subprime/articleshow/2626862.cms
hasn’t China’s property market started to tank ?
Unfortunately not yet. Still going gangbusters despite govt attempts at regulating it. Prices can be about 2x whackier than the worst areas in USA (compared with nominal incomes).
Did you know you can never truly own housing in China? All you get is a 99 year lease for rights to the land.
inflation and recession:
WASHINGTON: The world economy is facing the risk of both recession and faster inflation.
Global growth this quarter and next may be the slowest in four years, while inflation may be the fastest in a decade, economists at JPMorgan Chase say.
The worst U.S. housing slump in 16 years, coupled with a tightening of credit by banks, has brought the United States, the world’s largest economy, “close to stall speed,” according to Alan Greenspan, the former chairman of the Federal Reserve. At the same time, rapid growth in China and other emerging markets is driving energy and food prices higher worldwide.
http://www.iht.com/articles/2007/12/16/bloomberg/bxecon.php
“…America’s central bank has mismanaged the biggest risk of our times. Ever since the equity bubble began forming in the late 1990s, the Federal Reserve has been ignoring, if not condoning, excesses in asset markets. That negligence has allowed the United States to lurch from bubble to bubble.
Fixated on the narrow “core inflation” rate, which excludes the necessities of food and energy, the Fed has ignored new and powerful linkages that have developed between economic activity and increasingly risky financial markets. ..”
Stephen S. Roach
New York Times
http://tinyurl.com/2s8f3l
‘There is hope that young consumers from rapidly growing developing economies can fill the void left by weakness in American consumers. Don’t count on it. American consumers spent close to $9.5 trillion over the last year. Chinese consumers spent around $1 trillion and Indians spent $650 billion. It is almost mathematically impossible for China and India to offset a pullback in American consumption.’
They may not buy plasma TVs but they will buy food and energy. Has anyone noticed the explosion of motorcycles versus bikes in Vietnam? Consumer goods prices may deflate but not the things you need.
It is not currently possible for items manufactured overseas to deflate, unless there is a deflation in the underlying commodities.
The US manufactures few items for consumer use. The foreign manufacturers’ margins of profit will be cut, but prices in the US will rise. The biggest damage will be in the Euro nations.
In some sectors, yes. Especially food. India is the 2nd largest importer of almonds from the USA (today’s news) and will probably be the biggest in a few years. I buy Washington state apples, Wisconsin cheese and California grown products in the supermarket here in Shanghai. Red Delicious apples are available in India as well (in some parts of India they are the only apples sold). On some items, prices can be ridiculous compared with local equivalents. Wine is another big export, and will only grow.
The 9.5T consumption level in the US includes mightily overpriced categories like women’s apparel which has very high overheads. Don’t forget that a big portion of 9.5T is in turn imported from China, so putting aside the imported content and sales/overhead costs that aren’t relevant to the computation the consumption in India & China of US origin products can be a big driver of growth.
The worst U.S. housing slump in 16 years,..
following the biggest housing bubble in 117 years. Methinks 16 years is vewy vewy short, as Elmor Fudd would say.
December 17, 2007
The Case Against A Recession
Most of the data lining up now say that a recession has either begun or will early in 2008. Alan Greenspan thinks the economy may be headed for stagflation. The credit markets may get worse with further big write-offs at financial institutions. Consumer spending for the holidays appears to be weak. Fuel prices and food prices will take a larger piece out of everyone’s wallet.
…
The Fed has to be getting nervous. Who wants to see a blood bath on their watch? The agency has the chance to reduce rates again in January. If things are looking bad, they could go a half a point.
http://www.247wallst.com/2007/12/the-case-agains.html
World food price rises set to hit consumers
By Javier Blas and Chris Giles in London and Hal Weitzman in Chicago
Published: December 16 2007 22:08 | Last updated: December 16 2007 22:08
Global food prices will come under further pressure on Monday as benchmark prices for cereals at much higher levels come into operation, making it almost inevitable that a second wave of food price inflation will hit the world’s leading economies.
…
Knock-on price rises are set to hit consumers in coming months, raising inflationary pressure and constraining the ability of central banks to mitigate the slowdown in their economies.
http://www.ft.com/cms/s/0/03de75c4-ac22-11dc-82f0-0000779fd2ac.html
Stagflation is back in a big way. How does that ethanol look now?
“To the average consumer, a price rise is a price rise. But to a central bank the distinction is vital. Central banks can prevent inflation; they cannot always stop relative changes in the price of traded goods.”
Cleveland Federal Reserve Bank
It is therefore not inflation, just relative price changes brought about by a depreciating dollar.
dollar bounce as of late indicates inflation, but we all know where the dollar is headed…. double whammy on the horizon. when the hard landing arrives……gonna be brutal.
It is therefore not inflation, just relative price changes brought about by a depreciating dollar.
too bad for these idiots that the facts show that food/energy inflation is just as bad in other parts of the world and has nothing to do with a weak dollar. All courtesy of rampant money supply growth engineered by the worlds central banks, with chief architect Mr. Bubble himself. After 20 years of Greenspan party time, the chickens are coming home to roost.
Almost out of ammo, too.
What good does ammo do anyway when your weapon is jammed?
Good point, they can always throw rocks. More like rocks are going to be thrown at them.
Well I have to admit I have felt pretty good since I moved to Pittsburgh, except the Steelers are looking really bad right now.
Here’s a little opinion piece that talks about how the ‘Burgh missed the boom and bust cycle in real estate so far. Yes, I am a homeowner in the ‘Burgh as well since October. Nice house, 1 acre, close to work and still MUCH less than the rent I was paying in California.
http://www.post-gazette.com/pg/07334/837932-35.stm
Hey santacruzsux, where in the Burgh did you move? I grew up there in the East End, Point Breeze, Squirrel Hill, Shadyside. Also spent time out in Pine Township. Email me at sauer@ewee.com
Greenfield!!!
Lehman faces legal threat over CDO deals
By Peter Smith in Sydney
Published: December 16 2007 22:01 | Last updated: December 16 2007 22:01
Lehman Brothers faces the threat of legal action by municipal councils in Australia over the sale of high-risk collateralised debt obligations by the Wall Street bank’s local subsidiary, Grange Securities.
…
The news comes as central banks worldwide prepare to inject tens of billions of dollars into the financial system in an effort to unblock seized markets, starting with a $20bn liquidity auction in New York on Monday.
http://www.ft.com/cms/s/0/1464f522-ac08-11dc-82f0-0000779fd2ac.html
ALAN GREENSPAN - FISCAL POLICY PSYCHO?
Or is he just a semi-senile old fart, with incredibly BAD suggestions for the U.S. ecomomy, following his incredibly BAD handling of the Federal Reserve for the U.S. economy?
With all due disrespect, I submit that future generations may relegate Ole Greenie to the “American Psycho, Economic Division” for the grotesque results of his fiscal “experiments”. Since this an American category, we cannot lump him in with Foreign Psychos, as in the perennial and sentimental favorite, Dr. Frankenstein.
We submit the following equation, that A.G. was to the American economy : : what Ed Gein was to Wisconsin women…
http://tinyurl.com/53hle
FEED ME THE CAT!
Rural Australia suffers from debt exposure
By Peter Smith in Sydney
Published: December 16 2007 22:01 | Last updated: December 16 2007 22:01
The residents of Tumbarumba, an outback town in the foothills of the Snowy Mountains, have little contact with the exotic world of structured debt. But at one point this year their local council had invested close to 70 per cent of its investment portfolio in collateralised debt obligations.
Tumbarumba is not alone. Dozens of Australian councils, charities and a public hospital operator invested heavily in high-risk CDOs actively marketed by Grange Securities, a fixed-income specialist owned by Lehman Brothers, the US investment bank.
Similar pain afflicts communities across the world, from Norway to the US, as a result of direct and indirect exposure to exotic and complex debt instruments that failed to price risk accurately in the run-up to the credit meltdown.
http://www.ft.com/cms/s/0/fda5e240-ac09-11dc-82f0-0000779fd2ac.html
It’s not gonna take long before we are to financial instruments what China is to toys.
Already there…
Commercial re.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aUtIX.SZ8Xm8
wacthing bloomberg last night and saw a REIT in Australia get a 70% plus haircut….. this is another domino….
credit cards are next on the hit list…. its got a good beat but its hard to dance to.
Fla. Woman Has 10 Husbands, Charges Say
http://www.breitbart.com/article.php?id=D8TI81200&show_article=1&catnum=1
“I can tell you that none of the individuals she married had any type of residency,” said Terry Chavez, a spokesman for the Miami-Dade office of the state attorney.
How “mormonic” of her to practice polygamy.
tehcnically its ‘polyandry’ - ‘polygamy’ is only used when a man marries many women (from the Greek ‘poly’ = ‘many’, ‘gamy/gyny’ = women’).”Andros” = man, hence, ‘polyandry’.
Polyandry is still practiced in remote parts of northern India, Pakistan and Nepal/Bhutan. And, not surpirisingly, isn’t nearly as much fun as it sounds, as the poor woman is often married to a bunch of brothers.
“And, not surpirisingly, isn’t nearly as much fun as it sounds, as the poor woman is often married to a bunch of brothers”
It depends whether the society is matriarchial or not. About a decade ago during a hike on the indian side of himalyas, our group passed a village practising polyandry. One of the village woman took fancy for a guy in our group and insisted on marrying him. We had to pool money and bribe the villagers to get the guy out of it.
Sounds more like a racket than polyandry. You guys were had.
Short Ride in a Fast Machine
http://www.marketwatch.com/tools/marketsummary/
en.wikipedia.org/wiki/Short_Ride_in_a_Fast_Machine
Looks like the PPT is not taking any chances today — already intervening after a mere 1/2 point drop…
I can already tell there is going to be a great opportunity to buy the dip today.
Loading up on GOOG?
have a BIDU short with a stop over friday’s high. how’s that for nuts?
I hit McD’s on the pop up last week going out to ‘09. Goog and Bidu are to rich for my blood.
15K profit in one day on that one if I get stopped out now; otherwise, will hold for further downside.
Unbelieveable. That sucker is nuts.
Financial Times:
Harry Potter and the crisis over subprime mortgages
“…Voldemort can only be killed once Harry finds each of these objects, known as horcruxes, and destroys them - and the act of destroying them is itself fiendishly difficult. After nearly a year of the subprime crisis, that sounds dreadfully familiar. Subprime loans, which should never have been offered to the borrowers, were split into many complicated financial instruments, and distributed, or hidden, worldwide. The battle for investors and regulators has been to identify where these subprime “horcruxes” are, and to neutralise them. Until they are all found, Lord Voldemortgage rules the earth.
It may sound fanciful to read Harry Potter as a financial text. But The Wizard of Oz has been cited as a tract about the debate over leaving the gold standard, or “following the yellow-brick road”, so the notion of reading children’s classics as financial allegories has some precedent…..”
http://tinyurl.com/24ue3o
This article is a financial book review.
No Question, All’s Well in the State of Denial
By Elizabeth Razzi
Sunday, December 16, 2007; Page F06
Meet Pollyanna, your real estate agent.
She has stuck with the real estate business through two tough years, and she’ll spend the winter convincing herself that the only problem with the market is that headline-hungry oafs in the news media have talked buyers into hiding. It’s not the economy that’s keeping buyers away; rather, it’s the talk about the economy that has them sidelined. …
McClain said he expects that, despite the Washington region’s fundamentally good economy, prices are going to be flat until at least spring. “Some parts of our region, such as Loudoun and Prince William counties, will take a lot longer to recover,” he said. “There’s so much inventory.” How much longer will it be until they recover? “Not 2008.”
So, how should these forecasts affect your decision to buy or sell? Not as much as your household’s needs for a bigger or smaller home, better commute or any of the other usual reasons for moving.
The good news is that Washington-area prices are not forecast to fall off a cliff in 2008. But springtime may not warm up as much as Pollyanna hopes it will. ”
Washington Post
http://tinyurl.com/2uuq2j
Psst. Wanna Buy Some Risk?
The great benefit of securitization — packaging loans and selling off pieces of the entire package to investors — was that it was supposed to spread risk widely rather than concentrating it in banks.
But now that the big banks are in the process of taking tens of billions of dollars in write-offs and markdowns associated with asset-backed paper, you have to wonder what happened.
The answer: Banks don’t really spread the risk if they loan the money to buy these securities and guarantee to buy them back when nobody else wants them. In that case, all they’ve really done is hide the risk from auditors, ratings agencies, regulators and their own shareholders.
Washington Post
http://tinyurl.com/38umth
Stephen Pearlstein
Looks like real estate agents are going to have to work again…
http://www.azstarnet.com/business/216394
I don’t think they have been paying attention as of late, ratings don’t mean squat.
“”The reaffirmation of Ambac’s triple-A ratings should be a big positive for the shares and the affirmation of both Ambac and MBIA is a positive signal for the group,” wrote analysts at Banc of America Securities in a note to clients Monday.”
http://www.marketwatch.com/news/story/bond-insurers-rally-after-moodys/story.aspx?guid=%7B56372187%2D4D2C%2D4114%2DA9E2%2D9AE7A68B792A%7D&dist=hplatest
Back to AAA. Is that the same AAA model as a few months ago or a new model? To big to fail model?
NEW YORK (Reuters) - National City Corp (NCC.N: Quote, Profile, Research), the ninth-largest U.S. bank, said on Monday it expects its provision for loan losses for the fourth quarter to be about $700 million.
The bank said that home equity loans and non-prime mortgages transferred to its portfolio in the third quarter have shown further deterioration beyond what the company anticipated at the time its September 30 loan loss allowance was established.”
Reuters
http://tinyurl.com/2dv6cd
As Foreclosures Mount, Tenants Suffer
First I’ve heard of this.
“Almost a third of Massachusetts foreclosures in 2007 involved multifamily buildings.”
Puts a whole new spin on things, doesn’t it? In many cases, it’ll be the up-to-date, responsible renter feeling the pain on this one.
So where’s the media spotlight on the owners? Were they speculators? Are they defaulting because tenants aren’t paying or are the they experiencing low occupancy rates?
When this group is 1/3 of your foreclosures, somebody needs to be asking some questions before the bail-out money starts flowing. In this case, the familes being displaced will not be the ones receiving the bail-out will they?
At one point a while ago, someone had posted about the reversal of roles in the rental process (florida thread). Renters running credit checks on their landlords before signing a lease. Soon renters will be having someone fill out an application to be their landlord.
One of my wife’s co-workers is being evicted b/c of a specuvestor foreclosure. The speculord had about 12 homes around town. The co-worker joked he always demanded prompt rent payments.
I’m hoping that by spring, with a surfeit of these stories, ppl will come up with some decent templates for a “protection” addendum for new rental leases.
I’m thinking along these lines (while knowing that some things may have to be omitted or finessed, as landlords are also going to be going through denial, anger, etc.):
- escrow account to cover last month’s lease and security deposit, held by…? (lawyer, title co.? - Who would qualify as a neutral 3rd party? If home defaults resulting in loss of lease, this $$$ reverts to tenant. Sorry, landlord.
- Landlord gives permission for tenant to check mortgage status before lease signing; thereafter tenant may check X times a year. Similar agreement for property taxes, HO insurance, etc.
- Lease to include disclosure of all mortgages owing and balances, as well as any late pays or extended delinquencies. Not a lawyer, but wondering if a $1 lien on the house or something nominal like that might make it easier for an existing tenant to have this information provided to him as a matter of route?
- Landlord is required to inform tenant if any new loan is taken on house or if mortgage(s) at any time becomes 60 or more days delinquent. Same for any other obligations such as property taxes. If landlord fails to do this by (provable delivery method) within a certain time frame, landlord agrees that all subsequent rents are to be deposited in an escrow account, and…( OK, bit of a catch-22 here. Could stipulate mortgage/insurance/prop taxes to be paid out of the escrow account. But if the landlord is delinquent in the 1st place and the mort doesn’t cover the note, makes more sense for the $ to stay in escrow and again be repayable to the tenant, as damages for early termination of lease.)
- Specification of damages if tenant has to leave early, to cover moving expenses. (Not a UHaul either, bub. We ain’t kids anymore and back surgery is no fun.)
I could see old-timer landlords blowing a gasket over non-standard behavior from a rental prospect, but anyone with a newer home knows exactly why a tenant might be wary, and I’d be worried if he pretends otherwise. The bigger question to me is how much in the way of protection could go into a lease and be “sellable” to a landlord, even whether a tenant could perhaps stipulate that their check goes straight to an escrow acct established for payment of mortgage.
And no, I don’t see where working with a property mgmt firm assuages these concerns at all. Around my area, Property Mgmt firms are pretty slimy.
Of all the crap bills/proposals coming out of the house and senate, the one I DO like (may be part of a larger crap bill, though), is the requirement that tenants get 3 or 6 months automatically after being formally INFORMED of finalization of an event that supercedes the lease, i.e. foreclosure. Nobody living within their means should get too quick/rude a surprise courtesy of a FB who didn’t.
Had a meeting with my grandfather the other night.
Told the story of a lawyer he knew. The man was a rain maker for a firm and made about 3 million a year, due to the slow down its been cut back to 2 million.
The lawyer got into flipping houses in socal from what i understand he has let go of ten houses and is now upside down on 15 more and looking at BK.
When he worked for my family he was a bit of prick soo no real tears for that man
Humility and modesty are finally paying off after some tough years.
A lot of lawyers have clients who make incredible amounts of money. M&A specialists come to mind. I’ve personally known and seen a few who couldn’t stand it and tried to do what their clients are doing.
Two examples I have in the front of my mind - both were partners in large firms making probably 400-500K.
One became general counsel of one of the firm’s clients in the telecom business, got a huge amount of stock options, company went bankrupt in the telecom meltdown, lawyer is back at the firm to my understanding.
Second one tried “commercial real estate investing and developing” in the 1980s bust. My boss at the time had to put this guy into chapter 7 to get rid of his personal guarantees on $15M or so worth of loans.
Yeah that true. My grandfather was an accountant at a firm, he made some contacts with his clients, put together some ventures in 75 some were a hit some failed. but he told me it was always a problem dealing with millionaires who had no problem throwing money into a project when he didnt have that resource.
In his Virginia Rotary Club speech just now on CNBC, the President actually used the term, “housing bubble.” Is this the first time that he has used that phrase?
The statement was something like — It will take some time for the country to deal with the housing bubble.
The beauty of this housing bubble is that everything transpired on ’ssshrubery’s watch.
Watch them try to spin it and blame it on the previous occupant of 1600 Pennsylvania Avenue…
I proudly live in the Inland Empire (northern territories) and take a look at the deathmalls of Elk Grove, Ca., a consumerist ground zero, built just a year or 2 ago…
http://sacrealstats.blogspot.com/2007/12/elk-grove-commercial-real-estate.html
Way off-topic, but. . . Ross Perot owns the Magna Carta?
http://www.star-telegram.com/national_news/story/364040.html
–
December 17, 2007
Housing Mkt Index (19) Stuck at All-Time Low, Traffic of Prospective Buyers (14) at New Low
Sorry for being a broken record for 10 months in a row. THE MAIN INDEX, AT 19 (= Horrible), stuck at the historical low. “Traffic of Prospective Buyers,” at 14, is in beyond horrible territory.
http://www.nahb.org/generic.aspx?genericContentID=529
The recession deniers have a blind spot. It is called the housing depression.No, exports are not going to bail out the effects of the Housing Depression, which will plunge the global economy into recession some time in 2008 (the US economy is already in one). Time lags in the economy are very hard for people to grasp, but all the bad news will come thru.
Jas
Doesn’t the fact that the home builders’ index did not go any lower confirm the NAR’s forecast for the housing market to bottom out at the end of 2007?
No. It means the stocks are possibly priced for the news that is known.
Or that Bear Stearn’s analysts’ are recommending them. LOL
“In March, shortly after No. 2 U.S. subprime lender New Century Financial announces a major earnings restatement as a result of failing loans, Bear Stearns analysts Scott Coren and Michael Nannizzi write a research note on New Century. They argue that despite New Century’s stock having plunged 50%, to $15 per share, its downside risk is no worse than $10 in a “rescue-sale scenario.” Within a month, New Century drops below $1 a share, is suspended by the NYSE, and files for Chapter 11 bankruptcy protection.”
HSBC throws more good money after bad:
“Michael Jackson has evidently found someone to buy his $300 million main loan from Fortress Investments. The dubious winner of this prize is said to be HSBC, the same bank that recently wrote down $3.4 billion in losses on bad credit and closed several hundred branches.
Details are sketchy, but the international bank — with Sony’s help — is nevertheless taking on the debt.”
http://www.foxnews.com/story/0,2933,317088,00.html
Idiots.
“I’m bad — I’m bad — I owe it…”
If I had anything in a safe deposit box in a bank, i’d be re-thinking that strategy…
Huh? Might as well also say, “if you are living in a city with more than 50,000 people, I’d be rethinking that.” or “if you have less than 1,000 rounds of ammo, I’d be rethinking it.”
I think I will take the red pill in this case. I am no survivalist. In fact, my high income depends on me having NO LAND, no basic skills of growing my own food, no permanent residence, and that I cannot take my gun with me (at least not from AZ to MD). I will be more positive than that.
Italy already in depression? sounds like it…
http://www.bloomberg.com/apps/news?pid=20601109&sid=a7dt4e2MDOEs&refer=home
and UK not looking too good either…
http://www.bloomberg.com/apps/news?pid=20601109&sid=aMOga3dGjowQ&refer=home
Good news: Home builders’ sentiment index has bottomed out.
ECONOMIC REPORT
Home builders’ index steady at 22-year low
By Rex Nutting, MarketWatch
Last update: 1:15 p.m. EST Dec. 17, 2007
WASHINGTON (MarketWatch) — U.S. home builders remained extremely pessimistic in December, but at least their mood didn’t get any worse, according to a monthly survey of builders’ attitudes released Monday.
The home builders’ housing market index stayed at 19 for the third straight month in December, matching the lowest reading ever in the 22-year history of the index released by the National Association of Home Builders and Wells Fargo. The reading was in line with expectations.
At 19, the index shows that about one-fifth of builders are confident in the market for single-family homes. The index peaked at 72 in June 2005. It was at 33 a year ago. Read more.
http://www.marketwatch.com/news/story/home-builders-index-steady-22-year/story.aspx?guid=%7B88B95B43%2D5E91%2D41D3%2DB1EA%2DDCE7E42CE1DC%7D
More evidence a bottom is in on the builders: Check out how flat these charts are since the onset of the credit crunch (I would say they have plateaued):
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=TOL&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=7&freq=1&startdate=&enddate=&hiddenTrue=&comp=kbh+bzh+len+hov&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013
Dollar extends gains as traders square bets
By Peter Garnham
Published: December 17 2007 10:45 | Last updated: December 17 2007 19:55
The dollar rose to a six-week high against the euro and a ten-week peak against the pound on Monday, extending its recent strong run as robust economic data boosted the currency.
After last week’s expectation-beating US inflation figures, official data showed a strong bounce back in capital inflows into the US in October, while the US current account deficit came in smaller than forecast in the third quarter.
http://www.ft.com/cms/s/66f71a30-ac86-11dc-b51b-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F66f71a30-ac86-11dc-b51b-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Interesting day. USD faded as the day went on, finished flat. Looks like it might be down tomorrow.
Looking at things, I would think you could try a long on the BKX with a stop. It’s under long term support but that could be a shakeout and it did end the day up slightly. Wouldn’t give it much slack though.
I think she’s actually suggesting, BKX is set to bounce.
Are you suggesting “the buck stops here”?
Tech just taken apart. Probably based in part on that EE Times thing I linked here yesterday. That publication was a reliable source of tech short selling ideas awhile back.
java at 19, doesnt make me feel like beta got spanked…it was just in the 18’s
that’s not beta. Beta is RIMM, GOOG, BIDU . .
Is it too early to start talking about WEEKEND TOPIC SUGGESTIONS?
Here it is: “The dreaded conversations with your FB relatives over the Holiday Dinner Table”
I’m Jewish and married a Jew-by-Choice (i.e., a convert.) I grew up not having to be a part of this bizarre spending season known as Christmas. Expensive gifts were never exchanged on holidays. It was mostly homemade baked items, or a bottle of wine, etc. I looked forward to the holidays from Purim to Pesach for the special foods I’d get to eat, and not a pile of plastic crap from China.
Anyway, because I married a convert, the inlaws do “Christmas”. And I dread dealing with them. (They don’t really do “Christmas” of course. They don’t give a whit about the redemption of Mankind. It’s just a spendfest.)
We’re fortunate to have done very well–both of us were senior-executive level managers at big companies; I’ve since gone on my own as a consultant. We’re very frugal and live a low-key lifestyle.
But my FB inlaws are another story! My M-I-L has gone BK four times in her life. She’s actually come into money several times (after her seond divorce, got about 500K for sale of a house) and lost it ALL within a few years.
And everything with her family is about money. She’ll see my camera and ask how much it costs. She’ll ask how much we paid for our car, our trip to England last month, etc. Why someone who lives on SSDI and foodstamps (while shacking up with someone, so she’s not really that needy) should care what things cost is beyond me!
And then we get financial advice from her! Like “You can probably get a lot of money for your Sunnyvale house.” Or strange questions like: “Do you think I should buy Google stock?” (One of the ways she lost money that led up to BK # 3 was by joining a “day trading club” in 2000)
Of course, she has a special fascination for Real Estate. The 500K she got after divorce #2 in the early 80s was lost trying to flip houses. You’d think she’d learn, but she didn’t. Already she’s talked her current “boyfriend” (after 4 husbands she simply stopped getting married and now has boyfriends) into buying a Condo in Vegas last year.
We try very hard not to mention ANYTHING that is remotely connected with money and finance but it’s hard. We know she’ll ask us how much we paid for the cameras we’re going to give our nephews, etc.
She’s asked us for loans in the past (imagine! Asking your kids for a LOAN!) and we told her we don’t make loans to relatives. She thinks she’s some sort of financial genius, yet her house is full of infomercial crap collectibles, etc.
While on SSDI she inherited about $50K, and proposed some scheme where we’d launder it for her so she wouldn’t lose her SSDI. We refused, of course. (Not to mention her scheme was incredibly naive!). The money was soon gone, anyway. She met a friend who was a self styled “financial advisor” and the money quickly vanished.
Anyway, I hate dealing with people like this. It’s easy to say “smile and nod”, but the stupidity is enormous, and we all end up paying for it.
So how will *you* deal with your FB relatives this holiday season?
Kahuna Bear — your recent toon seems to have struck a chord w/ a big name economist (or maybe he independently shared your vision)…
The Fed must not play Santa to the markets
By Kenneth Rogoff
Published: December 17 2007 19:16 | Last updated: December 17 2007 19:16
US Federal Reserve officials were jolted last week by the cacophony of booing that greeted their quarter- percentage-point interest rate cut. Markets badly wanted double the amount. It is part of a growing town/gown rift between a model-oriented Fed and a profit-oriented financial community.
Market commentators, including some former Federal Open Market Committee members, almost unanimously expressed deep disappointment that the Fed did not seem more attuned to the growing risk of recession. The critics were especially peeved that the Fed’s statement did not contain a clear acknowledgement that short-term growth risks easily trump short-term risks to core inflation.
http://www.ft.com/cms/s/7449485e-acc5-11dc-b51b-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F7449485e-acc5-11dc-b51b-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
“Exploiting a flaw in a Defense Department purchasing system, South Carolina parts supplier C&D Distributors rakes in $20.5 million in shipping fees on just $68,000 in sales. The scheme is finally detected when a Pentagon clerk spots a $969,000 bill for shipping two 19-cent washers to an Army base in Texas.”
Where your tax dollars go
course that 125million dollar injector on a 12.95 UPS got through.
dont matter, Im to pissed that everyone is just watching and not up in arms about the utter lack of leadership.
“Spain’s National Institute of Statistics adds plastic surgery procedures such as breast augmentation and nose jobs to the basket of goods and services it uses to calculate the nation’s consumer price index, while excluding the cost of garment fabric, upholstery, and home-appliance repairs.”
What inflation, these are natural.
the fear factor is getting out of hand.
http://www.ft.com/cms/s/0/95b09512-acd2-11dc-b51b-0000779fd2ac.html
Don’t miss the poetic comments below the main post here…
December 17, 2007
Rogoff: The Fed Must Not Play Santa
Kenneth Rogoff explains why the Fed and the markets do not see eye to eye on the recent decision to cut the target interest rate by a quarter point:
http://economistsview.typepad.com/economistsview/
Better link here:
http://economistsview.typepad.com/economistsview/2007/12/rogoff-the-fed.html#more
good stuff:
Im livin it right now. The lowered bonuses, tragic increase in bonus money…no layoffs…..they are just walking away in masse…cant get an applicant in the door with any knowledge, yet…the rails aint runnin.
lowered expectations across the board.
increased anxiety.
santa’s not coming this year, the depression has already begun, most just dont know it yet.
Taxes
Stay Out Of Jail For $52 Million?
William P. Barrett and Janet Novack 12.12.07, 6:57 PM ETSanta Ana, Calif. - Forbes 400 member Igor M. Olenicoff pleaded guilty today to a federal tax felony and has paid $52 million in back federal taxes, interest and civil fraud penalties to settle charges that he lied for years about his ownership of accounts in the Bahamas, Switzerland, Liechtenstein.”
link, Soverign Bank, National Depository Corp. and Santander…. there is crazy money and lotsa people plugged into the money,..,the dollar attack is on…
6 million SOV shares SOLD in the LASTEST QUARTER…
never been a better time to DUMP SOV.
Insiders BOT 4900, yes forty-nine hundred shares.
SKF goes higher. Sit tight till after the year to go long banks….right before they report.
It was interesting tonight watching Cavuto on FBN. He interviewed (by phone) libertarian Republican Ron Paul. Dr. Paul mentioned his disappointment in Alan Greenspan. He mentioned that Alan Greenspan in the Ayn Rand days influenced his economics. And now Alan has changed, but Ron Paul hasn’t changed his economis. Also after the interview Jonathon Hoenig raised that issue again.
I looked at the Ron Paul 2008 website for during these blurbs. Money has still been creeping in at a good pace. I think about $50,000 in 90 minute.
Staring into the abyss …
http://www.rense.com/general79/collapse.htm
COMMENTARY
Dissecting the Bailout Plan
By ALAN REYNOLDS
December 10, 2007; Page A19
It is not quite right to describe the new White House plan as a bailout of subprime mortgage borrowers. Actually, it is a bailout for a tiny fraction of those with adjustable-rate mortgages (ARMs), not subprime loans per se. Nearly half of all subprime mortgage rates are fixed-rate loans, and only 32% of ARMs are subprime. With all the misplaced political anxiety about rates being reset, you might imagine that all those victims who signed-up for these mortgages had no idea their rates might actually be adjusted.
The Bush administration claims the plan will help “up to” 1.2 million people. Most of that promised help consists of nothing more than another phone number to call for counseling about refinancing — a redundant service unlikely to prove wildly popular. Refinancing has been soaring anyway, thanks to 30-year mortgage rates dipping below 6%.
If risky subprime borrowers were actually supposed to be the main beneficiaries of such refinancing assistance, then it would have been the height of irresponsibility for President Bush to suggest greater involvement of the Federal Housing Administration, Fannie Mae and Freddie Mac. Shifting default risk to U.S. taxpayers could be very costly.
In reality, the only financial aid in this plan goes to those who qualify for the five-year freeze on mortgage rates — a curiously selective little group, estimated to number between 145,000 and 360,000.
http://online.wsj.com/article/SB119724608592918778.html?mod=googlenews_wsj
Bailout Cure Is Worse Than the Disease
December 17, 2007; Page A19
Kudos to Alan Reynolds (”Dissecting the Bailout Plan” op-ed, Dec. 10) for his accurate dissection of the president’s disgraceful mortgage “bailout” plan. The only remotely possible reason for Secretary Henry Paulson to “jawbone” lenders into compliance would be to forestall truly catastrophic legislation stealing investors’ collateral proposed by the likes of Sen. Hillary Clinton. If so, he needs to be much clearer about it. As it stands, it looks like yet another case of Bush & Co. being bullied by the New York Times’s editorial page.
I would be amazed if legislation survived that prevented mortgage investors from suing banks who cave in to political pressure to sacrifice their property. The Constitution, Article 1, Section 9, forbids changing the rules after the starting gun: “No bill of attainder or ex post facto law shall be passed.”
John R. Graham
Sausalito, Calif.
http://online.wsj.com/article/SB119786332898933161.html?mod=googlenews_wsj
Why Bail Out Risk-Takers?
December 17, 2007
She who would be president excoriates, as Democratic presidential candidates must, the current president and almost all his works. But she and he largely agree regarding the subprime mortgage problem. Granted, she greeted his response to it with the cri de coeur without which Democrats would be speechless: “More!”
She upped his ante by proposing a moratorium, for 90 days, on foreclosures. But the crux of her proposal is the crux of his — a selective five-year freeze on the rates of subprime adjustable-rate mortgages.
Hillary Clinton already is intimating that a seven-year freeze might be needed. Let the auction begin. Any freeze makes it likely that lenders will henceforth add risk premiums to the cost of money for less-than-prime borrowers.
http://www.courant.com/news/opinion/editorials/hc-will1217.artdec17,0,798179.story
Commentary
Democrats may commit the real mortgage fraud
Steve Chapman
December 16, 2007
Nothing is more fun than doing noble deeds with someone else’s money, and right now Democrats are getting ready for a rollicking good time. Contemplating the subprime mortgage problem, with numerous borrowers unable to pay their debts, the party’s presidential candidates and congressional leaders have a simple solution: Fleece the lenders.
http://www.chicagotribune.com/news/columnists/chi-oped1216chapmandec16,1,1665159.column
Subprime bailout would be mistake
• December 17, 2007
The Bush administration’s subprime mortgage bailout sets a dangerous precedent. Many subprime borrowers agreed to adjustable rate mortgages, in which interest payments increase substantially after an introductory period of low rates. The White House proposal lets borrowers who meet certain criteria receive five-year extensions of the lower rate from mortgage lenders.
The problem is, these loans were packaged together and sold to investors who were promised specific rates of return. Essentially, the government is overseeing the renegotiation of contracts signed by these investors without their consent. Banks, insurance companies, mutual funds and pension funds own securities backed by residential mortgages. They signed contracts based on initial “teaser” rates increasing in the next two years, so freezing those rates will reduce the rate of return for investors.
http://www.app.com/apps/pbcs.dll/article?AID=/20071217/OPINION/712170309/1032