Bits Bucket And Craigslist Finds For December 21, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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SEC…
http://biz.yahoo.com/rb/071221/subprime_regulators.html?.v=1
“After more than a half century observing numerous price bubbles evolve and deflate, I have reluctantly concluded that bubbles cannot be safely defused by monetary policy or other policy initiatives before the speculative fever breaks on its own. There was clearly little the world’s central banks could do to temper this most recent surge in human euphoria, in some ways reminiscent of the Dutch tulip craze of the 17th century and South Sea Bubble of the 18th century.” ~Alan Greenspan, former Federal Reserve chairman.
(This recent statement by Mr. Greenspan is a lame defense of the Federal Reserve. The “human euphoria” that blew the real estate bubble into unsustainable dimensions was generated by his own easy money policy. The Fed could have nipped it in the bud. It didn’t.)
I agree with you. I do think the dropping of interest rates to near zero kick started this bubble, and if desired, they could have taken the punch bowl away.
My biggest problem with Greenie’s logic is if he thinks that it is NOT the CB’s responsibility to prick bubbles that have been created, why is it that he thinks that it IS the CB’s responsibility to clean up the mess after it bursts? By doing so is he not in action taking responsibility for the bubble to begin with?
His protests of not being partially if not primarily at fault ring hollow.
Why would they have wanted to take away the punch bowl? We could be mired in Japanese-style quasi-permanent recession at the moment, and instead we are looking for a continued expansion into 2008. Where is the down side?
Exactly. The banks have creatively found new methods to back their play, avenues they wouldn’t have thought of under other circumstances. These appear to be lucrative new channels good for years to come. The economy and job numbers will continue to expand through 2008 and beyond, as even now talk of recessions are vanishing in the media.
It depends upon what your definition of expansion is. Agreed that there was no desire to remove the punch bowl, but to say that you can’t is a fallacy.
I’m so sick of Greenspan’s defense focusing on the fed rate policy and nothing else.
The Fed has had the statutory authority to regulate lending practices. They finally, after YEARS of foot-dragging issued loan guidiance on “NINJA” (no income job or assets) loans.
The fact is the Fed didn’t want that regulatory authority and they did bupkis with it.
The Fed has continually lowered reserve requirements, gave the ok to fraudulent “sweeps” accounts that expanded bank reserves even more, turned a blind eye to the establishment of a “shadow” banking system via hedge funds/credit insurers, and generally said “LALALA I CANT HEAR YOU” when told there was a problem.
Now they act surprised when the non-bank banks have a bank run and the reality sinks in that they don’t have control over the majority of credit creation or destruction out there.
To say that the only anti-bubble action that the Fed could have taken is to raise the rate IS A LIE. IT IS A LIE THAT IS INTENDED TO EXCULPATE EVERY EXCESS AND FAILURE BY THE FED.
I think there is one clear pattern in this bubble and that is the simple fact that it was driven by greed yes, but more importantly by changes in the mortgage lending practices, which allowed the mortgage originator to sell off their junk, and provide a teaser rate just long enough to exceed the buyback period after which the loan would obviously go bad. I can understand these practices in a rising market, yet I still see ads published in mainstream media for the same… If lenders are finally required to verify incomes, we could see prices fall easily to 1997 - 1998 levels, and foreclosures continue to grow through 2008 and remain at very high levels through 2012. Sort of a hunch on my part, but if you do the basic math it does not add up any other way.
Did any of you see the circuit city numbers this morning? Now that home equity money is gone their sales are tanking.Anyone want a 4 dollar stock for a stocking stuffer?Etrade is also in the tank from all the bad loans.What happened to “money out the wazoo”?
You can be sure the lying morons will put a suit on the pig. “It’s good for the economy”, “we need tax cuts”, “we’re fighting them over there so we don’t have to fight them here”, blah blah blah….. friggin’ soundrels.
Home Depot as well Their chart looks almost just like the bubble chart 26 now off from over 40 for the past two years. That said, Best Buy is way up. Circuit City really dropped the ball. I cannot stand the store myself. Also Costco is way up… Go figure! Probably on account of my weekly bill there
But Best Buy is doing just fine. And the local Lowe’s here was pretty busy yesterday mid-morning.
I just saw headlines that consumer spending surged in November - highest in 3 1/2 years and that financial bonuses are up 14%. I just don’t get what is going on any more.
“Consumer spending in the U.S. rose more than forecast in November, allaying concern that the slowest shopping season in five years may have already pushed the economy into recession. Purchases gained 1.1 percent… Incomes rose 0.4 percent.”
tee, hee.
Yes, nothing to see here, all is well.
Except maybe for the fact that the middle class is sinking deeper into the abyss.
Nah, retail numbers being up are mostly a function of higher gas prices. Shopper trak show retail has slowed from last year.
Funny how these little things never make it into the headlines.
I don’t get it…Every night there’s some news clip about the fact that people are having to choose between eating and filling their fuel oil tanks to stay warm.
Collections are way off for the Salvation Army pots, and the cupboards are bare at all the food pantry’s.
Virtually nothing adds up anymore.
http://biz.yahoo.com/ap/071221/economy.html?.v=6
Circuit City has a really bad retail model. I wouldn’t read too uch into their poor performance. Now if we see Best Buy tanking thats a whole diferent kettle of fish.
“Circuit City has a really bad retail model”
Honestly I am surprised they are still in business. I can’t stand the place, worse than used car/house salesmen.
I only go there as last resort.
Remember last year when they laid off all those “higher” paid employees and wanted to rehire for the same positions at lower wages. What goes around …
“Remember last year when they laid off all those “higher” paid employees and wanted to rehire for the same positions at lower wages. What goes around …”
The MSM should interview the CEO and find out how much his “bonus” is this year.
everyone has a good run for a few years then someone else comes along and does it all better. Home Depot is out in the long run. I absolutely hate their store/warehouse layouts and their prices are high. Lowes is neater cleaner and slightly less expensive. Anyone on the East Coast with a good memory should remember these..Two Guys, Rickels, Channels, Bradlees, Caldor,
Seriously, Best Buy doesn’t appear to be the be-all in electronic retail. From trying to pass returns off as new items to their terrible returns policy, I’m surprised people still shop there. I get this about this retailer from lots of folks I talk to.
Last time I was @ a circuit city was about 10 years ago…
As we got out of our car in the parking lot, I told my wife not to lose it in the store because of what I was going to do, and explained our cover story.
After the salesman Pandit extended the offer of an extended waranty to me on the walkman i’d picked out, I worked my face into perhaps the saddest it’s ever looked,
and uttered:
“I only wish I could outlive the waranty, as I have a terminal disease”
and my wife told the salesman:
“He’s only got 6 months to live”
“Remember last year when they laid off all those “higher” paid employees and wanted to rehire for the same positions at lower wages. What goes around ”
It was a very good idea. Sales monkeys at stores like that are useless overhead used to do one thing and one thing only - hard peddle extended warrantees.
‘Anyone on the East Coast with a good memory should remember these..Two Guys, Rickels, Channels, Bradlees, Caldor,’
Great Easter, Korvettes, Woolworths, Montgomery Ward,
Grants too :
“By the time Mr. Grant died in 1972, at age 96, his nationwide empire of W. T. Grant Stores had grown to almost 1,200.”
RE: Anyone on the East Coast with a good memory should remember these..Two Guys, Rickels, Channels, Bradlees, Caldor,’
And don’t forget Woolworth’s, Zayre’s, Lechmere Sales,
Filenes, Jordan Marsh, and Marshall’s.
Sears will be the next to go.
Big nightly news consumer reports on how they have no tech’s to fix and repair all the appliances they sell which are under warranty. Calls to customer service lines never get answered-if somebody gets thru hold times are like for a couple hours.
Total nightmare.
Talk about putting the bankruptcy gun to your head and pulling the trigger.
Wall St and the greedy Hedge fundies and anyone that pays the $ to congress/senate WH types. So Greenie is fully responsible. Althought they will all deny the greed they ALL participated in. Ask them to give back the monies they have in their pockets now, or give back the 3 or 4 homes/multiple cars and vacations. Nope, they got theirs. Period.
A complete and total outrage…
http://news.yahoo.com/s/ap/20071221/ap_on_bi_ge/wall_street_bonuses
But that only works until the market reprices to account for the risk that has been given to bondholders, a process that is now being characterized as a “credit crisis.” The only reason that this went on as long as it did was because falling (not low) interest rates supported abnormally low default rates.
http://www.larouchepub.com/hzl/2007/3449finance_system.html
“If there is a person who bears more guilt for this mega-disaster than any one else, it is Alan Greenspan, the former head of the Fed. We have him to thank for the fact that we have all these wonderful “financial innovations,” which his successor, Bernanke doesn’t understand. When Greenspan took office in 1987, he responded to the then ongoing crash, which was comparable to the Black Friday of 1929, by establishing, bit by bit, all these “creative financial instruments,” whose very complexity underlies the problem. To this category belong derivatives, credit-derivatives, the CDOs, the SIVs, the MBSs, and the ABCPs, but also the hedge funds, the investment companies, the special-purpose entities, the conduits, investment vehicles, etc. Thus was the lie spread, that all these instruments “spread the risk on many shoulders,” and therefore minimize it—a milk-maid’s accounting….”
his successor, Bernanke doesn’t understand
That’s harsh on Bernanke. I’m sure HeliBen understands them full well, especially he’s the one who will take the fallout from the dilemma.
Maybe Zepp-LaRouche meant “which Bernanke didn’t understand why on earth ANYbody could be so foolish as to toy with the economy like that.”
Greenspan is a partial truth teller, he will say something that is true but does not tell all the truth
His responses about ARM’s is an example, its true that ARM’s have a legitimate function in the economy. However that is only partial truth, its also true that most people don’t have the financial or mental ability to know when to jump from a ARM to a Fixed and back to an ARM when its in their interest. And its certainly not a good time for most people to get an ARM when interest rates are at a historic low and the FED is in the process of raising interest rates.
“Greenspan is a partial truth teller, he will say something that is true but does not tell all the truth”
Thats the Wall St/K Street method. Take a little truth, add a boatload of lies and put it on the street. Within 6 months you have 30% of the population saying moronic stuff like “tax cuts pay for themselves” and “low interest rates are good for the economy”.
“Greenspan is a partial truth teller, he will say something that is true but does not tell all the truth”
Dr. Frankenstein of straw man monsters…
Don’t forget “Offshoring creates jobs”
…at Best Buy and WalMart
–
“Greenspan is a partial truth teller, he will say something that is true but does not tell all the truth”
You have just defined a good deceptor/manipulator, a key to success in modern economy. No one lies all the time and no one is wrong all the time.
Jas
Greenspan held the rates to low for to long ,but what about Wall Street and the Rating agencies marketing bum risky junk paper as safe investment grade ? Faulty ratings went a long way toward keeping the easy money coming .
I just wonder why the regulators didn’t notice that all of a sudden people were able to afford the higher priced real estate .
Why didn’t anyone question the fact that to many regular people were going on teaser rates without any money down ?It would of been easy to spot a speculative bubble in places like Florida and Vegas when you saw 39% increases in one year like in 2005. No excuse for the regulators and the Feds not jumping on this faulty lending in late 2005 or earlier . Why didn’t the people marketing these loans question the fact that sales were increasing in spite of prices increasing ? When “Flipping ” TV shows became main stream and seminars pushing flipping became the new investment choice ,you would think there would of been some alarm on the part of the powers that were suppose to keep the lending above-board.
I know that in early 2005 regular people on my block were saying ,”Who in the hell are these people buying property these days,and who can afford these high prices ?”
We know that Wall Street was paying higher commissions to the commissioned sales loan agents to put people on toxic teaser rate loans , and we know the real estate industry was selling the concept of leverage and refinancing down the road ,and most important the myth that “real estate always goes up “,became truth . I didn’t see the MSM disputing that myth that was peddled and often times the expert of choice to interview was a Realtor chanting appreciation data from the next hot investment spot .
The advertisers were in control of the ‘News”. I think during the height of the boom ,any channel I tunned into either had a mortgage ad or a Home improvement ad or ads pushing high price ticket items .
The market -makers were the ones quoted in the news ,and the industry and the sheep were brainwashed . Who can forget the spin coming from the NAR and the CAR . So, a lot of factors came into play ,but nobody in the game wanted to call a end to the “real estate always goes up” myth ,because it was financing a entire economy ,never mind the fact that the lending was faulty and getting very fraudulent as time went on in this speculative housing boom .
As at no time in history are advertisers in control, supported by the media’s corporate owners, who see no constitutional obligation to actually inform the public.
The amusing “he said/she said” mode of reporting demeans journalism, and confuses the Whopper-eaters. Who said we get the government we deserve?
My $0.02 on ARMs vs. Fixed rates:
1. If you are exceedingly wealthy (your monthly payment going up by 4x wouldn’t put a dent in your ability to pay, or change your lifestyle), you should always have an ARM. Over long periods of time, you will pay more with a fixed rate mortgage.
2. If you are at the other end of the spectrum, scraping by each month, and a $100 increase in payment would push you over the edge (well, aside from the fact that you shouldn’t even buy a home…), you should never, ever, ever get an ARM.
And everything in between is a judgement call based on your particulars. Fixed for 5, 7, 10, 15 fully amt, 30 fully amt, even an Option ARM for the financially educated all have their place. I personally would consider an Option ARM–chunky income, and seeing the benefit of switching between a 15 and 30-year amt payment depending on cash flows.
We Can Build a Snowpig
http://www.stockmania.com/index.php?showimage=118
“Walkin’ in a Subprime Wonderland”
– I just hate it when I can’t get a tune to leave my mind…
Try another song -
Spiderpig! spiderpig
does whatever a Spiderpig does
Can he swing from a web?
No he cant. He’s a pig.
Gone awaaaay, the investors,
The loan I paaaay, it still festers,
A Joshua Tree, is watin’ for me,
Walkin’ in a Subprime Wonderland.
beautiful…(wiping moisture from eyes)
I like it! LOL
Ha. ROFL. I should have consulted you on my tune!
“In the meadow we’ll build a subdivision,
One-tenth acre lots on graded ground,
Will the buyers have the cash for payments?
No, they’re interest-only zero down!
Later on, we’ll forclose ‘em,
Empty houses, we’ll bulldoze ‘em,
The American Dream, just ain’t what it seems,
Walking in a Subprime Wonderland.”
I think this thread alone will be responsible for a decrease in this month’s productivity numbers reported by the feds…
Later on we’ll perspire
as our bills mount higher
while smoking our bong
we’ll sing along
try to stop the consumer today.
I just hate it when I can’t get a tune to leave my mind…
Ooh ooh, that smell
can’t you smell that smell?
the smell of debt surrounds you
Does anyone have a link to one of the charts that shows Americans’ equity as a percent of home values? I heard something last week that next year it may fall below 50%.
Line 50 of this FRB report:http://www.federalreserve.gov/RELEASES/z1/20070917/z1r-5.pdf
http://www.larouchepub.com/other/interviews/2007/3450cathy_hinko.html
An eight-fold explosion of foreclosures in Louisville, KY
Sounds like a great opportunity for strong hands to invest before reflation measures kick home equity appreciation back into overdrive. Invest now or get priced out forever!
That day will come, but we’re not there yet IMHO. There will be a reshuffling of the rich, as those who jumped out at the top, before the great repricing (of equities and RE) will have much more money to spend and buy after the serial knife-catchers have been slain.
Professor: Are you taking anything for that sarcasm streak?
http://www.larouchepub.com/pr/2007/071215calif_budg_crisis.html
California Budget Crisis Escalates (As tax revenues fall short due to housing bubble implosion)
Rather than seeing the extra money as a windfall, the state of course adjusted their expenditures to the new permenantly high plateau.
But Real Estate always goes up, and in California everyone will be a millionaire since even 2 bedroom/1 bath shacks on a fault line is worth a million.
There is also quite a few multi million dollar houses that sit on the San Andreas fault line. Woodside and Portola sit right on top of the SA fault line.
Supposedly, Arnold is considering letting over 20,000 prisoners out of jail to help ease the fiscal pain. An early Christmas present to my boyz in cell block F.
Gee, if I had my own security detail that might sound like a good idea to me too.
That guy’s an embarassment to Styria.
I was under the impression they made a bundle hiring prisoners out to industry… I guess they are trying to unload the ones that won’t - or can’t work, most likely the mentally ill who now fill our prisons.
The way I see it is CA can pay those prison costs now or they’ll pay it later in police OT and increased expenditures for defense attorneys for the poor when the crime rates go up. Wouldn’t leaving them in be cheaper? They’d save a few people’s lives, prevent a few rapes while they were at it.
Meanwhile the pork expenditures keep a comin’.
Carrie,
We already have accelerating crime rates, especially property crime. It’s been ticking up for 14 months.
Sorry to hear that Gwynster. Us too.
We’ve had 2 different incidences of people killing their spouse/sugn other in the last few months in a town in our school district (previously unheard of here really) In both cases it was not premeditated. The person snapped over something really stupid.
The bank or gas station robberies in Syracuse (about 20 min away) have noticably surged too. The former is usually some poor schlep that gets picked up within days. They don’t even bother covering their faces sometimes. Lots of copper theft going on too.
CarrieAnn,
Sorry to hear about your local coppers and their thieving ways…
“We already have accelerating crime rates, especially property crime. It’s been ticking up for 14 months”
In LA, in the land of the instant carjacking, Better watch your wheels as a lot of desperate inner city brazen thugs are scoping out and eyeing opportunties to
grab a vehicle from some careless driver leaving the keys in the ignition or wandering lost in some depraved third-world ghetto corner off the 110/5 fwys. The LA gangstas are real opportunists in scoping out and doing quick grabs of vehicles running and unattended in LA mean streets. They will even drive off with a baby strappped in the back seat. Right now the chilly wet winter weather in LA means reduced Gang criminal activity but come the first thaws of spring, and with the upcoming CA budget crises and local cities shortfall in local revenures for funding anti-gang intervention programs and handouts to the desperately poor, the gangs and criminasl wil be out in full force extracting property from any and all sources including burglaries, car thefts, jackings, robberies, assaults, store breakins, ID theft, U name it. We could have a repeat of the hi-crime wave of the 80’s and early 90’s when criminal gangs virtually roamed all over LA freely robbing, looting, and assauting at will.
RE: people killing their spouse/
Yup…big time escalation in this form of mayhem here in the Northeast.
Recently, here in my yuppie town of 12k, the son of the beloved 80YO town clerk, who was a like well liked and respected civil engineer for the state DOT, with absolutely no criminal history whatsoever, took a baseball bat to his wife of 8 years when she told him she was screwin’ around with somebody else.
Whem the cops asked him WTF happened-the only thing he said was-”I lost it”. Acquitances were totally freaked
People are living on the edge and mega-stressed.
One trigger and they’re over the edge.
More of this to come.
Merry XMas.
RE: We could have a repeat of the hi-crime wave of the 80’s and early 90’s when criminal gangs virtually roamed all over LA freely robbing, looting, and assauting at will.
Except this time they’ll be un-packin’ their Eastern Bloc AK-47’s bought on the cheap for $300.00.
Ever seen what a 30 round clip of 7.62×39mm will do for damage?
Everybody better body armour up.
If some untrained gangsta with his piece-of-crap Romanian AK bullet-hose ever makes the fatal mistake of capering in my ‘hood, I’ve got a Remington 870 pump-action 12 guage, tactical model, that I keep handy for that scenario. If the law won’t protect me from him, it won’t protect him from me, either.
Ahnold Ziffel is all about pork…
“Supposedly, Arnold is considering letting over 20,000 prisoners out of jail to help ease the fiscal pain. An early Christmas present to my boyz in cell block F ”
The homeys of 18th street, grape st crips, 204th harbor st , will be hi-fiving each other and getting ready to do some serious LA Style wealth transfers , sucking all those stolen suv’s , hot stereos, warehouse booty into that blackhole universe of hot property, Compton.
Ahnold Ziffel signed a bill spending another $8 Billion on prisons in Caly-forn-ia, in May.
Where’d the dough go?
prison guard union is the most powerful in CA, even above the teachers union. Lots of bonuses and raises. Let the good times roll!
“serious LA Style wealth transfers ”
If U are the relatively few middle class still left here in the Third world wealth disparity region known ar LA U have opposite but equal pressures extracting your earnings. From one side above U are subject to exorbitant CA & local taxes & fees, hi property taxes ,as well as The IRS which drains the pockets of the middle classes here in CA . On the opposite side below U have the gangs and desperately impoverished criminalized poor of LA
going after Your property thru theivery , burgalries, robbing, Stealing Yout Identity, your car or parts of it, ect.
Test this out and leave your car parked with no auto-alarm on any street in LA inner hoods and see how fast it will be stolen and/or stripped .
Heres an example of Local city depts extracting(stealing )
the $’ s from middle/upper class law-abiding wage earners in LA region:
IMHO, local Municipalities and their lapdog PD’s, especially the LA County sheriffs dept , are more interested and devote as much revenues and City/PD resources in traffic ticket enforcement as in patroling crime in inner city S*itholes. WHy? Because it is a net positive cash cow flow for cities to go after hard working responsible law-abiding citizens thru traffic enforcement fees rather that engage in the municipal cash- draining activities of going after criminals in the mean LA hoods.
look for encreased traffic enforcement activties all ove r Scal metro region as cities /municipalities PD’s attempt to grab Citizen dollars in order to make up for local municipal revenue shortfalls
Giving us Barabas? Don’t you know that housing prices drop when neighborhood crime rates increase?
Supposedly, Arnold is considering letting over 20,000 prisoners out of jail to help ease the fiscal pain.
Go Arnold. Prison should be used only if total sequestering from society is truly necessary, which drug possession crimes are not. I’d fall on the floor if there weren’t at least 20,000 people in for just that reason. I don’t care whether people are in prison or not, I just care about the racket in gov’t expenses.
“Privately, Nunez is reported to be fuming, as he stood by Arnie during last year’s budget standoff, and is now losing credibility, as the promises of a balanced budget, and no further cuts in social welfare and health care programs, have vaporized.”
The losers will be the last to experience cuts.
http://www.federalreserve.gov/releases/z1/Current/z1.pdf
Page 101
B.100 Balance Sheet of Households and Nonprofit Organizations
Line 50
Owners’ equity as percentage of household real estate
As of the third quarter of 2007 the number sits at 50.4%
I wonder how much of that “equity” is imaginary.
I wonder how much of that “equity” is accessible without selling one’s home, given that lenders generally don’t like to make loans on falling knife collateral.
I wonder how much of that “equity” is available IF one CAN sell their home.
Thank you for the link. Does anyone have a graph?
Banks losing money. Insurance Companies losing money. Who the hell knows what the value of anything is anymore until institutions start marking assets to market.
Financials responsible for about 1/3 of S&P 500 earnings. More and more houses gettng foreclosed not paying property taxes. More and more people getting layed off.
Any thoughts on government deficits next year? What will be the effect on housing if government spending slows?
Was this spotted earlier in the week regarding London? (TimesofL)
London house prices drop £28,000 in a month
House prices in the capital have fallen by 6.8 per cent, or an average of £28,000, in the past month, according to Rightmove, the property website. The figures are the gloomiest that homeowners have had to face since the market began to turn this autumn. However, Miles Shipside, of Rightmove said that the roll-out of home information packs (Hips) had distorted the figures. He added: “Many sellers have priced below the market to try to sell. It is wrong to speculate that prices will continue to fall based on one month’s statistics from a quiet December.”
Yes, it’s just a one month data move, but worrisome nonetheless. I’ve got a few friends in London; some are worried, and some still figure prices will continue climbing. Sadly, some of the latter folk are staking their entire retirement on it because they have invested every single penny (outside the miserably low and mandatory state pension) into their house.
What on earth caused that large a move in just a month? Did they just realize that they have a similar situation to us and so the fact that our bust has been going on for 2 years affect what they think of the values? Are their banks tightening up faster than ours did? Any ideas? That is pretty incredible.
My family lives in UK. Apparently people are being turned down with otherwise solid long term credit standing and a single 30 day late … My impression of London however is that it is driven largely by foreign cash buyers, which then results in a chain of purchases in ever diminishing cost areas. I am not sure there are that many first time buyers (”getting in on the bottom rung of the ladder”)
The full article is here
(if that shows up, my HTML skills are OK)
Interestingly, in the very limited samples the article gave, prices on the high end *and* the low end dropped by very roughly similar amounts (measured in pounds), but that made for far higher percentages in the low-priced areas like Hackney than in Chelsea.
There’s also talk of HIPS causing the drop (Home Inspection Packets, something like that, which are required that sellers provide starting soon).
Just wait till the Buy-to-Let crowd starts cashing in and/or bailing out come the new tax regime in April!
They have a better education system. They’re picking it up quicker.
it’s a long swim from Mexico to UK.
“London house prices drop £28,000 in a month”
I see no problem there that unlimited helicopter drops of liquidity cannot solve. Real estate always goes up, in the long run.
http://www.lewrockwell.com/north/north591.html
Very nice re-cap. Not nice really, more like scary as Hell, but still accurate, IMHO
A small-time builder whose lot inventory is bleeding him slowly:
http://fortcollins.craigslist.org/rfs/514753796.html
He has more blereding to do if he’s offering 100% financing and poor credit loans
Here is more news that should ring off inflationary alarm bells at the Fed. But I don’t expect this, as they appear to be preoccupied with looking for signs of a recession which is apparently not materializing.
It says at the bottom-left corner of the front page of today’s WSJ that “Rise in Personal Spending Likely to Outstrip Income.” The War on Savers continues to show great signs of success!
November personal spending jumped 1.1 percent
Fri Dec 21, 2007 9:01am EST
EU inflation higher than thought
U.S. food inflation parallels 70s on ethanol boom
October personal spending, income inch up
Soft home sales, prices cast economic gloom
Recession fears spike among U.S. voters: poll
Global stocks jump, dollar falls on Merrill report
Oil near $91, inventories, economy in focus
Dollar dips as credit woes weigh
WASHINGTON (Reuters) - U.S. personal spending jumped a much bigger-than-expected 1.1 percent in November, the sharpest rise in more than two years, while prices rose, a Commerce Department report showed on Friday.
Economists polled by Reuters were expecting a 0.6 rise in spending.
The personal consumption expenditure price index, a key measure of inflation, rose 0.6 percent, the biggest gain since September 2005. Core PCE prices, which strip out food and energy costs, rose at a 0.2 percent rate, matching expectations.
The year-on-year core PCE, a favorite inflation gauge of the Federal Reserve, climbed to 2.2 percent, the highest since March. The overall PCE index rose 3.6 percent from a year earlier, the steepest 12-month climb since October 2005.
Real spending, which adjusts for inflation, rose 0.5 percent in November, the highest since December 2006.
Prices for U.S. government bonds fell as the report showed inflation flaring above the 2 percent rate that is at the top of the Fed’s ideal range.
http://www.reuters.com/article/hotStocksNews/idUSN2064907720071221
The FED could care less about inflation for the average Joe they are scared about the Deflation of the collateral of the investment banks, where their friends work. Average Joe will walk from a deflatining asset what a shock for Wall Street.
So what you are saying pretty much is that the Fed has a very strong incentive to respike the punchbowl, in order to help out its friends on The Street.
Time to join the SDCIA and start snapping up investment properties at a fire sale price, before the great reflation takes hold?
Yes first part the FED will try and keep the banks solvent, No on the second part although one property in San Diego to live in would be nice. Rentals? I don’t see how they will ever make sense in San Diego unless prices really come down.
Yep, the last SDCIA meeting had the ultra-bull Bruce Norris talking about how great 2008 was going to be and how high real estate prices were going to go.
http://www.sdcia.com/
Exactly. One price that isn’t going to be going up is the price of housing, though the price of housing is already sky high after years of unmeasured inflation. One could make the case that the real inflation rate is stabilizing.
“One price that isn’t going to be going up is the price of housing,…”
But isn’t that exactly the price that needs to go up (or at least stay propped up on a permanently-low plateau) in order to save banks that are mired in bad debt? I know, I know, respiking the punch bowl won’t work, because that would only give builders the incentive for more overbuilding into a glutted market, but desperate times breed desperate policies.
“One price that isn’t going to be going up is the price of housing…”
Um, not so much.
The purchase price of a house will be dropping, but real estate taxes and insurance will be rising to make up for it.
LIBERTY! LIBERTY!…
http://article.nationalreview.com/?q=ZWIzYWI4NTBjYTc3NGE1OGEwYWMyZjE1NDZjOWVmMDQ=
I’m in.
When did the last Chrysler bailout occur? Was it the early 1980s?
PAGE ONE
Chrysler Faces Financial Pinch, Sees Asset Sales
By JOSÉE VALCOURT and NEAL E. BOUDETTE
December 21, 2007; Page A1
Chrysler LLC has slipped into a serious financial crunch just four months after Cerberus Capital Management LP swept in to save the auto maker.
At a meeting earlier this month, Chief Executive Robert Nardelli told employees the company is headed for a substantial loss this year and is scrambling to sell assets to raise cash, according to an account by two people present that Mr. Nardelli confirmed.
“Someone asked me, ‘Are we bankrupt?’” Mr. Nardelli said at the meeting. “Technically, no. Operationally, yes. The only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with.”
http://online.wsj.com/article/SB119820798310144385.html?mod=hpp_us_whats_news
“At a meeting earlier this month, Chief Executive Robert Nardelli told employees the company is headed for a substantial loss this year and is scrambling to sell assets to raise cash”
Nardelli abosconded with $300 million in Home Depot wage earners cash….. how much will this larcenous CEO pickpocket from Chrysler workers wallets?
When did the last Chrysler bailout occur? Was it the early 1980s?
Yep, They were near bankrupt around 1979. Of course big credit is given to Lee Iococa however it was the Billion dollar plus loan guarantee by the U.S. Gubmint that saved their a$$, and Lee got big dough out of the deal. Thanks to the lowly taxpayer.
Too bad about Chrslyer, they built some decent cars the past decade…
This is a first, aladinsane, I disagree.
Please name a pick or two. The only two that come close, IMO, would be the Crossfire (based on decade old Mercedes tech) and the newer 300 / Charger (oh, that one was based on decade old Mercedes tech too? damn).
Couldn’t agree more, Aladinsane. I sure loved my 19-yr-old Plymouth Horizon. I got 180,000 miles out of that car before it finally broke down for good. My new MINI Cooper is only a pale imitation of the best car I ever had, my 1988 PH.
The US government made a loan guarantee. In exchange for the loan guarantee, which never resulted in a dime from the taxpayers, the US government made over a Billion dollars.
Mr. Iacocca deserved more than he was paid. He took a $3 asset to $48 in 2 years, made it cash rich with international credibility. Mr. Iacocca (acronym for “I Am Chairman of Chrysler Corp of America”) gave proof to the ‘great man theory’ of business management. Since he left, Chrysler has been on a toboggan slide.
They built pure crap while Ioccoa was at the helm, his compensation was more than ample.
There is definitely a value to a loan guarantee. In essence the US taxpayer insured the loan for free. That value was due the taxpayers, and was never collected.
Since the assumption is that no commercial guarantor could be found, the US should have charged loan shark amounts for backing the action. There is certainly a quantiable cost to this, which was borne by taxpayers.
Chrysler Corp paid 10.35% in a 14.5% market, in exchange the government received 14.4 million warrants exercisable at $13/share. The difference in interest was $12MM/yr. The government received 1% premium for the guarantee plus the warrants.
This was certainly a more appropriate use of tax payer guarantees than the restructuring of Latin American debt so that Bank of America could survive in 1989.
Should the government have gotten involved in private business? The answer at the time was if Chrysler went under 60,000 workers would be out of work and the cost to the government was greater than $1B in hard moneys.
Looking back it was obviously a bad choice Chrysler laid off the workers in the next 3 years. The government made 1.6B on the warrants, shareholders made a fortune and Mr. Iacocca’s $1 salary of 1979 was upped.
Hoz, the point that’s lost is that it should not be the U. S. government’s role to be guaranteeing loans for for-profit businesses. Chrysler should have been left to succeed or fail on it’s own. Period.
Chrysler was a big Army tank builder at the time. The gubmint didn’t want to let them fail.
They best let them go under once and for all this time. Cars, despite recent fancy gadgets, are low tech. If this country is to prosper we should let the Chinese knock themselves out making us disposable cars while we invest in the future - space, biomed, nanotech, etc. The auto industry is a drag on our nation in so very many ways.
Unless you make stuff, how do you make money?
In the US, the answer has been through the ’service industry’ and ‘financial industry.’
The service industry doesn’t pay well, either salary or benefits. The financial industry is built on a house of cards, and we see how that is playing out.
Now that the US is deciding it is beyond making stuff, what is left?
Now that the US is deciding it is beyond making stuff, what is left?
Selling stuff on Ebay what else ?
infusion question
if you pay 9% what due you have to get to make a profit ?
and who’s that desperate to pay
and why didn’t they offer FDIC-guaranteed CDs at 6%? Would have got a nice infusion there as well.
But I don’t think the institutions really want to compete on a retail level- that is chump change to them, being unsophisticated brick-and-mortar stuff.
Washington Post had a chat about the current economic outlook with Lawrence Summers yesterday. Said recession was more likely than not, blamed it largely on lack of saving and said housing mess will take at least 2-3 years to play out. Hardly in line with our gloomiest posters, but interesting coming from someone who used to be a public official.
http://www.washingtonpost.com/wp-dyn/content/discussion/2007/12/19/DI2007121901940.html
Also loved him slamming down the people who seem convinced that the falling dollar means that house prices should be going way up.
Summers = gloomster w/ a vested interest in raining on the incumbant party’s parade of bulls.
The fraud premium in U.S. home prices appears to be at risk these days…
Fraud Seen as a Driver In Wave of Foreclosures
Atlanta Ring Scams Bear Stearns, Getting $6.8 Million in Loans
By MICHAEL CORKERY
December 21, 2007; Page A1
http://online.wsj.com/article/SB119820566870044163.html?mod=hpp_us_pageone
WASHINGTON (MarketWatch) — U.S. consumers spent more than they earned in November, driving the personal savings rate negative for the first time in 15 months . . .
WTF? I thought the personal savings rate has been negative like 15 quarters in a row . . . am I missing something?
I am missing something, too. But I think if someone were so motivated, they might discover that a “change of accounting method” tipped the officially-reported personal savings rate from negative to positive at some point over the recent period.
The BEA modified their savings rate numbers *significantly* - retroactively - in June. Basically saying they were incorrect in the statement of consecutive quarters/months of negative savings rate.
Y/M Pre-adj Post-adj
——————————-
Mar-05 0.2 0.9
Apr-05 -0.4 0.6
May-05 -0.1 1.1
Jun-05 -0.5 0.6
Jul-05 -0.9 0.2
Aug-05 -3 -2.3
Sep-05 -0.5 0.5
Oct-05 -0.3 0.5
Nov-05 -0.3 0.8
Dec-05 -0.3 1
Jan-06 -0.3 1.1
Feb-06 -0.3 0.8
Mar-06 -0.4 0.8
Apr-06 -1 0.4
May-06 -1.6 0.1
Jun-06 -1.5 0.5
Jul-06 -1.7 -0.3
Aug-06 -1.5 -0.1
Sep-06 -1 0.4
Oct-06 -0.8 0.4
Nov-06 -0.9 0.5
Dec-06 -1.1 0.3
Jan-07 -0.8 0.5
Feb-07 -0.8 0.9
Mar-07 -0.4 1.5
Apr-07 -1.2 0.7
May-07 -1.4 0.5
I’m not sure why this very large adjustment occurred - it sure is noteworthy. Anyone got any links to info?
“I’m not sure why this very large adjustment occurred …”
I have no idea, either, but it seems noteworthy that all the numbers in your left column are negative since March 05 while only a couple of numbers in your right column are negative.
Does anyone have any theories about what this could mean?
I hope that adjustment didn’t have anything to do with all that house “equity” being amassed out there.
Oh, no, equity amassment is “incorrectly” excluded from the savings rate calculation.
Ahhhh, thanks for the info - I was not aware of the adjustment. I guess life is good then, we are all spending less than we make and building our nest eggs.
So how long before they adjust it again in light of the most recent data?
Until it goes persistently negative again, I would guess…
Ha ha - yep.
Seriously though - given that historically, up until 1985, the personal savings rate ran about 8-10%, and then has dropped steadily to now about 0.5% - there’s not really a lot of difference between 0.5% and -0.5%, relative to historical norms.
One thing I’m not sure of too - is how are capital gains applied to the savings rate. E.g. if I save 10% of my income in my 401(k) - but my 401(k) loses 5%, does that show up in these stats as 10% savings or 5%? I’m guessing the former, but in reality the latter is more important. It’s not just how much you sock away that’s important - it’s also *where* you sock it away.
Is this a real probe, or is it of the “OJ hunting on the links for his wife’s killer” variety?
And does it mean that Andrew Cuomo turned over his probe to the SEC?
SEC Probes WaMu on Appraisals
By Amir Efrati
Word Count: 559 | Companies Featured in This Article: Washington Mutual, Freddie Mac, Fannie Mae, First American
The Securities and Exchange Commission is investigating how retail bank Washington Mutual Inc. handled and reported on mortgage loans that may have been based on inflated home appraisals.
The SEC’s inquiry is in its infancy and involves several possible issues, including whether WaMu accurately disclosed to investors of mortgage-backed securities how its loans were appraised as well as whether the company properly accounted for its loans in financial disclosures to investors of the company, according to the people familiar with the situation.
http://online.wsj.com/article/SB119819701310243567.html?mod=PageOne_1
Never mind them probes and subpoenas, it is high time to pass a “temporary” increase in the GSE conforming loan limit in order to respike the Jumbo lending market.
CAPITOL REPORT
Fannie and Freddie: Bigger is better?
Support rises for buying bigger home loans, but legislative hoops remain
By Robert Schroeder, MarketWatch
Last update: 3:23 p.m. EST Dec. 21, 2007
WASHINGTON (MarketWatch) — If you’re looking for a “jumbo” mortgage, help may soon be on the way. Just one tip, though: write your member of Congress before getting your hopes too high.
Support is building for raising the value of loans big mortgage-buyers Fannie Mae and Freddie Mac are permitted to purchase. That amount is currently set at $417,000. Anything above that limit is considered a “jumbo” mortgage — a term that’s laughable to some in California, for example, where the median home price is about $712,000 in northern Monterey County.
But as the housing crunch exacerbated by the subprime-mortgage crisis lingers, a growing chorus of voices is calling for jump-starting the jumbo market.
Everybody from lawmakers to the White House to banks to borrowers wants the housing market to recover. But in this case, it’s lawmakers who hold the key to giving Fannie and Freddie freer rein. And it’s not guaranteed they will, say analysts.
The two government-sponsored enterprises still enjoy the enmity of some critics who remember the accounting scandals both companies underwent not long ago. “For GSE critics there’s no reason to let a temporary increase go through,” says Brian Gardner, an analyst with Keefe, Bruyette & Woods. It’s too much to give, Gardner says, because “we all know in Washington there’s no such thing as a temporary increase.”
To be sure, some supporters of an increase in the conforming loan limit — including Treasury Secretary Henry Paulson — have called for it to be a one-time event. And both Paulson and James Lockhart, who heads the federal agency that regulates Fannie and Freddie, say such an increase would need to be tied to reforms at the companies.
That’s where Congress comes in, again. Lawmakers have been trying to pass comprehensive reforms on Fannie and Freddie for years. But given the subprime crisis’s staying power, says community advocate John Taylor, raising the loan limit may just be an idea whose time has come.
“Everybody’s looking for solutions,” says Taylor, who is president and chief executive of the National Community Reinvestment Coalition. Taylor argues that allowing Fannie and Freddie to buy bigger mortgages would have a positive ripple effect on the mortgage market by expanding liquidity.
“We need to stabilize neighborhoods as much as possible by making sure loans above the current limits of Fannie and Freddie can be refinanced,” he said in an interview.
Taylor credits an anticipated tide of foreclosures for the newfound interest in allowing Fannie and Freddie to buy bigger loans.
http://www.marketwatch.com/news/story/fannie-freddie-bigger-better/story.aspx?guid=%7B4338651D%2D8EE9%2D4628%2DA1AA%2DC3D674105235%7D
Pensacola, FL
Who says that housing isn’t affordable in Florida? Take your pick. Hurry, real estate only goes up.
http://tinyurl.com/256qqs
(My intent isn’t to poke fun at people that live in modest homes; I grew up in a small and modest home. It is the wishing prices that people are still clinging to that is humorous to me.)
Never mind, the link didn’t work correctly. My apologies.
More fraud premiums at risk…so long as the SEC means business.
Pricing Probes On Wall Street Gather Steam
By Susan Pulliam and Kara Scannell
Word Count: 937 |
Companies Featured in This Article: Morgan Stanley, UBS, Merrill Lynch, Bear Stearns
Regulatory investigations into mortgage-securities pricing are examining whether financial firms should have told the public earlier about the declining value of such securities and how they priced them on their books, people close to the matter say.
The regulators, led by the Securities and Exchange Commission, also are delving into whether Wall Street firms placed higher values on their own securities than those they placed on customer holdings, the people say.
“As in most investigations, the issue comes down to what did people know and when did they know it,” said Mark Schonfeld, director of the SEC’s New York office.
http://online.wsj.com/article/SB119819956565943809.html?mod=PageOne_1
Just remember, stock prices always go up, in the long run
Even the Smart Money Looks Bad
By Dana Cimilluca
Word Count: 835 | Companies Featured in This Article:
MBIA, Citigroup, Bear Stearns, Sears Holdings, UBS, Morgan Stanley
The financial-stock knife continues to fall, and some of the world’s largest investors have gotten cut trying to catch it.
Warburg Pincus has racked up a $180 million paper loss in the 10 days since it agreed to invest in MBIA Inc. That is a rude awakening for a firm accustomed to big payouts from buying and selling companies.
Warburg is the latest in a parade of investors, including Edward S. Lampert, Joseph Lewis and the government of Singapore, that have committed big sums to struggling financial institutions only to see their investments slide sharply.
http://online.wsj.com/article/SB119820864438944403.html?mod=todays_us_nonsub_money_and_investing
December 21, 2007 9:38 A.M.EST
BULLETIN TECH STOCKS SET PACE AS U.S. INDEXES RALLY FRIDAY; BLACKBERRY MAKER RIM JUMPS 12%
Santa’s sleigh to visit Street
Mirroring Thursday’s action, tech stocks in line to pace early gains.
Hoovervilles are already popping up in Southern California.
http://tinyurl.com/2rxmse
What I want to know is when are the flop houses coming back?
Just noticed that BOA has dropped it’s zero down offer for mortgage loans in their latest local ads. Is anyone else seeing this?
Bit late.
“The Index of Leading Economic Indicators (LEI) fell 0.4% in November following a 0.5% drop in October. The 1.2% drop in the LEI during the May to November period is the largest six month decline in six years. On a year-to-year basis, the October-November average translates into a 0.8% year-to-year drop, which is the largest drop on record since the third quarter of 2001 when the U.S. was in a recession. On a year-to-year basis, the quarterly average of the LEI has fallen in three out of the last four quarters. The message from the downward trend of the LEI is that the risk of significantly weak economic conditions is growing rapidly.”
Northern Trust Bank
Dec 20, 2007
caution 5 pg pdf
http://tinyurl.com/2jshz9
Ignore those leading indicators, and focus on that ever-rising stock market.
http://www.marketwatch.com/tools/marketsummary/
P.S. Are there still no moneys, or did that 500 bn euro infusion (and a commitment to supply whatever moneys are deemed necessary to keep liquidity flowing) change everything?
There is no moneys. The $500B is a placebo. A loan vs winning the lottery.
Dec. 21 (Bloomberg) — Canadian investors holding $33 billion in short-term debt that plunged in value will have to rely on commercial banks for support after Prime Minister Stephen Harper said he won’t bail them out.
“If the government became the day-to-day underwriter of market risk in commercial securities markets, that’s a bottomless pit,” Harper said in an interview in Ottawa. A government rescue wouldn’t be “healthy for the long-term growth of the Canadian economy.” …
A bottomless pit pretty apt description of the debt markets today.
Speaking of our spendid European neighbors to the north:
http://www.foxnews.com/story/0,2933,317746,00.html
Good thing this guy didn’t have a gun lying around somewhere in his pictures. He may have had to actually serve some real time.
Hoz — Any theories on why the stock market would spike by 1 percent and then just flatline for the rest of the day? (I personally cannot imagine how prices could spike, then flatten out like that without price controls…)
Never mind — I just figured it out. The Bernanke put strike price has just been reset to DJIA = 13,400. Buy stocks now, or get inflated out of the market forever.
if your playing the bounce, get ready to head to the exits as all the tax savies are waiting till Jan… thats when the big legs down get started in earnest.
Agreed
But look at Gold. Up $11.40 at 11:02 EST
Consumer Spending Surges in November by Largest Amount in 3 1/2 Years
http://tinyurl.com/2wtuxw
The November advance was the biggest one-month jump since a 1.2 percent rise in May 2004 and was significantly above the 0.7 percent analysts had expected. Incomes were also up last month, rising by 0.4 percent, double the October increase but slightly below the advance that had been expected.
An inflation gauge tied to spending showed a 0.6 percent increase in November, the biggest jump in more than two years, reflecting last month’s big surge in gasoline prices. Excluding energy and food, prices were up 0.2 percent. Core inflation is up 2.2 percent over the past 12 months, above the upper range of the Federal Reserve’s comfort zone of 1 percent to 2 percent.
Credit cards still have plenty left in them.
Also those that still have money left on their equity loan are probably bleeding it dry before turning in the keys.
“Also those that still have money left on their equity loan are probably bleeding it dry before turning in the keys.”
Anyone know if helocs are also covered under the tax forgiveness law passed yesterday? At least in Cali, I think a heloc or refi changes the mortgage loan to recourse, from non-recourse.
jobs
http://www.minyanville.com/articles/nonfarm-payroll-recession-employment-birth-death/index/a/15297
Keep in mind that a lot of the jobs that were created in the Housing industry the past 5 years were relatively high paying. Many Mortgage Brokers were making Doctors salaries, along with high producing Real Estate Agents.
Construction workers were making money hand over fist in high growth areas with more overtime than they could handle.
Some of these people might not be collecting unemployment, but they sure as heck aren’t making anywhere near what they were used to making, and more importantly they aren’t making enough to cover their huge debt overhang.
I have a friend who works for a staffing agency in Florida. She says it is like being in a depression, with people with degrees calling in and begging for a job…any job just to try to put some food on the table and keep the roof over that table.
Pete, a new “Jeff”uvestor at SDCIA.
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=2358941
Hahah. This dude is Jeff’s bastard stepchild but it is funny to see another one of these clowns enter the confession booth.
What would be even funnier is to see you, TxChick, serve up another trout-slap like you did to that other flopped flipper in the SDCIA who was regaling us with his tale of woe about two years ago. All the other SDCIA Kool-Aid imbibers were consoling Flipper Boy, and then The Chick napalmed their tidy little anthill. That was quite amusing.
I am that completely inexperienced and ignorant “Investor” (”Rookie Speculator” is more like it) who back in June 2005 got caught up in the RE Frenzy,
He is That Guy.
His rental income doesn’t even cover the interest-only mortgage payment. Oh dear, he has a problem.
Too bad we can’t start a pool on the real market value of those two properties, versus what he claims. There’s going to be really bad news behind Curtain #3 when he finally puts those dawgs up for sale.
“Too bad we can’t start a pool on the real market value of those two properties, versus what he claims.”
The Jeff-Pete House Price Index
Oh my word…… It’s the Jeff saga all over again.
“Jeff”-uvestor!!!
Love it.
Bonuses up 14% on Wall Street
http://www.msnbc.msn.com/id/22356359/
Thank goodness. After yesterday’s news I was worried about these folks.
$50 billion is bonuses for the creeps at 4 wall street firms.
How big was your Christmas bonus this year? Kinda like last years bonus?
President gave me Monday off. I think he wants us to spend it shopping.
YeAH I wouldn’t want them to be without their 1,000 dollar glasses of brandy and their $2000 ice cream sundaes.
All is right with the world, for another two-three weeks anyway.
“Mack received no cash bonus a year ago but received stock and options worth an estimated $40.2 million, well above his $800,000 base pay.”
The English language is ruined. How in the world can “well above” apply to a spread of 50.25 TIMES? Even the English wouldn’t attempt that as typical understatement.
If I could drive a car 754MPH through a school zone, would the officer consider it to be “well above” the posted 15MPH limit?
“Bonuses up 14% on Wall Street”
Oh, (blush) excuse me. Did I scream out loud?
Those Wall Street bankers must have done a heck of a job to earn that 14 percent increase in multi-million dollar bonuses… meanwhile, back on Main Street, the alarm bells are sounded daily in the MSM to set us up for a future taxpayer-funded bailout of global credit markets.
todays NY Times:
“So where were the regulators as one of the greatest financial disasters since the Great Depression unfolded? They were blinded by ideology.
“Fed shrugged as subprime crisis spread,” was the headline on a New York Times report on the failure of regulators to regulate. This may have been a discreet dig at Mr. Greenspan’s history as a disciple of Ayn Rand, the high priestess of unfettered capitalism known for her novel “Atlas Shrugged.”
In a 1963 essay for Ms. Rand’s newsletter, Mr. Greenspan dismissed as a “collectivist” myth the idea that businessmen, left to their own devices, “would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings.” On the contrary, he declared, “it is in the self-interest of every businessman to have a reputation for honest dealings and a quality product.”
“Mr. Greenspan has come out in favor of, yes, a government bailout. “Cash is available,” he says — meaning taxpayer money — “and we should use that in larger amounts, as is necessary, to solve the problems of the stress of this.”
Yeah cash is available-like Medicare, and no child left behind isn’t. Scrooges all around me.
http://tinyurl.com/2zc25m
“Scrooges all around me.”
I believe money was much harder to print back in Scrooge’s day, before the advent of computers and the virtual money printing press.
“They were blinded by ideology.”
Mole Man is one of them. I am not.
Sorry if this posts twice. I was in Kohl’s yesterday and the girl in front of me had two credit cards rejected before she finally pulled out a third one to buy this huge pile of merchandise. I wonder if this is why spending is up. I would have been mortified. Anyone else noticing this?
Ha. Someone with a sense of humor
http://dallas.craigslist.org/apa/515901618.html
An interesting article on Bloomberg - a guy that set up a hedge fund to short mortgages back in 2006.
http://www.bloomberg.com/apps/news?pid=20601010&sid=adp5UMQkZfwc&refer=news
Also - I did my annual Christmas shopping take on the economy. For the last 16 years I have bought my wife a Hallmark Christmas ornament at the local Hallmark store. And every year, as I shop at the last minute, they have very few ornaments left in the store by the time I get there. But not this year - almost a full selection of Christmas ornaments. Either Hallmark has changed their stocking practices (which I doubt) or else every one is tapped out and no one is buying these small luxuries this year.
But not this year - almost a full selection of Christmas ornaments.
Look carefully…do they say “made in China” ? Just how many of those ornaments do you think you can get into a container… on a very large ocean going ship headed for America and being placed on the shelfs by a worker being paid $7.25 an hour?
I pass a small florist/garden shop on my way to work. They stock xmas trees in December. Guessing about 40 trees unsold.
Am I the first to note that dumping liquidity on markets results in a massive poor tax on labor and retirees that ends up in the pockets of Wall Street bankers? I thought not…
The best time to dump liquidity is under cover of a good old fashioned credit crunch, as this legitimizes the purpose of dilluting the value of the currency through the need to put out a fire.
Pessimism on Main Street
“Small businesses in the United States are in a blue funk. Yet their pessimism is founded on fears that the national economy will deteriorate, rather than worries about obtaining credit.
The National Federation of Independent Business (NFIB) Small-Business Optimism Index, an important barometer of owner sentiment, is now at its lowest level since 1993. The November Index value fell to 94.4 — a decline of 1.8 points from October — on a weaker sales outlook and lower expectations for business conditions in six months.
Optimism Index
Nevertheless, the NFIB claims that the credit crunch that is supposed to be crippling the economy has not yet trickled down onto Main Street, and small businesses are having no problem financing their operations. It argues that small business became bearish after Federal Reserve rate cuts in mid-September and then October, and cut spending and hiring plans.
The NFIB writes that:
* Cutting rates will do little to spur new home construction, as cheaper financing will not get builders to build houses where there is no demand.
* Rate cuts ease the burden on large financial institutions, but transfer the costs of adjustment from the big banks to savers, whose return on savings is now substantially reduced by the proposed interest rate freeze on many mortgages.
Small business owner sentiment on inflation, profits and wages and credit markets also bears elaboration:
Inflation
Around one in four (26%) small business owners have plans to raise prices. The NFIB reports that the historic relationship between inflation and the percentage of owners reporting higher prices suggests that inflation will be showing some “new, unwanted, vitality.”
Profits and wages
The percentage of owners reporting earnings gains was down seven points in November after a long period of improvement, despite a modest improvement in sales trends. Profits do not appear to be improving, even with a fairly high percentage of firms raising prices.
Credit markets
There is no discernible “credit crunch” on Main Street. Regular borrowing activity was reported by 32% of the owners, just four points below October. The percentage of owners who thought loans have been harder to obtain in recent months rose one point to 7%, fairly typical of readings over the last decade.
Oxford Analytica
Dec 21
US STOCKS-Futures point to higher open on tech rise
Reuters UK - 1 hour ago -
Ben-Here comes the blind herd….out of flipping and into day trading!
Liquidity is finding a home on Wall Street (again…)
Liquidity is the ability to buy and sell without moving markets. There is little liquidity in this market. This is window dressing, its Christmas time. Make the funds look good for the shareholders.
I think we will run up to the old highs, 14,000 djx and 1550 spx. Definately going long the vix at 15.
how about long financials/short beta for January first two weeks
Did you check out the IV on the Vix calls vs. puts? Whatcha think?
January and February contracts.
I’ll stick with the indices, maybe bby if it runs to 60.
A Christmas wish to Ms. TxChick - That Deutsche Bank gets in financial trouble and is forced to sell its $50B of art at distressed prices. (It keeps the art on its books at cost). If you worked at Deutsche, you might get a Richter or Baselitz or one of the other 50,000+ objets d’art accumulated over the last 100 years hanging over your desk.
Wonder how many of those pieces were stolen during the Third Reich?
I’d be more concerned about the thievery going on in the current REIC…
Since DB has been actively supporting artists for 100 years buying art for a few DMs from unknown artists, very few if any are “source undocumented”.
I don’t believe that, and I don’t care what their documents say. Seizure of assets was a major feature of the Reich and Deutsche Bank was THE major player.
“When in 1938 the National-Socialist government began systematically to monitor and freeze Jewish assets, Deutsche Bank’s Jewish customers were affected as much as those of all other banks. By the time the war ended, almost all account assets and deposits held by Jewish customers had been transferred to the German Reich. This exercise in dispossession proceeded under cover of a seamless panoply of laws and ordinances that gave a semblance of legality to what was in effect robbery by the state. No one offered any direct resistance to the new Nazi legislation; in fact, to do so would have been extremely dangerous, as witness the example of two Deutsche Bank directors who were executed in 1943 simply for voicing “defeatist” remarks.”
http://www.deutsche-bank.de/csr/en/history/7636.html
(Apologies in advance if anti-Semitism is another one of the politically-correct features of this blog.)
I like contemporary art.
Je sais!
Peaceful holidays to all until next year!
I heard a “re-fi” ad on the radio today. I suppose there are still some people in the bay area who bought in 2002, have ARMs and aren’t upside-down.
What was funny was they said “Refinance and wipe-out your debt!”
How can they get away with saying that! If you refinanced to take on more debt how are you “wiping out your debt”.
I think the sheeple really thought that money that they can borrow against their phony valuation equity was hard-earned income!
Most Americans cannot distinguish among income, gifts, and borrowings. It’s all the same; money to spend (for now).
This is, by far, one of the most DISGUSTING things I’ve ever heard W. say:
“”When you’re worried about making your payments, higher taxes are the last thing you need to worry about,” Bush said in a bill-signing ceremony. He stood along side members of his Cabinet and lawmakers who pushed the measure.”
(Said while signing the “Deadbeat Specuvestor Tax Relief Act of 2007)
Four times a year, I write out HUGE checks to the federal government to pay my taxes. My small company provides jobs for three people, and I have to worry that their taxes get paid, too.
Why should I, one of the FEW people in the US that’s productuve, HAVE to worry about paying taxes while Sally Specuvestor and Harry Heloc “should not have to worry.”
What happened to the Republican party?
He should tell these borrowers to take it like a man! Pay what they owe to the IRS or go to jail.
Bush used to have BALLS! I remember when he mocked murderer Karla Faye Tucker, literally MOCKING the way she kept saying she found Jesus and was sorry. And he did this knowing it may annoy the Fundamentalist constituency that supported him. I want THAT president Bush back! I want him to mock Harry Heloc and his Hummer and tell these FBs how despicable they really are!
I don’t want the despicable turd at all. Remember, this is the same asshat who said offshoring “creates” jobs. He’s the same coward who can’t find the courage to raise taxes to pay for his out of control spending. He is the same liar who said there were WMD’s in Iraq knowing full well they didn’t exist and never did.
According to old speeches I’ve seen, he used to have some semblance of a brain, too. But those times are gone, gone, gone.
“…I want THAT president Bush back!”
Bugs: “eh, I don’t think so.”
Well, either way, the Shrub family & Co. this holiday season will be chewing on this: (For dinner, President Push is serving a romaine salad, shellfish ravioli and Wagyu beef short ribs from the steakhouse. Wagyu beef is considered top of the line because of its silken texture and rich marbling) …. while the rest of America, ponders how “Our Nation” got so far into Debt via the “conservative” Republican party and why those “directly” responsible seem… so aloof and well fed.
Shrub: “Oh, Mom, there are hordes at the door wanting to be fed. What should I do?”
Barbara: “Let them eat cake honey. We’ve plenty of that with High Fructose Corn Syrup that will perk them right up so they can get back to work.”
Okay, what do y’all think about this?
If you build it, they will come…
Field of American Dreams
Today’s “Chart of the Day” shows REITs declining:
http://www.chartoftheday.com/20071221.htm?T
Not looking good…
Schwarzenegger proposes to release 22,000 prisoners
By Andy Furillo - afurillo@sacbee.com
Last Updated 6:39 pm PST Thursday, December 20, 2007
In what may be the largest early release of inmates in United States history, Gov. Arnold Schwarzenegger’s administration is proposing to open the prison gates next year to some 22,000 low-risk offenders.
According to details of a budget proposal made available to The Bee, the administration will ask the Legislature to authorize the release of certain non-serious, non-violent, non-sex offenders who have less than 20 months to go on their terms.
The proposal would cut the prison population by 22,159 inmates and save the cash-strapped state $256 million in the fiscal year that begins July 1 and more than $780 million through June 30, 2010. Besides reducing the inmate population, the proposal also calls for a reduction in more than 4,000 prison jobs, most of which would involve correctional officers.
A gubernatorial spokesman said no final decisions have been made.
The administration, which is looking at across the board budget cuts to stem a budget deficit pegged as high as $14 billion, is looking for more savings in prison spending by shifting all lower-risk parolees into what officials are describing as a “summary” system. The shift also would require legislative approval.
Under “summary” parole, offenders would remain on supervised release and still be subject to searches by local law enforcement at any time, but they would not be returned to prison on a technical violation. It would take a new crime prosecuted by local law enforcement officials to return the offenders to prison.
A summary parole system would cut the daily average population of released offenders by 18,522 in the next fiscal year and result in a further prison population reduction of 6,249, according to the proposal. It would save the state $98 million in the 2008-09 fiscal year and $329 million through 2009-10. The number of job cuts in the parole proposal will hit 1,660.
Gubernatorial spokesman Adam Mendelsohn declined to confirm the proposal outlined to The Bee, but reaffirmed the administration’s belief that all departments need to cut spending across the board by 10 percent next year. Schwarzenegger “has not made any decisions” on where the cuts will take place, Mendelsohn said, including whether they will involve the early release of inmates or staff cuts.
“He has not made any final determination on what his January budget will look like, but there are many, many scenarios that have been presented to the governor, and he is working extremely hard to figure out how we manage this budget situation through cuts and reduced spending,” Mendelsohn.
The corrections budget proposal outlined Thursday would not cut any of the prison department’s bond funding, including the recently enacted, $7.9 billion Assembly Bill 900 spending, nor would it affect the expenditures of the federal medical receiver, who is in charge of $1.5 billion of the agency’s total portfolio. The Corrections Standards Authority and the Division of Juvenile Justice would also be excluded from the proposed cuts.
For a complete story, see Friday’s Bee.
——
Keep alcohol available on our beach:
http://www.bantheban3.org/index.php
If you like investing in “options”
http://biz.yahoo.com/cnbc/071221/22360265.html?.v=1
“…Free-enterprise with a holiday shopping twist. I love America.”
I love America too!…That’s why, with just a little bit of that “rare” commodity known as: Time…these items will go the way of “bennie baby” options.
US Elderly + accumulated wealth + taxpayer Gov’t funds = Future source of “income accumulation” for the “well connected” …but hey, it’s all for a “good cause” or as they say in Texas: “It’s just Bidness”
Carlyle Group closes Manor Care buyout
http://www.reuters.com/article/ousiv/idUSWNAS523120071221
Advice Request:
Hi All,
I have a friend who is in the thick of a divorce and at the beginning of the proceedings the house was appraised in July 2006 in CA. The appraisal came in high due to the mania and loose lending standards that even the mainstream media know about now.
My friend did some research, also noted the price seemed high, and also noted 10 months of inventory on the market in his town. His exing spouse of course liked the number and expected him to cash her out for half of the appraised value minus paying off the loan. He declined and said the house needed to be sold and true market value determined by the sale price. It has been on the market for 6 months with 3 price drops. (he is committed to dropping it further until it sells, but she is freaked because she feels he should have had to pay her half of the appraised value) :-/
He is trying to matter of fact characterize the market education he has received about the credit bubble, housing bubble, what is typical rate of appreciation for housing, and the mania of the market he discovered. He needs to respond to a motion claiming unfairness that the house is for sale and she now has to wait to get half of whatever it sells for- rather than him just cashing her out at her wising price.
How would y’all respond to such a motion? (apparently he did not feel faxing his middle finger and a copy of Ben’s blog to her attorney’s office, like I suggested was the best option.)
any advice will be well used!
thank you,
Athena
If it is so unfair allow her to keep the house and buy him out. He can even “give” her 60% of the value and allow her to cash him out as an incentive.
In all seriousness, I think he should just keep doing what he’s doing - determining the true market value by selling it. No faxes of middle fingers though - he has a better chance at suceeding if the courts see him as a sane adult. Can’t his attorney file a motion of unfairness about having to pay on an outdated appraisal? I mean, the housing crash is pretty well established now.
Totally anecdotal: In Dr’s office this a.m., chatting with office mgr, she stated many of their patients are either not paying, or paying very small amounts very slowly as compared to six months ago. Typical stories, like 60 yr olds buying a large new house before selling their old one, which has not sold…..almost a year later.
The ofc mgr wasn’t coming from a position of criticism, but from concern about the patients. Several examples. None good, but any one of which would be a cliche’ here.
This is S.W. Oregon. Nope, it surely isn’t different here.
MaryLee — a bit late, but thanks for the anecdote. It’s on-the-ground reporting like this that reinforces a lot of us, particularly with regard to how broadly spread is the crash.
I got an answer from Barb Boxer today.
I sent her a letter telling her how disgusting the “Deadbeat Specuvestor Tax Relief Act of 2007″ was and suggested that she eliminate the Mortage Interest deduction to pay for it, so *I* don’t have to. (And no, I’m not a bitter renter! I just have a paid-up mortgage)
I got this form letter in response. I’m disturbed when I get these, because she didn’t address my point. I’m worried that her staffer who sent me the form letter put another tally in the “homeowner concerned about falling house prices” column and miscounted me.
Here’s the letter:
Dear Mr. S******:
Thank you for contacting me regarding the current mortgage crisis. I appreciate hearing from you.
Over the past decade, as housing prices rose sharply, lenders and mortgage brokers began offering new exotic loan products to millions of Americans seeking the American dream, frequently using low initial interest rates and predatory tactics to steer borrowers toward loans they could not afford.
Now many of these loans are resetting at higher rates, dramatically increasing monthly payments and forcing many families into delinquency or even foreclosure. Experts predict that over 2 million Americans (including more than 460,000 Californians) will lose their homes and that we all will be impacted by reactions in the financial markets and throughout the economy.
As a result of the record number of foreclosures, Wall Street firms have recorded losses in the billions, many subprime mortgage lenders have gone bankrupt, and communities are experiencing increases in crime accompanied by decreases in property values and tax collections.
Although there has been speculation about a government bailout of homeowners, lenders and investment firms, there currently is no legislation before Congress that would assume or reduce business or borrower obligations at taxpayer expense.
However, efforts to alleviate the crisis and prevent a similar crisis in the future are essential. The Department of Treasury recently announced a voluntary plan among lenders to freeze the original low interest rates temporarily for certain subprime borrowers. In addition, the Federal Reserve Board has lowered interest rates hoping to boost spending and minimize the chances of an economic recession.
Among Congressional efforts to address the situation , I supported the successful inclusion of an additional $230 million for housing counseling in H . R . 2764, the Consolidated Appropriations Act; this includes $180 million for a new program targeted toward foreclosure avoidance .
I also am pleased to announce that I am co-sponsoring several bills that would regulate the mortgage industry, prevent some of the worst lender abuses from reoccurring, and promote sustainable and affordable homeownership.
The Homeownership Preservation and Protection Act (S.2452) would require mortgage lenders and home appraisers to act in good faith in all aspects of the home appraisal and mortgage process while giving borrowers recourse against lenders who do not. This bill would also require lenders to verify the borrower’s ability to repay a loan and prevent lenders from steering a client into loans that are not determined to show a tangible benefit for the borrower. In addition, S.2452 would prohibit the use of balloon payments and prepayment penalties in subprime and non-traditional mortgages, and it would increase funding for the FBI to pursue cases of mortgage fraud.
I also am co-sponsoring the Homeownership Protection and Enhancement Act (S.1386), which would require mortgage originators to engage in loss mitigation activities to provide an alternative to foreclosure. It also creates funding for State-run homeownership protection centers, which would offer both one-time emergency grants and subsidized home loans to enable homeowners facing foreclosure to keep their homes.
In January 2008, my top staff will be convening five meetings in California to bring together experts and community leaders to share information and discuss ways to alleviate this crisis.
Again, thank you for writing to me. Be assured that I am committed to finding a fair and equitable solution to the housing foreclosure crisis.
Barbara Boxer
United States Senator
Have your barf bag at hand. Cost of U.S. uninvited invasion of Iraq in order to find and destroy non-existent weapons of mass destruction and install “democracy” that, witnessed by its neighbors, now has no chance of being implemented in any other neighboring state in the lifetime of the peoples living there: US$1.3 Trillion. As in, $1,300,000,000,000.
http://news.bbc.co.uk/2/hi/middle_east/7157017.stm
How far could that much money have gone toward boosting our economy in ways other than military-industrial-complex spending? Not to mention dead and maimed Americans who could be alive, healthy, productive and enjoying the festive season with their families this Christmas instead of going to rehab or being visited at the cemetery. The perps skate because the KIA and wounded numbers are far lower than during ‘Nam.
Even the socialists of the left (the ones of the right being the neocons) would have spent this money-taken-at-gunpoint far better, I think. They would not have increased external hatred of our country nor the decline of our prestige.
$1.3 Trillion dollars. And what have we got to show for it? We are borrowing the money that we are giving to other countries as foreign aid, for gosh sake. Hello! Is anybody home? Yo, Washington! Switzerland is filthy rich and they claim to be do-gooders — let THEM give the foreign aid for the next 10-20 years.
Mister Magoo! Where are you on this one, sir? Still trying to figure out how your promo for ARMS went wrong, are you? Well, then, I suppose we should conclude that you’re not “big picture” guy and move on. Fancy that, those speaking fees you get.