Bits Bucket And Craigslist Finds For December 25, 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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Weekend Surge…
http://www.bloomberg.com/apps/news?pid=20601103&sid=aG4Er3qLHtTg&refer=news
You know its been a horrible holiday season, when some of the larger retailers are open 24 hours a day until Christmas. In all my years in Shopping Center Management and Marketing, this is a 1st.
Merry Christmas.
Some of the grocery stores here are open today. I have never seen that before.
Whaaaaaat? Un-freakin real.
Most Realtors are open today. Quite a few open houses around here in FL today. A free cookie is a free cookie.
Walgreens is open today. Hope the folks who are working today are getting something beyond their normal pay.
Here Walgreens is open only a few hours. I don’t plan to be there. There’s nothing I need that can’t wait a day.
Last year my son (20 months at the time) got sick on Christmas, and I was very appreciative that Walgreens was open.
24 hours? Yikes.. they better hope they bring in enough revenue to pay the higher electric and payroll bills.
Actually Tom, it really costs a lot to close a store for 8-10 hours a day. Then reopen…..you still have to pay lots of people a good hour each way, plus you really cant shut off the AC in summertime, or turn off the heat….so you really don’t save as much as you think….plus lots of stores restock the shelves on the overnight shift, so might as well stay open….
can remember lots of bank branches being open at least 9-1pm on the 4-5 Sundays between thanksgiving and christmas but that was before ATM machines…
From the link:
Dec. 25 (Bloomberg) — A surge in spending during the weekend before Christmas may not have been enough to rescue Target Corp., Sears Holdings Corp. and Macy’s Inc. from the slowest holiday spending season in five years.
Then, they go on to say it’s because of rising food and gasoline prices. Can’t have anything to do with the fact that consumers aren’t taking in an additional $100K (tax free!) per year. Nope, it’s the food and gas prices.
A few years back, I read that the opening of Shrek 2 was the reason retail sales were down. I mean, can’t they be more believable then that.
George Carlin talks about consumption being our favorite pass time these days, and how we’ve littered our country with shopping centers. He’s right.
Maybe Americans will find documentaries and books again. Or how about taking up the piano, or finding a real hobby.
My husband and I grew up poor, and it served our imaginations well.
Imagine what a better country it would be if the “Pod People” had to disconnect themselves from their virtual-reality (read: unreal) cocoon of constant distractions/escapism from real life and real people. Imagine if they rediscovered the divine spark of reason the creator imbued them with, instead of being herd creatures on the incorporated global plantation. Imagine if we all read books that were worth reading and spent more time reflecting on what’s really important in this fleeting existence of ours.
I also grew up not quite poor, but in a large family of modest means. But, mom stayed home, and best of all, we never had a TV - so we all learned to read, and think, and use our imaginations, from an early age. My folks also had a wide and varied circle of quality friends, so we benefited from that, too.
Merry Chrismas, everyone, and God bless.
Sammy,
I loved your post. As a young child, many weekend outings were to the park, with a library and playground. We learned to read too. I read 40+ books a year, and I am learning piano. We haven’t watch TV in 12 years.
My husband has 9 siblings (almost the kids are bright and educated). He is sick of the school districts using $ as an excuse for their lack of educating our ‘future scholars’.
I believe Albert Einstein is quoted as saying “imagination is more important than knowledge”.
If you haven’t watched tv in 12 years, you have missed out on the best drama and comedy that humanity has produced in all of history.
Quit blaming tv!!
TV and entertainment (of all kinds) does waste precious time. That’s one asset, we all take for granted.
I’ll admit, I read this blog too much, but I need one redeeming vice.
Tv is basically responsible for the dumbing down of the US population. if tv shows are reflective of American society, then we are really in trouble. Is a tv program your babysitter?
I don’t think TV is to blame for dumbing do
Hey, there’s Britney!!!
If it’s the food and gas prices that are slowing the economy then how is lower interest rates going to solve everything (as Kudlow and Cramer would want you to believe)? I mean, if they lower rates, the price of gas and food goes up. The only person lower interest rates is saving are the people at the top who stand to make all the profits. Unfortunately (or fortunately : ) they are going to cut off their noses.
“Nope, it’s the food and gas prices.”
That can’t be correct — it has to be the weather.
My understanding is that the stores don’t book gift card sales when the gift card is purchased, but wait until the card is redeemed for goods. I wouldn’t be surprised if Target sees a surge of gift card redemptions after the holiday, but see a large part of it used for food, rather than allegedly durable goods.
If I had relatives who were in trouble financially, I would seriously consider Target gift cards as a present because they can go to junk (toys, dvds, electronics, etc.) but also can be used for practical stuff (underwear, socks, milk, food, pharmacy items).
Just speculation.
I sent our youngest daughter a gift card for Walmart since I don’t know how close she is to a Target. She can get whatever she needs that way. I did send a few small items as well. After all surprises are nice. I thought about sending her the Simpsons movie but wasn’t sure that her boyfriend might have gotten it for her.
Everytime you shop at Wal-Mart, a little kitten dies.
lol
I’m in the “Walmart sucks” club, too.
Target.com has a store locater just like almost every other retailer, don’t you know her address?
Know her address. They just don’t have time to get out much between work and college. Figure she can always use food if she doesnf’t need anything else. She fits phone calls in while she’s walking to class. Super organized.
Mayabe a Target card for her birthday in January for a change of pace.
I want to wish everyone a very Merry Christmas and may all of your dreams come true and including the ones that are not a dream, which means the subject matter of this blog!!!
SKB in Florida
The D.R…. Battle Royale.
http://www.dailyreckoning.com/
The reports such as lagging Honda sales at one dealership out of so many are now starting to get to me. And Bill Bonner’s article, yes, the government and the banks are pumping more liquidity to the system. A colleague of mine sold some of his last ounces of gold bullion to me a month ago and got into Vanguard’s Real Estate mutual fund. He tells me Gold has peaked. He knows all too well that there has been not one, but two major moves to pump more liquidity into the US dollar since he sold me the gold in early November.
I keep telling him this: The definition of inflation is an excess of fiat currency made. I ask him what has that meant historically with gold? He does not get the fundamental fact. He’s fixated perhaps on the magical $800 figure of gold’s price. But I told him that was matched 27 years ago and gold is priced around $300 today in 1980 dollars.
Multiply this individual by millions of other deniers and you know that Gold is going to have more years of runup before it appears on Time Magazine’s front cover. By that time, I will have sold off a good chunk of it and put it into bonds.
Happy solstice to all.
Just remember, that gold is only worth what someone else is willing to pay you for it.
Merry Christmas, everybody!
As a Christmas present to the HBB bears, here’s a listing that brings prices within 2001 range (Oceanside, San Diego — this is one of the hardest-hit zips):
Listing sold in 2000 for $192,500.
Now, it’s listed for $225K-$250K!!!
At the peak, it would have sold for around $475K.
Wow, we’re actually getting there!
http://www.realtor.com/search/listingdetail.aspx?zp=92057&ml=3&bd=4&typ=35&sid=72fabf53ea0040b0be3fc3f4d9cac0b7&lid=1086581200&lsn=1&srcnt=411#Detail
I’d like to see 92107 in that price range but it wasn’t there even 20 years ago.
Tx,
I think you’ll be able to pick something up in OB for around $300K, maybe less, when this is all over. But by then, you’ll probably be so turned off to buying, it won’t even matter.
Happy holidays all! Here’s how NJ is progressing. This development is around 1-1/2 hour commute to NYC. It’s a nice area, but the commute is unbearable. Taken from njreport.com
39 Briar Court, Hardyston NJ
Purchased: 3/25/2005
Purchase Price: $452,611
MLS# 2446411
Sold: 12/14/2007
Sale Price: $400,000
(12% Loss)
55 Briar Ct, Hardyston NJ
Purchased: 5/25/2005
Purchase Price: $460,148
MLS# 2446223
Sold: 11/1/2007
Sold Price: $420,000
(9% Loss)
82 Briar Court, Hardyston NJ
Purchased: 10/18/2004
Purchase Price: $524,486
MLS# 2427383
Sold: 12/17/2007
Sale Price: $395,000
(25% Loss)
28 Briar Court, Hardyston NJ
Purchased: 01/23/07
Purchase Price: $556,015
MLS# 2465060
Currently Active
Asking Price: $495,000
(Potential Loss 11%)
37 Briar Court, Hardyston NJ
Purchased: 12/8/2005
Purchase Price: $456,725
MLS # 2433854
Currently Active
Asking Price: $418,999
(Potential Loss 8%)
68 Briar Court, Hardyston NJ
Purchased: 1/27/2005
Purchase Price: $551,206
MLS# 2451979
Currently Active
Asking Price: $529,000
(Potential Loss 4% - Won’t ever sell at this price)
61 Briar Court, Hardyston NJ
Purchased: 1/24/2006
Purchase Price: $472,838
MLS# 2436271
Withdrawn - was also for rent
Asking Price: $449,000
(Potential Loss 5%)
1 Rock Oak, Hardyston NJ
(Crystal Springs)
Purchased: 6/28/2004
Purchase Price: $625,000
MLS# 2323293
Sale Price: $508,000
(19% loss)
8 Cypress Lane, Hardyston NJ
(Crystal Springs)
Purchased: 10/7/2004
Purchase Price: $667,000
MLS# 2415147
Sale Price: $625,000
(6% loss)
The Crystal Springs development in Hardyston was hyped every spring and summer for years during it’s development.
It was seen as a great alternative to those looking to head out to PA seeking affordability. While prices were higher than PA, the development did offer some nice amenities not seen before in Northern NJ (golf courses, clubhouse, etc).
Two major problems with the development, speculators and “stretchers” (those without the necessary income to purchase). These properties are all coming back shortly after their 2nd or 3rd anniversary. A good indication that borrowers used 2/28 and 3/27 ARMs to purchase.
That development is one of the hardest hit in NJ. Because of the sheer size of that place, the higher transaction volume and similar unit styles make it easy to track performance.
That development has a long way to go before it hits bottom.
I have heard that any development with a golf course can potentially cost you an arm and a leg. Can you imagine the fees you will be hit with if much of the development is empty? Merry Christmas on that one.
Although my primary address has been in Arizona since 1996 and I lived within walking distance to golf courses most of that time, I never took up the game. Poor peripheral vision I guess. Yes, it certainly would be a waste of my money to buy a house in a development that includes a golf course if I had to pay for the sport which I don’t play!
It depends on if it’s public or private. The one I described below is a public course, so they make the maintenance costs back by the greens fees. The “clubhouse” was a public restaurant and operated separately.
I personally don’t see the charm of living in a place where me, my kids, and our home and vehicles could be collateral damage for wayward, high-velocity golf balls.
Thanks for chiming in, James. I mis-typed the website. It’s njrereport.com.
Actually, there was an earlier golf course development in Montague, NJ called High Point Country Club. Montague is just south of Port Jervis NY and east of Milford, PA, so it’s as far NW as you can go. I lived there in the early 80’s and commuted to Parsippany, which was 45 miles. It was mostly two to four family condos with some single family homes.
High Point has a lake, and at the time I was paying $275 per month to rent a two-bedroom lakefront condo. There were many a abandon half built buildings. I had a friend who owned a condo in a four-family building and the other 3 units were owned by the bank for at least 10 years.
Since then it’s filled up with mostly poor people and welfare people. It was done on a much smaller scale than Crystal Springs, and I would call it a complete failure. But I doubt welfare people could ever afford to live in Crystal Springs McMasions.
Sacramento CA is still getting hammered. A home builder (JTS) sold 15 remaining homes in a subdivision to an investor for an average price of $470,000. The investor put a $250,000 deposit down in July, then tried to cancel the contract. The builder pressured him to close, or forfeit the deposit. He closed.
Now the average prices have dropped to $376,000. He is upside down $1,500,000! Some of the houses have not been rented yet. He is finally dropping rental prices. Three people rented houses for $4-500/mon above market, then moved out within 30-60 days when they realized they could rent a better house for $300/mon less. This investor did not catch a knife, he caught a guillotine. His carry is $300,000/year greater than the income, assuming all the houses are rented. Seven are still vacant, 4 months after he bought them. Three were rented, but people moved out already.
The whole neighborhood was sold to flippers in 2006. Several related Philipino families came and bought 9 houses in January 2007 from the builder at average prices of $560,000. They received $30,000 to $60,000 cash back on mortgage fraud deals. Now they realize the negative cash flow (rent = $1950/mon, 100% financing plus expenses = $5100/mon) will go on endlessly. So far, three are in notice of default. I beleive the rest go down soon. The renters will get screwed. The Philipinos will break even on the cash back mortgage fraud, but their credit gets wrecked, and the IRS cometh. The lenders (or MBS mortgage investors) get screwed (kiss off the 20% second, HSBC). And there will be a new round of price drops in the neighborhood when these 9 house go to REO sale, so the guy who bought the 15 houses gets his head chopped off. Next prediction….the latest investor walks from his 15 houses, thus beginning a whole new round of foreclosures in June 2008. Prices are currently around $110/sf, which is below reproduction cost.
I call it “Circling the Drain in Sacramento”.
Jingle,
that’s the whole, ugy mess in a nutshell.
It’s a good thing the jenius didn’t forfeit that $250,000 deposit. That was a close one. Now he can just wait out the downturn.
Good Grief! It seems that it’s going to be ten to fifteen years before this mess will be all mopped up all over the United States and the neighborhoods will return to the point where the real income levels will belong.
If you want to live among people who are genuinely in your own class, look to renting in large apartment complexes. See, there never are reasons for people to lie about their incomes to get into a rental. I said it before that large apartment complexes have better quality people than most new housing developments built since 2001. I stand by that. Buying a house this decade is basically investing in an inevitably deteriorating ghetto. A money pit. And adding a HELOC to buy a car on top of that goes beyond stupidity, making it a 30 year car loan. We could be in a precious metals boom for another 20 years! Gold is real. Gold is honest. Most Americans have been dishonest.
I know of no teaser rate program in our apartment building. You would think that would mean everybody is a well-paid professional but I don’t think so. There are a lot of kids (under 25) in this building. The number of “likes”, “you know” and “whatevers” are nearly uncountable. These are not polished adults. I think they are subsidized by mommy and daddy so I don’t know if this is a good example of finding our demographic equivalents. In cities other than New York it might be a better indicator.
They say “you know” so often, that it becomes a self inflicted speech impediment.
‘He is upside down $1,500,000!’
As George Michaels might say, make it big.
Did you just admit listening to George Michaels? How tragic.
The actual loss will be more as,there is 6% realtor fees associated with the transaction.
CA Renter - you’ve just given me renewed hope! Of course it seems trends take a while to trickle over to PA, but there may actually be a home in my future yet!
Told you so, eastcoaster!
Just be patient and you will be able to buy the house you’ve been waiting for all these long, long years.
Merry Christmas!
Wow. They’re preloading for townhomes here in Richmond, BC. The sign says from $399,000. Still waiting for the bubble to pop around here, it’s probably coming after the 2010 Olympics, then it’ll crash. Shouldn’t get as bad as Sarajevo, at least.
Seriously, if a 3bed in Oceanside, CA is $225,000, there’s no way prices are going to stay that high here in the Pacific Northwe(s)t.
To negative infinity-and beyond…
http://www.atimes.com/atimes/Global_Economy/IL21Dj01.html
http://www.youtube.com/watch?v=qE4sg1ygTqg
I never heard of him before. But after listening to that, I think I may be correct by saying he’s more Jimmy Buffett than Jimmy Buffet!
IMUS has been playing this the last few weeks………..come on we all love the I-Man!
Off topic…. How about a view of the currently nosediving auto sales industry from inside a top Honda dealership thanks to our friend the housing bubble….
Lets get the introductions out of the way:
I’ve been in cars my whole life, I enjoy them. I’ve washed them, driven the piss out of them, and at this point sold them for the better part of a decade. Because of my wide knowledge base and variety of brands I’ve sold for I’m a used car salesman (Honda new car departments turn out salespeople who are too biased to effectively sell anything else, so they usually hire used salespeople from outside). I’ve always considered myself one of the “good guys” in the business. I do a good through job, I’m not greedy, and I’m not a drug-addicted kleptomaniac refugee just out of tent-city with 2 DUI’s and no liscense (this sadly represents many of my past and present coworkers). Over the years I’ve been happy to take home a reasonably good income, which has supported myself and my family just fine. I currently live/work out of Phoenix Arizona (well, one of it’s cities anyway, trying not to get too specific), and everything has been going great for years here, until fairly recently.
Now that you know me a bit better, lets get down to the nitty gritty here:
Sales are -way- off.
Yes, December is usually a very slow month for the car business, but this has been an ongoing problem for the past 4-5 months. Our used car department that typically sells between 150 to 180 vehicles has been managing to sell a signifigantly lower 110-130. This month for example we are currently pacing 105, December of 2006 we managed a strong 152. These sales are split amongst 15 retail used salespeople and 3 used internet salespeople. The number of salespeople is also up year over year from 12 used retail and 2 used internet (typical dealership knee-jerk reaction, more salespeople = less people hit bonuses = smaller commissions = bigger dealership bottom line). To top it off the 3 used internet guys will account for 20-25 of those sales, so we’re talking 75-95 sales split among 15 people. The past 4-5 months have had the same kind of declines, we’re talking 20-30% lower year-over-year. New car sales are also significantly off, but I am sticking to our used department numbers for the moment.
We haven’t had a HELOC customer in at least 5-6 months guys and gals (for a year or two it seemed 30-50%+ of your customers were paying cash from their home equity line of credit). I haven’t had a mortgage broker or real-estate agent in here buying a car in at least as many months.
Of course lower sales mean inventory is sitting longer (and we are corporate owned who’s policy is a vehicle can only stay on the lot 60 days before they send it to auction). This equals -heavy- discounting as a car becomes “old aged”. 15-20 cars sitting on our front line right now are being sold for losses (well, after dealership “pack” anyway, which is a fee assessed to cars on the lot to reduce commissions paid to salespeople). A customer might be thinking that sounds great, but it leads to a reduction in what their trade-in is worth as well. When we are selling a slightly used 2007 civic -way- under wholesale KBB you can guess what their 2005 is worth on trade. It’s a double edged sword, sadly. To put it bluntly, this has caused our profits to drop by 2/3rds. This month we are pacing 40,000$ in used car commissionable gross. Salespeople earn 25-35% of their individual commissionable gross, at this average of 400$/car that’s 100-140$ (take in mind our average up until the last 4-5 months has ran slightly over 1000$/car commisionable gross for nearly 3 years in a row).
And all these things mean the bottom line for salespeople here has dropped massively. Day in and day out I’m sitting at work listening to coworkers who can’t make their bills. We’ve got several people here about to lose homes, people who’ve lost their car’s. These guy’s paychecks have went from decent living wages, to 1200-1400/month. Most everyone here is having a VERY lean christmas this year. People taking their vacation days lately has opted to work instead and just take the pay. People are running out of money and quitting (people who have been here for -years-). And guys, we have it fairly good here, a dealership just up the road shut down due to lack of capitol, salespeople’s paychecks bounced. There are people all over this autoplex barely surviving. Everyone is hoping things will get better, we are all looking to January for things to pick up. I’m decidedly pessimistic.
I’m riding out the wave as best I can guys, with savings in the bank, and a low rent payment. All I can say is, the housing bust is not contained. Like us or not, we are suffering, and the pain is going to keep spreading high and low.
Ncineration-
Welcome aboard. Your post was interesting. When asked “What’s your favorite car?” My husband always replies “A paid off one.” (He drives a Vet. - I’m the practical one.)
Well thanks, sorry if it was a bit of a long winded rant, just getting things off my mind.
And “A paid off one.” really is the best kind of car. I subscribe to that belief myself, and can prove it with a long list of beaters.
Ncineration,
Thanks for posting. We really value front-line posts. Auto industry info on how driven sales were by helocs confirms what we’e expecting here–a massive retail pullback by the debt-laden American. The retail numbers will tell the story as well. Glad you’re renting and have savings–i’m in the same boat, different line of work, and expect that the economic pain will reach here as well.
Merry Christmas to you.
Well spike, we keep telling ourselves people aren’t going to go back to walking. Ultimately used cars wont take the biggest hit (new car sales are going down much more significantly). When the economy is off people seek out less expensive options. Heloc’s did drive alot of business over the last few years though (to the extent it was a big joke here that some idiots were going to be paying for their car over the next 30 years). So it’s still painful to see them turned completely off at the spout. Likewise the real-estate agents and mortgage brokers, you wouldn’t believe how many of these guys were running through here making 6 figures snatching up cars they probably can’t afford today. I see a veritable cross-section of life here, deal with people from every profession, and I seriously haven’t seen a RE agent or mortgage broker in at least 5 months.
I’m in as good a place to ride out the storm as I could be in (providing I stay in this profession). Used Honda’s should continue to sell relatively well, and our store is part of a huge huge company, so working capital shouldn’t be an issue here…… The main reason we have so much difficulty at this point is the management’s “solution” to reduced sales is to hire more salespeople. I’ve seen it happen time and again over the years, I just need to ride it out while they starve and quit so we can get back to a relative balance. I’ll make it, but I know the broader impact this has.
Funny story, I have a neighbor who works as an exotic dancer in a local strip club. She’s been doing this for years, she’s a class act, really good person. She was over visiting the other day and started talking about work, apparently business is way off for the club as well (compared to a couple really good years for her). Her income has been cut in half and according to her they (at the club) are all hoping the superbowl being in town soon will bring some much-needed economic relief. I am just imagining some poor schmo stuffing HELOC dollars in her g-string.
Hope you don’t end up feeling the pain too Spike, Merry Christmas your way as well,
Ncineration
it was a big joke here that some idiots were going to be paying for their car over the next 30 years…
That’s a good way of putting it. Makes me happy I paid for my Toyota Matrix in 30 months (it was a 6 year 3.9% loan).
I too, have a neighbor (back in Phoenix) who works as a topless dancer. Maybe she’s the same one!
“(He drives a Vet. - I’m the practical one.)”
A Vette isn’t that unpractical. My 2007 gets 30 mpg on the highway. I clocked it on the odometer, driving from Long Island to Hilton Head.
“A Vette isn’t that unpractical.”
An older Corvette can actually increase in value while you use it.
Ncineration,
Sorry to read your post. First construction and home finance companies, real estate industry, now the auto industry, and soon retail. AZ folks are going to get slammed as this thing winds out and there’s not a lot any of us can do. Good luck finding a way to ride out the storm. As least you have your savings and low rent.
Lip
I have a relative who works for a major dept store chain and manages the juniors clothing section for several of the stores in her region. She said that sales are at 60% to what they were last year.
When is Honda going to have a red or yellow Element
I’m still waiting.
They had a red one (two different shades even, a fire engine red and a dark burgundy red)….. Yellow, not so much.
It’s still an oddball SUV though. They only seat 4, get poor “flying brick” gas mileage, and have strange plastic interiors (not to mention looks that kinda have to grow on you, like a fungus).
Guess it’s a love it or hate it sorta thing.
Ncineration
I bought a Scion Xb 2 weeks ago and when I offered to pay cash they said “Wow, were you able to get a re-fi?” I said “No, I’m a renter and I have money in the bank”.
I’ve never been looked at like that in my life. Now I know how circus freaks feel.
Merry Christmas to all of you
You should have told the sales people “Oh what a feeling!” to rent and pay cash for a Scion!
Although I don’t usually buy a new car, we bought a new Mazda this summer after looking at newer used cars. I was prepared to pay cash, but the dealer had a 1.9% financing deal going and a quick calculation showed that I could make a decent chunk of change by financing and keeping the money in the bank (I have a deposit account in New Zealand paying 8.8%). So that’s what we did, but only for half, I couldn’t bring myself to finance the whole thing. Pretty amazing to be paid to buy a car.
Love my Honda Element (’07 Silver Metallic) For a cross-over SUV, I think 23 mpg (city) is pretty good. Perfect for light utility, and for us living in the snow belt, the AWD and traction control is great. Great vehicle!
I’ve got the Kiwi Green one. Love it.
Yes, but they’re hideous. Only the Pontiac Aztec is an uglier car.
Don’t forget SLOBurbans, TaWhores and Ford Excretions. They’re just possibly the most garish and unecessary piece of equipment manufactured by man.
In most cases yes. I think it’s so silly to see soccer mom and one child in the Suburban.
We use ours for family road trips and I’ll put it up against most anything else in man-miles/gallon. It’s also like driving a couch down the road, it’s so comfortable.
And why do people feel so “safe” in them? Whenever there’s a rollover on the Interstate on ice and snow, it’s inevitably a Ford Exploder or Grand Chumpokee. I’ve test driven some of those rigs and you feel like you’re 50 feet off the road, no real sense of road contact or control. Give me an ol Subara AWD any day.
Amen to that! Stupid SUV drove off the road in front of us this afternoon. We chugged along in our 9-year-old Outback through a blinding snow and got to our destination safely. Love that ol’ Subaru!
Ncineration,
While a lot of us are gleeful over the prospect of falling home prices - and seeing FBs and the “axis of weasels” - realtors, mortgage brokers, and appraisers - getting their comeupance - insider accounts such as this should give us pause. Real people’s lives and livelihoods are being badly affected as the collapsing bubble - and far more serious collapse of the gigantic debt and credit bubble that has propped up our economic “prosperity” - continues to unwind. This is going to have tragic consequences for millions of individuals and families.
I sincerely hope you can ride out the worst of the coming storm and land on your feet.
Sammy
I second what you posted Sammy, there is a reason that greed is identified in so many moral teachings as a bad thing and this is it. The damage spreads beyond the initial transactors as we are seeing now. The fact is that the damage from this bubble has been out there for some time, but was masked by the wealth effect. Now that the tide has turned and sheeple can no longer throw money at problems or needs the damage becomes visible. The easy money and inflated “values” ran up prices and purchase volumes across the board. We have all been paying for this in many ways. As it deepens I hope that the good folks find a way to minimize the pain. As for the other folks, well it’s Christmas so I’ll hold my tongue.
Ncineration - welcome to the HBB, glad you are here and thanks for the inside scoop.
In this particular situation, because Ncineration now has a personal connection to me, I wish him the best.
However, in general, many professions were far too easy over the last five years because of the easy money. Just like we all couldn’t stand the mortgage broker who made $200,000 in 2005, I feel the same way about some schmuck salesperson who made $75,000 because everyone felt they were entitled to a new widget. We’ve pre-spent those sales from the future, cash will be king, and the toys will find their rightful owners. I’m in the market for a 2004 Porsche Turbo ;).
You want to research the potential repair costs on something like that. You could get burned really bad.
I know the market for some of the higher end Cessnas is starting to soften. If you want a late model Bonanza, the world is pretty much your oyster. I’ve seen some deals lately that are amazing…but I think that’s also partially due to the increasing cost of aviation fuel. Fifteen gallons per hour of 100LL at five bucks a gallon costs too much these days. There are other options.
Appreciate the words Captain (and others).
I’m not knocking what your saying, but as an “insider” let me tell you rumors of the 75,000$/year car salesman are greatly exaggerated. I’m not saying he doesn’t exist, but typically there are very very few that actually pull off an income that high without moving into management. The first half of them are both ridiculously good at what they do and have been doing it a -long- time. Many of their sales come from people they’ve known for years, people who bought previous cars, people they send Christmas cards to. These are salespeople any business would be proud to have on staff. The other half pulling down the 75K and above mark are usually salespeople working the equivalent of 2 jobs at 37,000/year. They simply work 80+ hours a week, get into work at 8 AM and leave at 9 PM. It’s hard to fault a worker who comes in day and night with ZERO pay for their hours, putting in such ridiculous workdays. Unfortunately this category is typically full of very nasty individuals. They make that 75,000$, but they are wearing the same pants all week, and it’s most certainly all going up their nose. The rest of us hate these guys, mostly because they “flood the floor” (coming in off shift to take your opportunities) and cause an unpleasant experience for EVERYONE at the lot. You can spot this guy easily, pull into just about any car lot and look for the guy SPRINTING for your door.
In any event, while the schmucks certainly exist, we usually outnumber them.
Wish you well finding that Porsche Turbo
(fun car to drive btw if you’ve never had the chance).
Ncineration
–
Haven’t you heard that export boom is more than countering any slowdown due to housing? Time to look for a job in one of the many booming export companies.
Could it be that all those who work in export industries are too busy to have time to buy a car? Those who bought cars with home equity had plenty of time at their disposal. Hell, there are people who haven’t worked for years who had money to go and buy cars and live off their homes. Those were the days.
Jas
Trade in? What’s that?
I go buy a car when my existing car can no longer be repaired for less than its book value. Seriously, the last 3 vehicles I had:
sedan: Bought for $3500 and drove for 2.5 years. Got rear ended by an uninsured driver who was arrested at the scene for bad checks. Not worth going after her in small claims court. Continued to drive it with trunk bunjied shut for another 6 months before again being in an accident (road rage. She was convicted of criminal wreckless driving. I got hit with “failure to avoid a collision”… not an easy thing to do when another driver is doing EVERYTHING they can to cause an accident.) This made the front of the car look like the back, so I sold it off to a guy that worked at a body shop for $500. 2.5 years with a net of -$3K. First time I’ve even paid more than $1000 a year for a vehicle.
Before that I had a truck. ‘91 bought in ‘94 for $5000 and sold it for $800 in ‘02 to a guy that wanted to convert it into a low rider. I did put $1500 into a factory remanufactured engine when it hit 150K miles.
Before that I had a ‘83 wagon that I bought in ‘87 for $2500.
–
It is the people like you and I who are bringing this economy down. Waste, and not “economy,” is what keeps the economy growing and it is paid for by debt.
Debt encourages waste!
Jas
In my younger days I used to do the “drive it till it dies” routine, too. When you have a wife and kids, though, you don’t want to send them out (especially on long trips) in a high-mileage auto, no matter how well you’ve taken care of it. So, we always have at least one newish vehicle.
Right on Sammy. Wife and children change everything.
The wife thing doesn’t change anything if you have insurance
but the kid thing does!
The sun rises and sets on my wife and kids. Exeter is right. They change everything.
i know of a friend’s daughter who drove an old car and had a breakdown in the el lay freeway in the middle of the night. called towing company and stayed in the car with seat belt. got rear ended by a drunk driver. she died.
The sun rises and sets on my wife and kids. Exeter is right. They change everything.
———————–
Awww, how sweet!
Kudos to you guys — it’s good to see someone posting nice things about their spouses. It gets a bit misogynistic (sp?) around here some times.
Phoenix drivers are some of the worst. It is a pleasure to drive on Los Angeles (in 2007, used to suck back in late 1990’s) compared to Phoenix.
Today, the worst cities I hate to drive in: Houston, Phoenix. I just spent 10 days driving around in NYC, that was way more pleasant than those two; people are just out to KILL you!
I agree with you about Phoenix drivers. They are the rudest. Just one example: they change lanes without signalling far more often than LA drivers and Baltimore drivers. Of course, I’m generalizing. There are good drivers in every city, including Phoenix, but the percentage of rude idiot drivers is higher in Phoenix than other places I’ve been.
I go on frequent business trips to DC, and have to say, the world’s most incompetent drivers frequent the beltway there. Something like two-thirds of the 600,000 people who have flooded into the DC/northern Virginia area in the past five years are foreign-born - obviously from country’s where driving was a form of warfare. I’ve never gotten used to the “act-think-signal” school of driving one sees on the beltway. The area also has a very high percentage of foreign-born East Asian females, who, not to sterotype, seem to have a congenital inability to pilot a vehicle in manner that avoids causing wrecks and near-misses.
I had a brief CalTrans test project out in the Palm-caster area in the mid-ninties. I would return toward the valley on the 14w with the cruise control set at 80-mph; lots of people passed often with a quick smile or a waving hand. Very good “autobahn” drivers, IMHO.
“The area also has a very high percentage of foreign-born East Asian females, who, not to sterotype, seem to have a congenital inability to pilot a vehicle in manner that avoids causing wrecks and near-misses.”
Amen. It is probably the only case (other than spotting illegal aliens) where I would support racial profiling.
I thought one of the most ironic things in life was when they were building an F-1 race course in Shanghai.
some of these rude drivers in el lay are sprayed with bullets. that is probably one reason to be courteous.
hey- at least we drive nice cars and we have insurance!
the most dangerous drivers here in LA come from south of the border with uninsured junkers
Thank you for your insights, Ncineration.
Your experiences make sense in terms of falling sales tax revenue in Arizona. I have read several articles on the subject (probably linked from HBB), and of course, Arizona itself faces a nearly billion dollar deficit that may double next year.
This Tempe article is interesting:
“Vice Mayor Hut Hutson warned that retail sales in Tempe aren’t just down — he said each month’s revenue has been smaller than the previous month’s.
That means even the revised surplus projection could be too optimistic, he said.
And things could get even worse, said Jerry Hart, the city’s financial services manager. He doesn’t expect an economic turnaround soon, given gloomy reports of the slumping housing market, rising gasoline prices and credit problems.”
http://www.eastvalleytribune.com/story/105080
From Kunstler:
Christmas means a lot in this country. It represents all Americans’ old hope that miracles can happen. Bums turn out to be Santa Claus. Old curmudgeons are transformed overnight into loving uncles. Angels save us when we jump despairingly into icy torrents. And Goldman Sachs executives pass out multi-million-dollar checks to the wizards who “innovated” an ingenious way for the rest of their country to commit financial suicide.
I just read that. What a great paragraph. I hope all the Goldman Sachs gangsters choke to death on their caviar today. Ho ho ho!
Many of us here on HBB have talked abouthow no more HLEOC money for cars and housing upgrades but to hear it from an insider who have the numbers is priceless!!! Keep posting!!!
Well, we’re off for our annual Christmas ritual at IHop. I always bring $500 in 100s with me to tip the wait staff. Can you think of anything worse than being a waitress in a cheap restaurant on Christmas morning?
Yes, being a homeless person in back of the restaurant diving the dumpster.
Here in Phoenix the dumpsters have locks on their lids, or bleach is poured on the dumpster contents; wouldn’t want the raggedy appearance of the homeless to scare the customers away.
Well, then, I guess they’ll have to wait outside the door for someone who’s passing out hundred dollar bills to the serfs.
Merry Christmas to you, too, pal.
Obviously you’ve never worked for tips.
Bubbleglum, that was one of the more jackass comments I’ve read in here.
Who cares. The person who got the $500 tip was thrilled. She was about 65.
Sorry if that one went over your heads. The sarcasm wasn’t directed at the waitresses.
That’s one of the nicest things I’ve ever heard. Well done.
Yeah, Bubbleglum, we know who the sarcasm was aimed at. Maybe you think it’s patronizing for people of means to look out for “the serfs.” I’m guessing the unfortunates who have to work at IHOP today are damned grateful for such “condenscendence” by the likes of TxChick. I can guarentee you that that 65 y/o waitress has pretty bleak prospects in this economy, as do most of her co-workers. TxChick’s $500 will not only help push back the wolves from her door, but will also be an incalculable morale boost for her and her colleagues.
In our so-called meritocracy, the concept of noblesse oblige is often scorned. It shouldn’t be. There is no more direct way to help aid and uplift the deserving poor.
TxChick, you have my fullest admiration and respect.
Maybe I should be like Mortimer Duke and give $5. LOL. I wish I had old Mort’s money.
i used to work with former waitpersons and i could not believe how they tips: at least 50 pc of their bill. why? they said they know how it is to be on those situations and such simple gestures mean a lot.
Bleach kills flies maggots etc…. not just to ward off the homeless.
The great thing about dating homeless chicks, is that after the date, you can pretty much drop ‘em off anywhere.
You are such a good person. My sister is a waitress, and once in awhile she gets a really good tip. Makes her day!
http://www.ronpaul2008.com/issues/no-taxes-on-tips/
Tell your sis that Dr. Ron Paul is looking out for waitresses (and not in the Bill Clinton sense).
I’m going to put a sticker on my credit cards with the Ron Paul “no taxes on tips” info. That ought to win a few minds.
If restaurants paid their staff about 50% more, charged about 20% more and had a policy discouraging tips, would that be so wrong?
most likely, they won’t survive for long.
They’ll remember you and your generosity for the rest of their lives, TxChick.
I paid my way through school working in restaurants. A lot of the “professional” waitresses were good people who were just barely scraping by. They are deeply appreciative of generous and decent customers - you wouldn’t believe how often they got run ragged by some a**hole and his family, then got stiffed. I still take very good care of conscientous waiters and waitresses when we eat out.
A good general rule-of-thumb is to pay people who work for you just a bit more than they think they’re worth.
I think this is just a good business practice.
Agree, lmg!
Yea, being stuck in Iraq and have to work a 14 hour day, just like all the others for the past several months!!
Txchick,
That is a great tradition. I need to consider ideas like this to do with my own family. Kindness such as this is infectious. Just like those gold coin donors for the Salvation Army.
ANT
Merry f-ing Christmas everyone. I opted not to go to family for this portion of the holiday season after spending double the time I normally would have visting around Thanksgiving. The hope was to not get sick (from visiting the house with 3 boys under 12), avoid the airports, enjoy the extra vacation day the President gave to most federal workers and go do a volunteer visit at the Children’s Inn at NIH after donating blood.
So, what happens? I have a cold with a horrible sore throat and can barely swallow. Volunteer with children being treated at NIH? I don’t think so. I’m going to end up spending a quality day with my shredder, the washing machine, a bottle of advil and a box of tissues.
What’s on TV that won’t make me want to puke?
At least I’m not trying to sell a house or four.
Oh, and the folks at the Friends of the Library store were delighted the load I dropped off on Sunday. It was nice for me, but I hope they aren’t quite that judgemental when people drop off stuff they don’t like. It can’t help with future donations for them to be muttering about recycling (ie pulping them) books rather than selling them.
Hey Polly, Merry Xmas. I’ve had it up to here with the music. But me too, I spent quality time with my relatives on Thanksgiving and also to make them happy I sent them all great gifts so that I can do nothing and spend today alone. I’m watching the animation “Robot”, which is cool. It’s on FX. It won’t make you puke.
Don’t worry about dropping off what you don’t like. Everyone drops off what they don’t like, otherwise they won’t drop it off.
Colds are going around. My office had severe colds a few weeks ago. I avoided that stuff but caught a minor cold from a woman I went out with one evening. My own cure kept the cold very mild and made it last only 4 days. Sore throat was a day and a half. I probably sneezed three times. I do a liquid diet at least 48 hours and right when I see the symptoms. No caffeine except in green tea, no dairy products, lots of broth, some grape juice, lots of water, and some cold-eze. I read about liquid diets in a book about Natural Healing. I had severe sinus infections in the late 80s to mid-90s and one case of walking pneumonia up to the point of following the book. See, I don’t get paid sick days and don’t have vacation, so it costs me hundreds of dollars even missing one day of work, so I have an incentive to stay healthy. Hope that helps.
Merry Christmas polly, I hope you feel better soon.
Take Zicam.
I didn’t catch this one early enough for Zicam. I should have recognized the sneezes, but I thought they were from dust off the book donations. Thanks for the tip though.
And thanks oc-ed. Not feeling better yet. Maybe tomorrow morning.
Bill, sorry that you are stuck in a job with no benefits. That stinks.
No bennies. I like it that way since my hourly pay rate is high to compensate.
State Points Laid-off Mortgage folks to New Jobs
“The CA state Employment Development Department has come up with a list of alternative jobs for laid-off Southern California mortgage and real estate workers that require similar skills — and where employers are hiring.”
Sorry, I looked, no listings for McDonalds or Walmart.
http://mortgage.freedomblogging.com/2007/12/21/state-points-laid-off-mortgage-folks-to-new-jobs/#comment-8965
I saw something on this blog some time ago that California has over 500,000 real estate brokers. I wonder if the socialist Republic will provide work programs for them? Like maybe clearing trails, building new dams, picking up litter?
The WPA did a look of good through public works projects during the last Depression. Could work wonders again in California this time around, especially since we’ve allowed our infrastructure to crumble through years of neglect.
Maybe they could clear cut all the brush that causes those fires to race through the canyons? I mean, as long as it doesn’t disturb some protected newt or squirrel it’s okay right?
Maybe not building in those canyons in the first place is a better idea.
Would we really want a bunch of dumba$$ Realtors to lay their hands on any of this nation’s infrastructure? The problems are bad enough as they are. We don’t need to make them worse. I wouldn’t trust most of these morons with a plunger or a dish towel. I sure wouldn’t trust them trying to build a bridge or dam. Their fake thingies and endless cell phone yapping would get in the way.
Haha thats right plus who knows maybe they would be trying to sell the bridges like in the old days.
I work for a software company that was started in Chicago about 15 years ago. They had cost problems with developers in Chicago area, so set up a development office in PHX. About 5 years ago they purchased a company that was out of Austin. Now about 2/3rds of development is done out of Ausitin with the other 1/3rd here along with most of support, with corporate, marketing, etc. still in Chicago. About 250 employees in total.
Every year the company kicks off the new year by getting all employees together in the same place for an “all hands” meeting in February. Last year is was Denver, year before that was Newport Beach CA, before that was New York, before that was Vegas, etc.
This year, Ft. Lauderdale was picked. A hotel/facility was selected. We had to submit our dates/times for travel, etc.
Just last week they cancelled this year’s all hands to save the $500K-600K it would cost. First time in the last 8 that there will not be an all-hands meeting to kick off plans for the new year. Instead, management will travel to our 3 main locations and do the meetings there.
Just last week they cancelled this year’s all hands to save the $500K-600K it would cost. First time in the last 8 that there will not be an all-hands meeting to kick off plans for the new year. Instead, management will travel to our 3 main locations and do the meetings there.
This has been standard procedure where I work for the last 10 years. We worker bees don’t travel much. The last time I flew somewhere on the company’s dime was in 2000. They just don’t budget anything for travel. If you want to take a class, unless its within driving distance it won’t happen.
Looking for an End
To the Housing Slump
By Amy Hoak
From MarketWatch
CHICAGO — After a year of falling house prices in numerous parts of the country and a meltdown in the mortgage market that affected borrowers regardless of their ZIP code, many hope that housing markets will finally start to get better next year.
…
“The only reason why demand is finding a bottom is because sellers are cutting their prices,” said Mark Zandi, chief economist of Moody’s Economy.com. “There was a sense that the market would cool — I don’t think there was a sense it would crash. And it crashed.”
http://www.realestatejournal.com/buysell/markettrends/20071225-hoak.html?mod=RSS_Real_Estate_Journal&rejrss=frontpage&rejpartner=wsj_hpp
Check out this lovely property. Bank owned? Check. On flag lot behind another house? Check. Mix of nasty older construction with poor quality recent work? Check. Unpermitted room? Check. Tagged with spray paint and … some other sprayed fluids? Check. Dehumanized neighborhood saturated with violence and hopelessness? Check. What a steal!
http://sfbay.craigslist.org/eby/rfs/518991499.html
Feces is such a wonderful paint color for your walls.
Is that the nutty chocolate brown or the dark oxygenated feces brown?
Insane! $269,000.00 for that POS…
ALlt hat for only $265,900.00
It’s funny when they mention Emeryville when the address is in Oakland. I don’t stray into the side of town too much.
The best thing is about this property - it last sold 3/23/2006 for $555K - see zillow http://www.zillow.com/HomeDetails.htm?zprop=68030008
Unless you’ve lived in the Bay Area, you just cannot understand how stupid people are her about real estate.
something funny about the choice in what to “tag” and what to leave alone, almost looks delibret in what was graffitied, with the exception of one wall, things will be easily replaced, a door, window, and the appliances, the cabinents were not even touched, maybe the would be buyer did it to get the bank to replace some stuff, new stove, double paned windows, before closing.
The tagging should make an interesting conversation piece
Bush Plan Leaves Out Borrowers With Option Arms
By Ruth Simon
From The Wall Street Journal Online
The Bush administration is pushing its plan to help subprime borrowers whose loans are due to reset to higher interest rates next year. But left out of the mix are hundreds of thousands of borrowers with good credit who could face sharp increases in their payments.
These homeowners could be the next wave of trouble for the mortgage industry. They took out what are known as option adjustable-rate mortgages, or option ARMs, which give borrowers a choice about how much to pay back each month. If they choose to make only the minimum payment on a regular basis, their loan balance can actually rise.
That is particularly a problem when home prices are falling. Borrowers who get in too far over their heads may not be able to refinance their loans or sell their houses for enough money to pay the loans back. The result, some economists say, may be another spike in foreclosures.
http://www.realestatejournal.com/buysell/mortgages/20071225-simon.html?mod=RSS_Real_Estate_Journal&rejrss=frontpage&rejpartner=wsj_hpp
Article is underestimating the problem of the option-ARMs and the hybrid-ARMs
http://blogs.marketwatch.com/greenberg/2007/12/straight-talk-on-the-mortgage-mess-from-an-insider/
http://online.wsj.com/article/SB119696216000715924.html?mod=hpp_us_whats_news
http://www.washingtonpost.com/wp-dyn/content/article/2007/08/18/AR2007081800089.html?nav=emailpage
Merry Christmas to all on the HBB and humbug to the Used House Salespeople.
I’m sure this has been covered here, but I was shocked to see it!
New York, NY- Markit, the leading provider of independent data, portfolio valuations and OTC derivatives trade processing and owner of the Markit ABX.HE index, today announced that the roll of the Markit ABX.HE has been postponed for three months. The Markit ABX.HE is a synthetic index of U.S. home equity asset-backed securities.
The new series, the Markit ABX.HE 08-1, was scheduled to launch on 19 January 2008. The decision to postpone its launch was taken following extensive consultation with the dealer community. It follows a lack of RMBS deals issued in the second half of 2007 and eligible for inclusion in the forthcoming Markit ABX.HE roll. The Markit ABX.HE 07-2 remains the on-the-run series until further notice.
Under current index rules, only five deals qualified for inclusion in the Markit ABX.HE 08-1. Markit and the dealer community considered amending the index rules to include deals which failed to qualify initially but decided against this approach at this time.
Markit and the dealer community remain fully committed to the index and will update the market as and when appropriate.
Wow. If it was discussed already, I hadn’t seen it.
Thanks for the post!
Central Banks and the Credit Crunch of 2007
Sam Vaknin, Ph.D. - 12/24/2007
I. The Credit Crunch of 2007
The global credit crunch induced by the subprime mortgage crisis in the United States, in the second half of 2007, engendered a tectonic and paradigmatic shift in the way central banks perceive themselves and their role in the banking and financial systems.
On December 12, 2007, America’s Federal Reserve, the Bank of England, the European Central Bank (ECB), the Bank of Canada and the Swiss National Bank, as well as Japan’s and Sweden’s central banks joined forces in a plan to ease the worldwide liquidity squeeze.
This collusion was a direct reaction to the fact that more conventional instruments have failed. Despite soaring spreads between the federal funds rate and the LIBOR (charged in interbank lending), banks barely touched money provided via the Fed’s discount window. Repeated and steep cuts in interest rates and the establishment of reciprocal currency-swap lines fared no better.
The Fed then proceeded to establish a “Term Auction Facility (TAF)”, doling out one-month loans to eligible banks. The Bank of England multiplied fivefold its regular term auctions for three months maturities. On December 18, the ECB lent 350 million euros to 390 banks at below market rates.
Interest rates for most lines of credit, though, were set by the markets in (sometimes anonymous) auctions, rather than directly by the central banks, thus removing the central banks’ ability to penalize financial institutions whose lax credit policies were, to use a mild understatement, negligent.
Moreover, central banks broadened their range of acceptable collateral to include prime mortgages. This shift completed their transformation from lenders of last resort. Central banks now became the equivalents of financial marketplaces, and akin to many retail banks. Fighting inflation - their erstwhile raison d’etre - has been relegated to the back burner in the face of looming risks of recession and protectionism.
As The Economist neatly summed it up (in an article titled “A dirty job, but Someone has to do it”, dated December 13, 2007):
“(C)entral banks will now be more intricately involved in the unwinding of the credit mess. Since more banks have access to the liquidity auction, the central banks are implicitly subsidising weaker banks relative to stronger ones. By broadening the range of acceptable collateral, the central banks are taking more risks onto their balance sheets.”
http://globalpolitician.com/articledes.asp?ID=3927&cid=1&sid=45
Sit tight and wait out the credit crunch
By ROSEMARY GALLAGHER
Advice for those worried about property funds
IT’S been another bad week for commercial property investment. As you’ll see from the main story in this page, people have been scrambling to take their money out of investments, including commercial property.
This comes on the back of lots of hype about a crisis in terms of a lack of liquidity in property and returns in freefall compared with previous years when they hit double digits.
But it’s not the first time we’ve seen this type of environment.
There was a severe property correction in the early 1970s due to the banking crisis – a very similar credit squeeze as today. When you include inflation in the equation, the commercial property sector didn’t recover fully for over 20 years.
Readers around the age of 60 or 70 who went through this may have the same antipathy toward commercial property as younger generations who were stung by technology stocks around the time of the millennium.
http://business.scotsman.com/business/Sit-tight-and-wait-out.3615236.jp
There is only one way to answer the question posed in this article: Let the market discover the price of the underlying assets.
Is subprime index subpar?
ABX, warts or not, is ‘only game in town’; UBS’s conundrum
By SERENA NG, CARRICK MOLLENKAMP and SCOTT PATTERSON
THE WALL STREET JOURNAL ASIA
December 13, 2007
When Swiss bank UBS AG wrote down its subprime-mortgage investments by an additional $10 billion this week, an obscure and sometimes maligned credit-market index played a key role.
The index, called the ABX, tracks the value of securities backed by subprime home loans. People familiar with the matter say UBS looked to the ABX as a guidepost in determining values for its holdings.
The development underscores the importance of this index in the subprime-mortgage crisis. It also raises questions about whether the market is sending the right signals about the severity of mortgage-debt problems. Some portions of the ABX are down as much as 79% this year; some analysts think actual losses may not be as severe as the index implies.
http://online.wsj.com/article/SB119748115105023983.html?mod=googlenews_wsj
I’m guessing HELOCs, especially the 20% portion of the purchase mortgage, have lost at least 80% value — at least where collateral value is concerned. I’ll give them the other 20% value only because some people will pay off their loans — but it could be worth even less.
From where I sit, most of the 100%’ers were first-time buyers and have no money. If housing/collateral prices crash 20% (already down by more in many areas), the HELOC is totally unsecured. Additionally, these people are now all underwater, probably stretched way to much to “get in” and will NOT be paying off these HELOCs.
Just a guess.
Subprime lending kingpins’ names are beginning to appear in print all over the MSM.
Last updated December 23, 2007 11:04 p.m. PT
The beginnings of a meltdown: Traders saw a cash cow in mortgage derivates
By MARK PITTMAN
BLOOMBERG NEWS
This is the first in a five-part series about the subprime mortgage crisis.
Representatives of five of Wall Street’s dominant investment banks gathered around a blond-wood conference table on a February night almost three years ago. Their talks over take-out Chinese food led to the perfect formula for a U.S. housing collapse.
The host was Greg Lippmann, then 36, a fast-talking Deutsche Bank AG trader who aspired to make mortgage securities as big a cash cow for Wall Street as the $12 trillion corporate credit market.
His allies included 34-year-old Rajiv Kamilla, a trader at Goldman Sachs Group Inc. with a background in nuclear physics, and 32-year-old Todd Kushman, who led a contingent from Bear Stearns Cos. Representatives from Citigroup Inc. and JPMorgan Chase & Co. also were invited. Almost 50 traders and lawyers showed up for the first meeting at Deutsche Bank’s Wall Street office to help set the trading rules and design the new product.
“To tell you the truth, it’s not very glamorous,” Lippmann says. “Just a bunch of guys eating Chinese discussing legal arcana.”
Those meetings of the “group of five,” as the traders called themselves, became a turning point in the history of Wall Street and the global economy.
http://seattlepi.nwsource.com/business/344669_subprime24.html
This would put it at about February 2005.
Just think, Ben’s blog was already up and attracting a growing audience.
We were aware that things were already out of hand at that time. Somehow, this group of 50 traders and lawyers had no idea the credit bubble was already reaching max expansion phase????
Merry Xmas everyone!
I’m up early to organise the feeding of the 5,000 (well, only 19, but it feels like 5,000).
Many, many thanks to Ben and all the smart people on this blog - its a continuing education every day (and Ben, I’ll throw some holiday season wonga your way, once the hoardes have dispersed).
I hope you all have a happy, merry food-and-fun filled day!
Merry Christmas, HBBers!
Bartender, please
Fill my glass for me
With the wine you gave Jesus that set him free
After three days in the ground
http://www.youtube.com/watch?v=cvudUe0ikbQ
And the plot for the sequel to “Its A Wonderful Life” is “Mortgage story is not so wonderful (With apologies to Frank Capra.) ”
http://www.detnews.com/apps/pbcs.dll/article?AID=/20071224/OPINION03/712240305
I liked the SNL alternate ending to “Its a Wonderful Life”, where the angry mob finds out that it was Potter who stole the money.
http://tinyurl.com/22hsjp
A High Risk Barrel.
This is a long video, but very interesting. For 3 barrels used, only one barrel of oil is being produced. Worldwide. When will the oil age end? Next month? In five years? In 30 years? Some European officials are worried about the end of the oil age. They have far more alternative energy sources than the U.S. Yet Americans are still in denial.
The crisis will come. We will survive. We will be on a greener planet. The problems associated with the loose credit bubble of this decade is nothing compared to the shortage of cheap oil.
Bill, I am agreement with you on this one, it will be withing 5 years. Last year I put (27) 220 watt solar panels on my house and they now generate just over $200 in electricity per month. What people are not factoring in (properly) is inflation due to energy prices. I have been overweight in energy stocks for the last several years and they have done well and with the deflating dollar they have done even better.
I was thinking about all the big bankers and their models:
During the last few years the banks:
Marked to model and now have to mark to market.
During the last few years the home buyer:
Marked his income to model. Now let’s see what happens when the FB has to mark his income(house, etc.) to market!
I sell cleaning, restoration and remediation franchises to the trades. We sell to builders, contractors, painters, dry wallers, roofers, gutters and siding, pest control, building inspectors, basement water proofing contractors, carpet cleaners, janitorial services, stone masons, heating and air-conditioning contractors, framing etc, etc.
The construction contractors are calling us in droves. We have never seen this kind of an initial interest in our business. They have the cash to buy the franchise. One thing is unusual about these guys. They are all complaining that there is very little work for them in the pipe line. They also seem to think that the spring bounce will help them pick up more work. The builders are claiming that prices of materials are way down so it is the best time to build. Lots of them are attending seminars on how to buy properties from distressed sellers and how to flip these properties within 5 days. They really believe the bull shit being fed in these types of seminars. These individuals are spending hundreds of dollars on such seminars. The cleaning trades are doing okay. They are seen a slow down but not a drastic one. Landscapers are happy they know when people don’t have money to go on vacations and what not. People stay at home and start sprucing things up.
The assessment I am giving covers. NY, MA, CT, OH, NJ, DE, MD, RI and PA.I saw this happening almost 18-20 years ago. I have been in this line of work for 23 years. I fully expect lots of contractors to go out of business. Some will take on jobs to keep doors open. Used boats, trucks and tool will be sold from the back of their pickup trucks. Divorce rate among contractors swill swoon. There is a lot of alcoholism among painters, which will increase. The older contractors will look for jobs and if that does not pan out will retire.
We offer financing thru independent lending institutions and they are applying for financing and hording the cash which they have. I expect lots of them will reduce their prices for services and lots of them will scam customers. The only advice I have to give is be careful when you hire them. Get a lien waver, check the insurance, verify the references, and call the better business, chamber of commerce as well as the police department before putting down a deposit and hiring some one.
Merry Christmas
Thank you for your insight!
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/23/cccrisis123.xml
From the UK Telegraph: Banking crisis may make 1929 look like “a walk in the park.” The British and German financial press have a far better track record of credible reporting than Wall Street co-opted fishwrap like the NYT or Wall Street Journal.
While many clueless pot-bellied Americans are watching spitting/swearing/swaggering thugs try to knock each others heads off between the beer and truck commercials on the day that others claim to celebrate the Prince of Peace, some of us go looking abroad instead to read news articles that tell us things we don’t hear over here. I direct the inquisitive HBB’ers to this: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/23/cccrisis123.xml
Thank you for the link. It seems the folks overseas are more worried than the U.S. about this debt crisis, although it will affect the U.S. much more than the Europeans.
We can expect more loose money, which is good for the price of gold. $900 per ounce in ‘08!
Where do you guys see gold headed in the next 2 years? I am thinking that since huge amounts of loans in USD will never be repaid,the dollar will weaken further. I am planning to buy a house when this bubble hits bottom, probably in a couple years. I have about 50k sitting in savings making 4.65% right now. I’m thinking about buying about 5-10k worth of gold with some of that money. I’m planning to buy physical gold, eagles or pamp suisse bars. So where do you guys think gold will be in 2 years? Thanks
I think gold will be a LOT higher in US dollars in two years. I think it will be higher in other currencies too, but not as much as in dollars, because the dollar is toast.
I think you’re on the right track thinking of owning precious metals as part of your savings/investments. In 2 years I see gold at $1060-$1180. Personally, I think silver will outperform gold substantially.
Most of the gold ever mined is still in use and most of the silver ever mined is gone forever.
Just wanted to say Merry Christmas and Happy Holidays to everyone . Now ,got to get back to the family .
Over take-out food, traders set Wall St.’s subprime debacle in motion
This is the first part in a five-part story on how Wall Street transmitted southern California’s go-go mortgage lending practices and the inflated U.S. real estate market into a global financial crisis.
By Mark Pittman - BLOOMBERG NEWS
Updated: 12/25/07 6:42 AM
Representatives of five of Wall Street’s dominant investment banks gathered around a blonde wood conference table on a February night almost three years ago. Their talks over take-out Chinese food led to the perfect formula for a U.S. housing collapse.
The host was Greg Lippmann, then 36, a fast-talking Deutsche Bank AG trader who aspired to make mortgage securities as big a cash cow for Wall Street as the $12 trillion corporate credit market.
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Subprime mess escalated from ‘dancing’ to missteps
After ‘containment’ talk of summer, several CEOs, easy credit became casualties of crisis.
By Rachel Beck
ASSOCIATED PRESS
Wednesday, December 26, 2007
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The implosion in subprime mortgages forced a market-wide reassessment of risky debt. Free-flowing liquidity dried up as lenders everywhere raised interest rates and investors demanded better protection against risk.
That put banks and other financial institutions on the spot. Not only were they unable to unload the debt to finance most buyouts, but their complex debt securities tied to subprime mortgage assets also plunged in value. About $100 billion in subprime exposure has been written off at banks and brokers worldwide this year.
Such losses cost two big-name CEOs their jobs. Citigroup’s Chuck Prince and Merrill Lynch’s Stan O’Neal were blamed for letting their firms take on risk that clearly outweighed the reward.
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xiaoding:
“If you haven’t watched TV in 12 years you have missed out on the best drama and comedy that humanity has produced in all of history.”
Here in the states you can rent/download those episodes of “The Wire”/”The Sopranos” (as two examples) and watch them on any number of electronic devices besides TV. US big consumption (big vehicle/big house/big RV/big screen/big meal) habits are ridiculed by many abroad. Btw, I was in Japan last year and it’s impossible not to notice that many people access TV via their broadband cellphones. People over there see use of space and regular saving quite differently than here in America.