December 31, 2007

Bits Bucket And Craigslist Finds For December 31, 2007

Please post off-topic ideas, links and Craigslist finds here.

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Comment by wmbz
2007-12-31 04:54:05

Bank Fell Victim… The most used word in 2008 (victim?) now poor unwitting banks were duped.,1,5610826.story?coll=la-headlines-business&ctrack=3&cset=true

Comment by Dawnal
2007-12-31 05:39:34

Speaking about banks, here is one point in the economic forecast by Saxo Bank of Denmark:

“5. Many of the big US home builders to go bankrupt

“As 2007 draws to a close, many of the stocks for the largest home construction outfits in the US are rallying after George W Bush rolled out his desperate attempt to stem the sub-prime tidal wave by fiddling with rate reset mechanisms and implementing other measures, which seem like pumping medicine into a dead horse. These steps are too little and too late, as the last phases of the US housing boom were one of the worst examples of overextension by any industry – driven by excess liquidity. At least three of the largest US home builders could go bankrupt in 2008.”

Comment by ozajh
2007-12-31 04:56:30

Well, it’s an hour to the end of 2007 (here :) ) and a lot of people who took a lot of grief from the Endless Appreciation Society have been (at least partially) vindicated this year.

I bid all the blog frequenters a happy and prosperous 2008, and don’t go catching any knives.

Comment by P'cola Popper
2007-12-31 05:44:55

Eight hours to go in Moscow. Yesterday on my way to the local supermarket spied three falling down blindly drunk “dedushkas” (old men) getting in some practice for this evening’s festivities.

Happy New Year to Ben and my fellow HBBers!! С Новым годом!!

Comment by Professor Bear
2007-12-31 06:20:57

Kak nucat6 b’cyrillic?

Comment by P'cola Popper
2007-12-31 06:25:54

Menya est cyrillic clavatura (keyboard) no ya peshu ochen medlina poetemo obichna ya peshu po latinsky.

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Comment by Pen
2007-12-31 06:42:33

Listen up you folks writing in Russian. You are in America..Write in Spanish

Comment by Evil Capitalist
2007-12-31 06:42:57

In Windows, install Cyrillic layout (nothing special is needed - NLS is a standard part of windows) and use “En”/”Ru” toggle in the bottom right corner to flip it.

Comment by novasold
2007-12-31 06:44:38


Ha, ha.

Happy New Year to you all.

Comment by P'cola Popper
2007-12-31 07:02:47

Good one Pen!

Comment by Professor Bear
2007-12-31 07:08:25

‘…use “En”/”Ru” toggle in the bottom right corner to flip it.’

My windows interface has too much useless cr@p in the bottom right corner for me to figure out what you describe.

Comment by Evil Capitalist
2007-12-31 08:03:09

“‘…use “En”/”Ru” toggle in the bottom right corner to flip it.’

My windows interface has too much useless cr@p in the bottom right corner for me to figure out what you describe. ”

Hear that. When windows has NLS layouts installed, it places “En” icon when English layout is used or “Ru” icon when Russian layout is used in the bottom right corner of the screen, right next to the clock. You can change the active layout by selecting “En”/”Ru” with a mouse. I think there is also some keyboard shortcut.

Comment by reuven
2007-12-31 17:49:28

My grandparents were all from Russia. Though all the Russian they knew was obscene–the so-called “mot” slang. (Native language was Yiddish). So I can’t repeat any of the Russian I learned here.

Comment by ghostwriter
2007-12-31 05:00:31

Well let’s wrap up the 2007 housing bubble bust and look forward to the 2008 bust. It’s going to be one bumpy year. Everyone have a safe New Year’s eve and a happy New Year. Here’s hoping the prices fall drastically and you all get the home of your dreams.

Comment by polly
2007-12-31 06:41:24

“and you all get the home of your dreams”

Not this year in the DC area. We are falling but not as quickly as some of the other very bubbly places like Florida and Las Vegas. But I will modify your wishes to be for the apartment of my dreams and accept with pleasure.

I hope to move when my lease is up at the end of January. I’m a little sick of this place and would like a little more room to spread out. The funny thing is I have been having a great time doing a purge of excess stuff the past few days. I swear I have half of my clothes bagged up to drop off at Goodwill at lunch time. HALF - and I purged a lot when I moved down here from New Jersey, purged at least once since I’ve been down here and I wasn’t even all that agressive. I’ll still have things I didn’t wear last year. And I have way fewer clothes than most women I know. Even before the purge I was using only a little over half of the hanging space in this one bedroom. Now it is maybe a third.

Even if I don’t move, this process is going to improve my lifestyle in this apartment. There is somthing to be said for the attitude toward life that a lease brings. Not that I let that healthy attitude affect my books. :^)

Shredding and tossing of papers and other junk reserved for New Year’s Day. May it be a happy and safe one for everyone.

Comment by Ozarkian from Saratoga, CA
2007-12-31 10:52:01

I’m inspired to de-clutter too!

Comment by Chad
2007-12-31 11:21:33

I do every quarter! :o

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Comment by exeter
2007-12-31 07:20:03

Thank you for the New Year wish. Lets be clear on something though. After watching FB’s, morons, RE-tards and other assorted nutjobs succumb to their dreams, I’m inclined disregard flakey lofty thoughts and off the cuff pondering and proceed with patient judgement, consideration and vision.

Comment by Jingle
2007-12-31 05:24:47

Mortgage Debt Foregiveness: I am starting to understand the strategy. Your phantom gain is only foregiven if you do a shortsale with the bank. No foregiveness if you walk away and let it foreclose. Now the banks have a hammer to make FB’s kneel before them again. More pain for the FB’s. Have you ever tried to negotiate with a lender? They don’t return my calls and when they do, no one can make a decision……and I am a buyer!

Comment by txchick57
2007-12-31 05:32:20

I tried to get a short sale approved (as a buyer) and found that the bank wouldn’t deal if the seller wasn’t already in default.

Comment by ghostwriter
2007-12-31 05:51:15

The one area I’m watching in FL has short sales, but when you look at the price reductions, it’s another story. Most have the prices reduced multiple times, sometimes up to $100-150k, but when the bank ok’s a price for short sale, the price jumps back up. That makes no sense to me. If a house didn’t sell at the lower price, why would it sell $20-50k higher.

Comment by Jingle
2007-12-31 05:58:12

Ghostwriter, you hit the nail on the head. There is the real problem. The banks will play games, keep the FB’s on the hook, kill realistic sales prices, milk the last $’s, and prolong the downturn. All in the name of helping the poor FB. Another ass kicking for the little guy. It reminds me of that false statement “I’m from the government and I am here to help you.”

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Comment by Pen
2007-12-31 06:46:56

Do you think that is because they smell fraud in mnay cases?

Comment by mrktMaven FL
2007-12-31 09:25:06

I’m observing a short-sale and the first thing the Realtor told the FBs was to stop making mortgage payments. They are paying off credit cards and saving for a rental. As you can imagine, there is no pressure to move or sell.

Loan servicers have a lot less skin in the game. So, don’t expect them to do the right thing either. In the old days, you could go down to the bank with the FB and negotiate. However, with securitization and severing of local banker-customer relationship, there is no contact until months after default.

Comment by polly
2007-12-31 06:49:03

That makes a lot of sense for the lenders. They can allow the short sale conditional on the borrower setting up a payment agreement that is just a smidge less onerous than the one the borrower would get from the IRS.

Example - if FB is pretty solvent and wants to do a short sale that result in $100 K of forgiven debt and the IRS would want $28K of taxes on that debt forgiveness, then the bank should be able to negociate with the FB to get up to about $27K of extra money on top of the short sale.

That is a very direct transfer from the government to the lenders. Very, very direct.

Not relevant for an insolvent borrower who knows that he/she could negociate the IRS down from the full tax amount.

Comment by azrenter
2007-12-31 07:53:58

new law for irs taxes on short sale. no tax on the forgiven amount.

Comment by polly
2007-12-31 08:49:16

But if you have to get a lender approved short sale to get the forgiveness, the lender controls your tax consequenses. So they can negociate with you to get what is effectively a “kick back” on your tax savings. Direct transfer from IRS to lender with the lender deciding whether to take it based on how easy it is going to be to collect.

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Comment by exeter
2007-12-31 07:28:22

Just some personal experience with short sale here…

During the last housing bust circa 1990-1999, I had a contract on a second house in same area where I was working in 1992. Owner was a small time gen. contractor who fell on tough times (who didn’t in 1992?) Bank had initially agreed to eat the 40k difference between contract price and what owner was on the hook for. Bank waited until the day of closing to inform all parties that they were going to back out of short sale. It didn’t make sense that they would take the house instead of eating the loss, nor does it makes sense today. In hindsight, I’m glad it fell through based on my career direction subsequent to the event.

Comment by Professor Bear
2007-12-31 07:34:54

“…and I am a buyer!”

Hard to believe a bank would ignore their best and scarcest customers…

Comment by Matt_in_TX
2007-12-31 08:11:52

The banks best and scarcest customers are us savers. Emotionally, they don’t even think we exist anymore.

I’m going down to the branch to _deposit_ money today, and ask questions about foreign branches. I doubt I will even show up on the security camera if it weren’t for the specially colored “Deposit” slip I will have to use. When I walk up the last few steps to the teller window, her 19 year old eyes always go wide when she sees the green slip.

Comment by SFMechanist
2007-12-31 12:17:33

Here’s how I see it: in the “bailout,” banks are going to first milk every dime out of the borrower, because they are contractually on the hook. It will be a borrower bailout only in the sense they continue to live in their houses. Then they will milk everything they can out of investors in securitized debt– after all they already have their money, it’s just a matter of not giving them any returns. Then they get what they can from the taxpayer, apparently through an expansion of FHA loan insurance, which a number of presidential candidates from both parties support.

Ron Paul and Mike Huckabee are the only two candiates opposed to any bailout. While Clinton favor a bailout, at least the one she proposed does not involve an expansion of the FHA, which seems to me to be handing banks a blank check.

Comment by watcher
2007-12-31 05:40:23

2007 winners; gold and oil

Dec. 31 (Bloomberg) — Gold held near a 28-year high in London, heading for a seventh straight annual gain, boosted by the dollar’s decline and civil unrest in Pakistan after the assassination of Benazir Bhutto.

Gold has gained 32 percent this year, its best performance since 1979, as surging fuel expenses boosted demand for the metal as a hedge against inflation. The UBS Bloomberg Constant Maturity Commodity Index of 26 commodities has climbed 22 percent this year.

LONDON (Reuters) - Oil rose above $96 a barrel on Monday, heading for its biggest annual gain this decade as dwindling fuel stocks and growing concern over political turmoil offset the impact of a softening U.S. economy.

With prices starting the year at around $61, oil is now up almost 58 percent.

Comment by Bill in Carolina
2007-12-31 06:54:53

I am 1 for 2 in the prediction department for 2007. Back in late summer I predicted that a Fed funds rate cut was “in the bag” even though the Fed was still obsessed over containing inflation. The first cut happened about 3 or 4 weeks later.

Knowing that a rate cut would seriously weaken the dollar, I then rashly predicted $100 oil by the end of the year. Looks like that one has fallen a bit short, but the next rate cut will cause it to happen.

So which causes more pain- lack of Fed stimulus which deepens the recession that’s now under way, or a still-weaker dollar in the world markets? That’s the Fed’s dilemma.

Comment by cactus
2007-12-31 08:35:40

So which causes more pain- lack of Fed stimulus which deepens the recession that’s now under way, or a still-weaker dollar in the world markets? That’s the Fed’s dilemma.

The FED will choose inflation

Comment by SFMechanist
2007-12-31 12:35:03

Sounds like you are assuming the Fed seeks to act for the benefit of the general economy, or an economic majority. I agree, given the amount of debt out there, a policy of heavy inflation would benefit more people than not. I disagree through, that is what the Fed is going to do. Just a hunch.

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Comment by exeter
2007-12-31 07:30:09

Forecast- 2008 Losers; Gold and Oil

Comment by aladinsane
2007-12-31 07:49:00

Anything to back up your sentiments, other than just 3 words?

Comment by exeter
2007-12-31 08:12:25

Oil demand down in US, Japan, Europe YoY 06-07, demand up by a small amount in China and India. Forecast demand in US/J/Eur forecast to decline in 08. The conservation mantra is back on again, the islam boogeyman is back in the closet where it belongs. Theres nothing under the price but hot air, fear and speculation.

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Comment by aladinsane
2007-12-31 08:27:52

You’ve explained one word of your 3 word prediction and i’ll cut you some slack on the “and”.

In the face of everything going wrong financially, why wouldn’t Gold be in for the performance of it’s life?

Comment by watcher
2007-12-31 08:35:57

Jas is still my favorite contra indicator, but you hold down the number two spot.

Comment by exeter
2007-12-31 08:47:25

I thought my explanation of oil was factually accurate and still do. Why would central banks capitulate to gold in lieu of their money making fiat currencies? I don’t think we need a savior a’la Volker to break the back of gold. Considering the massive destruction of wealth that we’re witnessing, it’s difficult to make the case for gold.

I’ll stand by my forecast and if I’m wrong, it won’t be the first time. We’re both willing to trade on our forecasts, so be it. My forecast doesn’t reflect my desire to see the entire system come apart. It wagers on the fact that central banks they will do everything possible to hold it together.

Comment by Professor Bear
2007-12-31 08:13:34

Irrational exuberance

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Comment by Professor Bear
2007-12-31 07:59:19

Good one!

Comment by combotechie
2007-12-31 08:37:33

“Forecast - 2008 Losers; Gold and Oil”

My forecast as well. Prices of most everything will decline as the dollar becomes scarce due to the global economic contraction. Global oil consumption will decline and drivers will curtail driving, hence gas prices will decline . Hoarders of gold will sell to raise cash in the deflationary environment.
Cash will be king, even the USD.

Comment by watcher
2007-12-31 09:16:37
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Comment by aNYCdj
2007-12-31 09:31:21

Tell that to BREYERS ice cream which just raided their prices another 10% to $6.49 for what used to be a half gallon ice cream container now a whopping 56 ounces…..

Deflation………maybe everything else but FOOD.

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Comment by DenverLowBaller
2007-12-31 11:13:21

I know I can’t survive without ice cream. Wait…..

Got rice n’ beans?

Comment by bill in Maryland
2007-12-31 10:54:29

“Forecast - 2008 Losers; Gold and Oil”

2008 - oil will hang around $100 per barrel - that’s my prediction based on the information and URL I give below.

Funny how people pick things out of the air without investigating whether they can be wrong.

The gentleman with the screenname khebab posts every two months with his charts, with the charts of IEA, and with other charts. He stands by his statement made quite a few posts ago that world crude oil + natural gas liquids peaked in May of 2005. That was 82.09 mbpd (millions of barrels per day). The Hybrid Shock Model, Bakhtiari model, and Ace models have been right on the money with the actual production figures. The Bakhtiari model projects 75.30 mbpd in 2010 and roughly 67 mbpd in 2015. The models do not say that there will be dozens of millions of more motorists in China and India demanding more oil based products. The oil drum blog is run by several versions of Ben Jones - not tied to the commercial interest in that industry. Ignore it at your own peril. The housing bubble is a tea party compared to what we will go through in 2010 through 2025 with energy. BTW: The oil and natural gas production in 2007 is 80.09 mbpd, which is 2 million barrels less than the peak in 2005. The significant showing is that the IEA is to Peak oil bloggers that the NAR is to the HBBrs. See Khebab’s December 29 post on the oil drum blog.

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Comment by exeter
2007-12-31 11:50:35

Fear, boogeymen, pandering, gloom, schlock and awwww, run for the hills….. $100 oil is closer to the ceiling than the floor……… but someones selfworth and portfolio is contigent upon all that stuff.

Comment by watcher
2007-12-31 12:02:10

Exeter posts many insults, but few links to back his opinions.

Comment by combotechie
2007-12-31 12:09:06

I have no arguement with the supply issue of oil; my point is directed to the demand side of the equation.
The demand for oil will diminish as the world economy contracts, as the trillions of recently created thin-air dollars revert back to thin-air.

Comment by exeter
2007-12-31 12:10:57

bullseye combo.

Comment by bill in Maryland
2007-12-31 12:25:19

someones selfworth and portfolio is contigent upon all that stuff.

Of course, Exeter is referring to me. However my stock in PGH is 2% of my portfolio. All my other energy stocks are part of my stock mutual funds. Even so, I started buying PGH after reading Matthew Simmons’ book “Twilight in the Desert,” and after reading various artlcles on the oil drum blog. I don’t take ignorant comments as insults. I only take them as foolish drivel.

Comment by exeter
2007-12-31 12:31:51

And if the facts don’t fit amateur analysis, it must be a lie.

Good luck with strategy.

Comment by bill in Maryland
2007-12-31 13:36:50

You once again are telegraphing your approach. It is obvious that you did not go to that web site or study the analysis that person did. Better to remain silent than to talk about something you obviously refuse to educate yourself about. Sheesh!

Comment by exeter
2007-12-31 14:53:17

It’s obvious? No. It’s presumptuous on your part that I didn’t look. Nice try though. His flawed analysis is based entirely on peak oil boogeyman, never accounting for declining consumption in the west. If educating oneself comes down to absolute black and white kindergarten logic, you’re in your post doc right now but I think that has already been established by some of the esteemed women who post here.

For someone who claims to disregard irrefutable evidence as drivel, you sure do put in sweat in responding to it promptly.

Comment by bill in Maryland
2007-12-31 15:17:46

By this time the best way is for readers to see for themselves. Exeter, you are blowing smoke, and that smoke smells funny. That’s my final word on this particular thread today. You are just hoping that readers will not see the URL for themselves. Your accusations about khebab are preposterous.

Comment by shakes
2007-12-31 15:31:12

In order for consumption to go lower, the government is going to have to do better then increase the gas milage requirement to 35 m.p.g. by 2020. For those who say consuption is going to go down in the west enough to offest the east Please explain since I do not see it! You sound like the RE cheerleaders who would not pay attention to the facts and analysis of those who did not fit Your view of how it ’should be’ rather then how it is.

Comment by exeter
2007-12-31 17:38:05

Consumption in the US/Japan/Europe is down YoY since 2005. I never implied that it would completely offset the increase in consumption in Asia. However, considering the fact that those same countries consume over 3 times India and Chinas combined consumption, any effort to conserve in the west will have a dramatic effect on price. As far as BillyBob, he’ll keep coming back for more, not having enough sense to know when to stop the self abuse.

Comment by Evil Capitalist
2007-12-31 18:46:51

Neither China nor India went through their equivalent of industrial revolution as of yet. West can stop consuming oil all together and should China or India hit the industrial revolution, their demand for energy ( and hense oil as right now it is the most cost effective energy producing material available ) will wipe all the west’s cut backs.

The problem with all oil consumptions models is that they are written by people who rely on oil and energy every day and hense take it for granted just like a hipster parading with “Free Mumia” signs takes it for granted that mommy and daddy will pay his or her credit card.

Comment by shakes
2007-12-31 21:31:02

“I never implied that it would completely offset the increase in consumption in Asia.”
If it does not completely offset the increase in the East then demand will continue to increase (although at a slower rate). If the supply VS Demand curve have intersected with more demand then supply it is only natural for the high prices to remain ‘high’. I agree the coming recession is going to take a bite out of demand and should keep prices relatively stable for 2008 unless the more dire peak oil predictions are correct. A few predictions state that we are going to start down the back side of the bell in 2008 (reducing supply at a higher rate). This will widen the supply/demand gap. If we have NOT indeed hit peak oil, then the supply/demand curve have not intersected, thus we have more supply and prices will fall. The other part of this equation (to me) is the dollars relative value as a world currency. I believe the dollar is going to continue to deflate which will make oil cheper to the world in their own currency. They will bid up the price of oil through increased consumption in US dollars and thus oil will be higher in US dollars. China is currently facing an oil shortage and still have yet to be fully industrialized. The US will see energy prices rise whereas other countries will not see this inflation due to the currency valuation. I believe oils recent runup is as much a currency valuation issue in as much as it is a supply and demand issue. I think the back side of the supply curve is still a few years away. Naturally, I am invested in oil for both reasons stated above. If the dollar continue to devalue I have a global commodity that trades on a global market.
You can lead a man to information but you cannot force him to think. For some this information is KOOL AID for others it is the TRUTH. What I know is the information is an accurate account of the past. Time will tell who is right. I predict oil will break the $100 a barrel oil mark in 08. I think the government is too focused on inflating our economy to allow the recession to hit its stride until 09. Inflation within the US economy does not bode well for low oil prices or a strong dollar.

Comment by technovelist
2007-12-31 11:33:53

Oil, maybe. Gold, I don’t think so. After this debacle is over (and it has just begun), unbacked fiat money is going to be unacceptable for a LONG time.

Comment by combotechie
2007-12-31 12:53:21

“After this debacle is over (and it has just begun), unbacked fiat money is going to be unacceptable for a LONG time.”

Agreed. The money that WILL be acceptable will be the backed money - the money that can be exchanged for goods and services, which is what ultimately backs our dollars.
The thin-air dollars that are destined to evoporate will cause the asset-backed dollars to become more valuable, for cash to remain king.

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Comment by watcher
2007-12-31 05:43:03

new cars are fully loaded - with debt:

When Jennifer and Bobby Post traded in their 2001 Chevy Suburban last year for a shiny new Ford F-350 turbo diesel with an extended cab, it seemed like a great deal. Even though they still owed $9,500 on their SUV after the trade-in value, they didn’t have to put a penny down.

The dealership, near the Posts’ home in Victorville, made it easy; it just added the old debt to the price of the new truck and gave the couple a seven-year, $44,276 loan.

The Posts were a little worried about taking on such a long obligation, but they couldn’t pass up a monthly payment under $700. Now they’re having regrets.

“I didn’t realize how much debt was in it,” said Jennifer Post, who has since moved with her family to Iowa.

Comment by Jingle
2007-12-31 05:53:45

In 2006 I had a landscape contractor come out to bid the installation of a back yard on a new house. He drove up in a GMC 5500. I did not even know GMC made a 5500 (the starter mode is a 1500 and “Watcher”, above, refernces a Ford 350, the equivalent of a GMC 3500). This truck was brand new and looked like it could pull a semi truck trailer. He needed drop down steps to climg into the cab. The landscapers bid was $14,900 for sprinklers and a lawn. He was $6,000 higher than the nearest bid (they were all too high. I put the lawn in myself and used a crawler sprinkler that follows the hose….all for $300).

Anyway, the landscaper called me back twice in the next month, eventually cutting his price by nearly 50%. He said he was running out of work….and that was in late 2006. I bet that truck is sitting back on the dealers lot. Foolishness.

Comment by Moman
2007-12-31 06:36:56

Another casualty of the stupid law allowing small business owners to take 100% depreciation of trucks in the first year. Every small business here had a crew cab pickup, Suburban, or a Hummer as a company vehicle and it was all fun until they couldn’t afford the gas. Look at the used car lots - stuffed with old SUVs and pickups that no one wants.

Comment by mgnyc
2007-12-31 09:11:46

my cousin had a really similar situation occur with a siding job on his home
guy with the super duper truck qote 25k
guy with old beater 14k to keep his workers working and break even
never trust a contractor with a 60k truck

Comment by Anon In DC
2007-12-31 11:35:44

There’s a funny movie called Tin Men with Danny DeVito about aluminum siding salesmen in Baltimore in the 1950s. Some of those siding guys, including the vinyl siding guye did really well. I worked one time in building supplies. There was one tin man who used to drive his Rolls Royce to sell siding. I kid you not. This was in the 1970s early 80s. Baltimore / Washington DC suburbs.

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Comment by In Colorado
2007-12-31 11:07:59

In 2006 I had a landscape contractor come out to bid the installation of a back yard on a new house. He drove up in a GMC 5500.

This has always been a red flag for me. But just as you experienced, those guys ALWAYS make insanely expensive bids.

We had the house painted in the fall. The guy who eventually got the job (and who did very nice work) undercut the expensive truck boys by at 50%+. He did all the work by himself (he was as productive as 3 illegals), and I estimate that he made $2000 profit on 7 days work. He drove a 5 year old compact pickup truck.

Comment by Chad
2007-12-31 11:30:53

Holy Schneikies, who is this guy and will he come to western Iowa for me???

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Comment by In Colorado
2007-12-31 16:43:03

He seems to keep himself busy here in Loveland. He was referred to us by a neighbor. We had some bids as high as $7500, his was $3400. And he did great work, much better than the original paint job.

Comment by spacepest
2007-12-31 18:44:44

A fancy car or truck is always a big red flag for me when a contractor or service repair person shows up (my husband owns a small plumbing and home repair business, so I see these kinds of people all the time. Its true, the guys with the big fancy vehicles often have big debts they need to SCREW YOU in order to make the payments).

And no, he doesn’t drive a fancy truck, hummer, or van. He drives a paid off four year old Honda–you’d be amazed at the amount of equipment you can stuff in a modified Honda Element! And the gas mileage can’t be beat.

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Comment by Danni
2007-12-31 05:53:47

I can’t see how any person could look at a $700 payment for a car and think “yeah, man, I got a great deal”
And did I read correctly or did it say a SEVEN year loan. I haven’t had my full cup of coffee yet but why does 700 sound like an awful lot for a seven year loan.

Comment by Jingle
2007-12-31 06:06:34

…because it totals $58,800. If they drove a clunker and banked that money at 6%, it would be worth about $100,000 cash in 7 years. Enough to make a down on a nice house. Instead, they will own another beater truck by then!

Comment by Evil Capitalist
2007-12-31 06:52:58

They haver had the cash. People in this country think “payment” is a lot more important than “balance”. I have a good buddy here - total blue collar guy - basically carpenter with some business skills. Him and two of his partners have a contracts to redo commercial carpets in a gigantic chain of stores. For last 6-7 years he had been clearing over $300,000 per year, of which I suspect he declares only $50-60k. Every day that I see him he has stacks of twenties in his pocket…. every month that I tell him he is ought to put some money away for retirement ( he is in his thirties ) or rainy day he says he has no money at the end of the month because he managed to spend it all! If it was not for his two car payments, boat payment and mortgage payments together come to about $4k a month, those $4k would be gone just as fast.

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Comment by Bill in Carolina
2007-12-31 07:00:31

That’s a well-known phrase in the building industry. Everyone knows a clueless about money subcontractor who has money in his pocket at the end of the day, but runs out of it by the end of the month.

Comment by Gadfly
2007-12-31 13:36:22

“People in this country think “payment” is a lot more important than ‘balance’.”

During a brief stint in car sales, payment buyers were the proverbial “home run”. We’d always run to check their credit–to see if they were too good to be true. If their credit was decent, it was hold your breath time until they drove off the lot. Then it was high fives all around the showroom!

Makes me shake my head at how mortgages have been sold to the rubes of the world in the same way. They probably did the high fives in the brokers’ offices, too.

Comment by ghostwriter
2007-12-31 05:55:13

Wonder what she’ll think if she wrecks that car and has to pay about $15-20k to the bank to get out of the loan, because the insurance doesn’t cover the total cost. She’s already behind the $9500, plus the $5-10k just driving a new vehicle of that price range off the lot.

Comment by flatffplan
2007-12-31 06:44:38

keep the chatter down- big gov will start a department of pick-up trucks loans

Comment by Pen
2007-12-31 06:59:47

very true..that way, the FBs can use the pickups to pick up the bailout money for their mtge

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Comment by Brian in Chicago
2007-12-31 09:24:30

I’d bet money that the dealership sold her a gap insurance policy with that truck. Quite profitable for the dealer.

6 or 7 years ago I bought a car from a Ford dealer and they offered up a gap insurance policy that would have added “only” $25 a month onto the payment. I declined but later asked my own insurance company about it, they said it wasn’t a bad idea. Their offer was $17 every six months and you could cancel it as soon as the car was worth more than the loan.

Comment by cmhappyrenter
2007-12-31 09:47:54

I have always enjoyed the “only” phrase. I always reply with “great, why don’t you pay it”

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Comment by Xiaoding
2007-12-31 10:04:13

I had that on a car once…it was actually totalled! Boy, you should have heard the loan people complain about why I didn’t make any more payments! They did not want to deal with that insurance at all.

Comment by Blue Skye
2007-12-31 06:19:31

$700. I paid twice that for my last pickup truck. Only had to make one payment though.

Comment by Chad
2007-12-31 11:35:08

Gotcha beat. I paid $500 for my last truck, and sold it for $900. ;)

Comment by Zionrenter
2007-12-31 06:23:57

This is showing where the next shoe will drop. When the bank repo’s this monster truck and is left holding the bag on an over priced used car. Have you looked at the prices on cars at used lots, its a joke. Then if you finance used the rate is higher. There is going to be a lot of paint fading in the sun for the next few years.

Comment by polly
2007-12-31 06:55:31

Maybe the banks can sell them in China and India? The container ships aren’t as full in that direction, are they?

Comment by txchick57
2007-12-31 06:59:20
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Comment by polly
2007-12-31 09:03:58

When I did asset backed securities deals, a lot of them were car loans. The very end of the article is sort of interesting. Almost, but not quite, hinting at a new model for valuing used cars based on the value of the income stream they can produce by transporting a person to work. With that model, a used car with a known reliability is extremely close in value to a new one.

Comment by Bill in Carolina
2007-12-31 07:03:08

Why should foreign importers buy cars and trucks from the banks? They pay a lot less to the car thieves who take fresh ones off the street.

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Comment by vozworth
2007-12-31 07:29:44

wrong polly, plenty of chemicals, frozen chicken, and soybeans heading to china…

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Comment by Professor Bear
2007-12-31 07:47:12

In particular, the U.S. ships dead PCs to China which contain lots of lead, an important component of paint.

Comment by yensoy
2007-12-31 09:51:29

Not India, drive on other side of the road and left hand steering cars are largely prohibited

China - I don’t see them allowing import of used autos to the detriment of their domestic industry (same is the case for many other countries, including India)

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Comment by tcm_guy
2007-12-31 07:04:56

So now we know. Serial new vehicle buyers, enabled by dealers desperate to move the metal.

Once this credit foolishness is gone, which car companies will suffer the most?

Depends on what these serial new vehicle buyers have been buying. I am willing to guess that all five vehicles these people have financed in the last three years were all Detroit gas guzzling SUVs.

So when gas hits 4 bucks a gallon and all of these serial SUV buyers will want to unload at the same time to get into a four-banger Honda civic, they will have to bring tens of thousands of dollars to the table. Not going to happen.

Goodbye Detroit, and good riddance.

Comment by exeter
2007-12-31 07:39:10

I watch the used junk market quite closely. Detroit and Tokyo are competing against the used junk market and are winning. Considering the fact everyone is focusing on payment, new payments can be had for less than used payment. Used inventory is skyrocketing. Wall street watches this metric closely.

Comment by Isabel
2007-12-31 08:07:17

on the topic of used cars. I went window shopping for a toy car (350Z) Haven’t even done a test drive yet (and proabbly won’t) but what I found out at the dealer is that there are more than one of these cars that is two years old still sitting on the lot in the dealer inventory in the Rocky Mountain area. They don’t seem to be either willing or able to drop the price enough to get it sold. I would think that if moving it to a more southern state to unload it was an option, it would have happened by now. K

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Comment by In Colorado
2007-12-31 14:54:20

Sports cars don’t seem to sell well out here.

Comment by Professor Bear
2007-12-31 08:16:03

“Detroit and Tokyo are competing against the used junk market and are winning.”

Similarly, new home builders are competing against used home sellers and winning.

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Comment by exeter
2007-12-31 08:19:02

Exactly GS.

Comment by In Colorado
2007-12-31 11:22:27

I am willing to guess that all five vehicles these people have financed in the last three years were all Detroit gas guzzling SUVs.

FWIW, Toyota and Nissan have jumped on the gas guzzler bandwagon.

Comment by cashedin05
2007-12-31 14:40:35

“Goodbye Detroit, and good riddance.”

Not so fast. Wife and I went out test driving Mitsubishi, Kia and Toyota small and midsize SUV’s to possibly replace our Envoy 4×4. I was unimpressed with the quality of the Asian vehicles, they were full of hard plastic and the doors felt very thin and the gas mileage was not as high as you would think. Our Envoy beats the crap out of any of the vehicles we tested, we decided to keep it a few more years.

Comment by In Colorado
2007-12-31 14:52:30

I also no longer buy into the myth of Japanese automotive superiority. Too many bad experiences with Nissans and Toyotas.

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Comment by Jambu
2007-12-31 15:45:19

Add German cars to that list. Never will I buy a BMW again. German engineering my a$$.

Comment by In Colorado
2007-12-31 16:38:52

At least the Beamer looks good and handles well. You can’t even say that about most Toyotas.

Comment by Paul in Jax
2007-12-31 18:12:48

Not so fast back atcha. All of the cars mentioned above are assembled by Milwaukee’s Best-swilling hicks right here in the U.S.A. BMW - South Carolina, Toyota - mostly Kentucky, Nissan - Tennessee and Mississippi. And of course Mercedes problems have increased since they got those renowned Alabama craftsmen into the mix.

Comment by Evil Capitalist
2007-12-31 18:50:33

If buying a Nissan, buy a Nissan assembled in Japan.

Comment by Mary Lee
2007-12-31 19:56:29

What’s the possibility the recent complaints about Toyota’s deteriorating quality being linked to building ‘em here?

Comment by rms
2007-12-31 08:53:07

About eight weeks ago one of our laborers asked our field technician for a ride to the Ford dealer in the next town. Apparently his 3-yr/old pick-up truck was in for some expensive repair work. The field technician said that the work wasn’t covered by warranty, and the laborer’s two credit cards were refused at the service counter after being swiped into the scanner. Solution? The laborer walked over to the sales floor and bought a Lincoln Navigator! No $hit, just like that, and the pick-up truck’s $30k loan was rolled onto the back end of the new loan just like magic. The service technician conceded that he thought I must have a tinfoil hat hiding somewhere after listening to my California stories over the years; he has come around full circle.

Comment by Simiwatch
2007-12-31 10:12:40

Sister just tried to trade in her old (3 yrs 60K miles) Lincoln Navigator. Dealears offer: $12,000.
Most likely paid $40,000.

Comment by mgnyc
2007-12-31 08:59:05

i suppose a modest car was out of the question

what would the other neighbors think?

in my opinion a car is the biggest waste of money

i have one which is paid off has only 51k and is a 2002
cost 1k a year for full coverage and gets 30 mpg
but it is a hyundai elantra and i must be poor to drive such an economy car

btw under warranty until 2012

Comment by wmbz
Comment by flatffplan
2007-12-31 06:48:53

will they be paying more than 9% CITI’s paying ?

Comment by Jingle
2007-12-31 07:07:47

Citi is reportedly paying 11%. And the loan comes with options to convert to stock.

Citi is now a SUBPRIME borrower. LOL

Comment by Professor Bear
2007-12-31 07:54:15

More precisely, Citi is one of the few remaining subprime borrowers who can find a lender.

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Comment by mgnyc
2007-12-31 09:02:12

citi at a 5 year low under $29

Comment by watcher
2007-12-31 05:48:23

mortgage fraud:

Kathy Moore’s loan application sailed through the mortgage desk at Lehman Bros. Bank, and little wonder.

With sterling credit, deep pockets and two appraisals pegging the value of the Benedict Canyon house she wanted to buy at $2.5 million, she seemed a perfect fit for a $1.47-million loan.

Had the bankers taken a closer look, they might have discovered that the home was worth just $775,000 and that Moore’s borrowing power existed only on paper.

They also might have derailed a burgeoning real estate fraud that authorities say grew into one of the biggest and boldest in California history, and one that sheds light on the wave of foreclosures now sweeping the country.

Comment by Jingle
2007-12-31 06:20:35

Fascinating. A friend of mine rents a house in Elk Grove (Sacramento) from a mortgage fraudster. She purchased the house for $460,000 and put a $660,000 loan on it thru New Century! About a month ago, my friend answered a knock on the door. It was and FBI agent with an IRS agent in tow! They wanted to know his relationship with the fraudster! He was emotionally drained at work the next day. No one likes to have the FBI AND THE IRS sitting in your living room for 20 minutes drilling you about relationship with the landlord!

Comment by mgnyc
2007-12-31 09:04:52

thank god my landlord owns my house outright since 83 and has taken no heloc’s i checked before signing the lease

renter beware

Comment by aNYCdj
2007-12-31 09:24:22


NYC has a good housing court so i think most renters if they use the system will fare OK, Its our right as an AMERICAN to have your day in court…even if you are a DEADBEAT Landlord or Tenant.

The judge could force the landlord into letting you live off your security or if the utilities get cut off you have a right in NYC, to use the rent money to get them back on without going to court

So you probably wont have really much to worry about unless the landlord is a REAL DEADBEAT, and is already in foreclosure when you sign a lease. But then again i know personally people that just paid the rent to the bank and stayed so far for almost a year.

Sure its up for sale and they will only get a 30 day notice, but still they are saving up for the move out day when it comes.

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Comment by Mary Lee
2007-12-31 19:59:47

You and me both. My landland inherited mine free and clear, and it still registers that way in the county records. I, too, checked before we moved in. Breathtaking number of available rentals to choose from.

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Comment by Anon In DC
2007-12-31 11:44:06

Sounds like great news that the Feds are going after a some fraudsters.

Comment by slb
2007-12-31 14:42:54

Thanks for the link, hopefully msm will be repoting more of these stories vs. the ‘victim’ sob stories.
Doubt that many can quite touch this one for sensationalism, tho’ - what w/ the agents involved having sold David Beckham and Posh Spice their place and one of the fraudsters being “a bigamist who fled the country in 2003 and was later [2006] arrested in Samoa…” described by his sister as “‘the crowning jewel’ of their large Utah family…”

Comment by watcher
2007-12-31 05:52:36

commercial real estate squeeze continues:

Six days before Christmas, the Commercial Real Estate Women of Washington, D.C., gathered for its last monthly luncheon of the year in the ballroom of the Capital Hilton. Hundreds of architects, commercial real estate brokers, developers and bankers ended the year with a panel on the defining event of 2007 — the credit crunch.

“Where we used to have 20 bidders on every asset, now we have six,” John E. Duffy, senior managing director of the commercial brokerage firm Holliday Fenoglio Fowler, told his audience. “The pretenders are gone.”

Comment by Zionrenter
2007-12-31 06:31:48

Great article, my favorite line is. “”There is a lot of liquidity, but I think that a lot of buyers are expecting a certain price and sellers are expecting another,” she said. “This is creating a sort of impasse.” I think that there is a problem with liquidity. The sellers see or want the glass half full. And the buyers see or want the glass half empty.

Comment by Professor Bear
2007-12-31 07:19:10

Sellers have lots of pixie money, and that is creating a sort of impasse, as today’s buyers don’t believe in fairy tales.

Comment by vozworth
2007-12-31 07:34:28

im lookin for related party transactions, direct and indirect.

its gonna be the indirect that unravels the ball of Ficticious Calital.

Comment by evildoc
2007-12-31 05:54:12

housing market falls further into despair

Comment by P'cola Popper
2007-12-31 06:04:43

What happens when a house’s market value falls signficantly below the mortgage in regards to insurance?

I understand insurance is required if there is a mortgage but wouldn’t the insurance company balk about insuring an amount in excess of the market/appraised/replacement value? Is this a problem?

Comment by Blue Skye
2007-12-31 06:29:17

Actually I think it might work in reverse. The type of insurance I always carried was “replacement”. In a falling market, the replacement cost is going down while you are sitting there paying the same premiums. It is more in the home owners interest than the insurer’s to be sure the coverage amount is appropriate. Two of my family members had houses burn down, and they didn’t see a penny that wasn’t first spent on replacement.

Comment by Matt_in_TX
2007-12-31 08:21:59

Insurance has a tradition of doing appraisals and analysis - unlike recent innovations in the banking industry.

Comment by tuxedo_junction
2007-12-31 11:52:34

Insurance has nothing to do with market value. It’s the cost of rebuilding. You have to be insured for at least 80% of the cost of rebuilding otherwise co-insurance kicks in.

Comment by watcher
2007-12-31 06:17:17

plunge into recession?

Losses arising from America’s housing recession could triple over the next few years and they represent the greatest threat to growth in the United States, one of the world’s leading economists has told The Times.

Robert Shiller, Professor of Economics at Yale University, predicted that there was a very real possibility that the US would be plunged into a Japan-style slump, with house prices declining for years.

Professor Shiller, co-founder of the respected S&P Case/Shiller house-price index, said: “American real estate values have already lost around $1 trillion [£503 billion]. That could easily increase threefold over the next few years. This is a much bigger issue than sub-prime. We are talking trillions of dollars’ worth of losses.”

Comment by Professor Bear
2007-12-31 07:57:26

“Robert Shiller, Professor of Economics at Yale University, predicted that there was a very real possibility that the US would be plunged into a Japan-style slump, with house prices declining for years.”

We have been discussing this scenario here since the blog had regular commentors. Glad to hear we have a supporting voice in academia.

Comment by Matt_in_TX
2007-12-31 08:25:26

What likely happened is that Shiller said something like 15 years, and the editor changed the obviously misquoted remark to “years”.

Comment by Simiwatch
2007-12-31 10:21:38

Professor Shiller, co-founder of the respected S&P Case/Shiller house-price index, said:

Since when did Shiller become respected. I can remember when he was shouted down by real estate, economists etc. on CNN, MSNBC etc. and made to look like a fool. Now he is respected?

Let’s not forget how quickley the media takes the fool and makes him into a respected person. How about an apology for Mr. Shiller by the aforementioned?

Comment by watcher
2007-12-31 06:19:24

wave of foreign buyers?

NEW YORK - Panden Rota, a Nepalese producer of fine rugs, is about to become a Manhattanite, the owner of a sumptuous apartment in the luxurious downtown neighborhood of Battery Park City.

His primary residence will remain Katmandu, but his new home will allow him to spend more time at U.S. showrooms that display his rugs and with a brother and sister in New York. “I looked at many places and I decided that a Manhattan apartment will always hold its value,” he said.

Comment by NYCityBoy
2007-12-31 06:52:31

“the luxurious downtown neighborhood of Battery Park City”

There must be two Battery Park Cities in New York. The one that I know is definitely not luxurious. Unless they mean the luxury of being near the world’s largest crater. In Battery Park City you get a view of New Jersey and the West Side Highway. What a joke these journalists are.

Comment by spike66
2007-12-31 07:40:17

“a Manhattan apartment will always hold its value,” he said.”

Manhattan crashed hard in 90-92 and prices gained at a crawl. So we have Nepali rug dealers, Irish carpenters, and who knows what-all buying now, while the locals are in a stand-off. Good.
NY is good at stripping out-of-towners of their cash, and we can use the money.

Comment by WT Economist
2007-12-31 07:43:51

Someone ought to tell these foreigners about the great invesment the Japanese made in Rock Center in the 1980s. They ended up selling for a 50% loss.

I actually thought the terrorists would hit someone else next time. But if enough idiots do this, be may be blown up by a crazed FB from Nepal instead of Saudi Arabia.

Comment by mgnyc
2007-12-31 09:15:50

wt you get the same nonsense from the brownstone brooklyn set

it cannot happen here everyone wants to live in park slope
or bk heights
battery park city is not luxury living

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Comment by Professor Bear
2007-12-31 06:33:01

2008 predictions, anyone?

I have one: This year will harken the end to the “It’s different here, because all real estate is local” variety of MSM story.

Notice that although the author of the article takes a swipe at “pessimists” who predict a 30 percent national home price decline, he does not bother to spell out whether he means real or nominal declines. Again I see evidence to support mandatory remedial economics courses for journalists writing on financial and economic subjects. Given the current trajectory of the dollar, 30 percent nominal declines do sound quite pessimistic.

Home prices declining faster, farther
Combined News Services
Article Last Updated: 12/26/2007 11:33:39 PM MST

The decline in home prices accelerated and spread to more regions of the country in October, according to a series of private indexes released Wednesday, but the news might not be all bad.

Prices fell 6.1 percent from October 2006 in 20 large metropolitan areas, according to Standard & Poor’s/Case-Shiller indexes, compared with a 4.9 percent decline in September. All but three of the 20 areas saw real estate values fall, and even the three places - Seattle; Portland, Ore.; and Charlotte, N.C. - where prices were up from a year ago saw prices fall from a month earlier.

(Salt Lake City was not included in the report. Results from the two closest metro areas showed that prices in Denver were up 0.2 percent, while prices in Las Vegas plummeted 10.7 percent. Separate reports have shown that prices along the Wasatch Front are still appreciating 5 percent to 9 percent, year-over-year, and in Utah 12.9 percent.)

Many economists are predicting that home prices will fall 10 percent to 15 percent from their peak to their trough, though some pessimists believe the drop could be as large as 30 percent.

Comment by flatffplan
2007-12-31 06:52:31

I’ll go w 20% by 09

Comment by Professor Bear
2007-12-31 07:05:24

I could see 20% nominal and 30% real.

Comment by shakes
2007-12-31 13:17:50

I say 10-15% nominal and 20% real. Price stickiness is still there but is loosing its grip and inflation will only be no higher than 5% ‘officially’. I think it being an election year and the Fed’s role of inflation of asset prices will continue. The downturn will definitely accelerate in 08. How far and how quick depends on several intervention steps taken by the government. These numbers are national numbers.

Comment by NYCityBoy
2007-12-31 07:03:08

“some pessimists believe the drop could be as large as 30 percent”

Journalism is dead. Do you notice how you must be labeled a “pessimist” if you really understand this situation? Why didn’t they write “some realists that understand the true nature of this disaster believe prices will drop by a minimum 30 percent”? The level of incompetence is astounding.

Comment by Professor Bear
2007-12-31 07:10:08

Those articulating the bear case on housing have been labelled “pessimists” all along, but somehow everything keeps also turning out “worse then expected.” Hummmm…

Comment by exeter
2007-12-31 07:46:34

35% nominal, 50% real by Q1 2012.

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Comment by Simiwatch
2007-12-31 10:26:58

“some pessimists believe the drop could be as large as 30 percent”

Yea: The same pessimist on this blog who have predicted this happening for the last few years. And, the same pessimists who have a real track record for being correct.

Unlike the optimist Bernake who said it is contained and the Realtors who said real-estate never goes down.

Comment by Earl The Vagabond
2007-12-31 12:16:28

Don’t forget losses in the 50-100 billion range. Only off by a magnitude of 10, for this year. Pretty close…

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Comment by SFC
2007-12-31 06:37:37

Funny stuff from Dave Barry’s 2007 year in review:

“On the economic front, the dollar continued to lose value against all major foreign currencies and most brands of bathroom tissue. There was a major collapse in the credit market, caused by the fact that for most of this decade, every other radio commercial has been some guy selling mortgages to people who clearly should not have mortgages. (”No credit? No job? On death row? No problem!”) It got so bad that you couldn’t let your dog run loose, because it would come home with a mortgage. The subprime-mortgage fiasco resulted in huge stock-market losses, and the executives responsible, under the harsh rules of Wall Street justice, were forced to accept lucrative retirement packages.”

Comment by PoodlePoodle
2007-12-31 07:02:20

Out of curiosity, if you are out making bids what should you be bidding? 2004 prices? 2001?

There’s a house I’m interested in, the owner has a lien against him from the county and he paid 240,000 back in 92. I was thinking of offering 350,000 or so — but no more. 350,000 takes the price all the way back to 2003-2004. If I go back to 2001 we’re talking 290,000 or so.

This is in Narberth PA if anyone is interested.

Comment by vmaxer
2007-12-31 09:30:22

First rule of making an offer: If they accept your first offer, you offered to much.

Comment by Simiwatch
2007-12-31 10:29:29

First rule: He who makes the first offer loses.
Let him make the first offer.

Comment by Professor Bear
2007-12-31 07:03:08

Lender Lobbying Blitz Abetted Mortgage Mess
Ameriquest Pressed For Changes in Laws;
A Battle in New Jersey
December 31, 2007

During the housing boom, the subprime industry succeeded at more than just writing mortgages. It also shot down efforts by some states to curtail risky lending to borrowers with spotty credit.

Ameriquest Mortgage Co., until recently one of the nation’s largest subprime lenders, was at the center of those battles. Working with a husband-and-wife team of Washington lobbyists, it handed out more than $20 million in political donations and played a big role in persuading legislators in New Jersey and Georgia to relax tough new laws. Those victories, in turn, helped blunt efforts by other states to crack down on reckless lending, critics of the industry contend.

Comment by Professor Bear
2007-12-31 07:15:11

“Some of the giving by Ameriquest executives and associates was high-profile. President Bush received more than $200,000 for his 2004 re-election campaign, and Ameriquest founder Roland Arnall and his wife, Dawn, contributed more than $5 million to political organizations that backed the president. Last year, President Bush appointed Mr. Arnall ambassador to the Netherlands, and his wife took over as chairman of Ameriquest’s parent company. California Gov. Arnold Schwarzenegger’s campaigns received at least $1.4 million, along with stacks of tickets to a Rolling Stones concert that were used to lure big donors. A spokesman for Gov. Schwarzenegger said his decisions are not influenced by campaign contributions. Mr. Arnall declined to comment. The White House said Mr. Arnall was nominated because of his qualifications.”

Comment by exeter
2007-12-31 07:49:46

And people wonder why govt. doesn’t function well with nepotism like this?

Comment by ReverendDave
2007-12-31 11:28:26

Ambassadors to first-world countries have always been political hacks, and act as a figurehead, with actual diplomatic work being handled by the state department career diplomats. Only requirement for the job is “keep your mouth shut, your fly zipped, and your checks cleared when dealing with the locals”.

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Comment by Professor Bear
2007-12-31 07:21:29

As for the federal lawmakers currently working hard to pass measures to use your tax dollars to guarantee Jumbo mortgages…

“Federal lawmakers didn’t pose much of a threat to the subprime industry in recent years. Members of Congress received at least $645,000 in donations from Ameriquest and large sums from other big subprime lenders, Federal Election Commission records indicate. They debated new oversight of the industry, but took no action.

Comment by WT Economist
2007-12-31 07:45:39

Just like the S&L scandal.

Comment by Professor Bear
2007-12-31 07:50:13

Much worse actually, because at least there was an existing govt insurance program (FSLIC) to back the S&Ls, while the currently-hot idea of guaranteeing Jumbo mortgages up to $700,000 or maybe $1m would create a new taxpayer-borne insurance liability out of thin air.

Comment by aNYCdj
2007-12-31 09:15:03

I think all of you forgot the S&L scandal started when the FDIC raised its insurance limit to $100,000 per account from $40,000. That opened the doors to a lot of hot money, and investing in other assets like art work, rare coins.

Raising the $417K limit on mortgages could do the same thing…..Unless of course we have very conservative appraisals and borrowers with a decent down payment.

Comment by Professor Bear
2007-12-31 07:27:36

Stocks are poised to end the year with a bang as traders eagerly anticipate news of an improvement in existing home sales. BTW, since when does the housing market drive the stock market? I thought Main Street and Wall Street were decoupled?

Stocks Poised to Open Higher
A Wall Street Journal Online NEWS ROUNDUP
Word Count: 667 | Companies Featured in This Article: Honeywell International, Citigroup, Apple, Google, Research in Motion, Delta Petroleum, Merrill Lynch, Aegon, Legg Mason, Barclays Bank,, Google, International Business Machines

Stock futures edged higher Monday on the final day of 2007 as traders awaited a report on the housing market.

The data on November existing home sales are due out at 10 a.m. Eastern. Economists polled by MarketWatch expect sales to rise to five million homes from 4.97 million sold (in November?)…

Comment by Professor Bear
2007-12-31 07:39:47

SOL moment for premarket prognosticators…

Comment by Professor Bear
2007-12-31 07:42:59

A little plunge protection, please?

Comment by vozworth
2007-12-31 08:10:32

you might want to add SFK to the watchlist.

ultrashort Russel2000

has a nice ringing harmonic with SKF, no?

Comment by vozworth
2007-12-31 08:13:08

“I thought Main Street and Wall Street were decoupled?”

GS, its Chang Street thats supposed to be “decoupled”

Comment by Professor Bear
2007-12-31 07:32:58

a defining year

The terrible year suffered by the Irish stock exchange was only the tip of the iceberg as it seemed bad news was all around, but there were reasons to be cheerful for savers and homeowners.

By Charlie Weston Personal Finance Editor
Monday December 31 2007

THE year just ending was a mixed one in terms of personal finance.

Competition among banks for customers continued to be fierce with National Irish Bank and Halifax making sure domestic banks like AIB and Bank of Ireland kept on their toes.

But as the year draws to a close there are ominous signs that next year could be a tough one.

Here we look back on the year in terms of mortgages, pensions, credit cards and deposits.


Homeowners escaped an interest rate rise this year as the European Central Bank was forced to backtrack on hiking rates because of the turmoil caused to credit markets by the subprime crisis in the US.

As many as two rises had been expected this year which could have seen base rates hit 4.5pc.

However, falling property prices prompted a sharp slowdown in the mortgage market. First-time buyers, in particular, have been resisting entering the market.

Comment by Professor Bear
2007-12-31 08:04:05

Bullseye! BwaHaHaHAAA!!!

U.S. Nov. existing-home sales rise 0.4% to 5.00mln pace
By Rex Nutting
Last update: 10:00 a.m. EST Dec. 31, 2007

WASHINGTON (MarketWatch) - In a hint of stability, sales of existing homes rose 0.4% in November to a seasonally adjusted annualized rate of 5.00 million, the National Association of Realtors reported Monday.

Comment by Professor Bear
2007-12-31 08:07:49

Hints to those who report housing market statistics for a living:

(1) Avoid reporting numbers that exactly match premarket predictions.

(2) Avoid reporting numbers that exactly match whole numbers when rounded to two decimal places.

Comment by WT Economist
2007-12-31 08:13:12

Bwahaha indeed.

While the MSM continues to report NAR numbers when released, I couldn’t help but notice that when I saw a MSM report on the direction of the housing market in 2007, the number used for the price decline was Case-Shiller.

Comment by Professor Bear
2007-12-31 08:24:34

Serial lying eventually undermines credibility, at which point the consequences of past actions return to bite the liars in the back of the neck.

Comment by Professor Bear
2007-12-31 12:24:55

Why doesn’t the NAR encourage used home sellers to lower their prices to affordable levels instead of engaging in a futile arm-twisting game with the Fed? Why can’t they figure out that lower interest rates cannot make much difference when underwriting standards (including income verification and downpayment requirements) are coming back into style while sellers still have visions of 2005 market values dancing through their heads?

“Hey — Realtor — leave the Fed alone!
All we need is a — larger drop in the price.”

Wall St unimpressed by housing data
By Anuj Gangahar in New York
Published: December 31 2007 14:38 | Last updated: December 31 2007 15:33

US stocks pared earlier losses but remained in negative territory in mid-morning trade on Monday, the last trading day of the year, as investors digested fresh data on the housing market.

The data from the National Association of Realtors, showed the pace of existing US home sales edged up in November to a 5m-unit annual rate and the median price fell from a year earlier.

FTSE higher in 2007 but credit crisis pares gains - Dec-31
Dollar remains under pressure - Dec-31
Gold within striking distance of record - Dec-31
Economic Outlook: Inflationary pressures cause rates conundrum - Dec-30
Oil prices of $100 a matter of ‘when not if’ - Dec-29)

The trade group also urged the US Federal Reserve to slash interest rates by as much as three-quarters of a percentage point in January as a way to embolden home buyers. Most analysts expect a quarter-point cut.

Over the last 12 months, existing home sales have plunged 20 per cent, underscoring the troubles in the housing sector.

The national median existing home price for November fell 3.3 per cent from a year earlier to $210,200.

Comment by bicoastal
2007-12-31 08:07:08

There’s now affordable housing in Santa Barbara (all you have to do is… live in your car):

Comment by Halifax
2007-12-31 08:16:09

Symbol Description Exc Contract
Size Months Tick Size Daily
Limit Deliverable BOS Boston Housing Index CME
$250.00 x S&P/Case-Schiller Home Price Index
0.20 = $50.00
CHI Chicago Housing Index CME
$250.00 x S&P/Case-Schiller Home Price Index
0.20 = $50.00
CUS Composite Index CME
$250.00 x S&P/Case-Schiller Home Price Index
0.20 = $50.00
DEN Denver Housing Index CME
$250.00 x S&P/Case-Schiller Home Price Index
0.20 = $50.00
LAV Las Vegas Housing Index CME
$250.00 x S&P/Case-Schiller Home Price Index
0.20 = $50.00
LAX Los Angeles Housing Index CME
$250.00 x S&P/Case-Schiller Home Price Index
0.20 = $50.00
MIA Miami Housing Index CME
$250.00 x S&P/Case-Schiller Home Price Index
0.20 = $50.00
NYM NY Commuter Housing Index CME
$250.00 x S&P/Case-Schiller Home Price Index
0.20 = $50.00
SDG San Diego Housing Index CME
$250.00 x S&P/Case-Schiller Home Price Index
0.20 = $50.00
SFR San Francisco Housing Index CME
$250.00 x S&P/Case-Schiller Home Price Index
0.20 = $50.00
WDC Washington DC Housing Index CME
Attention housing bulls:

You are invited to take the other side of CUS May 08 short today.

$250.00 x S&P/Case-Schiller Home Price Index
Months: G,K,Q,X
Tick: 0.20 = $50.00

Two minds make a market.

Comment by Halifax
2007-12-31 08:26:12

Apologies for formatting.
Still waiting for a fill of Case-Schiller Feb 08 short.

Comment by Grey.Fox48
2007-12-31 08:18:20

Predictions for 2008:

1. Yankee Dollar goes below 70 on Dollar Index
2. Oil goes over $125 per BFOE
3. Gold breaks $1000
4. Housing sales and prices continue hard decline (100% guarantee)
5. Consumer prices continue upward climb in necessities, prices go down on all assets tied to debt

Comment by watcher
2007-12-31 08:31:48

Agree on all points.

Comment by bill in Maryland
2007-12-31 11:10:12

I posted above that I think oil will hover around $100. But the caveat is, if the world instability does not get worse. If it does get worse, then yes, $125 per barrel. I agree with all your other predictions. I say we have to wait until 2010 and we’ll see oil go for $150 per barrel. Of course, I invest in an oil drilling trust (PGH) and am walking the walk. Just bought a couple of 1 oz gold maple leafs over the weekend too. My reasoning for $150 barrel of oil in 2010 is explained in the earlier post. Or click on my name to go to the blog that is oil the same as Ben’s Housing Bubble Blog is to real estate.

Comment by Mary Lee
2007-12-31 20:05:35

Moi aussi

Comment by edgewaterjohn
2007-12-31 08:23:42

A plumber’s tale:

A friend of mine became a plumber a few years back. During his apprenticeship he told us all about jobs he worked where people spent more on their bathrooms than I spent on my entire hole-in-the-wall. He works mostly in Chicago’s better off western suburbs.

Naturally I’ve been waiting to hear his perspective of recent events and courtesy of holiday get togethers I got my chance last night, and what he said was interesting:

First, he said the union and various HB’s had warned them at this time last year that a slowdown was coming, but it didn’t. In fact all of 2007 things held up well - until about a month ago. Of course I asked if the slowdown was seasonal - and he responded that it was but only partly. This is different he added, things have come to a dead stop, so much so he couldn’t get on a job for a month and has since had to turn to doing heating work - mostly repair and upgrade stuff. He was quite clear about saying that his peers know this is it…the boom is over even though the holidays and season have masked it a bit.

Comment by Professor Bear
2007-12-31 08:28:09

Is your friend in a union? If so, the drop off in work may be due to the typical union price-fixing folly. If your friend could drop the price he charges for his labor to current market value, he could be working steadily.

Comment by spike66
2007-12-31 10:30:25

Are you suggesting that a guy who lives in Chicago screw his union brothers by undercutting them? Not the best idea.

Comment by Professor Bear
2007-12-31 11:56:00

The idea is called competition, and it has survived in good stead since at least the time of Adam Smith.

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Comment by creamofthecrap
2007-12-31 11:59:01

Yeah, there are lots of laborers competing for work here in Texas (right to work state). Most are from Mexico, and living 6 to a trailer. Adam Smith rocks!

Comment by Faster Pussycat, Sell Sell
2007-12-31 12:55:48

Yes, but Adam Smith didn’t take into account the occasional bullet in the head, and being dumped off in some of the wastelands on the South Side.

Having lived in Chicago for just under a decade, I’m with spike66 on this one.

Comment by Professor Bear
2007-12-31 13:11:59

You guys make some compelling points :-)

Comment by Gadfly
2007-12-31 13:50:32

Yeah, Adam Smith for the working stiffs–and no bid contracts and gov’t-sanctioned monopolies/oligopolies for the big dogs. What a country.

Comment by edgewaterjohn
2007-12-31 14:28:06

Yes he is, but the rates aren’t the issue, it is the absolute cessation of new construction and major rennovations. Where he has found work, in heating, makes perfect sense as its winter and such work is unavoidable. Just another tiny piece of this huge puzzle.

Comment by aladinsane
2007-12-31 08:25:21

Was talking to my sister that lives in Rancho Bernardo, and her house was spared from the fire, but 2 blocks behind and in front of her, whole streets were pretty much wiped out…

I asked about re-building going on, and she said that one house is being re-built with much speed, and will be finished in a few months.

Most of the other houses aren’t being re-built so quickly…

The reason?

Most people were under-insured on their houses, as they had owned them for some time, and hadn’t kept up with increases in their home’s value.

Comment by Professor Bear
2007-12-31 08:29:59

Rebuilding 1400 or so fire-destroyed homes out of a housing stock of maybe 1 million is supposed to save the SD economy going forward, right?

Comment by mgnyc
2007-12-31 09:18:59

i saw sean merriman helped rebuild one home
that is one more playoff game then the chargers wlll probably win

Comment by pubsky
2007-12-31 10:20:28

I’d say it is actually more likely to be the number of playoff games the chargers will probably win.

Tennessee doesn’t look very strong going into next week.

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Comment by AK-LA
2007-12-31 08:40:07

Was around Europe for the week. Since it was a holiday week, it was hard to get a sense of the economy with everything shut down. I picked up the Guardian in Amsterdam and found the UK and US continue to have parallel experiences:

The requisite FB sob story,,2232531,00.html

Shoppers continue to go nuts

Record bankruptcies expected in ‘08×97

Mortgage lending slowdown

FB landlords can’t cover their mortgages

Housing market will hurt consumers

(All of these articles were from the weekend edition.)

Comment by aladinsane
2007-12-31 08:48:49


The Dollar loses 1/2 of it’s value currently against other currencies, and is replaced in use in oil transactions by a new petro-currency, that links all producers of crude oil, much like the Euro links most western Europeans together.

Value of the new currency is based upon production capabilities, not dissimilar to when all currencies were backed by their gold reserves, until they went off the Gold standard.

Gasoline goes to $8 a gallon, and the “Norton Line”* is breached.

* The cost in gasoline to and from work, is more than your net take home pay

Gold doubles and then almost re-doubles, to $3,000 per Troy Ounce.

Houses can be had for a song, if you’ve got a 25% down payment.

Every last house in the country is worth much less than it was, pre-2000.

Comment by watcher
2007-12-31 09:24:00

Time frame? If we hit $8 gas and $3000 gold this year, katy bar the door. I agree with the direction of all your predictions but am unsure as to timing.

Prediction: Deflationists will push back their forecasts…for another year.

Comment by aladinsane
2007-12-31 09:33:47

The idea of going back on a Gold Standard seems remote, but an Oil Standard is totally doable…

Comment by yensoy
2007-12-31 10:17:56

Other countries are also busily printing bills. I agree with the contrarian view here that the dollar may indeed be oversold with respect to the euro, pound, and possibly even the yuan.

Comment by Professor Bear
2007-12-31 11:03:18

We are currently in a “Beggar Thy Neighbor’s Currency” international monetary policy regime.

Comment by Professor Bear
2007-12-31 11:05:24

Perhaps a better term would be “Beggar Thy Planet’s Savers.”

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Comment by Houstonstan
2007-12-31 11:24:44

I just bought 400x UUP as a trade. Other paper currencies also suck.

Comment by exeter
2007-12-31 13:55:04

Rather the euro, pound and loonie is overbought. Not the right elements for the extremists who bet their first born on a doomsday scenario.

Comment by creamofthecrap
2007-12-31 11:57:25

Prediction: none of the above occur in 2008, but all of the above (except crude oil producer currency) occur by 2012.

Comment by CA Transplant
2007-12-31 08:55:07
Comment by Professor Bear
2007-12-31 09:09:54

Kudos to Voice of San Diego for providing a rare bright spot this year in the otherwise dismal field of financial journalism.

Comment by Professor Bear
2007-12-31 09:00:48

Invest in Greenland real estate today, or get iced out forever…

Climate Connections: Signs
Greenland’s Mysterious Holes Speed Ice Flow to Sea
by Richard Harris

Comment by Professor Bear
2007-12-31 09:05:42

Earlier this year, I commented numerous on the modernization of Wall Street’s 1929 “Shoe shine boy” moment to this year’s “Flip that Yacht” story.

Fast forward to December 31, 2007:

Boating Industry Slump Could Signal Recession
by Scott Neuman

(Annapolis, Md., is a sailor’s mecca, attracting several annual races, including the St. Mary’s College of Maryland Governor’s Cup Yacht Race on the Chesapeake Bay. AP)

Morning Edition, December 31, 2007 · Economists looking for signals of a recession might want to keep an eye on recreational boating, a $40 billion a year industry that in the past has proved to be a bellwether for the rest of the economy.

Comment by Professor Bear
2007-12-31 09:07:07

Will Tough Economic Times Persist in New Year?

Weekend Edition Saturday, December 29, 2007 · The subprime woes and the resulting foreclosures is the biggest economic story of 2007. What are the economic ramifications of the sharp dive in the subprime mortgage markets, or the recalls for defective toys in China? And what are the prospects for 2008? New York Times columnist Joe Nocera surveys the economic landscape with Linda Wertheimer.

Comment by mgnyc
2007-12-31 09:07:27

on cnbc (aka the comedy channel) goog to $1k by august

Comment by yensoy
2007-12-31 10:22:40

The way goog works, advertisers bid for search keywords/phrases. Words such as “mortgage”, “home insurance” and other big ticket items command huge prices, can even be $5 (or higher) just to show up on one individual’s screen! With the death of this market, I see this huge revenue source dry up for the most part.

However, more and more people are indeed shopping online. This may offset some of the downsides of the end of the “good times”, but probably not by much.

As for the prediction, I can’t say I agree or disagree.

Comment by exeter
2007-12-31 09:11:38

Diane Olick interviewed (fun)Yun. She indicated after the interview and off camera, (fun)Yun stated a full 25% of RE SalesTurds in California had ZERO sales for 2007. LMAO….

Comment by watcher
2007-12-31 09:33:24

Prediction time:

Dollar decline is the story of 2008, ties into general inflation and misery index. You may wake up one day to find an extra 0 on the end of your bank account; you won’t feel richer for it.

Gold, oil, food, etc. up up up. Stop measuring things in terms of dollars, just like the rest of the world is learning to do. This year people will know what euros look like.

Housing; the slide continues with even more government attempts at intervention. Expect the unexpected and stay tuned to the HBB.

Comment by exeter
2007-12-31 09:42:15

Euro is already weakening as is the Canadian loonie.

Comment by creamofthecrap
2007-12-31 12:11:41

I’vebeen a dollar bear for a long time, having shorted it since 2002. 2007 was a good year for me. But I don’t see the massive drop that many are anticipating in 2008. The Euro is also a fiat currency, and their economy/finances share many of the problems of America. Suppose that anything can happen - we’re in uncharted territory.

I like gold, but wonder if oil is actually the better “store of value” since gold has fairly limited industrial uses.

Prediction: 2007 will be very much like 2008, except more so. Sideways movement on most of the market indexes, meaning losses in real terms. China crashes (FXI cut in half). One or more US bank failures (and bailout). President-elect Huckabee.

Comment by LostAngels
2007-12-31 09:44:34

A few tidbits from Bank Investment Daily I thought you folks would like to hear:

The American Bankruptcy Institute reports
business failures surged 45% in the first half of 2007,
compared to the same period in 2006. The good news is that,
despite the surge, filings remain near historically low levels.

The FHLB of Indianapolis started “HomeRetain,” a
program that allows its member financial institutions to assist
their borrowers that are facing foreclosure. The Home Loan will
target $100mm for funding ($15mm max per institution), at
slightly above its cost of funds, to add liquidity to those
mortgages that will be restructured and retained.

Happy new years everyone. I really hope things turn out better than I think they will.

Comment by cactus
2007-12-31 10:08:05

2008 predictions; Election year big changes but not until 2009-2012. I think we will be in a Recession and the stock market will head lower by around 20% in 2008. RE will continue down in price and new government will raise taxes in 2009-2012 in order to save us.
Interest rates will be much lower and certain items more expensive, like oil and food.

I thought the Stock market would be in a Recession in 2007 but clearly I was wrong. So I won’t quit my day job yet. :-) I have 50% cash and 50% in stock mutual funds like commodity, foriegn and growth type not so much in Finacials. PRNEX for example of a commodity mutual fund. This is pretty bearish for me 50% cash.

Comment by cactus
2007-12-31 10:18:23

Stock Market lower last trading day

I have been following the stock market since 1982 , one nice long bull run as interest rates have come down from really high levels in the 1980’s. I think this is over. I think we are in for a Secular change because of demographics. I think this housing boom was the last gasp of the boomers looking to boost their net worth in preparation for retirement. Like musical chairs whos left holding the bag now?

the Future maybe much like Japans’ is now where older US cash hoards go to invest in emerging economies for a better return. Dollar carry trade.

Comment by bill in Maryland
2007-12-31 12:37:13

Japan’s long deflation from 1990 to just a few years ago was pre-peak oil. Crude oil and Natural Gas liquids peaked in May of 2005. I agree this could be a long slide in Home values, perhaps through 2017 or 2022, and particularly in rural areas.

Comment by arroyogrande
2007-12-31 10:45:04

Foregive me if this has already been posted, but it astounds me how the Average American Citize…err, I mean Consumer managers their finances. Anyone that tells you that this credit crunch is just about over is smoking something:

LA Times
New cars that are fully loaded — with debt,1,2767577.story?track=rss

“When Jennifer and Bobby Post traded in their 2001 Chevy Suburban last year for a shiny new Ford F-350 turbo diesel with an extended cab, it seemed like a great deal. Even though they still owed $9,500 on their SUV after the trade-in value, they didn’t have to put a penny down.

The dealership, near the Posts’ home in Victorville, made it easy; it just added the old debt to the price of the new truck and gave the couple a seven-year, $44,276 loan.

The Posts were a little worried about taking on such a long obligation, but they couldn’t pass up a monthly payment under $700. Now they’re having regrets.

“I didn’t realize how much debt was in it,” said Jennifer Post, who has since moved with her family to Iowa. Now, she’d like to get rid of the truck but can’t, because there’s so much debt that she’d literally have to pay someone to take it off her hands.

“We have no options,” she said”

“Analysts warn that just as investors didn’t comprehend the risk inherent in some of the more exotic home mortgages in recent years, they aren’t considering how risky these car loans are. If longer loan terms allow debt on the loans to grow too large, many drivers may simply default, leading to expensive repossessions.”

Photo Caption: “MAXED OUT: Cindy Gerhardt of Clinton, Okla., shown with her husband, Steven, and their Ford Expedition, has rolled over so much debt on vehicle purchases — five in three years — that she now owes almost $43,000 on two trucks worth no more than $29,000 and, she says, perhaps as little as $22,000.”

Comment by SUGuy
2007-12-31 11:00:31

To All the smart, witty, intelligent and I am sure gorgeous as well as good looking blogers. I wish you a very safe, healthy and certainly a prosperous new year.
I do want your opinion on something. Is it safe to keep a Million plus in CD’s in any one bank. I had Chase bank in mind. As far as I know JP Morgan Chase bank does not have mortgage exposure. Chase was offering 5.32 (negotiated rate a few weeks back 7 months).
Would people buy CD’s above 100K in any small bank or credit union? Can these banks fail and depositors loose their money. I hope I am not sounding paranoid.
Thank you for your thought full and funny comments all year.
Happy New Year.

Comment by Houstonstan
2007-12-31 11:32:40

SU: Why do you have $1m essentially in cash? Do you need quick access to the money ?

Buying short term Treasuries may be an option as higher the rates, the more the risk. Look at eTrade who offered great CDs but how they got it was through toxic loaning.

You should certainly spread the risk around in different institutions as even if they are insured, it may take you a while to get money back in event of bank collapse.

Comment by SUGuy
2007-12-31 12:13:45

I dont need the money for quick access. I have not had good luck buying mutual funds or even stocks. I lost money in both those areas. So I decided if I can save money for retirement and reach that goal by getting around 5%, why should I try and risk it in other areas.

Comment by Remain Calm. All is Well
2007-12-31 11:36:15

JPMorgan has huge derivatives exposure.

I’ve opened Northern Trust account recently; gonna shift the cash from BofA to TreasuryDirect & Northern Trust.

Comment by SUGuy
2007-12-31 12:04:16

Would you recommend breaking the CD’s take some losses and moving the money to various banks by depositing around 150K in each bank? These are only 7 months Cd’s

Comment by Evil Capitalist
2007-12-31 18:56:17

Deposit $100k per bank and you are FDIC covered

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Comment by technovelist
2007-12-31 12:05:23

JPM is extremely exposed to the derivatives market. I wouldn’t keep $10,000 there, much less $1 million.

“But, according to the latest figures from the Office of the Comptroller of the Currency, JPMorgan Chase & Co. has the most exposure to derivatives, with $80 trillion outstanding. The bank has total assets of just $1.46 trillion.”

Comment by In Colorado
2007-12-31 11:39:54

From yesterday:

yes, it’s obviously very tribal –she’s mexican, so mexican illegals are all to be pitied and welcomed and catered to — but she’s rabidly anti-cuban, anti-black, and anti- all sorts of other people.

Surprise, surprise. The colors of the rainbow don’t get along with each other.

And yeah, Latin Americans from different countries hate each other. Ask Guatemalans (or any Central Americans) what they think of Mexico. Mexicans have saying about when a situation deteriorates. They say that it went from Guatemala (Guatebad) to Guatepeor (Guateworse). I’m sure that saying endears them to their southern neighbors. Funny, isn’t it, that most Amercicans can’t tell them apart. Also, northern and southern Mexicans don’t like each other either, and they didn’t even have a north vs. south civil war like we did.

Tribalism trumps multiculturalism any and every day.

Comment by SUGuy
2007-12-31 11:40:24

I had about 700K at HSBC, and about 400K at Chase. The CD at HSBC came up for renewal.They offered 4.65 and Chase offered 5.32. So I moved the meney. I do not know any thing about Treasuries. I always thought they were for the chineese govt and paid less than a good CD rate. I do have acounts at Key bank rate is 5.00 and a local credit union rate is around 6.00 which I got about a year ago. Bank Of America does not pay good rates, M&T bank, Citi Bank same story. We do not have many banks in CNY.

Comment by technovelist
2007-12-31 12:25:17

The reason that Treasuries pay less than CDs is that they are safer. I personally would rather be sure of getting my principal back (in dollars, at least) than get a slightly higher yield with possibly a lot more risk.

Of course, I don’t think the US dollar will retain its value, so I wouldn’t have a lot in dollar securities in any event, but what I do have is as safe as I can arrange. The extra yield doesn’t compensate for the extra risk.

Comment by SUGuy
2007-12-31 14:01:43

Thank you for warning me on this mess.
Have a safe New Year.

Comment by cactus
2007-12-31 18:46:30

No state tax on the Treasuries interest paid. I also buy CD’s through Vangard online its easy. You will need a Vangard Brokerage account and with your money you can get free investment advice. Vangard is a good company if I were you I would roll the whole amount over there when your CD’s are up.
Vangard has a treasury money market account which you can set-up as a sweep account to buy CD’s with and spread the dollars around to many different banks. I don’t think any of the CD yields offered at Vangard are above 5% right now though.

Comment by Matt_in_TX
2007-12-31 22:33:21

Citibank pays close to CD rates (above 4%) for their eSavings account.
You have to open it online, but otherwise it seems to act just as an FDIC insured savings account.

Comment by yensoy
2008-01-01 02:14:37


1. With that kind of money you can afford a financial planner and should consider getting one, instead of free advice from this blog :-), although I must admit this free advice is probably very good.

2. Again, with that kind of money, you have huge negotiating power with the banks involved. Did you ask whether HSBC would match the rates given by Chase? I can’t imagine why they wouldn’t.

3. My 2c to you is to gradually move some of your money, preferably via automatic periodic transfers, to a well picked mutual fund or funds. I am a firm believer in not making any sudden moves.

Comment by Chip
2007-12-31 12:07:07

Happy New Year, all and especially to Ben. Wow - more than three full years of his blog without a break.
Family duties are keeping me from the blog. Am having some withdrawal problems.

Comment by Professor Bear
2007-12-31 13:07:33

Congrats to all who correctly gambled that the Fed would worry more about leaning into the bursting housing bubble than defending the value of U.S. currency.

Gold closes lower on stronger dollar; ends year up 31%
By Moming Zhou, MarketWatch
Last update: 2:27 p.m. EST Dec. 31, 2007

SAN FRANCISCO (MarketWatch) — Gold futures fell on Monday for the first time in six trading sessions as the dollar rose against a basket of major currencies, reducing values of the precious metal as an investment alternative. Gold, however, ended the year up $200, or more than 30%.
Gold futures for February delivery closed down $4.7, or 0.6%, at $838 an ounce on the New York Mercantile Exchange. It earlier fell to an intraday lower of $833 in electronic trading. For the year, gold gained $200, or 31%. It’s the best year-on-year gain since 1979, according to Jon Nadler, senior analyst at Kitco Bullion Dealers.

The dollar index, which tracks the value of the greenback against a basket of other major currencies, rose for the first time in six days, up 0.5% to 76.695. A stronger dollar reduces the value of dollar-denominated gold as an investment haven.

Gold had risen nearly $40 in the past five sessions, as the dollar fell consecutively in the same interval.

Got negative correlation?

Comment by Professor Bear
2007-12-31 14:24:03

Markets in 2008
Dec 29th 2007
After CDOs and SIVs come CDSs

IF NOTHING else, 2007 has enriched the vocabulary of international investors. Think back 12 months; how many people knew what subprime loans were, or what CDOs and SIVs stood for? (For those who are still baffled, they are Collateralised Debt Obligations and Structured Investment Vehicles.)

It is hard to believe, however, that central banks will not face renewed calls for rate cuts in the New Year. What investors want is for the Federal Reserve and the other banks to do what they did in 2002—keep cutting rates until borrowing money is dirt cheap.

That will allow asset markets to soar again, and when they do, there will be no problem in financing asset-backed securities. In 1998, central banks cut rates and helped create the dotcom boom; in 2002, they boosted the housing markets; in 2008, the next beneficiary might be emerging markets or alternative-energy shares.

This possibility is why we have not yet seen a really big downturn in the equity markets. Investors have two scenarios before them; recession, or a resurgent boom. Government-bond markets are priced for the former but equity markets are not; they are still hoping for the latter.

And until we start seeing some really, really bad news—a big bank failure, corporate defaults, a negative quarter for American economic growth—that hope will be hard to shift. After all, where else, apart from equities, can investors put their money? Government bonds offer low yields; corporate bonds would be hit harder than equities by recession, if it occurs; and commodities have already had a very good run.

Shares are thus the default asset of choice. But defaults of a different kind could be the big issue of 2008. If you want to mug up on jargon for the year ahead, then the business of insuring against bond defaults known as credit default swaps, or CDSs, would probably be the best place to start.

Comment by Professor Bear
2007-12-31 16:20:09

Robert Shiller Bloomberg interview: “Real estate markets are accelerating in their rate of decline.

We had the biggest housing boom in U.S. world history.

We had a lot of construction and now we have a huge overhang of homes on the market.

This is what happens after a bubble.

The biggest drops in the places that had the biggest increases.

I don’t expect sudden changes… we’re not talking about professional Wall Street investors.

It’s hard to forecast, but it’s not implausible that prices won’t bottom out for another five years.”

Comment by Ria
2007-12-31 17:27:36

““When Jennifer and Bobby Post traded in their 2001 Chevy Suburban last year for a shiny new Ford F-350 turbo diesel with an extended cab, it seemed like a great deal.” “The Posts were a little worried about taking on such a long obligation, but they couldn’t pass up a monthly payment under $700. Now they’re having regrets.”

The gotta have the biggest, highest, baddest vehicle regardless of the consequences inbred bubba fun bunch.

We have a couple in our town (who in their brilliance) converted a semi cab into a personal mega SUV. I see them coming and going from the supermarket parking lot.

Comment by reuven
2007-12-31 17:48:02

Today’s Wall Street Journal

How AMERIQUEST payed many hundreds of thousands of dollars to lawmakers to limit tighter requirments for subprime mortgages

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