Bits Bucket And Craigslist Finds For January 3, 2008
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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Three day chart US Dollar/Japanese Yen.
ummm……………..
The Nikkei 225 might be interesting when it opens.
http://quotes.ino.com/chart/?s=FOREX_USDJPY&v=i
BEIJING, Jan. 2 (Xinhua) — China’s currency, the yuan, hit a new high against the U.S. dollar on Wednesday, breaking the 7.30 mark to reach a central parity rate of 7.2996 yuan to one dollar.
The yuan, also known as the renminbi, went up 50 basis points from Friday, the last trading day in 2007.
The Chinese currency had appreciated against the greenback by about 12 percent since a new currency regime was imposed in July 2005 to revalue and de-peg it from the dollar.
http://news.xinhuanet.com/english/2008-01/02/content_7352499.htm
OT, but an interesting blurb on http://urbansurvival.com/week.htm
about how an Israeli firm is hired to count votes in Iowa with no audit trail. Hmmm? I guess the fix is in.
Palmetto is wrong. Globalization is the SECOND worse idea.
Electronic voting machines with no audit trails is the
WORST…IDEA…EVER!
C’mon hackers out there… get Ron Paul elected!! I know you can do it!
That’s kind of weird, given that the caucus system doesn’t even record indivdidual “votes” - my brother does election-night consulting for CNN (political journalist as regular job) - I’ll ask him about this (in a couple days) - but it sounds like hot garbage to me.
NEW DELHI — No dollars, just rupees please.
In a sign of how the once mighty U.S. dollar has fallen, India’s tourism minister said Thursday that U.S. dollars will no longer be accepted at the country’s heritage tourist sites, like the famed Taj Mahal.
http://www.ajc.com/business/content/business/stories/2008/01/03/India_NoDollars_0103.html
Seems like grandstanding to me, rather than a serious concern about the devaluation of the dollar. What is stopping them from simply raising the dollar-denominated admission fees?
Solvency fears?
Vote Ron Paul, the only candidate addressing the DOLLAR CRISIS that no one seems to care about.
Globalization worst idea ever.
Got Gold?
I will be at caucus tonight, and will let you know how things go. I’ll be in Ron’s corner!!!
Good Luck!
If they are concerned about continueing declines, it would be annoying to constantly have to update the dollar denominated amount, tell employees about new rates, update signs etc. Also, tourists showing up with outdated guide books and complaining about changes is a drag. Better to just keep the price fairly stable and in their own currency.
If they thought it would be a one time change, it wouldn’t have been a big deal.
–
I agree. It is feel good stupidity, IMO.
Jas
I disagree.
Accepting US$ for entrance was a convenience extended by the government, and the government in turn extended this courtesy because the US$ was in short supply. Given that US$ is not widely accepted for payment in India (it can only be changed at authorized dealers, banks, hotels and airlines), there is no need to continue this courtesy. That is all there is to it.
A good point. After all, Disneyland doesn’t take rupees.
I encountered the same policy in China last summer. When they DID (occasionally,) accept USD for exchange into RMB at regional banks, they did NOT accept any bills that had been obviously circulated. Any wrinkles, or wear and the bills were rejected. Can you imagine a Chinese tourist walking into a suburban Wells Fargo and attempting to change yuan? Same reception.
Guess what, Murkins? You’re not the only people on the planet anymore….
This has to do with sovreignity, not the exchange value of the dollar. I’m sure if they don’t accept dollars they also don’t accept euros. Nobody will take your country seriously if you accept foreign currencies in inter-country transactions. India isn’t Panama. We sure as hell don’t accept rupees at the Statue of Liberty. I say smart move by India - now just get rid of your socialist regulations and become a true economically free country - like China.
China doesn’t have socialist regulations?
India is far more socialist and regulatory than China in labor laws, housing regulations, rent control, business formation, layers of bureaucracy, etc.
You’re smoking crack.
Having seen both India and China from up close, I think I can comment.
I meant Paul is smoking crack
China is weirdly capitalist, once you get past the mountain of forms, and once the higher ups are convinced that they stand to gain and don’t have to give up much in return. India is just old-style protectionist.
China - maximum rate of personal income tax - 45%
India - ditto - 30%
They basically turn over their market to foreigners over the holidays. Now that they finally got around trading for the first time in a week, it’s down 4-5%. But most of it’s taken up (at least for Americans) by the appreciation in the currency as well as the fact that their big companies trade on foreign exchanges, and have already been down smartly in concert with other markets. So when you see big ooh’s and ahh’s from anybody on CNBC Friday morning about “the big selloff in Japan” (you will) they are just proving that they are provincial, it’s just a job, and they don’t really pay attention.
A heartwarming knife catcher story from my old hood:
http://www.philly.com/philly/news/20080103_For_some__its_an_ideal_time_to_buy_a_home.html
Yeah. First it says she will be paying $200 less in PITI than she was paying in rent. Then it says the rent was in North Jersey, the house she’s buying is in Warminster PA. Apples and oranges.
“First it says she will be paying $200 less in PITI than she was paying in rent.”
No it doesn’t. These articles are sneaky. It just says she will be paying that much. If you do the math you will see that unless she make a down payment of MORE than 50K $1500 can’t cover PITI. See my comment below.
could be worse
at $1,500 a month, will be $200 less than she pays for rent, Clay eagerly awaits her March 17 settlement.
Does anyone have ideas/links / friends who are suing Countrywide?
Have an ex roomie who seems to have a good case…but dont’ they all.
Just wondering where to guide her.
By the way, the FB/lost home already, is in Chicago near Downtown. So it is not just happening in CA.
In order to get payments of $1500 a month when the home cost $289,900 she either is paying no principal or she put about 50K down. If we add the lost income from the 50K, that would be about $160 a month, which she should be able to get at 4%. This brings her to a savings of about $40 a month at most, but she still has to pay property tax and maintenance. This may well be worth it for her, but she isn’t saving any money over renting, as the article implies.
My custom spreadsheet says $289k price, 5% down, 6% rate, has a $1400/mo after-tax carrying cost (here in Cali, no mainenance or HOA)
“My custom spreadsheet says $289k price, 5% down, 6% rate, has a $1400/mo after-tax carrying cost”
That works if taxes are less than $400 per year, which is hardly likely, and she doesn’t pay any principal. I don’t see how you are coming up with your figures if you think that covers taxes and principal. 289000-14450 = 274550 *
“My custom spreadsheet says $289k price, 5% down, 6% rate, has a $1400/mo after-tax carrying cost”
I don’t see how you are coming up with your figures. 289000-14450(5%) = 274550 * 0.06 = 16473 / 12 = 1372.75 monthly interest payments.
1400 - 1372.75 = 27.25 left for taxes.
Less than $30 per month for taxes. No principal. No insurance. No maintenance.
Monthly:
IO 1372.75
PMI 194.47
Prop Tax 297.19
Tax Credit 524.87
Subtotal 1339.54
HO Ins 60.00
Not that I don’t consider Principal Repayment to be part of the carrying cost.
I’d wager that she has a noticeably longer commute now, so add all the extra fuel cost.
“An Ideal Time To Buy A Home”
The freakin’ Inquirer, headed by Toll Brother’s co-founder, Bruce Toll, trying to paint the rosy picture on housing. At this stage of the game, though, one could argue that the decline in housing is no longer “news,” and that the real news is anyone who thinks that it is an ideal time to buy a home.
“Housing prices must come down” was the word from NYU professor who developed MBS/CDO scheme on Bloomberg Radio.
Cut Stirs Up…
http://www.nytimes.com/2008/01/03/business/03econ.html?_r=2&ref=business&oref=slogin&oref=slogin
“The manufacturing sector is probably shrinking at a modest pace right now,” said [a Lehman Bros analyst]. “It doesn’t mean the overall economy is going into a recession.”
Hmm. Exports down (yup), housing down, mfg down, financial jobs about to outsourced to China/Dubai/Slobovia. But the Overall Economy will be fine, thanks to all those new jobs in bottle redemption, rag-picking, and bedpan-toting.
Can We Cure Our ‘House Lust’? By Robert Samuelson
“We’re not selling shelter,” says the president of Toll Brothers, a builder of upscale homes. “We’re selling extreme-ego, look-at-me types of homes.” In 2000, Toll Brothers’ most popular home was 3,200 square feet; by 2005, it had grown 50 percent to 4,800 square feet. These “McMansions” often feature marble floors, sweeping staircases, vaulted ceilings, family rooms, studies, home entertainment centers and more bedrooms than people.”
Congratulations Ben, the MSM is now using the buzz words that the HBB has been using for years. What will be the next buzz words that they learn and use?
FB?
Realtor admits to posting fake sex ads about competitor
http://cosmos.bcst.yahoo.com/up/player/popup/?rn=4226712&cl=5792282&src=news
Americans Sold Out…
http://www.bloomberg.com/apps/news?pid=20601103&sid=a7SxhXzLk6tI&refer=news
Last time we were “sold out” the Japanese were buying overpriced office buildings all over the place which they were later forced to dump at a 30% loss. You have to look carefully at what these foreign investors are actually getting for their money rather than the perception of what they get. Of course in this case we are rather desperate for liquidity…
And yesterday they were reporting that the Kuwaitis were eyeballing subprime assets. They believe they are currently underpriced. Bwahaha. “Come on over boys. Let the fleecing of these oil maggots, I mean magnates begin,” is what I say.
I don’t understand why anyone would buy a subprime asset, of any kind. Do they still think you can apply normal risk management models, as in: you accept that some % of it will tank because the high interest rate (risk premium) on of the rest will make up for it?
Personally, I don’t think a SINGLE one of these subprimes turn a worthwhile profit. How many of them will last the full 30 years, or even to that 7-year point of peak profit? Everything is so overpriced, you’re guaranteed to lose money on the foreclosures, and you’re lucky to be break even on the remainder.
The losses on subprime or any form of funky finance is going to be staggering.
Pensions… FL..states, cities, Norway..
Made me wonder last night, since most Corps have underfunded their Pensions (yet given their CEOs/mgrs etc HUGE bonuses) are our PENSIONS in all these horrible RE hedgefund “AAA” funds?
YIKES>
Gotta get right on that one..as if it will matter now.
See what happens when your Insider CEO/bod Directs the 401k and Pensions without any input allowed from employees..
I suspect there will be more side collateral damage for many more americans who didn’t buy houses.
Tata (India) Picked As Top Jaguar Bidder.
I thought they were a tech outfit? Sounds like they’ll all overreach now too and go the way of Japan.
They’re a conglomerate - kinda like Samsung but smaller in size. TCS (Tata Consultancy Service) is the software arm, which is probably what you’re thinking of. TELCO (Tata Engineering & Locomotive Co.) is the automobile arm. For decades, Tata and Ashok Leyland were the only two brands of passenger buses & cargo trucks available in the country, just as Ambassador & Fiat (PAL - Premier Auto Ltd) were the major car options.
I can imagine the British accents in England trying to understand their Indian master’s accents in Mumbai over the phone. Good luck with that.
I once tried helping a friend with a Dell ‘puter problem and it took me about 1/2 hour to understand that the guy from Bangalore was talking about the “%” symbol on the “5″ numbers key.
big deal they are used to one another. india was once a part of the british empire.
Shhhh!
The time to pour billions into Citi and other bankrupt outfits is when they are in receivership.
Greenspan orchestrated this entire situation to Cover his Dotcom buddies who were losing $, so this one took over and they could recoup their losses. 13 rate cuts in fewer yrs without putting in any curbs at all..just keep pocketing the $.
Ultimately the US will come out ..but it will be painful in the short 5-10 term.
Saw a bank run in Fresno, yesterday…
On the tv news, they showed a food bank that was 95% empty.
People are hurting more than we suspect, methinks…
I’ve seen a peanut stand, Heard a rubber band, I’ve seen a needle that winked it’s eye but I’ve never seen a bank that could run.
Is your refrigerator running?
Have you got Prince Albert in a can?
Blue, you’re showing your age on that one….
I spent volunteer time SF Food Bank. What an eye opener. Most of the food (on pallets) is “donated” from large ag corps for tax breaks. Those “cans” from can food drives everyone has…sits on selves…no one wants your old creamed corn. Nice products…some very nice truffle chocolate candies donated. Anyway hoo…majority of people wasn’t for “people hurting” it was just a supplement so they could have extra money for gas or go to the movies. Place needed a reason for being so bad…now giving away “healthy” baskets so kids will have alternative” to their parents purchases sugar cereal and chips. Boo-ho. what a do-gooder racket. Anyway with all the extremely over weight bums on SF streets everyday. Say no to poverty pimps.
I like your anger.
“Those “cans” from can food drives everyone has…sits on selves…no one wants your old creamed corn. ”
I love it. I should have known. Thanks for giving us all the inside scoop. We truly do live in a world where nothing is as it seems.
If you think your local food bank is well-run enough to warrant your donations, cash is king. If they need to use it to buy food, they can get more food per $$$ than you can. Most likely they’ll need it for operations. That stuff doesn’t distribute itself.
We gave about 1/4 of our year’s supply of canned food to a food bank, last month.
They were very appreciative, and it allowed us to get rid of stuff that had use-by dates that were coming due in a few months.
Bought $80 worth of staple foods at Save-A-Lot, dropped off at local food bank. Dunno about your hood, but we have some poor poor people here. Yeah, some of the kids are fat, but Lion Brand ho-ho’s aren’t good nutrition. Anyway, best $80 I spent this season.
When I have old creamed corn (so to speak) I drop it off with Catholic Charities. The St. Francis house will cook it up or distribute it that day. Brought them soap bars I didn’t need & stuff like that, too. A lot of our homeless are hurting for a bar of soap.
Why not just the people $80 bucks in gas or movie tickets and save of the cost of the middle man. Look on the street there are no hungry except for the people wanting their third Big Mac. The homeless in SF are like Yellow Stone bears…they’re not looking for soup or soup…they want the picnic basket of Coors. Say no to poverty pimps.
no one wants your old creamed corn
Beggars can’t be choosers.
“Place needed a reason for being so bad”
That was then. In another year, we may be grateful that the food banks found a way to stay in business when there was no need. Of course, Americans may be willing to let people starve if food actually costs something. Perhaps the American fat bubble will prove to have been useful after all.
See The Economist on “The End of Cheap Food.”
My mom volunteered for years in a soup kitchen, The leftover food she used to bring home was incredible. I remember someone “donating” like 300 pounds of frozen shrimp….well…after giving the homeless shrimp soup which they hated…the Volunteers just divvied up the spoils and man we ate good for a long time…shrimp salad, boiled shrimp shrimp pizza…mmmm
But otherwise it was mostly bread cakes stuff or just outdated cans she used to get lots of holiday fruitcakes…canned rum cakes…which the homeless couldn’t care less about……or fruits veggies they were going to toss out anyway.
A lot of food bank food doesn’t go to individuals it goes to “soup kitchens” that feed great numbers of homeless. As another poster stated, beggars can’t be choosers, and the majority of donated food is appreciated. Also, cash is not king, at least at my food bank. They prefer food. Cash means you need people to buy the food, additional overhead, accounting etc. Taking food means you take it, put it in a warehouse, and soup kitchens/individuals come get it.
I was just watching CNBC - apparently the new boat business is really struggling. I guess all the dried up HELOC money is really hurting the trade.
I’ve been wondering how long it would take to have some effect on big toys. Motor homes are another sector I just don’t get, when will their sales hit the wall?
I hope soon. I’ve been picking apart RV sales (5th wheel) for 18 months and the hard reality hasn’t hit RV dealers on main street. Not surprisingly, owners trying to dump rigs are sometimes priced over new dealer prices because they’re so far upside down on it. Wholesale shipments to dealers from manufacturers on towable rigs are down roughly 4% YoY but considering the fact that dealers are required to order a minimum number of units and the fact that RV manufacturers likely book those shipments as revenue, the lofty outlook doesn’t reflect reality. MEW was a huge driver behind RV sales too. I talked with a dealer in Ohio last nite and I ask him how many customers are rejected due to credit quality. His answer? 1 in 3. He indicated it was 1 in 10 during the boom years. So you tell me….. How the hell are RV prices holding up when a full third of your customers can’t get credit?
Our local RV dealer just expanded in a large way. Says 2007 was a top notch year. I read some where that 2 out of 5 retired persons owns a motor home or camper. I would think that sales will slow in ‘08 but my expectations have been way off for a long time now.We shall see.
IN Florida a lot of the sales of RV’s are being made to people for their prime residences. No taxes, limited insurance costs, mobility and comradery. Kinda like buying a sail boat and traveling the waters.
That’s the reason I wouldn’t buy a used rig from a FL owner. They’re all living in them and most aren’t designed for full time use.
Not designed for full time use? What an idiotic statement. Of course their designed for full time use. I`ve been living in mine for 10 years, and would never want to live anywhere else.
It is important to consider that for a Road Warrior existence an armed RV is not a bad idea.
Having been in RV retail (own a dealership) for 35 years, I can tell you the industry as a whole is in a pretty bad slump right now - regardless of product type. RVs make a pretty good proxy for the economy because they cover a wide swath of demographics (tent trailers to 40′ diesel rolling bordellos). I pushed my inventory down to the lowest its been in 15 years. The recent national wholesale trade show in late November was a bust as far as sales go. 07 was good - until the end of the 3rd quarter and then the switch was flipped to off. Dealer inventories as a whole are way too high for the sales rate - that means at some point the cash flow demands ( as curtailments begin to accrue) will eat dealers alive. The old axiom “the bigger they are, the harder they fall” is spot on when it comes to RV dealers. Due to buyback agreements with wholesale financing providers a failed dealer hits the manufacturer right between the eyes.
RvDoc…. I don’t want to wait out until the fallto strike as I’ve done that 2 years in a row. You got any suggestions?
Can I just say, that as a floor plan afficianado, I really appreciate the design that goes into RV’s. I went into a few big ones at the display at the State Fair. Talk about no wasted square footage and creative storage! McMansion architects could take a few tips from the RV architects. If I ever need to get a small cottage designed, RV plans will be in the idea folder I take the the architect.
Got that right.Our 35 ft 5th wheel has better kitchen storage than the house. It is like having a 1 bedroom condo on wheel with enormous amounts of accessible storage.
I just sold my 2005 motor home. It sold within one week of listing, even had a couple of dealers call on it. My secret? I priced it slightly below DEALER wholesale. My phone rang off the friggin hook. I had about 6 firm full price offers by the time the buyer finally showed up to take delivery.
All these asshats that whine about not being able to sell their toys or houses are idiots. Price it so it is an obvious good deal and it will sell. Any issues with owing more than the selling price is borne by the seller, don’t try to get the buyer involved in that problem by pricing the product higher than necessary to draw offers.
I would think RVs would do very well in the current state of the economy. Especially with all the boomers starting to retire. If you look at them as toys purchased with home equity that is now drying up, I think you’re missing the point.
These are going to replace the McMansions as primary residences. Strong RV sales means no end to the number of overpriced houses dumped on the market. It will have a wonderful effect, lowering house prices for another 10-15 years.
Most private parties can’t sell at the true “market price” because the loan balance amounts are way over retail values. Anybody putting less than 20% down is upside down before they drive off the lot or get the keys to their new house.
If you can really utilize an RV enough to justify the investment and pay cash then just strike a good deal on the rig you want and enjoy it. They all depreciate - financing only adds to the problem. Right now if you have to finance a “toy” you probably shouldn’t be buying it.
No I’ll be writing a check and depreciation is obvious. Dealers are still holding out for retail with a few exceptions. Some Michigan dealers are doing some heavy price reductions.
Exeter try this http://dgrv.com/2004_closeouts.htm
We paid cash for our Coach, bought two years old and way under book. We’re selling in the spring for, again, way under book because we see a glut coming to the market. Remember the three “F’s”, if it
flys, floats, or F____’s, lease it.
Hey RVDoc…. check out this half-wits babbling;
“Not designed for full time use? What an idiotic statement. Of course their designed for full time use. I`ve been living in mine for 10 years, and would never want to live anywhere else.”
Aside from Teton and Carriage, can you name just one manufacturer who warranties rigs for fulltime use?
NuWa
looking for some advice
i found that there is a foreclosure going to auction next week in my area. the lien states it is 158k, typical homes in the area fetch around 475k to 525k. i do not know much about the process can anyone please help. to ge thtis property and even put a large renovation on it would still be a great deal
tia
If you don’t know much about the process then you shouldn’t be going to an auction unless you want to see how it works. You’re paying on the spot for a property that you likely haven’t been able to get inside and look at. Do you have 158K, 200K, 250K sitting around??
If your numbers are correct you will also likely have competing bidders who are probably more experienced than you. Foreclosure auctions are a lousy place for rookies to find deals, and an easy place to catch a knife. Take the time to learn first, or don’t bother.
Yeah, I tried that game back in 1997, before RE became the in-thing to do, and I had no clue, no chance. you have to believe that there are lots and lots of experienced people eyeing that one. I’d bet that if it is actually auctioned, it will fetch more than it’s worth anyway.
Discuss
http://www.smartmoney.com/aheadofthecurve/index.cfm?story=20071228
Sorry, I couldn’t make it past the headline. It was like a bright read neon sign shouting “don’t read this crap!”.
Luskin is really an arrogant bull, if the market is going down it’s because everyone else is stupid. He’s saying housing is only 5% of the economy? bunk. Then he talks about the “real” Fed rate minus core inflation being very low-Grr. As if ‘core’ inflation has anything to do with the Fed rate.
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Couldn’t agree more. The guy is a bubble-meister and dishonesty is required to be a bubble-meister under the current conditions.
Jas
I learned from one of the comments that Google is a blue chip stock. (I guess to a raging bull, a P/E of over 50 must be “Blue”.)
“financial and nonfinancial, business and household — grew at or near the fastest rates of the last several years”
I just posted the smallest December Sales in 5 years.
Transports in recession, getting worse. Car and Truck sales are already offering the 0 down 0 interest.
Financials crashing = Dow sell theory breech.
Commodity rally continues to hammer stomachs to backbones, and its got legs this time.
Its almost time for a FED suprise move.
JAVA under 17?
JDSU under 13?
CSCO under 26.5?
INTC off 5% yesterday?
bottom fishing can be hazerdous to your wealth.
Just more cheerleading by the bulls.
My shorts and puts are combined up for 11% YTD. I didn’t see a bounce coming today so I stayed put.
“…11% YTD.”
Not bad for Jan. 3rd.
…and not a typo.
I made some really good decisions on the last week of ‘06. Short LEN, puts on LEN, BBY, SPY, and MER. EOB today up 17.8% unrealized, 9%-ish locked in.
“…and not a typo.”
I didn’t think it was. The year is starting off well for the bears.
Luskin writes for “Smart” Money? He’s a partisan hack who needs to talk up the economy in order to get Republicans re-elected. Nobody stupid enough to believe the bs he spews.
Now the Fed and the rest of the world’s central banks are making policy easier, in response to the global credit crisis that they themselves enabled. We’re experiencing the benefits of that, in the form of resiliency in the economy and the markets. But I continue to worry that over time, once the housing contraction and the credit crisis have passed, the Fed will have to tighten significantly to curb the inflation risks set in motion by its ongoing easy posture.
Worried about another bubble? This guy believes the FED can solve the problem by giving the banks more money to lend. Then he worries this will cause inflation down the road but for right now its no problem. We have an Inflation problem right now not down the road. uncontrolled Inflation is bad for many types of companies and the cure is bad for almost all of them.
jas would argue that the FED can’t even reinflate at this time.
I disagree the FED can inflate any time it wants but the side effects will be banks with plenty of cash to loan and US consumers who are unable to afford even the basics. A commodity bubble is what we are looking at right now.
And the re-liqiudated Banks will turn their backs to the US consumer and loan to emerging markets so the third world can bid up commodities.
Some US stocks will do well like exporters. Stay away from US consummer stocks the consummer is broke.
What are you going to believe: the bears or your own two eyes?
He presents a false choice: the bears and our own two eyes are seeing the same thing. It’s a very odd article because he enumerates all of the current problems with the economy and concludes that things aren’t bad. Maybe he is blind or in severe denial.
Mortgage applications down 11.6% last week: MBA
http://www.marketwatch.com/news/story/mortgage-applications-down-116-last/story.aspx?guid=%7BDD2119CF%2DD168%2D4E79%2D8A6C%2D4D4F8EFA0CB4%7D
Another oh Sh!! moment for wall $treet
State Street Takes Big Charge, Top Fund Exec Leaves
NEW YORK (Reuters) - State Street Corp said on Thursday it will take a $279 million fourth-quarter charge for legal and other costs after making bad bets on subprime mortgages and other debt, and said its investment management chief has resigned.
http://www.nytimes.com/reuters/business/business-state-street.html
$279 million charge?
That is worth at least $27.9 million compensation pac.
Good job mr imc. Now u and your offspring r set for life.
From Yahoo message boards:
THIS IS SO TYPICAL OF MGMT GETTING A GOOD PAYOFF, EVEN WHEN THEY MAKE STUPID MISTAKES please read
In a filing with the Securities and Exchange Commission, State Street said Hunt will receive $14.1 million in severance compensation and benefits, excluding about $5 million in stock options, appreciation rights and retirement benefits that were already vested. He is not entitled to a 2007 bonus or any other annual incentive plan.
“Good job mr imc. Now u and your offspring r set for life.”
Nah, let’s just hyperinflate him in to poverty!
http://www.europac.net/Schiff-Fox-1-01-08_lg.asp
Peter Schiff takes on a Beverly Hills Agent
Here’s Connie’s site
http://www.conniedegroot.com/
Looking at her listings, nearly all of them proclaim “Just Sold”
Connie sez:
Q: How much should a seller be willing to negotiate with a buyer and meet their demands? Is there a certain percentage you recommend that they don’t cut their original listing price by at all costs?
A: Offer incentives and an incentive doesn’t have to cost you a lot of money. You could give the buyer something you were planning to give away! The buyer feels like that got more and that is key to remember when giving in the negotiation. Lots of small things can have as much or greater an impact as a few costly items. Start “smart and small” with the giving and only give bigger items when absolutely necessary to close the deal! Be careful when you cut the price. Make sure the buyer wants the house and not just a “good deal”. Never agree to reduce the price right away if the buyer comes into the house and without even seeing the entire home is already negotiating. Reductions must come only after the buyer has worked hard for it! Every give should require serious effort from the buyer of they will not appreciate it and keep coming back for more!
Connie? As in Constance? C%#ntStinks? err… uhh… lmao.
She looks like hell. I wonder if she scares people into buying.
I think I just flushed her twin.
ditch the agent is the first rule for saving a buck on a RE transaction
Her hair looks like it is a result of an electrocution/execution gone bad.
How an agent from Beverly Hills of all places could comprehend what’s going on everywhere else is beyond me.
I agree Blano. At least they could have used a San Fernando Valley real estate zombie.
DeGroot’s a dumbass.
She has to say buy,buy,buy look at that hair. Has to run around $500.00 every few weeks just to keep it’s size!
I saw this yesterday. This reali-whore used all the tricks in the gambit. RE is local, almost used the “you’re just jealous” routine before realizing Schiff is worth more than her, “I’m not going to bore you with numbers” routine, and sneaks in a “I’m not trying to sell a book” after Peter supposedly gets the last word. Peter knows it’s not nice to laugh at retards.
“Peter knows it’s not nice to laugh at retards”.
Yep, What a mis-match, a plastic blow up Barbie used house sales minion. Pull her string and she repeats the same thing over and over. Peter really could have just been silent and let the fool prattle on.
I hope the fox producers were having a little chuckle when they scheduled that match up.
not unlike the UGA v. HAW matchup.
GO SEC!!!
Wow, Connie was annoying. The typical NAR ploy of shouting over the facts, but I forgive her because she’s hot. All that glitters is not gold. Not all who wander are lost.
And the gold that does glitter is probably L’oreal in a bottle from Wal-mart.
I love Peter Schiff. Seems like every match-up in which he’s placed, his opponent(s) are screaming or laughing at him as if he is deaf or comedic. And he just retains his composure and speaks calmly with an emphasis on facts and a de-emphasis on emotion. Darn, I’m ready to go sell my house after that.
To this discredit, Peter lets Mike Norman get him all bent out of shape. Mike is an annoying used car salesman, however.
I loved watching her wave her hands, shake her big hair, and jump our of her seat trying to sell houses. The juxtaposition of Schiff’s principled truthtelling with her wild cheerleading was great to see.
–
Surprise, surprise (not really)…
Refi apps down from 2879.8 to 1620.9 (down 43.7%) in three weeks! Purchase index down from 472 to 360.8 (down 23.6%) in the same period. The numbers are seasonally adjusted.
All those bad inflated data of Jun-Nov last year are getting corrected. ECRI econ-meisters got totally bamboozled by the bad data when it talked of “stronger housing activity” for the period.
Jas
-x-x-x-x-x-x-x-x-x-x-x-x-x-x-
http://www.mortgagebankers.org/NewsandMedia/PressCenter/59113.htm
WASHINGTON, D.C. (January 3, 2007) — The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the Christmas holiday shortened week ending December 28, 2007. The Market Composite Index, a measure of mortgage loan application volume, was 533.9, a decrease of 11.6 percent on a seasonally adjusted basis from 603.8 one week earlier. On an unadjusted basis, the Index decreased 47.2 percent compared with the previous week and was down 20 percent compared with the same week one year earlier.
The Refinance Index decreased 15.4 percent to 1620.9 from 1915.3 the previous week and the seasonally adjusted Purchase Index decreased 8.5 percent to 360.8 from 394.5 one week earlier. On an unadjusted basis, the Purchase Index decreased 44.9 percent to 161.2 from 292.3 the previous week. The seasonally adjusted Conventional Index decreased 11.8 percent to 757.4 from 859.1 the previous week, and the seasonally adjusted Government Index decreased 9.6 percent to 161.1 from 178.3 the previous week.
The four week moving average for the seasonally adjusted Market Index is down 9.0 percent to 650.8 from 715.3. The four week moving average is down 5.9 percent to 412.4 from 438.2 for the Purchase Index, while this average is down 11.8 percent to 2127.4 from 2412.5 for the Refinance Index.
The refinance share of mortgage activity decreased to 50.9 percent of total applications from 53.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 9.8 from 10.4 percent of total applications from the previous week.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.05 percent from 6.10 percent, with points unchanged at 1.05 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.61 percent from 5.66 percent, with points decreasing to 1.02 from 1.09 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for one-year ARMs decreased to 6.00 percent from 6.03 percent, with points decreasing to 1.00 from 1.01 (including the origination fee) for 80 percent LTV loans.
Solution to $100 Oil
http://www.stockmania.com/index.php?showimage=125
Anyone worried about fossil fuel tailpipe pollutants definitely should ponder the “tailpipe systems” of yesteryear…
Sorry to say, I doubt your “vehicle’s” preferred fuel will see much less inflation than oil, as oil is an input to oat production.
Grains lifted to highs as oil surges
By Chris Flood in London
Published: January 3 2008 18:25 | Last updated: January 3 2008 18:25
Agricultural commodities rose to multi-year highs Thursday following crude oil’s surge to $100 a barrel as traders anticipated higher demand from the expanding global biofuels industry.
In Chicago, wheat jumped 16 cents to $9.31 a bushel, 59 cents below its all-time high, while soyabeans rose to $12.38, a fresh 34-year high, and corn traded within touching distance of its recent 11-year high.
http://www.ft.com/cms/s/71243198-ba26-11dc-abcb-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F71243198-ba26-11dc-abcb-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Let me see…..believe the blonde bimbo with big hair constantly repeating “now is a great time to buy” or Peter Schiff, accomplished author, polished, well educated investor who can do higher math in his sleep. Tough decision…
You have to some perspective on this. All across the media spectrum, we have big haired bimbos telling us what to buy, how to act, who to date and so on. Most star-struck knuckle-draggers lap this vapid crap up. To them, Peter Schiff may as well be speaking Greek.
If you watch T.V. you might come to the conclusion that creation of beautiful blond women and brainless male thugs is the driving motivation of our society. But is that a bad thing?
It is if you have to pay for their screwups.
I like to watch local weekend daytime Spanish language tv in Los Angeles. Nothing but car dealership commercials with HOT HOT HOT Latina babes in bikinis and high heels prancing around 15 year old cars. Is that a bad thing?
The Latina babes are so hot. I watch Univision just to see them. Caucasian girls could take some lessons, but they won`t.
“Caucasian girls could take some lessons, but they won`t.”
Britney Spears apparently did. The rest must have horrible parents. You know… the kind who would much prefer that their daughters display a modicum of self-respect. It really is a shame.
Bravo, Anon Coward!!!
“beautiful blond women and brainless male thugs”
Funny, but I think this was tried before…
ooo, snap.
I was singing his praises to a forum when a reali-whore came back with a piece of the wiki page:
He is also credited as a contributor to his father’s 1985 book, “The Great Income Tax Hoax: Why You Can Immediately Stop Paying This Illegally Enforced Tax”. His father, Irwin Schiff, was convicted to a jail sentence for protesting the income tax.
So sad that he had to scrape the bottom of the moral barrel to make a point (what point was that? That he helped write a book about the evils of the IRS?)
Springfield (Mass) buys $14m in CDOs, now worthless:
http://www.boston.com/business/globe/articles/2008/01/03/springfields_investment_nightmare/
Not sure how I feel about this. On the one hand, we have a municipality gambling with taxpayer money, and getting burned. Hopefully, the citizens of Springfield will demand to know why their leaders took their money to the Wall Street casino and lost. The citizens are ulatimately responsible for the “personal finance” of the place they live in.
On the other hand, I also feel concerned and a little angry that thanks to the fraudsters and money changers on Wall Street, the people of Springfield can probably expect higher taxes and less services. One more way Wall Street’s losses are ultimately socialized.
Citizens of this country better wake up, call city hall, and find out if their town too is sitting on a CDO timebomb.
D’ough!
Deep d’ough, indeed.
My semi-retired father is the treasurer of my hometown, about 6k people. It’s an elected, part time spot. Most of the surrounding towns have the same set-up. These guys aren’t finance people. They are local, smart, conscientious citizens. Before this mess, it was more of a bookkeeping job than finance job.
The number of baseball, NFL and NBA tickets he gets offered from financial firms is sick. He passes on them, but these brokers are putting the hard sell on for a lot of junk to folks who see a AAA rating and a higher yield, without a good understanding of finance and risk, that’s hard to pass up.
or join your local
http://www.fcta.org
bring your pitchfork
This looks like the same web page as that nut who claims that too many abortions led to a too low birthrate, and hence a wave of illegal immigrants to fill the jobs.
Oh, and when the Supreme Court ended “Bible-reading and prayer in public schools, the Supreme Court removed from the classroom the basis of Western Civilization.”
http://members.cox.net/votepurves/
He (Arthur Purves) ran for the 35th district of the Virginia House of Delegates.
At the rate this dude is dropping, this condo will be free by June. Got to love that bubble proof Austin market
http://dallas.craigslist.org/rfs/526866047.html
I personally like the proposed mortgage fraud the ad poster posits. He offers to cut a check for 6k by inflating the sale price by the same amount noting that over the life of the loan it only adds 15 USD/month.
106k under value? Guess what! If you sell for 294k, it’s value is 294k- not a penny more.
I know, it’s a hoot. The guy’s reducing this place 3-5K every couple of days. I started watching this ad when he was trying to sell it at 389K.
When will Little Mr. Ride-’em-Cowboy discover that he needs to drop the photo as well as the price? Extra credit: count the number of phallic symbols in the photos.
I counted 4.
He’s got that many on his bed.;)
He should change his name to Ben Dover.
It is the only RE ad I have ever seen that mentions a paper towel rack or a swifer mop being part of the deal.
It’s a “stagetring” STEAL!
Must be taking advice from Connie Degroot, txchick quotes her in a post above…
“Lots of small things can have as much or greater an impact as a few costly items. Start “smart and small” with the giving!” says Connie.
He’s throwing in the spice rack, paper towel holder, and swiffer mop… what more could you ask for in “incentives”?
the seller cotact info pic was hysterical.
HOA at $445/month. Add property tax to the mix and it’s probably cheaper to rent the same place. Austin is not a high-rent city.
‘CD player alarm clock in master bedroom’
All I need is 100 square feet to crash and a bathroom to use. Not sure if I want to spend $160/ft^2 for that right now.
ummm I want some seller BenJordan with the house..I could pretend I was a Cougar and take me some Ben..Just kidding..
haha
From the looks of him, he’d be happy to oblige…
what the eff, go for it dd
Is that cowboy hat supposed to give him some “Texan credibility” or something? Realtor pictures are a scream. Where’s his dog?
It’s different there. Apartment prices still soaring in Manhattan:
http://www.nytimes.com/2008/01/03/realestate/03real.html?ref=nyregion
But if you read to the end of the article, one finds they are now dropping in Brownstone Brooklyn, joining the rest of Brooklyn, the other boroughs, and the suburbs.
Funny, as I rode my bike over the Brooklyn Bridge yesterday, I saw dozens of bears lined up on the Brooklyn side, with a punch of realtors trying to hold them off. I hear the same thing was going on at the entrance to the tunnels to New Jersey. It is the final redoubt.
An amusing take on the value of Manhattan apartments — it is plunging if measured in gold, but the dollar is falling faster.
http://www.nysun.com/article/68830
Your post leads me to doubt the claims that rich foreigners are going to save the Manhattan apartment market. Wouldn’t they do better buying gold now and investing in apartments later at fire sale prices?
I thought it unusual that they mentioned Gold at all…
I doubt if 1 in 10,000 Americans, own any physical bullion.
gold under 10k an oz is cheap. If you really think about it. All the gold ever minded would fit in a 60ft square cube.
Yeah, but Connie DeGroot’s brains would fit in a one foot square cube.
The brain of any singular person would fit in a one square foot cube. Try one square inch.
“One foot square cube?”
Thought you were being ironic in reference to the sh(r)ill.
http://boise.craigslist.org/rfs/526777924.html
Wow!- 880k short sale forclosure in Idaho- unfinished home. the bubble is really popping on these monstrous homes around Boise.
Do you also own half of Idaho at that price? Or perhaps a quite large potato?
Unfinished, no landscaping, $1000/month to heat, ugly to boot. Until a place like that takes at least another 50% haircut this game ain’t over.
Better thrown in a decent snowblower with that place.
90% complete? The last 10% is 90% of the trouble.
Wow, that has California equity refugee target written all over it. At first I thought, “wow, a detached garage on new construction.” Then I saw the side view. The detached “garage” is more half-shop, half-RV storage. Bet it’s cold and quiet out there right now….
retirees losing their deposits on levitt homes
http://www.nytimes.com/2008/01/03/business/03abandon.html
Here in Orlando Levitt walked away from a 37,500 sf clubhouse that is open to the sky and sucking up water like a camel. Oh and about 1,000 lots and 40-50 partially completed homes. Just 1 sub.
Comment by wmbz:
Our local RV dealer just expanded in a large way. Says 2007 was a top notch year. I read some where that 2 out of 5 retired persons owns a motor home or camper. I would think that sales will slow in ‘08 but my expectations have been way off for a long time now.We shall see.
Interesting. My sister is employed in collections for a large bank. Her niche is boats and RV’s. She serves the southeast region, and she tells me there is huge inventory of product. She says these depreciating assets are hard to unload even at greatly discounted prices. Banks are really dealing to recover what they can. Not for me to deter those consumer dreams of Rv’ing and boating, but I’d think long and hard about putting your money into those things.
Any suggestions on how to get a good RV deal from a bank in the SE looking to unload?
Ria, a nice RV is much more comfortable than a hotel room and pay for themselves while traveling for work. Shoot me a link to sisters inventory or better yet, email me… chbjeep@msn.com
If you’re blowing $300k minimum (sometimes up to $1m or more) for an arvee you don’t give a damn what gas costs. Remember, you can live in your car, but you can’t drive your house, unless it’s an arvee.
at that point, it should be diesel, anyway…
Do the newer ones get better mpg? Lying salesmen from Gillig claim their new 40′ EPA-baffle-combobulated-tail-pipe-equipped transit bus gets 5 mpg. Um, yeah right. HYBRIDS are supposed to get 4mpg, and they often get less. Regular transit bus gets 3mpg!
What about a coach? Say an old, heavy Eagle conversion. 2.5mpg? Ha ha ha.
stagflation:
For anyone who is worried about the economy, 2008 is off to a lousy start.
The price of oil briefly rose to $100 a barrel for the first time yesterday and fresh evidence emerged that the economy is slowing. To investors, the news raised the specter of stagflation, the toxic mix of stagnant economic growth and price inflation that made for hard times in the 1970s.
http://www.washingtonpost.com/wp-dyn/content/article/2008/01/02/AR2008010203033.html
Apparently the $100 trade was a one-lot by a couple of locals in the pit who wanted to be famous. The previous trade was 99.53 and the following trade was .40. This is technically against exchange rules (you cannot bid above an existing offer, and if the last trade was .53 I strongly believe there were lower offers than par), and can even be considered a pre-arranged trade, which is usually a real big no-no. Looks like they’re counting the trade, though.
No matter - CNBC’s ticker tape showed a couple of brief forays over $100 this morning, so, indeed, pukka $100 a barrell oil….
CBC Canada is running a story about Canadians going down to California to buy houses. They are quoting a realtor by the name of Ziggler who is stating that 30 of their 40 realtors are working with Canadian buyers.
RE agent friend in Hemet is so swamped with REOs in the Entire IE, that she has had to enlist agents from all over to help with inventory and viewing. In one yr, she says it ballooned. More so in the last 3 months.
What do these people think they’re doing? Speculating intelligently? Investing in rental properties? Buying a one-week-a-year vacation home? They’re planning on retiring in affordable California?
Canada doesn’t have many grossly wealthy people. I don’t get it.
I have noticed recently that the The Globe and Mail (large national newspaper) has had large glossly fliers inserted in the Toronto weekend editions for vacation properties in Florida, South Carolina, etc. A couple last week were big; four pages per side fold outs.
reign in the brokers:
Seven states on Wednesday launched a standardized and mandatory process to more thoroughly license and track tens of thousands of mortgage brokers.
The effort could be expanded on by congressional Democrats, who are expected this year to continue pushing for tighter national standards.
Mortgage brokers have come under scrutiny over the last year as home loan defaults grew and housing market troubles worsened. Experts say loose licensing standards made it easy for shady operators — even those with criminal records — to work in the business.
http://tinyurl.com/373pg7
Word from mother referring friends son who Was mtg broker in Los Angeles who is moving to desert and getting another job.
denying a problem:
MADRID (AFP) - Spanish property developer Inmobiliaria Colonial insisted Wednesday its business was progressing normally after the stock market regulator suspended trading in its shares following sharp losses last week.
ADVERTISEMENT
Shares in Colonial, saddled with debt put at 8.9 billion euros (13.1 billion dollars) at the end of September, lost 25.4 percent of their value on Friday after a drop of 16 percent on Thursday amid speculation it was facing problems.
http://tinyurl.com/3449pg
I love this every year. Predicting Countrywide and HB bankruptcies in ‘08
http://www.thestreet.com/s/kass-20-surprises-for-2008/newsanalysis/investing/10396519.html?
I thought about 15 of his 20 picks were pretty good/interesting, and I tend to agree with him about the election - very close but Dems will probably squeak it out. What I don’t get is the (possibility of another) 2X increase in Shanghai, AAPL, and GOOG. That would mean PEs on all going from around 50 to 70-80. I guess maybe if inflation expectations vanish PEs could get weird on the high side for companies and countries that continue to perform?
Buy the dip…buy the dip…buy the dip…buy the dip…
Stocks Headed for Higher Start
A Wall Street Journal Online NEWS ROUNDUP
Word Count: 642 | Companies Featured in This Article: Automatic Data Processing, Toyota Motor, General Motors, Ford Motor, Monsanto, State Street, Merck
Stock futures advanced Thursday, as oil futures hovered close to $100 a barrel and worries about the global economy lingered.
http://online.wsj.com/article/SB119936596060264795.html?mod=hpp_us_whats_news
So far the S&P is putting in another higher low. I still think you’re gonna see a 2000 style spike up here at some point.
I agree not, but my stops show my confidence level.
Put calls are extreme but I know where I’m wrong too. I have some long spx, dia, qqqq to hedge the spring puts that are up quite a bit already. I wish it wasn’s so complicated so early in the year.
I bought the BIDU dip at 374. Time to dig out the clown suit!
Don’t let yesterday’s bad news discourage you from buying the dip today!
Market’s start is worst ever
REUTERS
January 3, 2008
NEW YORK – Stocks sank yesterday, with the Dow getting off to its worst-ever start to a year, after data showed a surprise contraction in manufacturing and oil prices surged, raising the specter of stagflation.
http://www.signonsandiego.com/uniontrib/20080103/news_1b3market.html
Classic panic shot of frenzied traders accompanies the SD Union-Tribune headline news story today. There is a puzzling aspect: Don’t slowdown fears normally lead to lower oil prices?
(Associated Press
Traders jostled in the oil futures pit at the New York Mercantile Exchange yesterday on a day when oil hit $100 a barrel for the first time.)
Slowdown fears rock market
NEW YORK TIMES NEWS SERVICE
and THE ASSOCIATED PRESS
January 3, 2008
http://www.signonsandiego.com/uniontrib/20080103/news_1n3econ.html
TxChick suggested a short squeeze would play out until March or so, then something like a repeat of 2000 for the rest of the year. But I have my doubts, as stock markets are rational, in the long run.
Panic over, the oil price is the fault of one crazed trader.
Single
trader behind oil record
From Today’s Wall Street Journal about how renting vs owning:
http://online.wsj.com/article/SB119931831334463571-email.html
Owning vs. Renting: Still not close!
I’m too hung-over to read the article. I’ve been partying for a while now because I’m a renter.
I guess renting poses a moral hazard problem (too much money left over at the end of the month to buy alcohol)?
“How will he celebrate his birthday this year? ‘I’ll be working, the same as on Christmas,’ he said. ‘It’s time and a half on the holidays. I’ll take the money. Renters have a different mentality; they can party.’” Johnnie Pitts
The housing bubble’s footprint is clearly visible in the “Homes vs. Rentals” chart which accompanies the story. From 1960 through 1998 or so, the average annual rent as a percentage of average home price fluctuated in a band between 4.8 percent to 6.1 percent. Translating the ends of this range into the “home price to monthly rent” ratio often discussed here gives the bracketing values from 196 to 250:
100*12/6.1 = 196
100*12/4.8 = 250
Since the onset of the bubble, rent as a percentage of average home price fell to 3.58, implying an unprecedented average home price to average monthly rent ratio of 100*12/3.58 = 335.
Puzzling detail: When we bought in 1996, the price-(monthly) rent ratio was maybe 115, implying our “personal annual rent” as a percentage of our purchase price was
1200/115 = 10.4 percent (way off the chart!).
Perhaps since all real estate is local, local variation is hidden in those ratios of averages shown in the chart?
Prof, your numbers make my head hurt. Yes, I’m a blonde. But for an e.g., we have a lot of newer 3/2 and 4/2 houses around here, all about the same, asking around 220K though 200k might fly. The same units rent for 1200/mo. With your formula I get 184. Are you saying that’s low, high, reasonable or what? I thought the rule of thumb was that rent should = 1% of sale price, and there’s no way they could get 2200/mo for these houses here.
“The same units rent for 1200/mo. With your formula I get 184. Are you saying that’s low, high, reasonable or what?”
I am flattered to hear that a blonde is reading my posts.
A regular poster here has frequently asserted that home prices have bottomed out every decade forever at between 100 and 120 times monthly rent, and my personal experience bears that out. 184 sounds quite high compared to a level where I would be willing to buy, but as they say, de gustibus non es disputandum.
These are just average neighborhood, cheaply built, small lots, vinyl siding…push the doorbell and the whole panel caves in. (You’d think they’d anchor that part down better.)
I think locality must play into it heavily. And even then I would suspect two things.
First these numbers are skewed high. I’d heard 100 to 150 as the ratio. I think that’s a little low, but there’s a huge discrepancy between 150 and even 196.
The second point is that as has been mentioned before, we’re likely to see an overcorrection on prices (eventually) due to the increadible over-supply. Take a look at that 1970ish spike up to almost 7%. We could easily see that again. In which case, the 100-150 isn’t so outrageous as something to be looking for when you’re bottom calling. Again, dependant on historical norms for your particular neighborhood.
100 to
150120Fed economist study take: w/ 4 percent rent increases for five years, a 15 percent drop in home prices is needed for prices to be in sync with rents. The implied current equilibrium gap between home prices and rents can thus be computed as:
(1-(1-0.15)/1.04^5)*100 = 30.1 percent.
But it is entirely unclear why one would want to assume 4 percent annual rent increases in the face of a McMansion glut. The Fed economist study conclusions would be a lot more convincing if they did not lock themselves into a single high-end rent increase assumption.
One can easily use high school algebra to back out the implied necessary home price declines for other rent increase scenarios as follows:
5-yr Annual Rent Increase Implied Necessary Home Price Decline
—————————— ———————————————
3 percent: 100-1.03^5*(100-30.1) = 19.0 percent
2 percent: 100-1.02^5*(100-30.1) = 22.8 percent
1 percent: 100-1.01^5*(100-30.1) = 26.5 percent
0 percent: 100-1.00^5*(100-30.1) = 30.1 percent (surprise!)
-1 percent: 100-0.99^5*(100-30.1) = 33.5 percent
Whether homes currently are merely 30.1 percent overvalued is another matter which heaviliy depends on geography, as all real estate is local.
I forgot to include a scenario for my local market. Given no rent increase YOY and maybe 3 percent inflation, my *real* rent increase was -3 percent or so. Project this out for five years, and (presto-chango):
100-0.97^5*(100-30.1) = 40.0 percent
Comps is going to be a very dirty word, in matters real estate, soon…
Prices always going down, because of it.
txchick, some Pearl District stuff for ya:
http://portlandhousing.blogspot.com/2008/01/want-to-move-into-civic.html
Our lease is up in two months and we received a letter stating that our rent would go up nearly 7%. I was amazed at this as I’ve been predicting that rents should be going down here (DC area.) I returned the form and stapled some ads for similar places nearby with significantly lower rents.
I called the manager and asked if we could leave sooner, mostly just to force their hand and find out if they thought they could lease the unit. They said no! There are many empty units and noone is scheduled to move in. “The market is really slow right now.” So I’m like, why in the h@ll are you raising our rent, then? The manager said she’d try to see if they’d make us a better offer but seemed doubtful.
So, we’re looking for a new place - CL is flooded, absolutely flooded with ads. Mostly FBs and repartments. Most of these are pretty overpriced given the inventory (seems many times greater than when we were looking last year at this time.) I’ve been calling around and a lot of places have a high nominal rent but then they give “pro-rated” specials of 1-2 months free. Most of these are still ridiculous and the rental agents are seeming desperate to get a tenant. What is wrong with this market???!!
I am so freaking sick of this bubble. I’m sick of the greed that would rather pay mortgage and interest on many empty units than lease or sell at a price that average to high income people can afford! When will this stupidity end? How much longer do these folks need to get beat up before they realize they can’t get any more blood from a stone? It’s so frustrating.
Fortunately we have identified a place that will likely work out and I think I’ve got the moving logistics under control. But really, what a huge waste of resources for everyone.
Wow. It sucks to have to move, but sometimes you really do have to play hardball with landlords to make them see reason. And even then, some refuse to get it. Surprisingly, a certain percentage of tenants will make very little or no noise about a rent increase, so it usually pays for landlords to aim high and see if it sticks. They are going to find that this worked a lot better in the madness of the last few years when no one questioned why housing costs should be rising than it will in the next few years, when everyone is scrutinizing their monthly costs and looking for good deals. It will take a while for the mindset to shift, and I guess in the meantime we’ll get this stupid behavior where landlords would rather lose a good tenant and have a place sit empty rather than accept that they can’t continue to get the increases they were hoping for just because they need to in order to offset their own rising costs. Supply and demand just doesn’t work that way. The supply of housing units cannot be easily adjusted downward, and the whole “willingness to pay” issue is going to be a real bummer for landlords.
Once you’ve got your new lease signed, be sure to share your story with any of your neighbors at the old place. Don’t let your landlord screw other folks with a 7% increase in a declining market.
There should be a LOT of great deals in the DC area with so many condo’s going the apartment route. I see that in Alexandria/Arlington (in one - or more - of the new buildings around shirlington, in a condo-conversion project that will just end up being re-habbed apartments on Seminary Rd. near 395 (right by the library) and in some of the condos proposed for back behind the patent office off Duke Street. And, this doesn’t even address investment condos that can’t be successfully flipped (although, having a potentially troubled individidual condo landlord is probably an unstable situation). Not to mention all the stuff going in by Potomac Yard.
Happy hunting. Where do you think you’ll end up?
Wow, that sucks, but sounds very similar to things out here in Sacramento (and probably many other areas as well). Too many FBs, lots of rentals with a high vacancy rate, yet most of them demanding prices that are too high since they’re in crappy loans. Not my problem. The real challenge is not finding a decently priced rental, but one where you can trust that the owner is “safe” with their mortgage and/or isn’t planning to sell in the near term.
It seems that most of the rental homes around here were intended for sale, but when the market tanked, renting it out became a move of desparation.
Thanks for your comments. The place we’re in now is a repartment and the buyer is F’ed on a grand scale. They bought the place for over 300K per unit in order to rehab and sell as condos. Now it’s an apartment complex again with some renovated units.
The problem with this bubble is that it’s amateur hour. We’re tempted to try to rent a SF house, but as my husband says, then we’ll be the centerpiece of someone’s already failed business plan. A resentful landlord can make your life miserable and that’s if they don’t go to foreclosure. It looks as though the f’ed condo developers are going down a similar path. I suppose if they were dumb enough to try to get into the RE development business without doing the slightest bit of preliminary research, they are dumb enough to drive out good tenants.
We pay our rent, all of it, on time and we cause no problems. We are in a state where a deadbeat renter probably takes a year to get rid of. So yeah, I guess I have a sense of entitlement and I expect my business to be valued. Oh well.
The place we’re probably going is part of Avalon Properties - I’m thinking this is a professional organization. They have already contacted me to nail down the appointment and the people on the phone seem competent. Hopefully our dog will not be a problem.
All sounds good. I do have one quibble - all the NoVa jurisdictions have pretty comprehensive real estate assessment databases - so you can pretty easily see when potential SF landlords bought their properties. There are a lot of mom-and-pop landlords around who just never wanted to sell their first house or just enjoy long-term landlording. There’s some great places in my neighborhood that have been rentals for decades - some people just can’t bear to sell (and - if they didn’t sell in 02-06 — they ain’t selling for a while). I was in one of these for a long time - and, it was great - landlord NEVER raised the rent (in my nine years there). I liked being in that situation, rather being subject to a more corporate situation, where they were obviously going to make sure they maximized their profits as best they could (as they should). Or even tried the bull—- your current landlord is trying to pull. Of course, individual landlords are also capable of that, as well.
Just my experience as an Alexandria long-timer. I’m sure you’re in good shape, nonetheless.
The problem with this bubble is that it’s amateur hour.
Well said.
I looked at a SFR for rent last year, owner wanted $2400/month. (Last tenant paid $1100/mo). I asked her what happened after the previous tenant to justify the rent increase. A: nothing.
I passed on the rental, and one year later, it remains vacant.
Oh, and this whole concept of a high nominal rent with a “special” is something to be leery of, for anyone else who is looking. I figure that they are betting the market will get better for them, so this will be a way to raise the rent that hopefully their renters will accept. The manager told us “well really the rent on your place is 2300.” Um I don’t think so.
I’m afraid of getting into this situation all over again. So, one thing I’m taking away from this is that if the management is betting that the market will be significantly better next year, they may well be stupid enough to try to screw over decent tenants.
The special is a one time thing, so you’d be paying the full “rate” next year. It would be interesting to do some sneak work to find out what your current landlord would offer a stranger on one of the empty units next to you.
I rent a SFH, but it was never an “investment” for my landlord, it was an inheritance. He frequently tell me how happy he is that I pay my rent.
I have a co-worker in MD renting in a similar boat. The actual increase they popped on him was only about 5%, but the landlord is in the same slow business situation. He was already looking for another place to live but I recommended he talk with the landlord first; to negotiate. He got all wide-eyed, “wow, I never thought of that.”
We knocked $100 off our monthly rental because of my good credit history and because we were compeltely willing to forgo the place for one of the other three we were looking at. Even if you do go to a new place, don’t take the listed price as a given. I don’t think there’s as much room for lowballing as there is in the actual buying process, but shaving off $100 a month is probably doable in most places around here. It saves you $1200 over the year and the landlord probably makes it up in no-time because the lease is filled, rather than vacant.
I rent a SFH in a good stable middle class neighborhood. Every time I go to the landlord’s house to pay the rent I have to sit through his lecture about increasing property taxes. I am now in my 32 month of renting with him (1 yr lease & then mo-mo) and he has never raised the rent.
One industrial plant phasing out & moving to a nearby town, another industrial plant closing & moving to Mexico. No real new jobs here, other than a little bit of new retailing from a few new strip malls (that never get to be fully leased out).
His two previous renters where involved in criminal activity, and they left owing him rent.
I am one of his best renters he has ever had. Usually pay one week early, do most small repairs myself, take care of lawn, rake leaves, etc…
So he cain’t raise the rent and he knows it. His choices are very limited. He can go back to renting to criminals, or he can try selling in a town where similar houses have been sitting for over a year. He is not a FB (I think he owns outright) but still his choices are limited.
He is in a pickle, but it is not my problem.
Just in case, and out of curiosity, I periodically do check the classifieds and talk to people about what rental prices are available and where, and sometimes I do walk throughs. This week I will be walking through a newly renovated place that rents for 12.5% less. He also has a nephew in town who also has rental property. I tacitly let the old man know (through his nephew) that I am not stupid and I know there is other rental property available.
Totally OT, but - You go to your landlord’s house to pay the rent? That strikes me as very unusual, almost bizarre - like something Ralph Cramdon would do. And yet you must be a southerner, writing “cain’t” for “can’t.” You were friends with the guy before renting, right?
We also go to the LL’s house to pay the rent. They’ve made us dinner (and we give them fresh fish — DH is a fisherman) & they’ve brought presents back from their travels for us and our kids. We visit and enjoy their company. Never knew them before we rented from them in 2004.
If everybody’s decent, why would that be unusual?
$610k to buy or $2500/mo to rent. They are willing to negotiate on rent, and even encourage undergrads to team up and rent this luxury house in the country (that is one way to get rid of the new home smell). This new house outside Pullman, WA has been on and off the market, for rent and for sale, for a year now.
What sort of idiot lent this builder money to construct a $600k spec home outside a town with a median income of $50k and a permanent population of 9k.
http://tinyurl.com/2jzu5j
http://tinyurl.com/38znqf
What would the intitial rate these days on a 2 or 3 year arm for 550k (I’m going to be generous and think they put 10% down)? Could you even come close to covering your expenses for 2 or 3 years at $2,500 a month while you prayed for some kind of financial deus ex machina (hello Powerball tickets) to bail you out? Or, do you still lose 1,000 (or more) a month AND watch yourself get further underwater.
Ouch. Hurts just thinking about it.
Since this is held by a builder, not a flipper, I made the following conservative assumptions:
$500k loan
8.5% interest for business loan
Monthly interest: $3540
Monthly taxes: $500
Monthly insurance: $350 (vacant property)
Monthly utilities: $150 (propane)
So roughly $4,500/mo in carry costs assuming there are no bank penalties to roll over the construction loan. So even if they could rent it out for $2,500/mo (which they can’t) the builder is still losing a couple grand a month. At this point, vacant and completed for 7 months, they are already out $30k with no reprieve in sight.
At the end of the day, this will likely go back to the bank. To move this, the builder would probably need to slash the price to ~$400k range, less than the construction loan I’d imagine.
Saw the following bumper sticker on the back of a redneck truck in W. Colo:
Save an elk.
Shoot a land developer.
Ahh Colorado. Nice
Was it a blue Dodge Ram near Grand Junction? If it was, it was my BIL.
Comment by exeter:
Ria, a nice RV is much more comfortable than a hotel room and pay for themselves while traveling for work. Shoot me a link to sisters inventory or better yet, email me…
exeter, even if I were so inclined to run it by sis, she’d never breech her job loyalty to her employer, and she’d think I was nuts to even ask. Don’t get me wrong, I’d love to see a potential RV buyer get a better deal, and just so everyone knows - I don’t begrudge people who like the RV lifestyle (I live in AZ and we have oodles of RV’ers here). I was in a RV over at Cliffs Castle Casino parking lot that looked better than most high end living rooms recently. I’d never buy one with my hard-earned dough (I’m 1/2 Scot and true to the stereotype - I save invest save invest), but different strokes for different folks.
I just found this in my mailbox from my local gov
“In A&F we authorized the mayor to sign a contract for the American Dream Downpayment Initiative (ADDI) grant of $10,000. Unfortunately the grant amount has been going down each year as HUD funds are redeployed, so to speak. Missoula receives 13% of the state’s allotment and that is all we got this year. It is expected that it will be enough to help one household. The money is given as a deferred loan and paid off at the time the house sells. Whatever percentage of the cost of the home the loan represented, the owner repays at closing when they sell. So if the $10,000 loan bought a $100,000 house and the house sold in 10 years for $200,000, they would pay back $20,000 to the program.”
Isn’t this just more bubble fuel?
Meh, my bad. One household! Pathetic. Need more govt programs!!
I still wonder if the *lucky buyers* will be able to afford whatever the local nonprofits put them into.
One household gets $10k downpayment assistance. For for each $10k doled out, it probably costs the government $50k in adminstrative overhead.
I love the bullish front running of the close that MarketWatch routinely engages.
At this time the headline is “Day One a Distant Memory” and about the same time that they threw that up as the heading as if on que the Market started to take a dive. Probably end up red based on today’s consistently elevated TRIN. LOL.
The bull lacks conviction.
Somebody moved my dead cat.
http://www.marketwatch.com/quotes/quotes.aspx?symb=tol+kbh+len+ctx+dhi+fnm+aapl+goog+bzh+phm+sbux+peet
Funny how the headline indexes are moving orthogonally to REIC stocks today…
http://www.marketwatch.com/tools/marketsummary/
Headline indexes are moving orthogonally to REIC stocks…
…
arewere moving orthogonally…Financial gravity seems unusually strong so early in 2008…
PPT snuck in a little last minute DJIA kicker for headline adjustment purposes…
Countdown to the close:141min45sec
January 3, 2008 4:08 P.M.EST
BULLETIN
DOW INDUSTRIALS HOLD GAINS FOR FIRST POSITIVE SESSION OF THE YEAR
Wall St. scales back gains
Dow industrials bounce back into positive, Nasdaq slumps as
investors await Friday payrolls report for more economic guidance.
LOL.
As for currency collusion…
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=C_JPY&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=4&freq=1&startdate=&enddate=&hiddenTrue=&comp=c_gbp+c_eur+c_chf+&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013
“There are few safe bets in currency markets, but in Europe the nearest thing to one is that sterling, attached to a debt-sodden UK economy afflicted with larger financial imbalances than the US, will sink. Those high growth economies of eastern Europe that have large current account deficits look similarly vulnerable on the currency front. So while there will be opportunities to buy these countries’ assets cheaply, the timing will be tricky.”
http://www.ft.com/cms/s/bc4ded14-b95c-11dc-bb66-0000779fd2ac.html
Traders turn to Swiss franc and yen
By Peter Garnham
Published: January 3 2008 11:07 | Last updated: January 3 2008 11:07
The low-yielding yen and Swiss franc advanced Thursday in the face of mounting risks from a global economic slowdown and rising inflationary pressures.
Analysts said a weaker-than-expected survey of the US manufacturing sector on Wednesday, combined with the minutes from the Federal Reserve’s December meeting – which revealed increased concerns over growth in 2008 – had heightened risk aversion.
(EDITOR’S CHOICE
Dollar stumbles into 2008 - Jan-01
Renminbi on the march as trade pressures intensify - Jan-02
Lex: Slowing down China - Jan-01
Lex: Recession risks - Jan-01
Venezuela launches new currency to stem inflation - Jan-01
Oil sector fuels Footsie’s sixth day of gains - Dec-27)
This prompted investors to abandon carry trades, in which the purchase of riskier, higher-yielding assets is funded by selling low-yielding currencies such as the yen and Swiss franc.
http://www.ft.com/cms/s/0/a21f0ed4-b9eb-11dc-abcb-0000779fd2ac.html
New investment strategy: Sell after the opening bell kicker, buy back at the close, to catch the overnight DCB.
If at all possible, try to avoid being on the losing end of this incipient wealth transfer.
Insight: Post credit bubble wealth transfer will beggar belief
By John Plender, chairman of Quintain and an FT columnist
Published: January 2 2008 18:19 | Last updated: January 2 2008 18:19
When financial market bubbles burst, a transfer of assets from the weak and undercapitalised to the strong and liquid invariably follows. The unprecedented scale of the credit bubble that burst last August suggests that the extent of the resulting wealth transfer will beggar belief.
The process is already well under way. So far, sovereign wealth funds have mopped up some $25bn worth of equity and debt in Citigroup, UBS, Merrill Lynch and Morgan Stanley. One of the safest predictions for 2008 is that this will lead to political friction of the beggar-thy-neighbour kind, with Western politicians complaining that their financial crown jewels are being sold for a song. Yet it is far from clear that the jewels are outright bargains.
In the long run it is admittedly hard not to believe that investing in an 11 per cent IOU in Citigroup with conversion rights attached represents good value. That said, it is possible that this and other comparable investments might be available on better terms at a later date. For while the immediate liquidity problems of the banks have been dealt with over the December 31 year end, more intractable difficulties remain.
http://www.ft.com/cms/s/bc4ded14-b95c-11dc-bb66-0000779fd2ac.html
What interests me is what the true value of some of these companies will be after the dust settles. I was just hearing today that some WS guru type assumes that Target’s price isn’t so bad because of its land holdings value. And that begs the big question, ‘Just what are those assets really worth’ in a changing RE market? These WS types are making judgements akin to journalists asking serious questions about the housing market.
It’s the Fed’s unstated mission to ensure the dust never settles.
ahhhh,
the worm has turned….its not the IPO’s…
its the spin offs, the “break-up” value…. I heard this arguement today on the “talk” shows.
As the market closed flat…no buyers. no volume. no pushing and shoving?
I suspect the PM markets may be on to the helicopter drop plan…
METALS STOCKS
Gold futures close at a fresh 28-year high
By Polya Lesova, MarketWatch
Last update: 2:19 p.m. EST Jan. 3, 2008
NEW YORK (MarketWatch) — Gold futures surged to a new 28-year high on Thursday, as a slide in the U.S. dollar boosted demand for the precious metal.
Gold for February delivery rose $9.10 to end at $869.10 an ounce on the New York Mercantile Exchange. Earlier, the contract hit an intraday high of $872.
The record high for Nymex gold futures was $875, set on Jan. 21, 1980.
“Pure momentum, shorts scrambling to cover and the realization that gold is only in the fourth or fifth inning of a secular bull market” are fueling today’s gains, said Peter Grandich, editor of the Grandich Letter.
“A near term peak is coming but should only be a pause that refreshes,” Grandich said in emailed comments.
http://www.marketwatch.com/news/story/metals-stocks-gold-futures-close/story.aspx?guid=%7B14BCCA2B%2DF5D5%2D4E40%2DBEE4%2D35A2FD7274F6%7D&dist=hplatest
The full story on the vote counters in Iowa.
Insight: Tough year ahead for high-risk debt
Published: January 3 2008 17:11 | Last updated: January 3 2008 17:11
So 2008 is upon us. But it does not seem a particularly happy new year. Or not, at least, for the markets.
Never mind the soaring oil and gold prices, or the wobble in equity prices. For my money, one of the more alarming trends is in leveraged finance, the corner of the banking world that provides funds for sub-investment grade companies, such as debt-laden buy-out deals.
In the past three years, the leveraged finance world – the business of arranging funding for sub-investment grade companies – has witnessed an explosion in activity. It has become ludicrously cheap and easy for buy-out groups to raise funds.
What has been even more remarkable than the scale of deals is that until now there have been few defaults.
…
However, the credit research team at Citigroup have stuck their necks out and declared that US leveraged corporate defaults are set to soar from 1.3 per cent last year to 5.5 per cent at the start of 2009, meaning, in effect, that out of 100 leveraged companies, five are expected to default.
http://www.ft.com/cms/s/afcb0cda-ba19-11dc-abcb-0000779fd2ac.html
Got vega?
Review: Wild swings leave investors breathless
Published: December 26 2007 17:10 | Last updated: December 26 2007 17:10
Investors who bet on volatility should have done extremely well in 2007.
…
The average for the Vix in 2006 was 12.8. But this year it was 17.4 – spiking at one stage to 31 – a sign that investors were prepared to pay more to protect their positions from expected volatility.
The cause of this fragile confidence was the credit squeeze – a theme that looks set to endure into 2008.
http://www.ft.com/cms/s/0c8cf7bc-b3d5-11dc-a6df-0000779fd2ac.html
Where’d I leave that bottle of lotion?
Mixed portents for Wall Street’s rescuers
By William Cohan
Published: January 3 2008 18:11 | Last updated: January 3 2008 18:11
The hand-wringing has already begun over the latest lemming-like craze to hit Wall Street: the repairing of many firms’ badly depleted capital accounts by taking money from deep-pocketed, state-owned foreign-investment funds.
http://www.ft.com/cms/s/160d7a62-ba0d-11dc-abcb-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F160d7a62-ba0d-11dc-abcb-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Interesting on the financial channel that in the last 4 trading days that there has been a $10B outflow of cash in mutal funds and also in ETF’s. No mention as to where its going. Interesting because this is the usual time that money pours in.
you are right, it NORMALLY pours in at this time. I think the market is going to have one last failed rally early in the quarter then a bear market that will last all of 2008. We have an aging population (less risk tolerant), a cash strapped consumer (No HELOC $$ so it is time to tap their investments), a turbulent market with more negatives then positives in the news, and a Fed slow to react(due to the inflation risks). I predict Dow below 11,000 in 2008 based upon the above info.
A question for the HBB:
When people convert condos to apartments, or vice-versa, just what sort of changes have to be made?
TIA.
Those requirements are usually in the local building code.
I know that’s vague, but for instance, in my locale, plumbing adjustments are required. Whether or not they happen is another matter.
But why should the plumbing be different for apartments? How is the plumbing different?
I wish I could give you a precise answer on this one.
All I know is the local building inspector stopped construction on a condo building that was going up because the builders initially got permits for an apartment building. They decided to go the condo route midway through construction. The inspector stopped the job because plumbing for apartments must be configured differently than for condos.
I can get the details if you want.
At last a MSM-quoted expert sees a silver lining in the dark clouds of declining market values for housing!
Wednesday, January 02, 2008
The coming decline in UK house prices: how large and how helpful?
…
These detrimental effects from a decline in the price of residential property are, however, likely to be transient – cyclical at most. The social benefits from a significant decline in UK house prices are bound to be significantly larger than the social costs associated with any short-term credit squeeze on consumers it may cause or aggravate.
http://blogs.ft.com/maverecon/
The sovereign wealth put
Published: January 3 2008 09:38 | Last updated: January 3 2008 10:52
First it was Alan Greenspan at the Federal Reserve. Then it was the massed ranks of private equity. Now, some hope the sovereign wealth put will come into its own in 2008.
http://www.ft.com/cms/s/1/99ab49e0-b9df-11dc-abcb-0000779fd2ac,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html
Any news to report on the mortgage bailout front? Seems like the issue has lost some political support, at least judging by MSM coverage, but it is hard to tell what might be in the works behind the scenes.
Moral Hazard Meets Mortgage Bailouts
December 8, 2007; Page A9
Kudos to Andy Laperriere (”No Bailouts for Borrowers,” op-ed, Dec. 4) for showing why, as a matter of public policy, it is wrong and an enormous mistake for taxpayers to bail out distressed borrowers, subprime or prime. Those of us who were fiscally responsible and lived within our means should not suffer to benefit those who didn’t.
…
We are watching closely the stand that each of the presidential candidates takes on this issue. We’ll also be watching how our senators and representatives in Congress vote on this issue, which — sadly but unavoidably — seems headed their way. Bail out those who were irresponsible at your own peril.
Alan Bressler
Atlanta
http://online.wsj.com/article/SB119707239087617816.html?mod=googlenews_wsj
The anti-bailout candidate won in Iowa. (Not trying to suggest the anti-bailout position had anything to do with the outcome, but who knows?)
Huckabee wins Iowa Republican caucus
By Andrew Ward in Des Moines, Iowa
Published: January 4 2008 01:02 | Last updated: January 4 2008 02:14
Mike Huckabee, former governor of Arkansas, was projected to win the Iowa Republican caucus on Thursday night, surging past Mitt Romney, former governor of Massachusetts, who was expected to take second place.
http://www.ft.com/cms/s/67e4c418-ba5c-11dc-abcb-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F67e4c418-ba5c-11dc-abcb-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
The Iowa caucus is the demographic equivalent of farmers from Argentina deciding world economic policy. (pop. of Arg. relative to the world being approx. equal to Iowa to the U.S.).
It turns out that I am not the only bailout handwringer on the planet.
‘07: Buyouts and Bailouts
By Allan Sloan
Tuesday, January 1, 2008; Page D01
When I sat down for my annual review of what I’ve written over the past year, something jumped out at me. Usually, I write about widely diversified subjects. But in 2007, I devoted an inordinate number of columns to … the attempts by the world’s central banks to rescue financial markets.
…
I spent a lot of time in 2007 trying to understand how the subprime meltdown happened and why it spread so wide. In the process, I came upon a particularly wretched 2006 issue of mortgage securities underwritten by Goldman Sachs in which two-thirds of the value of second-mortgage loans that individually were toxic waste was rated AAA (if only briefly) by Moody’s and Standard & Poor’s. Goldman, being Goldman, figured out early in the game that these markets were heading south and made a fortune betting against them. However, also being Goldman, the firm didn’t pass on that insight on to buyers of the securities it underwrote.
Shortly after I joined Fortune, the debt market meltdown began in earnest. (No, I don’t think it was cause and effect.) In recent months, I’ve focused — some would say obsessively — on the fact that the too-big-to-be-allowed-to-fail firms that enabled financial excesses are getting bailed out at the expense of those of us who have behaved properly. It’s obvious that this is going on, but not too many people are saying it, at least not in public.
http://www.washingtonpost.com/wp-dyn/content/article/2007/12/31/AR2007123102163.html
“I spent a lot of time in 2007 trying to understand how the subprime meltdown happened and why it spread so wide.”
I have a mindlessly simple explanation for why it happened and why it spread so wide:
Greenspan’s serial bailout policy led financial corporations to the rational conclusion that no matter how stupidly they behaved, the Fed would bail them out, provided they were also too big to fail.
There’s an interesting and entertaining piece on the “subprime airline passenger.” The writer concludes that the credit crunch will cause a huge drop in airline travel and hopefully a subsequent improvement in the quality of air travel - certainly an improvement in the quality of the average passenger.
http://www.lewrockwell.com/englund/englund42.html
RE-related cartoon:
http://www.comics.com/creators/wizardofid/archive/wizardofid-20080103.html
Interesting debate.
America’s economy
Aspirin, not morphine
Jan 3rd 2008
From The Economist print edition
America’s economy will be weak in 2008, but policymakers should dispense the pain-killers with care
…
In recent weeks luminaries such as Larry Summers, treasury secretary in the Clinton administration, and Martin Feldstein, a Republican economist, have also called for fiscal stimulus. Mr Feldstein wants a tax cut that would automatically kick in if employment fell for three consecutive months. Mr Summers wants a fiscal boost worth $50 billion-75 billion. Congressional Democrats are working on a stimulus of temporary tax cuts and spending increases. The White House is said to be exploring a fiscal package.
The political appeal of a stimulus is easy to understand. It is an election year and Americans are feeling increasingly pinched. The economy has soared to the top of voters’ priorities; approval of Mr Bush’s handling of it has fallen to a record low; and one poll suggests that Americans are already gloomier than they were during the 2001 recession.
But does speedier action make economic sense? In a recent speech Mr Summers argued that America risked the worst downturn since the early 1980s. Failing to deal with this, he argued, would be far costlier than loosening policy too much to avert it. If overly loose monetary policy created “undue inflation pressures”, they could be countered at a “moment of much less financial peril”. A “timely”, “temporary” and “targeted” fiscal boost could complement more monetary easing without compromising America’s long-term budget health. This argument hinges on three questions: How vulnerable is the economy? What is the price of overdoing monetary easing? Will politicians design a sensible stimulus package? Each, on closer inspection, argues against rushing to action.
Cold-shower treatment
No one doubts that 2008 will be hard. The combination of a weakening labour market, slipping house prices, tighter credit and higher fuel costs will weigh on domestic spending. The price of oil hit $100 a barrel this week (see article). House prices have fallen by 5% from their peak and by all accounts have far further to go. A pessimistic survey of manufacturing published on January 2nd only deepened the gloom.
And yet, although tumbling house prices and a sharp credit contraction could indeed pull the economy into a noxious downward spiral, the evidence of such an economic disaster is, as yet, slim. The last reading of consumer spending, in November, was surprisingly strong. The stickiness of house prices suggests the drag on consumer spending will be long and grinding, not sudden and sharp. And it is worth remembering that slower domestic spending and higher saving is exactly what America needs to correct its current-account deficit.
Anyway, insuring against calamity can be costly. The last time the Federal Reserve slashed interest rates to shore up the economy, between 2001 and 2003, it sowed the seeds of today’s housing mess. Although a housing and credit collapse would be deflationary, pre-empting that risk too dramatically could be inflationary. Consumer prices are rising uncomfortably fast, and people’s expectations of future inflation, by some measures, have inched upwards. If central bankers allow inflation expectations to become unhinged, they will have a nasty, protracted problem on their hands. That is why the Fed’s measured pace of interest-rate cuts is prudent.
http://economist.com/opinion/displaystory.cfm?story_id=10430273
Peak oil — heh heh…
The oil price
Peak nationalism
Jan 3rd 2008
From The Economist print edition
Oil keeps getting more expensive—but not because it is running out
http://economist.com/opinion/displaystory.cfm?story_id=10430264
I cannot disagree with this arguement about peak oil, much of the bubbling crude does pose significant cost barriers to the current supply, but Canada has the pipeline to America, as does Alaska.
That said, a long position among a broad array of Energy stocks is currently in the portfolio, along with a rural house with access to water and a large garden that is getting underway.. the fruit trees will bear this summer…not much, but enough to keep me in pies.
Natural Gas is also important as the metro bus systems are moving to this strategy.
ITs important to have a broad outlook.
Im short the dollar.
Im short China.
Im long a basket of currencies.
Im long rural housing with water access.
Im long oil.
Im long natual gas.
Im extremely long short term treasuries….
I want to put some money to work, but the odds of just paying my current gasoline requirments in a long position in a dividend paying oil stock will have to suffice.
Im still bullish on commodities, gold in particular….no position in the precious as I have stepped off gold, you cant time the top.
Im about to get really short Commercial Real Estate…and APPLE.
You have a great portfolio diversification strategy — pretty much what I would do if I had money and the time on my hands to worry about it.
I shorted AAPL a couple of years ago, and from there, the stock more or less said, “Skuse me, while I kiss the sky.” I seem to have a propensity to get short too early. Maybe by the time I am an old geezer, I will slow down enough to get the timing just right
P.S. If AAPL stock were a volcano, there would be a mandatory evacuation order in effect.
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=AAPL&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=20&freq=2&startdate=&enddate=&hiddenTrue=&comp=Enter+Symbol%28s%29%3A&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013
Bank runs are outlawed in GB… Who loses and how?
Darling in UK banks shake-up
By George Parker and Delphine Strauss
Published: January 3 2008 22:01 | Last updated: January 3 2008 22:01
Sweeping powers to intervene in failing banks are to be given to the Financial Services Authority as part of a regulatory shake-up by Alistair Darling, chancellor of the Exchequer, to avoid a repeat of the Northern Rock crisis.
The new measures – which echo those in place in the US – would allow the FSA to seize and protect depositors’ cash when a bank gets into serious difficulty, heading off the risk of a run on the bank.
http://www.ft.com/cms/s/5b658f3c-ba3f-11dc-abcb-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F5b658f3c-ba3f-11dc-abcb-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
modern day bank runs occur at non-depository institutions.
the notion of not having money or access to same is the same myth as Y2K.
Borrowers: Victims or Accomplices? by Stephen Pizzo
http://www.smirkingchimp.com/thread/11893
Partners in subprime