The Process Has Started To Unlock Dollars At Every Turn
Some housing bubble news from Wall Street and Washington. Dow Jones Newswires, “Coast to coast, Lennar Corp’s potential buyers see different scenery, but they might encounter the same kitchen faucets. The nation’s second-largest home builder is whittling down options, seeing standardization and simplification as tools in a cost-cutting drive aimed at saving millions of dollars and surviving the housing crash. Other home builders are taking similar steps.”
“With margins razor thin and builder stocks in tatters - one index has them down more than 55% in the last year - saving money has gained urgency.”
“‘When you can raise prices every Monday morning, like it was during the boom time, it’s hard to get the organization’s attention on something as mundane as lowering cost,’ said Pulte CEO Richard J. Dugas Jr. ‘The whole process has started to unlock dollars at every turn.’”
Gannett News Service. “If you’d asked housing economist David Seiders at this time last year to forecast the real estate industry’s future, he would have told you to expect ‘a recovery year’ in 2008. ‘That outlook has been cut dramatically from what I was saying a year ago,’ Seiders, chief economist for the National Association of Home Builders, concedes.”
“An even more pessimistic economist, David Rosenberg at Merrill Lynch, goes so far as to warn, ‘Real estate pricing in general can expect to be in the doldrums through 2012.’”
“The biggest problem is the glut of homes for sale - more than 10 months’ worth. And about 2 million of those homes (about 2.6 percent) are vacant, with banks or builders trying to get them off their hands.”
“Meanwhile, many would-be buyers are having trouble qualifying for a loan. Half of senior loan officers surveyed by the Federal Reserve in October said they had tightened their standards from July.”
“‘A lot of (buyers) haven’t come to the realization that the subprime market no longer exists,’ said Ritch Workman of Workman Mortgage in Melbourne, Fla. ‘Mortgage brokers are turning away more and more borrowers.’”
The Pioneer Press. “Homebuyers beware - the noose is tightening on zero-down-payment home loans in the Twin Cities. With portions of the area now flagged as a declining market, lenders are curbing 100 percent financing to adhere to lending rules set by mortgage-buying giants Freddie Mac and Fannie Mae.”
“Lenders admit they now are more reluctant to approve zero-down loans for fear that they will get stuck with them. Dan Arrigoni, president of U.S. Bank Home Mortgage, estimates that about 40 percent of borrowers who qualified for no-money-down loans a year ago would get them today.”
“‘Now most of Fannie and Freddie’s underwriting is automated,’ Arrigoni said. ‘If it pops out to be a reject or a caution, that’s where both agencies say ‘Well, use your judgment.’ But if we use our judgment and they don’t like it, we have to buy it back.’”
The Salt Lake Tribune. “Zions Bancorporation lifted its forecast for write-downs linked to real estate collateralized debt obligations by 16 percent to $109 million in the quarter in a regulatory filing late Dec. 31.”
“The company, which announced a previous set of write-downs on Dec. 19, also identified a further $40 million in charges on securities purchased from Lockhart Funding LLC. Zions, which operates in 10 Western U.S. states, bailed out Lockhart by buying $840 million in assets at a loss as the investment vehicle has difficulty raising short-term debt known as commercial paper.”
“‘They never thought this would be much of a problem until very recently,’ Manuel Ramirez, senior VP of equity research at Keefe, Bruyette & Woods, said in an interview. ‘They’ve got quite a bit of exposure to real estate markets in a pretty challenging part of the country: California, Arizona, Nevada.’”
The Toledo Blade. “Huntington Bancshares Inc. said yesterday that ties to a subprime mortgage investment company will slice $276 million from fourth quarter profit.”
“Franklin Credit was a customer for 17 years of Sky Financial Corp., which Huntington acquired in July for $3.1 billion.”
“About three-fourths of Franklin Credit’s business involves buying home loans typically made by lenders who misplaced key documents or applied rules too loosely. The balance of its business is tied to making subprime loans to borrowers with relatively low credit scores.”
The Miami Herald. “An internal audit last March warned the State Board of Administration, which invests local government money, that it should have a risk management committee to monitor its investments.”
“The audit also listed Lehman Brothers as one of five large firms that the agency relied too heavily on when buying securities. Seven months later, the Local government Investment Pool sustained a run as some of its investments turned sour. More than half of the ailing investments were sold to the state by Lehman Brothers.”
“Meanwhile, as a growing number of Florida municipalities expressed anxiety over when they will be able to withdraw more money from the fund without a penalty, state board officials said at a meeting Thursday in Tallahassee.”
“At the meeting, Lee County Schools Superintendent James Browder urged the agency to provide more liquidity quickly. ‘I have people in my school district who are starting to ask the question, ‘Jim, What did you do with our money?’”
“State auditors, who have been directed to investigate what went wrong, are looking to hire an outside auditing firm and legal counsel.”
The St Petersburg Times. “Even as the State Board of Administration on Thursday tried to reassure investors about the future of its Local Government Investment Pool, problems deeper in the past came to light.”
“Last year a handful of…brokers sold the state’s money managers investments in mortgage-backed securities that quickly ran into trouble. Thursday, investors found out the withdrawal limit is expected to increase to 21 percent by the end of this month and about 26 percent by the end of February, but they did not get a promise of the full refund they are demanding.”
“‘The state of Florida absolutely needs to step up; this is a disaster,’ said Robert Wishner, deputy mayor of Sunrise.”
The Boston Globe. “Securities investigators for Secretary of State William F. Galvin have opened a probe of Merrill Lynch & Co.’s dealings with Springfield after the city lost nearly $13 million in investments that Galvin said were too risky for municipalities.”
“The investments, backed by home loans, plummeted in value amid the ongoing subprime mortgage disaster. Worth nearly $14 million last year, Springfield’s investment today is worth just $1.2 million.”
“‘We’re interested in the documents that exist, the e-mails and communication records,’ Galvin said by phone yesterday. ‘We want to know who got paid. Then we can start to unravel the question: How did the City of Springfield find itself in this predicament?’”
“Springfield officials have blamed Merrill Lynch, saying the financial firm improperly invested city funds in risky instruments. The Springfield Finance Control Board issued a statement yesterday saying it…’believes that Merrill Lynch can and should be held fully accountable for any potential losses.’”
“‘From what I know today, Merrill Lynch is accountable and responsible for this and will be obligated to fully pay the citizens and taxpayers of Springfield all the money involved here,’ said Chris Gabrieli, who joined the Springfield Finance Control Board as chairman in June.”
“Galvin said his office is investigating a similar case in Maine, involving a Quincy-based Merrill Lynch broker. He said his office is helping determine whether the broker advised a public retirement entity to invest $20 million in a fund that was later frozen.”
“‘These type of investments have been problematic, not just for cities and towns but across the board,’ Galvin said. ‘They’re often marketed as ‘like bonds,’ which have a connotation of being very secure, quality investments.’”
The New York Sun. “The number of class action lawsuits filed against Wall Street firms surged in the last year, fueled by the meltdown in the subprime mortgage market, according to new research published yesterday.”
“There was a 43% jump in the number of securities fraud class action lawsuits last year to 166 suits — 100 of which were filed after the mortgage crisis hit, the study by Stanford Law School and Cornerstone Research found.”
“‘I think we’re going to see more litigation coming out of the subprime crisis,’ a partner at law firm Bernstein Litowitz Berger & Grossmann, Gerald Silk, said.” “The finance sector led the way for class action suits, with 47 Wall Street firms sued in 2007, more than four times the number sued in 2006.”
“New York City itself has gotten into the lawsuit game, with the city’s retirement and pension funds for city workers filing lawsuits against mortgage lender Countrywide Financial Corp., claiming the lender misrepresented the risk of its mortgage-backed securities.”
“‘I think you’re going to continue to see impaired assets being written off by companies, and investors claiming that those writedowns should have been taken earlier, and that the valuations were not accurate when disclosed,’ Mr. Silk said.”
“He is representing New York-based publisher Unisystems Inc., which is suing State Street Corp. for investing its retirement funds in the risky mortgage market.”
The New York Post. “A shake-up at giant money manager State Street over its contaminated junk mortgage paper could unleash a new flood of lawsuits against Wall Street firms for peddling risky, subprime mortgage assets.”
“State Street - the world’s biggest manager and overseer of institutional money pools and trusts of the wealthy, in all totaling $2 trillion - yesterday said it fired asset management chief William Hunt, and set aside $618 million for an expected legal battle ahead.”
“Securities lawyer Jake Zamansky said investors are suing firms for ‘lack of disclosure about the risk of the subprime assets, and possible fraudulent sales presentation, calling them conservative when they weren’t.’”
From Bloomberg. “U.S. regulators, concerned brokerages may have sold clients money-losing securities tied to subprime mortgages, are seeking information about how the investments were marketed, a person familiar with the situation said.”
“The Financial Industry Regulatory Authority, which polices about 5,100 brokerages, sent letters Dec. 14 to more than a dozen firms that sell collateralized mortgage obligations, a type of security linked to home-loan payments, said the person, who declined to be identified because the inquiry isn’t public.”
“Mounting losses from securities tied to home loans are prompting regulators to examine how Wall Street firms valued and promoted the products. CMOs cut up payments from pools of home loans to create bonds that offer a variety of characteristics, known as tranches, based on income and risk.”
“Finra’s Web site warns that the products should be reserved for ’sophisticated investors’ who are ‘prepared to do a lot of homework.’”
“Finra and other U.S. regulators have opened a growing number of inquiries as they seek to understand the extent of Wall Street’s culpability behind investor losses on mortgage-backed securities.”
“The Securities and Exchange Commission is focusing on issues including how banks valued mortgage-backed securities, how promptly they disclosed losses and whether executives at lenders dumped shares before loan defaults surged.”
From Newsweek. “One of the nice things about being a billionaire, or a private-equity magnate, or the CEO of a gigantic bank is that you don’t fret about paying retail. If you see an object you desire—a plane, a mansion, a car, a suit—you don’t wait for it to go on sale. You just buy it.”
“But efforts to catch such falling knives depend on perfect timing….Today, several savvy financial operators who tried to catch falling knives in the formerly hot housing and credit sectors are walking around with huge gashes in their hands.”
“On Aug. 22, Bank of America decided things couldn’t get worse for Countrywide Financial, the massive mortgage firm whose stock had been halved since the beginning of the year. Bank of America boldly announced a $2 billion investment. In the months since then, Countrywide, stung by a deteriorating housing market, has fallen another 50 percent.”
“Bank of America, which is already licking its wounds from an ill-timed plunge into investment banking, is already out several hundred million dollars on its investment in Countrywide.”
“In the fall, Bear Stearns, the mortgage-dependent Wall Street firm that soared to dizzying heights as the credit market boomed only to crash back to earth, attracted an international cast of falling-knife catchers.”
“In September, Joseph Lewis, one of Britain’s wealthiest men, spent $860 million on a 7 percent stake in Bear, paying an average of about $107 per share, according to the Wall Street Journal. In December, he boosted his stake twice. Today, with Bear’s stock trading at close to $85, Lewis has turned his massive fortune into something slightly smaller.”
“In October, Bear agreed to a complicated deal with CITIC Securities, in which the Chinese firm would invest $1 billion in Bear Stearns for a stake worth at least 6 percent. Since then, Bear’s stock has fallen about 20 percent.”
“On Dec. 10, Warburg Pincus—a very sharp private-equity firm—agreed to invest up to $1 billion in struggling bond insurer MBIA, which had lost 55 percent of its value in the previous two months. Within days, as MBIA dealt with questions about its exposure to collateralized debt obligations and other exotica, the company’s stock plummeted.”
“In less than two weeks, Warburg lost nearly 30 percent on its investment in the shares, or about $183 million.”
“Of course, it’s early days, and these investments could well turn out to be genius moves. The housing bubble popped, but between October 2006 and October 2007, according to the Case-Shiller index, housing prices fell only 6.1 percent. Housing prices may need to fall 30 percent or 40 percent before they bottom out, but it will take years—rather than months—for that process to play out.”
“And as the market continues to slump, companies whose business models rest on making mortgages—and on buying, selling, and insuring securities based on mortgages—may face a string of losses.”
“With margins razor thin and builder stocks in tatters - one index has them down more than 55% in the last year - saving money has gained urgency.”
And not just in housing. Bought a package of six socks yesterday. Three had holes. I think we are going to see a serious reduction in quality as a hidden price increase going forward.
Already, the guys selling food from carts are shifting for the displayed price including sales tax to excluding sales tax. They don’t like to do that, because it means handing out lots of change, but its a way to sneak through at 8.375% price increase.
WTEconomist, you might find this quote from an article I read on theTRUMPET.com interesting:
America is facing deteriorating economic conditions, and much of it has to do with dishonesty—homebuyers inflating income statements, realtors pushing sales, lenders abrogating lending standards, credit ratings agencies knowingly overvaluing risky subprime mortgages, and banks marketing overvalued subprime mortgages as safe investments to unsuspecting investors. America’s boiler room is running on the fumes of fraud and greed, and you can’t run on fumes for long.
The National Association of Realtors’ thermometer still indicates that everything is fine, the worst is over, and America has nothing to worry about. But should you rely on what a thermometer is telling you, or what is happening in the boiler room?
Bought a package of six socks yesterday. Three had holes.
Same thing happened to me with two brand new pairs of Calvin Klein socks. They didn’t come with holes, but they were ruined after the first wash. I’ve been noticing this deterioration in quality for some time and it drives me nuts because it’s the hidden inflation that no one is accounting for.
We just noticed this sort of chiseling again the other day: bought some cardboard file boxes using the same part number as some we had that we liked, because they were sturdy and strong. The new ones arrived with the same part number printed on them, but with cardboard half as thick and the extra fold-overs missing.
Oh, and they were more expensive as well. But I’ll bet the government inflation statistics would count them as an improved product because they use less paper. Nothing to see here; move along, move along.
You are so right. Received a couple of Christmas presents that were damaged (one from Clinique via Lord & Taylor, one from Burt’s Bees). Both came in zippered cosmetics bags and in both cases the zippers were broken.
“Bought a package of six socks yesterday. Three had holes. I think we are going to see a serious reduction in quality as a hidden price increase going forward.”
I just paid $250 for some very nice USA-made boots. Had to order online, stores don’t carry this stuff anymore. Quality is too expensive these days.
You guys are not alone in seeing consumer product quality suffer as pennies are pinched even tighter.
I had to buy a plastic shelving unit from Lowes the other week (24×36″ 5 shelves) Total crap compared to the much nicer units I bought 2 and 3 years ago. Cheaper materials, easily warped, no small feet to stand the unit on, simple soft tubes instead of hard, shaped poles to connect the shelves.
I would be very afraid to buy a new house built this year (or until the correction is over). Builders were bad enough about cutting corners during the past few years, what are they going to do now to be even cheaper?
——————
One more thing: Counterfeit Consumer goods. A recent issue of Consumer Reports had a brief discussion of counterfeit consumer goods. I had no idea the extent of items being knocked off: New Balance Shoes? sure. One Touch Blood Sugar Test Strips? News to me.
Sadly, I don’t see this problem being solved anytime soon: besides greed, etc, various economic forces will keep the market open to counterfeit goods for a long time.
RE: “An even more pessimistic economist, David Rosenberg at Merrill Lynch, goes so far as to warn, ‘Real estate pricing in general can expect to be in the doldrums through 2012.’”
My, my…at least we’re NOW we are seeing some realistic prognastications.
Lostsa pain comin’ in the next 4 years.
Good fookin’ luck to the next Prez.
Been saying 2013 is bottom for over a year. Nice to see MSM catching up…
Just in time for the end of time, Mayan style.
http://en.wikipedia.org/wiki/2012
Aladinsane, are you a video editor? I know a few and you remind me very much of each of them. I have to be close… you work in media, yes?
Good fookin’ luck to the next Prez.
I have no idea what you are talking about. Our current president has just said:
http://tinyurl.com/23r5ty
U.S. financial markets are “strong and solid,” President Bush said Friday….
So take your negativity elsewhere, you jealous bitter renter you.
“With impressive proof on all sides of magnificent progress, no one can rightly deny the fundamental correctness of our economic system.” - Herbert Hoover
RE: So take your negativity elsewhere, you jealous bitter renter you.
LMAO…After 30 years in a SFDH, I relish my status as a lowly divorced RENTER!
RENT = FREEDOM
Just had to get a permit to burn a brush pile for my elderly mother. Town stung me for a $10.00 fee.
Absolutely fookin’ unreal. $10 to burn a pile of sticks.
Per flush toilet use charges right around the corner.
Per flush toilet use charges right around the corner.
Stop giving them ideas.
This is going to be a reality for the Inland Empire. Those treatment agencies are in serious debt after building a system they thought was going to handle shite flows equal to Capital Hill.
Negative growth in connection fees for years to come and non-paying empty homes won’t pay your bonds and state revolving loans.
Mandatory pay toilets for all residentials in Perris, CA by 2010.
RE: Mandatory pay toilets for all residentials in Perris, CA by 2010.
OH, sh*t! (with tears in my eyes).
Man, sometimes this blog is better than Comedy Central, although it’s no joke for those unfortunates in Perris, Cali.
Could be worse though…Consider a Forest Depletion Tax on each sheet of toilet paper used with a surveillance monitor in the bathroom to record usage.
Can’t spare a square.
Heck of a job Benny..
‘Real estate pricing in general can expect to be in the doldrums through 2012.’”
When compared to this time last year where it was wait until after the superbowl, we’ve come a long waaaaaaaaaay baby!
Hi folks,
I am not nearly as fiscally sophisticated as many of you, but I do have a question that I hope will lead to an interesting discussion.
Back in the 1970’s, we had “stagflation” with inflation rates that were very high. From what I am reading, it appears that our economy is heading for that same scenario. It was considered a smart strategy in the 1970’s to not save (even though you could get 16% CD rates) but to get into as much debt as possible, because you will be repaying your loans or whatever with much cheaper dollars. This assumes that your interest rates on your loans were fixed and lower than inflation (such as a fixed mortgage rate). This is why/when I bought my first home.
Would this not be a wise strategy to follow if inflation keeps increasing and you cannot keep up with it through playing the market or socking your $$ away in CD’s?
Thanks for any comments you may have
No, no, no……you’re not paying attention. The new way is to go in debt as deeply as you possibly can and then go “oops - my bad”, then walk away and all is forgiven. After all, it was those nasty lenders that got you in all that trouble in the first place. (vehement sarcasm off)
I’m not really sure what you question is. If it is should you fix any variable rate debt you may have via interest rate swaps or other hedging tools while interest rates are low, the answer is yes. If the question is whether you should max out on debt while we are heading into a recession and you may not have a job next year, I think you already know the answer. Same thing with buying a home. Based on historical ratios not only have home prices gone up to eliminate the benefits of buying now to lock in a low interest rate, they have far exceeded income and rents more than any other period in history, and will likely fall. A simple example is that only a fool buys a 300k house for 600k to take advantage of low rates. You are much better off paying low principal in a high interest rate environment. There a dozens of ways to take advantage of falling interest rates after the purchase. You, however, are stuck with your prinicipal amount until you pay it off.
Indeed. I re-fi’d in ‘99 into a fixed 15-year loan at a notch below 9.0%. Chased the dropping interests all the way to 5.4%. While my monthly payments stayed the same, the interest savings is accounted by eliminating future payments - about $50,000 worth. I see it as HELOCing bear-style.
i like that bear-HELOC’ing. Good plan.
You are now the Fed’s worst nightmare; you are talking about front-running inflation. Yes, people will try to get rid of their money as quickly as possible as inflation rises, thereby creating more inflation. It’s a feedback loop.
Beware the tricks government will use to try to keep you locked in their system. They will try to sell you TIPS, saying they are indexed to inflation; don’t believe it. Historically gold is the ultimate inflation protection and I see no reason why that should change. Also consider commodities in general. Real estate has had its’ run. IMO it won’t keep up with inflation this time.
28% collectables tax though … as high as the dividend tax …
Should have played GLD in the Roth account, oh well.
I still have some physical. Insurance.
When inflation is high, it sometimes makes sense to take on a lot of debt. I seem to remember in the early 80’s the inflation rate being higher than credit card rates.
The difference between now and the 1970’s is that you could get 16% on a CD. Today you’re lucky to get 4-5%. Of course on the other hand loan rates are 5-6% instead of 16-18%. Maybe it’s all comparable, but I can tell you we lived better in the 70’s with more money left over every pay than now, and back then we were paying rent & we don’t even have a house payment now. Food now has climbed drastically in the last several years and I’m talking grocery store, not restaurant. I can’t believe the percentage of income we pay now compared to years ago. Plus the sizes are all smaller and you have to buy even more.
I don’t think 70s style Stagflation is what we are facing today. The reason for this I think is because job outsourcing is going to prevent any real wage growth from happening as it did in the 70’s and 80’s to wages. Prices of commodities such as food and energy and existing debt are already putting a squeeze on people’s budgets. So I think housing prices are going to have to come down drastically much further to even begin to compensate. Maybe more likely it will result in having two classes of people, the uber rich and then those who are the hollowed out “middle class” and everyone below that. What a mess it looks like we are facing.
“…prevent any real wage growth from happening as it did in the 70’s and 80’s to wages.”
Thank you, it still seems alot of folks out there think their wages will follow gas and milk…sorry Charlie, put the acrylic goldfish shoes back in the closet. (sans fish)
RE: Uber rich…from Jim Kunstler
In any case, whoever ends up in the oval office will preside over one king-hell of a clusterfuck. In the immortal words of TV’s erstwhile “Mr. T,” I pity da fool who gets elected into this mess. There will be a whole continent full of bankrupt, re-poed, and idle former WalMart shoppers, many of them with half of their skin tattooed and many of that bunch all revved up to “roll heavy and gun up” against the folks who screwed them.
Which leads me to my penultimate observation of the moment: 2008 will be the year that celebrity wealth goes into hiding. A land full of people crying into their foreclosure notices will take a dim view of the Donald Trumps and P. Diddys luxuriating out there and may come looking for scalps — though in the case of Mr. Trump they’ll be sorry they woke up the wolverine that lives on his head. Basically, though, I’m not kidding. Conspicuous displays of wealth will be so “out” that Mr. Diddy might take to club-hopping in a 1999 Mazda. Lindsay Lohan and Paris Hilton may have to double-up living in a minuteman missile silo to keep the angry mobs of fans-turned-vengeful-berserkers away.
hd74man,
Though I wish your scenario would come true, I seriously doubt it. Turning against the corrupt, rich and powerful is simply not in the nature of the average Amerikan today. It would require large numbers of the beer-and-TV (bread & circuses) addled public to wake up and recognize what’s being done to them and by whom. Instead, they will keep tuning into Fox, Kudlow, Rush & Co. and blame “them Lib’rals”, gays, A-rabs, or Darwinists. More likely, if things get really desperate, they will support even more extreme “Patriot Act” or “Bankruptcy reform” measures and welcome yet more government intrusions into their private lives and fewer civil liberties in order to buy so-called “safety”.
“Most men with nothing would rather protect the possibility of becoming rich than face the reality of being poor.”
–1776 (play)
RE: Turning against the corrupt, rich and powerful is simply not in the nature of the average Amerikan today.
HARM~
When I watch those lemming dolts with their foolish signs standing out in the rain wavin’ to the NBC talking heads seated in the warm comfy NYC studio of the “Today’s Show”…I know you are right.
I seem to recall that we went through a period where conspicuous consumption was “out” as recently as the early 1990s - that being a reaction to the recession and backlash against the “greed is good” yuppies / 80s. Anyone remember the almost-daily announcements of corporate layoffs of “middle managers”?
As I recall though, it didn’t amount to that big of a deal over the long run. Most people who hadn’t profited up to that point had the attitude where they talked a good game about giving up conspicuous consumption, ‘cocooning’ and other stuff, all the while keeping their eye on the door so thew could get their turn/chance at sharing in economic largess that they deserved. Soon enough though, the internet boom came along, and our collective attentions turned to the ‘new economy’ and you all know the rest.
Many of the really rich are doing what they have always done - keeping a low profile from the public, lest the public clamor to the politicians about the “unfairness” of someone else being better off than them , and the well-meaning honest politicians who might see the moral right in removing more of their wealth from them.
I agree that globalization will keep the real cause of inflation down (wages) also the depreciation of real estate and therefore housing costs.
I disagree that celebrity lifestyles will go low key. The 1930’s was the decade of movie screen decadence. People, for some reason, love to live their life thru others. Can’t understand that mentality myself, just like I can’t understand our collective debtor mentality.
Jubak at msn sees more ‘flation’ than ’stag’ in stagflation. The debt as a put on the dollar hasn’t been bad if you can invest in the right area. The fast increase in the money supply lately is sort of surprising, it seemed the bad debts would dry up liquidity faster, guess I just don’t get it. Leveraging up and hoping dollars will be cheaper down the road is too risky for me though.
How does money get into the hands of the people to fuel inflation? They have had to borrow it seems. So a contraction of borrowing due to an already debt ridden world of pain, and the extreme loss of re-equity to borrow against will really result in alot less money out on the streets. (main street, not wall street). There will be inflation in commodites such as fuel, food etc… but deflation in everything else that is non essential. Remember that trillions of re-equity dollars that people thought they had or could retire on are presently and will continue to evaporate. The end result will be a lower standard of living for most. Thank wall street and greenspan for that.
Some in congress want tax breaks or credits. Ie handing out cash to everyone. This of course won’t solve the problem because if they pass such a bill, by the time people receive the dollars inflation will have made the whole manuever meaningless. If the economy tanks enough I’m still expecting a period of deflation, in consumer items and even oil, but don’t blink it won’t last long. Housing has only one direction to go.
After reading “The World is Flat” 2 years I have gained a greater appreciation of the global market. Over the last several years, I believe the Increase in US dollars have left the US, to places like China and other national governments. We printed money, and spent it on imported items so the end state was the dollars left the US. In essence we have been exporting our inflation. These countries held the US dollar- due to it was seen as a stable currency and its government had the most perceived transparency in its markets. This perceived transparency and stability is what held the US dollars value high relative to other currencies. Now ,with the lack of transparency in the CDO, SIV and other financial products that have been packaged lately, it is losing its value. As it loses its value other countries are dumping the dollars back into the US (soverign wealth funds) or into the global currency market (increase supply with less demand)and thus we are on the backside of the curve. Deflation of the dollar as a currency equals inflation for the US citizen (I mean consumer). As long as the dollar continues to deflate we will see an uptick in inflation for those items that are purchased outside the US borders. All our imports will be more expensive. Oil is imported and thus items that rely on imported oil will see inflation if they are necessities. Food is dependant upon energy thus food prices has and will continue to increase. Those assets that are overvalued, homes, SUV’s, and the consumer discretionary items will deflate due to their being less excess money in J6P wallet to purchase such luxuries.
Please respond - I am looking for holes in my theory
i’m with u. exported debt inflation.
I definitely agree with a lot of your points, and had trouble finding holes. I’d add that the way food is currently produced is very oil-dependent (fertilizer is petroleum derived), so food prices could increase even faster.
At the same time, a lower dollar, esp. if coupled with low interest rates, is going to make foreign direct investment in the US more attractive. The US is already one of the largest recipients of FDI in the world. But that’s the only bright spot I can come up with at the moment, and none of my international business professors know what’s going to happen next.
Just my opinion..
There is direct foreign investment because we are the biggest market in the world, and they are using it as a hedge against any action by the government (federal, state, local) to impose tariffs, taxes, whatever.
If the U.S. market tanks, that money will go away. The only foreign investment will be to buy out publicly owned companies that have stuff to export (oil companies, food, aerospace)
The real question is not whether interest rates will rise or fall, but how the principal price falls within historical norms and which expected changes in interest rates, if any, have already factored into the principal price. You either have to be more accurate than the market with respect to your estimate of which way interest rates will move or possess cash during a period in which cash is supreme. Of course, this just speaks to taking advantage of changes in interest rates and does not relate to other factors that may influence the bubblicousness of various asset classifications. Also I note it is much easier to take advantage of interest rates in high interest rate environments, the only game you can play in low interest rate environments is to fix.
I think in the ’70s and ’80s we had Wage Inflation along with asset/commodity/general price inflation. This time around we may very well have general price inflation without Wage Inflation. Adding fixed-rate debt only makes sense if your salary rises. If you loose your job, or your salary stagnates, then it’s a terrible idea.
Homes back then were appreciating at a much lower rate than what was being paid on the 16% CD. Banks on the other hand for a mortgage, were charging double digit interest rates since the bank was paying 16%. That was about 1979 when interest rates on CD’s were at 16%.
Do the math, you will certainly find your answer. Until then I will give you a hint:
Cash is king for the consumer and banks want people to be locked into debt due to a steady stream of revenue from interest. In todays market, I am making money on my CD’s while others holding an asset with a mortgage are losing money on that house that is a liability due to interest, taxes, insurance, maintenance and declining values.
Thanks to all for your comments. I learned quite a bit.
Where I lived in the late 1970’s was Reno, and housing inflation was just as strong then and there as it has been for the past 5 years. The house I bought doubled in price in two years. The cause of this was a large number of new large casinos being built in the area. This bubble also burst in the next couple of years. But, i sold at the peak, even though I had to partially be the bank for the buyers (I had to carry the paper on a second mortgage for them). This may come back as a strategy if the difficulty in getting a loan continues.
“The biggest problem is the glut of homes for sale - more than 10 months’ worth. And about 2 million of those homes (about 2.6 percent) are vacant, with banks or builders trying to get them off their hands.”
No no, my friend - 2.6% of all homes are vacant - including homes not for sale. The percentage of for-sale homes that are vacant is much, much higher than 2.6%. (no clue - but guessing 20% ish?)
According to the Ada County MLS numbers (Boise, ID)- 1296 out of 4587 homes on the market are new construction. Assuming a home would have to be vacatant to be classifies this way, that makes for a vacancy of 28%.
The Town I live in has 1,230 homes listed on the MLS, with 390 classified as “new and never occuppied”- That means at least 32% of the homes are vacant.
And the figures you are providing are the minimum. THere are also a huge number of vacant existing homes for sale. It wouldn’t surprise me if the close to half of all the worst bubble-market listings are vacant.
A vacant home is by definition not a home. It is just a house.
In fact, they are all houses, since ‘home’ is a human emotional concept which may or may not identify with a dwelling.
Knowing of this sense of bonding, real estate people like to call houses ‘homes.’
Yeah, I thought that math looked funny to. If 2 million is 2.6% of all homes for sale, then were talking roughly 80m homes for sale. That would be a bit more than 10 months worth dontcha think?
RE: The biggest problem is the glut of homes for sale - more than 10 months’ worth
The idiot home builders have gotten themselves into the same mess as the Big 3 Auto mfg’ers did when gaz hit the roof in the 70’s.
They’ve constructed acres of McMansion energy hogs and targets for the property taxman when demographics pointed towards legions of boomers downsizing their lifestyles.
And now they’re left holdin’ the obsolescence bag.
Whatta mega screw-up.
But it’s one thing to fire-sale a gas-guzzler Detroit-a-Saurus…
Quite another think to liquidate a 5000SF vinyl, glue, and chipboard white elephant.
Thats an excellent analogy.
But I’m a 40something with the measles, so don’t listen to me.
You could be on your death bed and still know more about this stuff than a lot of us, me included.
If 57 is your birth year then wouldn’t that make you Forty ten?
She counts in the hexadecimal form.
No. It’s a lucky number, not a birthdate.
Hm, I’m not familiar with that position. Is it like a 69?
“‘I think we’re going to see more litigation coming out of the subprime crisis,’ a partner at law firm Bernstein Litowitz Berger & Grossmann, Gerald Silk, said.” “The finance sector led the way for class action suits, with 47 Wall Street firms sued in 2007, more than four times the number sued in 2006.”
what a shocking development
How far would a lawsuit like this go? Don’t these finance guys sign the same type of “This invesment many lose value, please check the prospectus etc” statements that individual investors do?
And is anybody suing Moody’s for rating this crap? What about the banks (like WaMu) who booked full amort profit on the neg-ams? IMO that’s a big reason for Moody’s ratings blunders.
seems like an issue with gaap. It bills all events as equally likely. not so.
“Springfield officials have blamed Merrill Lynch, saying the financial firm improperly invested city funds in risky instruments. The Springfield Finance Control Board issued a statement yesterday saying it…’believes that Merrill Lynch can and should be held fully accountable for any potential losses.’”
“‘From what I know today, Merrill Lynch is accountable and responsible for this and will be obligated to fully pay the citizens and taxpayers of Springfield all the money involved here,’ said Chris Gabrieli, who joined the Springfield Finance Control Board as chairman in June.”
Investing is always “at your own risk” until its your money. These funds took a risk which they thought was low risk. They miscalculated and lost. Too bad. That doesn’t mean they have a law suit. I don’t see these folks helping the little guy when he gets ’scalped’ by brokers and other financial folks lossing their life savings. Then its always ‘buyer beware’.
Here in Ohio we are not allowed to invest city, county or school district money in securites and stocks. We have to stick with CD’s. We had our county treasurer invest in securities about 10 years ago, lost a ton of money and he ended up with 7 years in prison for illegal investments along with his son. The treasurer died in prison and the son was released about 3 years ago. Now retirement funds are not regulated, so they can invest in anything. Like the teachers retirement was heavily into Enron and lost a ton of money. Now they are regulated as to how much of a percentage can be invested in any one category.
I think its disgusting they would even considering suing unless there was fraud involved. Let’s think back to Economics 101, you are given two choices to invest your money: a very secure way with a lower interest rate, or a more riskier way with a higher interest rate. Just cause you got greedy and lost doesnt give you a right to bitch. The safer alternatives, accompanied with lower interest rates, existed. You wanted to be big boys. Now take your beating like a man and shut up about it.
More people need to start their day with daily affirmations.
“It was my fault. I got greedy. I didnt do my due diligence. I accept complete responsibility for my actions and hope to learn from them. I will try my hardest to make things right again and not ask others to bail me out.”
But that isn’t the (current) American way…..
Hi my name is _____ I am a Greedaholic!!!
The real criteria is: money lost times likelihood of winning plus cost to defend (often large) discounted by the value of certainty adjusted by the ability to collect equals the value of the lawsuit. The first thing you look at is the ability to collect. If that is there, a big loss, even with a small likelihood of winning can equal a big settlement number.
Yes, and Merrill is easy to villianfy. Mention Orange County a few times and watch the settlement numbers rise. They are already trying to play the media. What bastards.
Investing is always “at your own risk” until its your money. These funds took a risk which they thought was low risk. They miscalculated and lost. Too bad. That doesn’t mean they have a law suit.
It most certainly does if they were misrepresenting the client by informing them they were purchasing low risk investments that turned out to be high risk investments. It would be like being told your money would be in a safe CD, but instead they put it into Enron and Worldcom.
I do not know the facts of this particular case, but many ppl tend to focus on higher rates and less on risk disclosure. If they were getting a higher rate of interest then they were put on notice there was higher risk. The extent of risk, however, is an issue I can’t answer. I was involved with the tech bubble burst lawsuits, pure freaking bs. 90% ignorant ppl looking for a handout to compensate them for their own mistakes.
Follow the dollar. The lawsuits always do.
I got bumped from my Lennar short, made 11% in 4 days.
With teh puts I’ve got, LEN, MER, SPY, BBY; this is the best day of the year, similar to the day last Feb when FMT went bust.
OT anyone buying any stocks ?
many of my can’t get this low limits just got that low !
Yeah, I am.
We haven’t had a Black Monday since Black Monday, don’t forget.
Maybe it’s different this time
Tx, S&P hovering circa 1420. How much support do you see? What do you see as a breakout low 1390?
I’m personally still waiting for Dow 11,500…. just like I have been since about this time last year. So, I wouldn’t put much stock in my words. I think 11,500 would start a trap rally for a month or three, though before bottoming back down to 10,500. If we break below 10,000 I’m bunkering up.
FWIW - I sold gold stocks and bought DUG (short energy) yesterday afternoon but am buying more MSFT this afternoon. Nothing will hold up into a full-on capitulation, but the risk-reward of being long MSFT going into earnings looks too compelling to me.
Yes. That’s my fave stock right now too. That and BIDU
Take it from an ex-blue badge, MSFT is not as strong as it appears.
We’ll see, ex-. Personally I would say it doesn’t appear very strong, which is why I like it. They hit a nice double last report and if they can’t knock the cover off the ball this report I’ll bail.
Here’s my take: They seem to have everything going their way - including the underreported fact that they are finally gaining big market share against pirated operating systems in China and other Asian countries. My theory is that actually having a genuine registered copy of software is like smoking - once a country gets to a certain level of income it goes up dramatically.
On the next up leg (there will be one) sometime during earnings I see people swapping out of the high-fliers like AAPL into MSFT, because MSFT is still trading like a DELL or INTC when it is finally spreading its wings and growing faster than its P/E, which is big in a low-interest rate environment. And unlike other behemoths like GE, no mortgages in closet.
Problem with MSFT is that it’s eminently dumpable in downdrafts because people aren’t that worried about it getting away on the upside. But all in all, a good long against some other short, if nothing else.
many of my can’t get this low limits just got that low !
Usually I can appreciate the unique poetry of flat’s posts, but I confess this one is beyond me.
Means he put in joke bids and they got hit.
*think* *think* *think*
*ding*
Oh I see. Flat lowballed his lowballs and is shocked they were accepted, and it’s not the “shocked, shocked” shocked either.
this is an awesome selloff, especially in the nasdaq. when the sheep run, they really run!
You speak “Flatffplan”? You have been on this blog way too long! Now we know who to call when we need a translator. LOL.
When I see the nick and the 2 to 3 lines of text with no punctuation, I just skip over it. My brain can’t do those gymnastics.
Little bit of QLD
BiM is buying today and always.
““The biggest problem is the glut of homes for sale - more than 10 months’ worth. And about 2 million of those homes (about 2.6 percent) are vacant, with banks or builders trying to get them off their hands.””
Think about that fact in connection with a couple of other major points: The rate of homeownership is at an unprecedented, and unsustainable, high level, elevated by stupid lending practices that are gone and won’t be coming back for a generation. The homeownership rate will be far more likely to fall than to rise in coming years.
Even with homeownership at historic high levels, there are still 2 million homes sitting vacant. The American population isn’t growing all that fast; to the extent it’s growing at all, it’s a function of immigration of low-skilled, low-income people — not prime homebuying candidates. So in order to absorb the vacant housing inventory, the homeownership rate would actually have to increase from its already elevated level.
What factor could possibly drive homeownership rates higher from where they are now?
“Gurus”:
Some guy I know who bought a house in Frisco, TX circa March 2007. Excellent neighbourhood, schools, job market. Low commute time due to North Dallas Tollway. Median household income in Frisco approx $90k pa. Easily qualified for a
“‘They never thought this would be much of a problem until very recently,’ Manuel Ramirez, senior VP of equity research at Keefe, Bruyette & Woods, said in an interview. ‘They’ve got quite a bit of exposure to real estate markets in a pretty challenging part of the country: California, Arizona, Nevada.’”
No problemo, it’s just a little Axis of Evil, economically.
Consumer recession coming?
http://www.thestreet.com/s/apple-supplier-sees-cutbacks/newsanalysis/hardware/10397099.html?puc=_tscfoc
Maybe people figured out that a 30gig hard drive is big enough- the 160gig model was overkill.
On a more serious note- I’ve been waiting a long time to see consumer spending start to slow down. The time has come where people are thinking twice about where their money is going and the $300 ipod may not be a priority.
I’m not sure if people are thinking twice about where their money is going or if they’ve simply exhausted every credit source they had available.
Nobody takes granite for granted, anymore.
“Coast to coast, Lennar Corp’s potential buyers see different scenery, but they might encounter the same kitchen faucets. The nation’s second-largest home builder is whittling down options, seeing standardization and simplification as tools in a cost-cutting drive aimed at saving millions of dollars and surviving the housing crash. Other home builders are taking similar steps.”
“With margins razor thin and builder stocks in tatters - one index has them down more than 55% in the last year - saving money has gained urgency.”
I’d be worried more about what they’ve cut of of the house that you can’t see. Builders are notorious for cutting what’s behind the walls in bad financial times.
I am already unwilling to purchase any home built since 2000 because of the shoddy workmanship. Can it really get lower?
Yes. Materials can get shoddier.
RE: Yes. Materials can get shoddier.
But there’s nothin’ quite like missing the studs with the drywall nailgun and havin’ your interior walls start collapsing
after you builder goes BK.
Since my other comment was not posted I will try again. North Dallas market has awesome new or nearly new homes (e.g. Frisco) for under $70 / sqft. Job market and local income in line with prices. WHAT BUBBLE?? Get out of crappy CALI.
Oh, yeah, those are lovely. Not. They are out in the middle of nowhere, albeit in the bankruptcy capital of Tx. and would blow over in a stiff breeze
The job market sucks here.
I’d put a bullet in my head before I’d live in Frisco
You get what you pay for. Same house 4/5 times cost in CALI. Maybe Austin is more to your taste?
All I am saying is get out of CA while the getting is good. Salaries 10-20% higher should mean houses 10-20% higher.
Job market is very solid in Dallas.
Yeah, but you’ll be in Texas. I think I’ll stay in Cali, thank you very much.
Move to Texas for 5 years save all your money then buy a post-crash CALI home for cash.
Bulls**t.
This dude sounds like one of those DFW scamsters that populate the SDCIA board trying to find stupid California money.
I think that well is empty, dude.
Boy. I have had the measles twice.
But I was never this testy. hehe
I had German measles twice , reubella sp?
What kind did you get?
No, it makes you a suspect, i.e., someone who has an interest in selling houses in this hellhole.
Are you on crack? Dallas home price appreciation has trailed inflation for decades. Somewhat the opposite of what has happend recently in CA.
Ben, can you zitz this troll?
I’m just wondering what job market you’re talking about in Dallas. If you’re a lawyer, this town sucks. Then again, being a lawyer sucks.
It’s not your opinion, it’s your zeal, that makes you suspect.
Actually the high tech and telecom markets. Exactly the kind of jobs to lure away the (supposedly) talented Silicon Valley boys.
Yeah tell that to all the brokedicks who still haven’t recovered from the telecom bust.
Also, the only places where Dallas price appreciation has trailed inflation are in tract developments in the ‘burbs. All you’re new builds and rehabs close to downtown have gone from $100/sqft to well over $200/sqft over the last couple of years and the condos are even more ridiculous. Yeah, it isn’t Cali, but maybe we’re just a tad bit less insane around here. Just a tad bit.
I think you’d find the SDCIA more to your liking. Of course, other Dallas scammers have already staked out their territory there.
“It’s not your opinion, it’s your zeal, that makes you suspect.”
Or the fact you’re not complying with the groupthink obvious in this little clique of posters. Good for you, I say.
Only one problem. Hire people from California and you’ll have to deal with the suicides when they find out what they’ve signed up for.
I personally know of the local software development market pool in Dallas because I hire from it all the time. There is a major dearth of talent here. Senior people are even harder to find.
Check out monster.com for senior staff software engineers and manager jobs in Dallas if you don’t believe me. 10-20% lower salary than CA with 400-500% lower housing costs. Not to mention gas, food and all the other CA taxes out there and soon to come to cover the tax shortfalls. I work in San Francisco 1-2 weeks per month and I can see it happening.
I wouldn’t believe all of those jobs on Monster. I have found that it runs 1 actual job & 100 head hunters posting ads to fill that same 1 job. I also wouldn’t believe that the jobs actually pay 10-20% less than California jobs. Its all a bate and switch.
The supply vastly out numbers the demand for software people in the DFW area. Don’t believe anyone who claims that there is a shortage.
can anything be 400% less than anything else?
RE: brokedicks
LMAO…atta girl, TX.
Frisco is on North Dallas Tollway. Middle of nowhere? 100,000+ people at latest count. One of the fastest growing cities in US. Median household income $90k+.
Cali real estate is like PETS.COM. TAKE THAT TO THE BANK. The stupid puppet was a flipper in Oakland lol.
Middle of nowhere if you want to see anything other than a boatload of white trash posers, strip centers and Hummers.
and just check out the docket in the E.D. Tx bankruptcy courts.
It’s the OC without the beach, mountains or money.
And I thought all those mullet-heads were clearing some really big money, what with the lower cost of living, cheap housing and plentiful job market. I didn’t realize they were all one paycheck from BK.
Whatever you say, Bunky. Houses in DFW are not cheap and people are in debt up to their asses with consumer crap. Dats da fax whether you like it or not.
Begone. You’re harshing my buzz.
Begone. You’re harshing my buzz.
Your my hero txchick57! Here is the final score of your game with these idiots:
txchick57 100 idiot bloggers 0
Texas is a funny state…
Those that live there think highly of it, most everybody else is nonplussed
about the place.
I’ve been here since the early 80’s - never really been all that jazzed about Big “D”. I’m just too darn lazy to move - and, I can’t afford to live in California on a six figure salary. Oh yeah, and I’m basically anti-social.
Ditto. I’ve been here since the late 80s and did live in California. I wish sometimes we’d never left.
You can afford to live in Calif on six figures, many of us do quite happily with less, but we do without nannies, housekeepers, gardners and new cars. There’s an underground collective of unspoiled Californians at a neighbhood near you.
Make that a large underground collective of unspoiled Californians at a neighborhood near you.
Those that live there think highly of it, most everybody else is nonplussed about the place.
California is a funny state…
California is most definitely a funny state, but i’m not pleading with Texans to spend 5 times what their house is worth, and hightail it over here.
The “Economic Iron Curtain” keeps them deep in the heart of.
Except those of use who were born there, were stuck there for 18 years (until high school graduation), then fled. My mantra: “I’ve done my time in Texas.”
“Those that live there think highly of it, most everybody else is nonplussed
about the place.”
“If I owned hell and Texas I’d rent out Texas and live in hell” — General Sheridan
I did two years in Round Rock and didn’t like it much — flat, ugly, weedy/scrubby landscape, shallow plastic suburban living-death culture, trashy people, bible-thumping creationists bullying the school district.
I visited Dallas once — the most ugly, soul-sucking metropolis I’ve ever been to.
Maybe Texas sucks, or maybe living in coastal CA and Australia has spoiled me.
I visited Dallas once — the most ugly, soul-sucking metropolis I’ve ever been to.
Do you ever have that right!
Wow, actually lots of people do f**k with Texas!
I knew a guy who owns one of those hair restoration (a-la Rogaine) companies in Texas, he says the place is full of dickheads. Not helping is the fact that he is an orthodox jew, not sure why the hell he lives there.
However, I must say Austin is cool, in the best sense of the word. If Texas was like Austin, it’d be okay.
“Maybe Texas sucks,”
Ding, ding, ding! And we have the correct Jeopardy! answer to:
Q: Why does the wind blow from the west in California and from the east in Florida?
I like the Hill Country and west Texas, though - very peaceful, nice and big. Have driven through it many, many times and it beats the hell out of being further north.
RE: “If I owned hell and Texas I’d rent out Texas and live in hell” — General Sheridan
Very good for wild pig shooting, though…
Montana is what I imagined Texas would be like, from listening to Texans describe it” — Mark Twain
I did three years in Dallas, learned everything I could and came back to Montana. This after growing up in Cali.
THE DRUM BEAT IS ON…
“NEW YORK, Jan 4 (Reuters) - A sputtering job market has convinced economists at key U.S. investment banks that the Federal Reserve will need to resort to a steeper half-percentage point interest rate cut when it meets later this month.”
AINT GONNA HELP.
is it armagedoning real good yet?
You bet your arse it is.
Happy Bear Year, HBBers!
Arghhh…
With the FOMC more than three weeks off something makes me think the prospect of 1.00 will be breached. Didn’t the Tan Man blubber something about 1.00 last month?
that my friend is nightmare scenario for the bond market…they might lose control of the long end, exacerbate dollar crisis, and ramp-up Capital flight.
What ever happened to the “bond Vigilantes” that would drive bond yields up when the data didnt jibe on inflationary presures? Oh yeah, they got outsourced to Dubai, China, Japanese, and all the other SWF/GOVT entities who have such large stakes in low bond yields…
everyone PUSH AND SHOVE….only the weak will perish.
“AINT GONNA HELP.”
That’s why I am banking on a ‘larger than expected’ 75 bps cut.
“But efforts to catch such falling knives depend on perfect timing….Today, several savvy financial operators who tried to catch falling knives in the formerly hot housing and credit sectors are walking around with huge gashes in their hands.”
Brings to mind the fate of Edward Scissorhands’ hands…
http://en.wikipedia.org/wiki/Edward_Scissorhands
“Lenders admit they now are more reluctant to approve zero-down loans for fear that they will get stuck with them. Dan Arrigoni, president of U.S. Bank Home Mortgage, estimates that about 40 percent of borrowers who qualified for no-money-down loans a year ago would get them today.”
It just amazing that ANYBODY can still get a zero down loan. What incentive do those borrowers have to keep making payments once the value of the house drops below what they owe? Since the tax penalty on forgiven debt has been removed they no incentive what so ever to keep making payments. Mail in the keys and make it somnebody else’s problem.
Any meaningful reform in the lending sector has to start with a mandatory 20+% down on any home purchase, no exceptions, no piggy back loans, no financial engineering or creative financing.
Of course that’s not going to happen, too many vested interests to keep the scam going.
I was amazed by this statement as well. So 60% of the folks out there can still get a no-money down loan?! And the GSE’s have a rear-view mirror risk mitigation program: those areas that have ALREADY fallen in price (i.e. defaults are already rising, lenders are losing money) are redlined. But we won’t do a thing to reduce lending risk for the rest of the country–UNTIL we start losing money there too, in which case it will be too late to do anything about it.
Did Fannie just hire a bunch of eggheads from the bond rating agencies?
“Since the tax penalty on forgiven debt has been removed they no incentive what so ever to keep making payments.”
If I understand that bill correctly, it covers tax years 07/08/09 and the property must have been held for at least two years. Unless new legislation is passed, this would not cover someone buying today.
RE: It just amazing that ANYBODY can still get a zero down loan.
Watch for repeal of HUD/FHA 3% equity requirement.
Talking fools in DC are already hammering that the 3% needs to go.
IMO HUD/FHA aka US taxpayer still targeted to be the ultimate bagholder.
The buy the dippers are not prepared for a bear market.
I don’t know about that…I am waiting for a really really really big dip
Anyone else notice that CNN/Money article refering to it as a housing crash? Not a downturn or slowdown or slump or recession or any other declining word, but a hard-hitting, immediately-impacting, the sky-is-falling “crash”. That’s a big change for the MSM.
Lunch hour at my desk in The Mile High City…..
Surfing ESPN and HBB, here was a comment by a writer about coach Pat Riley and the Miami Heat.
“Riley is like one of those people who moved into an oversized house on a gimmick mortgage. Now the rate’s adjusted and the payments are skyrocketing. The easy way out would be to declare bankruptcy and head into foreclosure. But that’s not the honorable thing to do. He must hang in there and keep writing the checks.”
Except the checks are written to him thanks to his $millions salary
There was another quote in there that coaching the Heat this year was “Punishment by Paycheck.” Sign me up for that beating.
A question for the traders.
When I decided to start doing naked options I limited myself to 25% of my spec account max.
My recent gains have driven the value of my current puts to about 35%. How should I reconcile this, or is there even a need. I worry about discipline as I’ve found my losses occur when I break my own rules.
My ideas are:
1) Don’t enter any new positions until I’m back below 25%.
2) Exit the highest gaining positions until I get myself back below 25%.
3) Exit the lowest gaining positions until I’m back below 25%.
Any input would be greatly appreciated, as I’ve admitted before I was a naked puts virgin up until Dec.
c’mon, txchick, WT, Jas, voz, hoz(on vacation?), and others too numerous to mentious. Help a fellow out. Feedback please?
dude, your being very un-dude.
any advice given is grounds for assault. Nobody has the answers, everyone opperates under their own risk tolerance and understanding of how this all works….
If you are enjoying what you are doing, keep at it. I dont have fun trading stocks, I have fun proving “this is so” or “this is false”.
slow money=this is so.
fast money= this is false.
I am a slow money kind of guy, I am not a trader I am an investor. I do understand your desire to bounce ideas off of people, but any advice givin in these circumstances is suspect at best.
I will add however, that under the current pressure cooker environment we will see very interesting things, and I have to agree its a great time to get into the market……
the question remains, how should one get in?
short side this is false? or long side this is so?
Thanks, I guess my thought is that the options game is sufficiently different from the regular short/long daytrading game (mostly due to expiration IMHO) that someone might have insight as to how to handle this.
long positions:
short term treasuries
oil
ginnmae
natural gas
high yielding world currencies
short positions:
CRE
China
lookin into shorting the consumer cyclicals….the bottom of UXPIX was 11, in August not really cyclical unless you think most of the medium sized business models are failing, which many are.
Where am I most bullish..
low debt, alternative energy technology companies….many are in a bubble, and thus my bullish sentiment in current energy delivery.
Im gonna close with:
whats the cash burn rate of all the goods being manufactured in China when America starts buying HOME GROWN RESIDENCY RESTRICTIONS APPLY TREASURIES?
its coming….
rules apply.
I’ve been meaning to ask, did the demise of the uptick rule last summer help you short-sellers much?
It did not make a difference from what I could tell.
“Jim, What did you do with our money?’”
Answer the question Jim!
This news is giving me a buzz.
the Fed has increased their TAFFY pull to $30 billion per bi-weekly auction, up from $20 billion, and intends on offering them until hell freezes over or the market recovers- whichever comes first. of course still no insight on who is bidding/receiving.
http://biz.yahoo.com/ap/080104/fed_credit_crisis.html
financial dark matter will find a home in the most uncomfortable place imaginable for the PTB.
the unwinding is here, everyone into the lifeboat.
RE: everyone into the lifeboat.
Sorry Captain-the rats have chewed away all the drop lines.
We’ll have to let’er sink a bit more.
In my neighborhood vacancy is about 50%.
“At the meeting, Lee County Schools Superintendent James Browder urged the agency to provide more liquidity quickly. ‘I have people in my school district who are starting to ask the question, ‘Jim, What did you do with our money?’”
Market’s dead, Jim
Recovery in 2012. Recession in 2008. Looks like they’ve been reading my posts. China inceasing it’s military power more than US intelligence were aware of and developing weapons which can knock out US satellites. Including military satellites.
However, China is not in a war mood so lets stick to the economy. To be more precise, a recession in 2008 gets a YES. Actually, it’s already here despite the propaganda put out by Bahgdad Ben Bernanke.
A housing recovery in 2012? Well, we might be around the bottom in 2011/2012 but a recovery? Probably not if one uses the term to describe a significant rise in prices. Around 2011/2012 prices might be around the bottom but there will be no “surge” to buy property for several years even after the bottom is in. If you are thinking of buying, don’t think you will miss the boat if you don’t buy now. You’ve got plenty of time even AFTER the bottom is in ’cause the boat has run out of steam and it’s gonna take a looooong time to reach it destination. Above all, remember:
“NOW IS NOT A GOOD TIME TO BUY.”
We are probably entering a very nasty period of financial and national un-certainty which will last several years. Possibly up to 10 years until all the excess created over the last 20 years has been wrung out of the system. It’s going to cause a lot of financial pain.
This morning I went to the store. EVERYTHING is up over the past 6 months from 3% to 25% and it’s only just starting. Gas has hit $100 a barrel but that might not last. It sounds strange but the oil sheiks would not be too happy to see a deep recession (or depression). Not one that lasts too long anyway. Meanwhile, with America on sale to anyone with money (asia and the oil producers) a downturn gives them a great buying opportunity to buy up America. (Why go to war when you can buy up a country.) We have already seen a few big foreign money buyers moving in. However, they don’t want the sfh or condo buildings. They want the big commercial buildings in the major cities. If the credit crunch deepens, commercial property values will fall (they already are) and foreign buyers will move in for the kill.
Watch out (as usual) for the politicians and Washington hacks like Bahgdad “no recession or inflation” Ben Bernanke or Bush with his usual, “The economy is strong,” mantra. It isn’t.
How do they get out of trouble, or should I say attempt to get out of trouble, when a recession arrives? They print money to give the millions of unemployed their unemployment benefits for a period up to a year. As they did in the last recession. That means more US Peso’s on top of the very,very large pile of US Peso’s already is exsistance. That, in turn, feeds inflation. Tighten your belts. 2008 is going to get very bumpy.
When I started reading this blog over two years ago , There were two events on my radar screen, the housing bubble and Peak Oil. Since then, the housing bubble has started to collapse but Peak Oil is perhaps upon us now and is going to turn everything upside down. You can do all the research you want by reading at theoildrum.com . I think the next shocker will be what happens when gas prices start to reflect $100+ crude oil. Its not just $5 per gallon gas, and then perhaps real shortages, gas lines, rationing, the whole works. These two events are setting up for a perfect financial storm that is going to radically change the landscape. McMansions that are too far away from alternative transportation centers, will take an extreme hit.
FYI on a barrel of oil breakdown
Product Percent of Total Finished Motor Gasoline 51.4% Distillate Fuel Oil 15.3% Jet Fuel 12.6% Still Gas 5.4% Marketable Coke 5.0% Residual Fuel Oil 3.3% Liquefied Refinery Gas 2.8% Asphalt and Road Oil 1.9% Other Refined Products 1.5% Lubricants 0.9%
One barrel contains 42 gallons of crude oil. The total volume of products made from crude oil based origins is 48.43 gallons on average - 6.43 gallons greater than the original 42 gallons of crude oil. This represents a “processing gain” due to the additional other petroleum products such as alkylates are added to the refining process to create the final products.
Additionally, California gasoline contains approximately 5.7 percent by volume of ethanol, a non-petroleum-based additive that brings the total processing gain to 7.59 gallons (or 49.59 total gallons).
i’m not so sure China doesn’t have war on their mind… don’t they drill amphibious assaults frequently - uh oh Taiwan!
somehow i don’t see the US stepping into WW3 just for Taiwan.
They have the biggest WMD on the planet.
Our debt instruments.
China at the UN:”Let us do what we want or we will blow a hole in the financial markets so big, you wish you just nuked us to the stone age.”
bond vigilantes must unite in a secret residence to formulate a strong hand. though weak it must be.
RE: 2008 is going to get very bumpy.
Bank and convenience store hold-up’s are becoming much more prevalent around here. Mostly it’s been the dopers…next will be
the legions of unemployed.
Got guns?
Holy mo of Jeebus — this article is from Newsweek??? That will give the sheeple something to ponder…
“Of course, it’s early days, and these investments could well turn out to be genius moves. The housing bubble popped, but between October 2006 and October 2007, according to the Case-Shiller index, housing prices fell only 6.1 percent. Housing prices may need to fall 30 percent or 40 percent before they bottom out, but it will take years—rather than months—for that process to play out.”
“And as the market continues to slump, companies whose business models rest on making mortgages—and on buying, selling, and insuring securities based on mortgages—may face a string of losses.”
Anyone seen this?
Hilarious smackdown of Lereah:
http://www.irvinehousingblog.com/2008/01/04/already-gone/
Scroll down to the makeover illustration of the Lereah book. A serious belly-laugh. I am still giggling.
Today’s Officers of Loan (TOOL)
“Meanwhile, many would-be buyers are having trouble qualifying for a loan. Half of senior loan officers surveyed by the Federal Reserve in October said they had tightened their standards from July.”
And the other half are no longer working as loan officers?
Coast to coast, Lennar Corp’s potential buyers see different scenery, but they might encounter the same kitchen faucets. The nation’s second-largest home builder is whittling down options, seeing standardization and simplification as tools in a cost-cutting drive aimed at saving millions of dollars and surviving the housing crash. Other home builders are taking similar steps.
Uh huh. At this point in time, their objective is to “cut costs”, but what if they had done this at the beginning in order to give their homes a cheaper price tag, as in more affordable?
On the other hand, maybe I’m being unrealistic - lower costs at the outset wouldn’t necessarily have facilitated cheaper prices, since they had no problems allowing their product to be sold at very inflated prices…
CDOs and SIVs going into default.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKS.7Ccky2eg&refer=home
“Liquidations”
thats gonna unlock some value..
Buyers know and realize that subprime has changed, what buyers can’t understand is how the builders built a house for 300k then raised it to 600k within weeks what changed other then greed?
When the builders realize they have to return to normal selling prices then all will be fine, you need to wake up not the buyers???
“Stock” beats “sex” in Google China keyword searches
http://www.reuters.com/article/technology-media-telco-SP-A/idUSPEK20243420080104
Confirmation China has a mega-stock bubble.
the hits just keep comin.
can I get a rimshot on that one!
dandelionsalad for your pleasure and amusement…
http://dandelionsalad.wordpress.com/2007/12/03/doomsday-seed-vault-in-the-arctic-by-f-william-engdahl-gmo/
Laugh but BIDU was 300 the last time the market was this low and is now 360. I bought that yesterday and today and held it.
no disputing your prowess chick…im an old guy….
not too quick.
INTC how?low? it aint a financial….
hows VMWARE doing?