The Housing Bubble

$200.00 Oil…

http://www.bloomberg.com/apps/news?pid=20601103&sid=aERkSvnAUV_U&refer=news

If you must panic…………always be the first to do so……….even if you are the boss.

http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=A1YourView&xml=/money/2008/01/07/ccview107.xml

To the DC-area HBBers:

We will have our first outing this Tuesday 7pm at Capitol City Brewing Co on Capitol Hill (2 Mass Ave NE). At this point, my list is 9 people: zeropointzero, gt, polly, Xpovos, Hondje, clue phone, NOVAwatcher, jane, and me. I also note that some on the list are only probabilistic attendees.

I’m planning to show up with a upright 8×11 sign that says “It’s Different Here”. (I’m coming in from NOVA. Shouldn’t be a problem being on time, but you guys know the traffic situation.)

If you want to join the list (please do!), then leave a post here so we can give the proper heads up to CapCity.

Somebody please hold me while I weep. This piece of fishwrap arrived on my doorstep this weekend. The column in question is referring to the neighborhood I live in. Note the prices of the house listings on the right which are about 4x what this neighborhood should be buying income-wise. I just wonder if I should bother to skin the idiot who wrote this alive or maybe turn him over to the Tyler, Texas cannibal.

It’s a .pdf for anyone that needs to know that

and IT’S DIFFERENT HERE!

http://www.advocatemag.com/uploads/pdf/01ED_1_08.pdf?PHPSESSID=6577b6a9fc8deff3371ea47857ebb598

OC peddles kool-aid:

At best, a bottom.

That’s what I can divine is Orange County housing’s fate for 2008 from gathering the opinions of some folks – brokers, investors, economists and consultants – who watch the local market.

http://www.ocregister.com/money/market-housing-estate-1952113-real-prices

This snow might put me out of action today folks. It’s blotting out the streetlights.

AnnScott -

please email me at

dealton45@yahoo.com

A friend called last night…

I had no idea he was as upside-down as he was, shocking.

Nearly $300k in arrears, he told me.

If you’d asked me how I thought he was doing a few days ago, i’d have thought he was doing ok…

How many more ticking financial time bombs are out there, do you suppose?

Anyone want an over/under on how long this gap up will last this morning? That is the last thing you want to see after a day like Friday. The most bullish thing that could happen would be a huge gap down under support. Unless the Fed does a rate cut this a.m., I give this gap 15 minutes after the open to be gone.

Carmela C!inton is being interviewed on NPR right now. They asked if she could afford to lose New Hampshire. I was shocked when she didn’t give a direct answer. She then asked that voters look at her record and see that she is the best qualified for the job. What record does she have? Anybody?

“If you want to know what I’ll do, look at what I’ve done.” Ouch!

A penny saved

http://www.stockmania.com/phpBB2/viewtopic.php?t=134

“As housing crisis deepens, cities fight lenders over abandoned homes.” Buffalo tries to force maintenance of houses in foreclosure limbo.

http://www.msnbc.msn.com/id/22506609/

In places like Buffalo, the best course might be to bulldoze whole areas an make room for redevelopment with better, more energy efficient housing.

But in other places housing that could and should be sold and re-occupied may end up falling apart just because mortgage servicers are overwhelmed. I say pile up those fines and liens and try to force a sale.

Chick:

It seems the QQQQ’s are coming off their highs in the futures right now. I kept my short position from Friday (risky, I know, and not something you would probably do), do you think we might open flat? What do you think the prospects are for the first couple of hours?

So it seems the two paths Shrub can take are leave it alone and let the cards fall where they may, or mess with it and make it 10% better, but twice as long.

Since, at the moment, it’s clear that he may be seeing a veto-proof Democratic Congress and a Clinton-less White House, my bet is that he wants to make it as bad as possible for as long as possible. Hey, the WSJ is already helping by calling this trainwreck “The Clinton Housing Bubble”.

One thing about conservatives, there isn’t any negative event they won’t blame on a Clinton, and no positive event they won’t spin as good for Republicans.

But no matter what the political flavor, I still totally respect the economic spin I get here, for it shines far brighter than anything “out there.” Had to put a stick in my friend’s wheels this weekend. He’d been reading the local San Diego paper and (remember this is the one I talked out of catchinig a falling knife a month ago) crowed that the bottom was already here and he may buy in the second quarter. I asked him who bought the majority of the ad space around the story he read. He got it.

inflation watch:

Jan. 7 (Bloomberg) — Prices paid to European manufacturers accelerated in November to the fastest pace in almost a year, boosted by surging energy costs.

Factory-gate prices increased 4.1 percent from a year earlier, the most since they rose by the same margin in December 2006, the European Union statistics office in Luxembourg said today. The increase was above the 3.3 percent gain in October and the 4 percent median forecast for November in a survey of 21 economists by Bloomberg News.

http://tinyurl.com/2u85mx

UK property losses:

Jan. 7 (Bloomberg) — LaSalle Investment Management put Condor House, a seven-story office building facing London’s St. Paul’s Cathedral, on the market for 130 million pounds ($256 million) six months ago. The building sold last month for about 117 million pounds, 10 percent below the asking price.

Appraisal values fell at a record rate in November and commercial real estate derivatives contracts indicate owners of British offices, shopping malls and warehouses may suffer their biggest annual losses in more than a quarter century.

http://tinyurl.com/33wlkk

News from London via Bloomberg about REITs there:

“Real estate shares, the worst performers last year of 39 industry groups on the London Stock Exchange, trade at a 32 percent discount to net asset values”

A 32 percent discount to NAV! Now you’d think that if any people really thought that a 32 percent crash is NOT likely, they’d be loading up on these “cheap” shares. But apparently they are not, and in fact some of the funds are implementing withdrawal restrictions. The article is mostly about commercial real estate, but the REIT situation spans both commercial and residential.

I’ve been thinking for some years now that the UK is in for a nasty price adjustment; the question I could never answer is exactly when the timing would make it so. This might be the precipice.

Full article is at
U.K. Real Estate Losses May Be Biggest in 25 Years

Did anyone else watch The Simpsons last night? The opening chalkboard gag was “Teacher Did Not Pay Too Much For Her Condo.” If this isn’t a sign the bubble has gone mainstream, I don’t know what is.

Meet the new riders of the purple sage…

Japan’s new rich party like it’s 1989

“They customise the headrests of their Rolls-Royces with “Harry Potter writing”, sip martinis poured over diamonds and buy US$130,000 (NZ$168,930) watches on a whim.”

“Maserati sales were up 21 per cent in January to November 2007 compared with the previous year. Ferrari sales grew 11 per cent in that period, Porsche 15 per cent.”

“Meanwhile, cars for the once so mighty middle class are selling badly. Toyota sales fell 17 per cent in the same period, Volkswagen sales 6 per cent and Mercedes sales 7 per cent.”

http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10485624

–
Recession, Recession, Recession…

I watch quite a bit of CNBC-World. No matter where the business broadcast was originating from last night, East Asia and Europe, the talk of the town was US recession. This morning a strategist on CNBC, as soon as I turned on the TV, said that we will barely avoid recession. We know what the last comment means coming from a stock-promoter.

Recession IS here and it is here to stay for a very long time. Here is why.

Americans can live well on consuming 70-80% of the new products, i.e., use the old homes, old cars, etc., than they did in 2007. What I mean is that the US households have excess inventory to work off. Therefore, we will have a major consumer led recession, which will easily slide into a depression. What would a 5% drop in the GDP, YoY mean? 8-10% drop in employment (think restaurants, hospitality & leisure, etc.). And how about 10% drop in the GDP? Sorry, I forgot that the Fed wouldn’t allow that kind of drop. People wanting to cut back on consumption based on new purchases, because they already have lot of stuff they need, has no place in our economy.

Jas

So who gets credit…if there is no author?

From: Investor’s Business Daily Jan 7th 2008

“…Yet, though the U.S. economy is head-and-shoulders above the others, you’d never know it from our friends in the mainstream media. As repeated surveys show, U.S. media coverage of the economy is overwhelmingly slanted toward the negative side of things.”

http://biz.yahoo.com/ibd/080102/issues01.html?.v=1&.pf=personal-finance

Be sure and watch the Art Cashin video embedded in here

http://www.minyanville.com/articles/C-jpm-bac-WB-wfc/index/a/15423

Which way is “out”?

January 7, 2008 10:11 A.M.EST
BULLETIN
Wall St. climbing out of hole

http://www.marketwatch.com/tools/marketsummary/

For the 3 of you out there, that attend…

This year’s theme for Burning Man is “American Dream”

I just realized we have to build the coolest House Of Cards ever, as our token of esteem to said theme.

Fire is an important part of the vibe in Black Rock City @ night, and I wonder how we can incorporate flames into our artwork?

War? What war? Economy trumps Iraq in election

http://www.reuters.com/article/newsOne/idUSGOR74662420080107

America to Shurb & “Dickey Boy” Cheney: Mission Accomplished!

Who the heck has that banner anyways? Sir Greenspent must have it in his basement with his “box index”

“Joe Stiglitz, today at the American Economic Association Meetings, talking about financial crises: “Once-in-a-hundred-years events occur every 10 years.” He’s thinking of the stock market crash of 1987, the Long Term Capital Management crisis of 1998, and the current subprime-plus crisis — all of which involved changes in asset prices that were supposed to be vanishingly unlikely.”
Paul Krugman

Leigh, Looks like I will owe you! 24 days left

Half out.

Old Ripple Effect: You drank too much cheap wine

New Ripple Effect: Dominoes falling upon one another

–
Scam Market Will Be Down At least 10% by April, From Friday’s Close, To Fully Factor the Recession

Key words are “at least” and that would not be the end of it (juts a near-term target). The off-and-on slide will continue into 2010 with tech carnage that will resemble 80%+ drop during 2000-02. A reasonable bottom may form in 2010.

The current recession that we are in will prove to be no ordinary recession. Scam Lovers who have faith in the Fed will be sorely disappointed. Blind faith has its consequences. Sorry, but Fed can do lot more harm than good, as hard as that may be for many to believe. Showering money on irresponsible bankers does an economy no good.

Ja

Anybody contemplating getting solared up?

We’ve been at it for about 3 months now.

My buddy that does it for a living, tells me there are almost 50 companies installing solar panels in the greater Fresno area…

Financial Globalization and the U.S. Current Account Deficit
Matthew Higgins and Thomas Klitgaard

“Conclusion
Perhaps surprisingly, large U.S. current account deficits have
not led to an unusual buildup in foreign investors’ holdings
of U.S. assets; in fact, foreign investment in the United States
has remained broadly in line with the relative size of the U.S.
economy and the U.S. capital markets. The key reason for
this outcome has been rapid financial globalization, with
cross-border flows worldwide rising as fast as flows into the
United States. Our results suggest that such globalization has
allowed the United States to finance large current account
deficits without experiencing sharper downward pressures
on the dollar and U.S. asset prices. However, a retreat from
the recent pace of financial globalization by foreign investors
or an increase in the rate at which U.S. investors buy foreign
assets could make it more difficult for the country to sustain
a large current account deficit on favorable terms.”
Caution pdf
New York Federal Reserve
http://tinyurl.com/2nsb9q
Interesting because it treats the entire US economy as a single stock and compares to other ’stocks’ around the world. Smart investors go where the return is best.

Mother Nature (always bats last) is in the clean-up spot, and i’m always amazed at her resiliency…

20 years ago the Quagga mussel showed up in the Great Lakes, and more recently, in January all over the Colorado River, and now it’s in 5 of San Diego’s freshwater reservoirs.

The first of the 1/2 inch invaders came on a Russian Ship…

What sort of a predator are they?

Deadly

“The volume of all prey fish in the lake — alewife, bloaters and other small fish eaten by salmon, lake trout and whitefish — dropped by half, from 61 kilotons in 2006 to 30 kilotons in 2007, according to data compiled by the U.S. Geological Survey’s Great Lakes Science Center.”

“That’s the lowest volume recorded since the government began tracking prey fish densities in 1973. Prey fish abundance last year was 92 percent below the record volume of 400 kilotons recorded in 1989, said Chuck Madenjian, a USGS research fishery biologist.”

http://www.mlive.com/environment/index.ssf/2008/01/big_lakes_fish_population_plum.html

http://tinyurl.com/2bwnla
Peak oil? from AlJazeera youtube

“For every six barrels we consume we find one—at this rate we need to find a Saudi Arabia every four years”

–
Looks like one by one many are falling in line to confirm the recession that has been here for 2-3 months. Sadly, they all forecast recession after it has already begun. All the y can do is to confirm it; never being able to forecast several months ahead of time. Who wants to run the risk of being early or wrong?

Economists exist to make weather forecasters look good!

Jas

-x-x-x-x-x-x-x-x-x-x-x-

David Rosenberg, Merrill Lynch; 01/07/08:

Employment report suggests a recession has arrived

Friday’s employment report confirmed our suspicions that the economy was transitioning into an official recession towards the end of last year:

1.At no time in the past sixty years has the unemployment rate risen 60 basis points (50 bps is the actual cutoff) from the cycle low without the economy slipping into recession, and here we now have the jobless rate hitting 5% in December versus the March/07 trough of 4.4%.

2.Aggregate hours worked in the economy contracted at a 0.4% annual rate in 4Q, and this comes on the heels of a 0.6% decline in 3Q. Back-to-back declines in total hours worked have always been associated with recession.

3.The breadth of the report was also very poor with the diffusion index slipping below the 50 cutoff mark, just like ISM, to 48.4% from 52.2% in November. A number below 50 indicates that a plurality of industries are now in the process of cutting jobs outright – heading into the last recession, this index fell below 50 in February 2001 and the recession began … exactly one month later.

4.The level of unemployment is up 13% YoY, again a development that has always been consistent with past recessions. The YoY rate of change in the level of the unemployed who have been idle for at least 15 weeks is particularly ominous – +20%, which is a pace that prevailed in the early stages of prior economic downturns (hitting this trend in April/01 and in Aug/90 when the recessions were one-month old).

5.And we have Household Employment contracting 49,000 in 4Q and the YoY trend slowing to +0.2% in December from +2.2% a year ago, another classic recession signal. Consider for a second that in March of 2001 that trend was running at +0.8%, and in July of 1990 the pace was +1.1% – those two months represented the onset of a technical recession and yet the trend in Household jobs is weaker now than it was then.

In sum, Friday’s employment report strongly suggests that an official recession has arrived. The recession dating committee at the National Bureau of Economic Research (NBER) will be the final arbiters, but since it waits for conclusive evidence, including benchmark revisions, it may be at least two years before we are notified.

Check out San Diego’s KPBS Radio’s “These Days” take on the 2008 economic outlook for San Diego. Dan McAllister and Dean Calbreath weigh in on the causes and likely aftermath of the bubble.

My prediction for 2008: The high end of residential RE will disproportionately weaken, as the credit crunch bites the ueber-rich, and Jumbo loans become very expensive when subject to prudent underwriting.

Economic Forecasting for 2008
Jan 08, 2008
Audio will be posted the afternoon following the broadcast

What’s in store for the economy in ‘08? On the next These Days, we’ll look at how the slumping housing market will impact the economy in the year ahead.

http://www.kpbs.org/radio/these_days;id=10510

Did any of you see “Flip This House” on 05-Jan? Highlights:
1. This is Atlanta, where all the fake buyers supposedly loved the properties. But now it has the assistant as the primary flipper. While a not-so-silent silent partner pulls the strings. This has got to be code for “A&E kicked me off, so I’ll do it anyway with a shill partner.”

2. Of course the silent partner didn’t bother with permits.

3. Too costly, foreclosure, walk away bombshell was great.

4. The huge middle pillar that wasn’t in the plan blocking the view.

5. The terrible plumbing that hung below the sheetrock line.

6. My favorite part was when the silent partner wrote a check out for $6000, knowing that the properly was going to go to foreclosure.

I had to watch it twice because the estimated renovation costs weren’t that much lower than the actual, yet they made such a big deal over the back deck breaking the bank.

Where have all the competent people gone?

–
Breaking News…

Atlanta Fed President Lockhart says that painful adjustments would be necessary. Isn’t this another confirmation of the recession?

Jas

What credit crunch? Interest rates on mortgages are still historically very low. Interest rates in general are very low. If there were a credit crunch - no one willing to lend - wouldn’t interest rates be skyrocketing?

Here’s the historical list of rates on the 30 year fixed mortgage, since 1971, from Freddie Mac: http://www.freddiemac.com/pmms/pmms30.htm

Low interest rates and “credit crunch” seem to be oxymorons. Lots of people still seem willing to lend, if interest rates are any indicator.

I just want to clue you guys in to this website, which is showing promising negative “appreciation” in the Bay Area neighborhoods that I checked (even though DataQuick has been suspiciously reporting gains all over the Bay Area).

http://www.bestplaces.net/zip-code/San_Jose_CA-79512600000.aspx

Pessimism:
Philosophy, Ethic, Spirit
Joshua Foa Dienstag

Winner of the 2006 AAP Award for Best Professional/Scholarly Book in Philosophy

Cloth | 2006 | $35.00 / £19.95
314 pp. | 6 x 9

Pessimism claims an impressive following–from Rousseau, Schopenhauer, and Nietzsche, to Freud, Camus, and Foucault. Yet “pessimist” remains a term of abuse–an accusation of a bad attitude–or the diagnosis of an unhappy psychological state. Pessimism is thought of as an exclusively negative stance that inevitably leads to resignation or despair. Even when pessimism looks like utter truth, we are told that it makes the worst of a bad situation. Bad for the individual, worse for the species–who would actually counsel pessimism?

http://press.princeton.edu/titles/8307.html

Stupidity know no bounds. The light bulbs that congress will force us to use are full of mercury.

http://www.dailymail.co.uk/pages/live/articles/technology/technology.html?in_article_id=506347&in_page_id=1965

“Yeah I laugh every time! Dollar is looking good! It just shows as long as they can buy a burger for a buck, the currency crisis does not exist.”

I’ll pass. Those cheap burgers are usually no deal. Ever drive by one of those mega cattle feed lots? You can smell the stench for miles coming and going, but the real problem are all those additive they add to the cattle feed (not to mention the hormone injections). Some of this makes its way through our livers when we consume that flesh. Not a bad idea to pay a little more to know where your meat comes from.

“…When the smell of sleaze begins to pollute the air,
stock prices fall to lower altitudes, even when reported earnings
would suggest much higher prices. Virtually all severe stock market
setbacks are preceded by underperformance of financial stocks, and
the selloff tends to continue until the financials start to outperform.
1987 was a classic example of this phenomenon. The sharp
underperformance of the NYSE Financials was the warning of coming
horrors. Then the TED Spread (the spread between T-Bill and
Eurodollar yields) began to widen sharply, skyrocketing to 215 before
New York opened on October 19th. (Regrettably, the NYSE Financials
Index was discontinued some years ago; it had a nearly perfect
warning record. Its successor, the Philadelphia Banking Index, seems
to have filled its shoes admirably.)

Historically, the banks start to underperform if the financial system is
under strain due to monetary tightness, dollar weakness, a plenitude
of bad loans in the banking system, or a toxic mixture of those
ingredients….”
Mr. Donald Coxe
BMO Capital Markets
April 2005
caution pdf 30 pg
http://tinyurl.com/24w7nv

No. of homes (SFRs + condos) on SD county ziprealty.com currently listed at $450,000 = 160; at least 40 more are listed between $449,900 and $450,000 (”$100 off!”). Meanwhile, the median list price has dropped somewhere south of $449,900…

There are also 66 SFRs currently listed at the median price of $500,000, with at least 134 additional listings between $499,000 and $500,000.

Got Jumbo loan financing?

With talk of monetary stimulus, I am still wondering how long before fixed income cost-of-living becomes a major political/presidential campaign issue. Is AARP asleep or what?

Convoluted logic - connecting dots from recent blog reading: We need to replace a “failing” Social Security system with 401Ks and other (possibly mandated) investments in the Free Market Economy. Only yes, in a truly free market economy investments can FAIL, so we have to socialize those losses. But you know, that’s the *good* kind of socialism.

Spouse’s work has started making 401K enrollment automatic for new hires going forward - you can opt out, but otherwise investment deductions in the “default” fund begin automatically. I know that there is a trend in this direction - how big? And could it make a substantive difference to the market?

The psychology being played on or preyed on here, I assume, is that it’s tougher to affirmatively decide, “Nope I don’t want to save more, and benefit from company matching, as applicable.” Gotta tell you, I’m tempted to say let’s go ahead and put the $ in, because the newly increased employer match and tax benefits would mitigate against a fair amount of market tanking, maybe? - on an index fund or such. (a fairly scary thought in itself as I mull it over - you can bet on a losing horse, but the game is sufficiently rigged that you can fare worse that the unlucky better by NOT betting.) In any case, the 1-2 punch (opt out & increase matching) looks pretty agressive, prompted - maybe? - because so many “overcompensated” workers can’t invest or can’t invest a significant amount before age 50, if that would weigh the aggregate investments in favor of these workers, vs. the “undercompensated” workers who aren’t investing.

I know this digresses a bit from housing but I’m morbidly curious about how developing sell-those-401Ks tactics figure into the bubbleverse.

Forgot to add - how long before workers are legally mandated to throw into the craps table (a severely limited choice of 401k funds for the hoi polloi)? I believe this has already been proposed by H Clinton & others, only such a thing really needs to be timed with an “up” market so as to minimize opposition.

Hey txchick57 - did you see this?

25% - Not even I thought it would be that bad

http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/010808dnbushomesales.1ba57795.html

Ahh - but there is no bubble here - it is different here ——

In yesterday’s thread “A Massive Perception of a Market in Freefall”, I made the following comment:

Comment by Lostcontrol
2008-01-06 12:33:48

“How bad can it get? My Mother, age 79, recently explained to me that no matter how bad it gets, it will never be as bad as the early 20th century. She explained that when families of immigrants arrived in Elis Island, and the parents died on the trip, the children were put on trains heading into the Midwest. Some of those children were murdered (killed?), because the belief in those days were that these children would end up as beggars and thieves.

Just wanted to pass on an interesting sidenote.”

You responded as follows;

Comment by Paul in Jax
2008-01-06 15:17:11

“Some”

1, a handful, dozens, hundreds? This is not an “interesting sidenote”; it is heresay.

Losscontrol comment:
Just so you do not think I am blowing smoke, Google “Ophaned Children 1880s-1929. Concerning your questions, during the period from 1880s through 1929, approximately 150,000 children were sent by train to the midwest. My mother, age 79 was born and raised in Iowa. While source docs do not indicate the number of children killed, families from the midwest will pass down the stories from generation to generation. By the way, my mother was born in 1927.

http://www.google.com/search?q=orphan+trains+children+killed&sourceid=navclient-ff&ie=UTF-8&rlz=1B3GGGL_enUS234US234

This nasdaq selloff looks like forced liquidation again. These damn hedge funds drove those stocks up and now they’re being puked. Ciena, one I really like, being beaten with an ugly stick. 28? I’ll buy it there.

Sorry if this is a repost:

What will we do if big two go bust?
By Rolfe Winkler
January 4, 2008
They don’t know it, but taxpayers stand to lose billions as the housing bubble bursts. And in a bipartisan effort to “do something” to save the housing market, President Bush and the Democratic Congress appear set to put taxpayers on the hook for billions more.

Until now, losses in the housing world have been confined to homeowners, mortgage lenders, banks and investors in toxic mortgage securities. But by virtue of the implicit federal guarantee backing mortgage giants Fannie Mae and Freddie Mac, U.S. taxpayers may be one of the largest mortgage lenders in the world - set to lose billions, like all the others.

http://www.baltimoresun.com/news/opinion/oped/bal-op.fannie04jan04,0,1654729.story

Why the market will not crash and why I am going to go back to college!

“If you’ve been around awhile, you’ve probably heard of the hemline-markets theory. First introduced by George Taylor, an economist at Wharton Business School, the theory promotes the view that when women’s hemlines are rising, stocks tend to go up as well.” Kirkreport - old news -from the ’60s
todays news
“There’s a direct inverse relationship between how revealing their theme is and how drunk they get,” he told ABC News. “At lingerie parties they drink the most. … They have to drink more if they wear less because they have to lower their inhibitions to be seen wearing that out.”…

“There are these girls walking down the street, and you can see their butts hanging out of their skirts.”
ABC News
http://tinyurl.com/yta6mv
How high will the market go on this one!

test

Gold is the new global currency
Published: January 7 2008 19:05 | Last updated: January 7 2008 19:05

There was a time when gold was money. In today’s uncertain world, the yellow metal is back in fashion. Bullion prices rose to a record nominal high after the assassination of Benazir Bhutto in Pakistan added to nervousness about the world economy. Part of gold’s allure is its traditional status as a safe haven. It is seen as a store of value when everything else seems risky. But the bigger drivers behind the rising spot price are a depreciating dollar and the prospect of negative US real interest rates.

A better way to think of gold may be as central bankers used to before America dropped the gold standard: not as a commodity, but as another currency. As long as the dollar stays weak, gold’s bull run will last.

http://www.ft.com/cms/s/301c112e-bd51-11dc-b7e6-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F301c112e-bd51-11dc-b7e6-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus

At the AEA meetings in New Orleans last weekend

STEVEN D. LEVITT AND SUDHIR ALLADI VENKATESH presented a new preliminary paper on the economics and market for street prostitution, (this works well with their previous paper “AN ECONOMIC ANALYSIS OF A DRUG-SELLING GANG’S FINANCES”) - All research was done in Chicago.
As Andrew Leigh summed up the primary points:

“Very few prostitutes get arrested. Levitt told us that a Chicago street prostitute is more likely to have sex with an on-duty police officer than to get arrested by a police officer.

Prostitutes who work with pimps have higher wages and better conditions (largely because pimps drum up supply).

Reflecting this, many of the prostitutes who didn’t have pimps asked Levitt and Venkatesh if they could please link them up with pimps. L&V planned a randomised experiment (randomly assigning prostitutes to pimps), but before they could carry it out, the pimps got angry at Venkatesh and told him that he would be killed if he returned.

Most women work 11 hours a week, and charge $40-80 per trick. Including waiting time, they make $25-40 per hour. This compares with the $7-10 per hour they make in the formal sector.

Levitt cited evidence that in the 1930s-50s, a very large share of men had their first sexual experience with a prostitute. With the rise of premarital sex, this is no longer true, so the market that’s left today is much seedier than in the past.

On 4 July, there are large family reunions in Washington Square Park. The authors use this as an exogenous demand shock, driving up demand by 60% and prices by 30%. This suggests that supply is quite elastic, adjusting on three margins - higher labour supply by existing prostitutes, in-migration by prostitutes from other areas, and ‘temporary prostitutes’ joining the market.”

Much more exciting than reading Excuses for Federal Reserve Board Policy Actions (Kohn). And how many economists get threatened with death if they show their face again?

Moral hazard, Keynesian style:

1) The fiscal authorities believe they face no hard budget constraint, as the monetary authorities can always dilute the real value of outstanding debt by running the printing press.

2) The monetary authorities believe they can always reflate the economy by running the printing press.

3) Would-be savers become full-fledged participants in the asset markets, rationally believing the prices of whatever long-lived assets they buy will always go up.

What is wrong with this picture?

“SANTA ANA, Calif., Jan. 7 /PRNewswire/ — G REIT, Inc. (the “Company”) today announced that the Company intends to enter into a liquidating trust agreement (the “Trust Agreement”) on or about January 22, 2008, for the purpose of winding up the Company’s affairs and liquidating its assets. It is currently anticipated that, on or about January 28, 2008, the Company will transfer its then remaining assets to the Trustees (as defined below) of the G REIT Liquidating Trust (the “Liquidating Trust”). The Liquidating Trust will also assume the Company’s then remaining liabilities. As of January 22, 2008 (the “Record Date”), the Company’s stock transfer books will be closed. The formation of the Liquidating Trust is in accordance with the Company’s Plan of Liquidation, which was previously approved by the Company’s stockholders (the “Plan of Liquidation”).”

let the liquidations to/from the insiders commence.

A quick survey by just humble me. CNBC and Fox News seem to say that Obama has the edge over Hillary. Personally, I think it’s way too early to make the call. This smells like a setup. I don’t know Obama’s stands. I do know Hillary is for class warfare. Perhaps the corporate media are building up Obama for a fall when a Republican can beat him.

They also say McCain is leading in NH. McCain - also a class warfare type. He was against the 2001 tax cuts and quoted left wing think tanks to support his stand. I know, I wrote a letter to his office supporting the tax cuts and his office sent me the reply, with information from the Brookings Institute. Also McCain was a champion for the illegal aliens and wanted to make them all citizens, which means automatic dependents on U.S. taxpayers. The fool should have done the opposite: sponsor a bill to forbid taxpayer money to educate illegal aliens’ children and to forbid taxpayer funding of health care for illegals. Arizona is doing the right thing that stupid McCain should have backed all along. Stupid Republican socialists!

I’m becoming less enamored of Jim Rogers. He used to avoid the media spotlight and so when you heard his opinion a couple times a year it was always worth listening to.

Now he’s doubled the size of his bow ties and gives long interviews to every Tom, Dick, and Harry, repeating the same thing over and over and using cliched phrases. Please - go lay low in Singapore for awhile and come tell us what you think next Christmas.

Let me be a woman for 30 seconds: why is it that 60-ish men, once they’ve lost their sense of humor and their testosterone is all but used up, seem so determined to overstay a fading spotlight?

MONDAY, DECEMBER 31, 2007
BARRON’S COVER

Farmland prices have soared, and bulls say underlying trends will keep the boom going. Sound familiar?

By JIM MCTAGUE

YOU’VE LIVED THROUGH THE TECH-STOCK BUBBLE. The dot-com bubble. The residential-real-estate bubble. Now, get ready for the cropland bubble. - At year-end 2007, farms — the latest count shows that the U.S. has 2,089,790 — are what Miami condos and San Diego McMansions were at year-end 2004: properties so hot that they’re likely to have a meltdown in their future.

http://online.barrons.com/article/SB119882116265055389.html?mod=b_hpp_9_0002_b_this_weeks_magazine_home_top

Another golden parachute is about to open on Wall Street…

Bear Stearns CEO plans to step down
By Ben White and David Wighton in New York
Published: January 8 2008 00:46 | Last updated: January 8 2008 01:18

Jimmy Cayne has told the board of Bear Stearns that he plans to step down as chief executive of the Wall Street bank, which has suffered heavy losses in the credit market turmoil.

Mr Cayne, 73, hopes to remain as non-executive chairman and hand over the chief executive role to Alan Schwartz, Bear’s president. Bear Stearns directors are expected to meet soon to discuss the matter and an announcement could come as soon as Tuesday, people close to the matter said.

http://www.ft.com/cms/s/0/90218646-bd81-11dc-b7e6-0000779fd2ac.html

Posted above, but FT limits access, while yahoo.com makes available the whole article in its glorius entirety…

America’s inflated asset prices must fall
By Stephen Roach
Mon Jan 7, 1:05 PM ET
…
America’s aversion toward saving did not appear out of thin air. Waves of asset appreciation - first equities and, more recently, residential property - convinced citizens that a new era was at hand. Reinforced by a monstrous bubble of cheap credit, there was little perceived need to save the old-fashioned way - out of income. Assets became the preferred vehicle of choice.

With one bubble begetting another, America’s imbalances rose to epic proportions. Despite generally subpar income generation, private consumption soared to a record 72 per cent of real gross domestic product in 2007. Household debt hit a record 133 per cent of disposable personal income. And income-based measures of personal saving moved back into negative territory in late 2007.

None of these trends is sustainable. It is only a question of when they give way and what it takes to spark a long overdue rebalancing. A sharp decline in asset prices is necessary to rebalance the US economy. It is the only realistic hope to shift the mix of saving away from asset appreciation back to that supported by income generation. That could entail as much as a 20-30 per cent decline in overall US housing prices and a related deflating of the bubble of cheap and easy credit.

http://news.yahoo.com/s/ft/20080107/bs_ft/fto010720081324550910

Stephen Roach:

“It is going to be a very painful process to break the addiction to asset-led behaviour. No one wants recessions, asset deflation and rising unemployment. But this has always been the potential endgame of a bubble-prone US economy. The longer America puts off this reckoning, the steeper the ultimate price of adjustment. Tough as it is, the only sensible way out is to let markets lead the way. That is what the long overdue bursting of America’s asset and credit bubbles is all about.”

http://news.yahoo.com/s/ft/20080107/bs_ft/fto010720081324550910

TxChick — how’s your post-holiday appetite?

P.S. Technically, stock market allocations are risky investments, not savings.

BILL DONOGHUE
Into the woods
Commentary: Don’t be a sitting duck or the bear will eat you
By Bill Donoghue, MarketWatch
Last update: 6:03 p.m. EST Jan. 7, 2008

SEATTLE (MarketWatch) — The stock market opened this year in trouble. The gains the Standard & Poor’s 500 Index made in 2007 were just about wiped out in the first three trading days of 2008.
Sometimes you eat the bear; sometimes the bear eats you. If you’re expecting a “January effect” rally, remember the bear looks lean and hungry and is after your savings.

http://www.marketwatch.com/news/story/dont-sitting-duck-bear-eat/story.aspx?guid=%7BECF29A1E%2D5228%2D4343%2D86D1%2DC167AA532658%7D&dist=sp_inthis