Bits Bucket And Craigslist Finds For January 13, 2008
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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lots of talk today from EU leaders, trying to push the ECB for further easing or at least prevent further rate hikes. Keeping inflation below 2% is officially one of the cornerstones of ECB policy, but now that inflation has been at/above 3% for several months, the EU dumbocrats (most of all the French, guided by US-supporter Sarkozy) are pushing for a much higher inflation ceiling for the EU. When Bernanke launches his new bomber squads end of the month, or when housing markets in Britain and other EU countries come under more stress, I don’t doubt there will be even more calls from the dumbocrats to trash the euro. The only voice to the contrary seems to come from ‘Dutch European Affairs minister Timmermans’. Well, don’t worry, this is a totally irrelevant function, I didn’t even know this ministry existed until today …
The Chinese are again way ahead of the game, they are openly worrying about inflation (maybe because they have more honest inflation statistics than the EU and US?). They are discussing and taking many steps to curb inflation, while in the US and EU there is only some hawkish talk but no substance.
The currency depreciation race is accelerating; the gold market noticed two months ago, euro and dollar are now loosing value at the same breakneck speed.
nhz… long time no see.
I’m starting to hear noise in the dutch media that the housing-market in Holland is (finally) starting to stall.
What’s your take?
I think some trouble is brewing, but no serious damage to be seen yet. According to some statistics, Dutch home prices went nowhere last year, but realtors say there was a 4.7% gain. Everyone seems to agree though that inventory is at unhealthy levels.
The RE mob in my area is suddenly appealing to policians to cancel production of new homes for the next few years because it threatens home prices. Just a few months ago they were still explaining that the ridiculous prices here are caused by the fundamentals of eternal lack of supply. Apparently the bottom is falling out of the lower part of the market and because of that, the realtors are seeing less turnover. So we need to work harder to keep the artificial shortage and of course, we need more subsidies. But it seems like the era of the Dutch home as a prime income source is over, and once the general public finds out selling homes will get a little bit more difficult.
That’s funny…
Our politicians (all on a local level) want more and more homes, as their livelihoods depend upon the fees they charge to homebuilders.
yes, to some extent it works the same here (local gov. has huge income from land sales). But we don’t have a ‘free’ market for building new homes like in the US, everything is controlled by local politics.
In Netherlands the ‘housing corporations’ (remains of a former socialistic era, associated with Labour party) are extremely powerful players in the market. They were privatized several years ago and received their huge housing+land stocks for free. These private corporations own a large chunk of the housing stock and now do everything they can to push prices up, by building only expensive villas or heavily subsidized projects and demolishing cheaper homes whenever they can. Because of this my local government says they are unable to build homes for anything below 225K euro, while even in the most expensive part of the country nice homes for small families can be built for about 75K including the land. The problem is that simply nobody wants to build those homes, it is far more profitable to build just a few very expensive villas on relatively big lots for rich citizens and investors.
Even the builders probably like it that way, because they usually make far more money on the land that they sell with the home than on the home itself (it is impossible in Netherlands to buy a lot from the government, unless you are very lucky or politically well-connected).
I think Sarkozy would love to get out of the EU
a good warning for UK and collectivists everywhere
The Chinese may be more “honest” about inflation but the measures they seem to be adopting, namely price control, will make the problem worst.
sure, I don’t think price control will work but they are taking lots of other measures, and some of them seem to be working. Maybe not enough, but we will see how big the inflation problem is in China and Europe one year from now; my guess is that China will be doing far better.
If China doesn’t raise their currency peg China will continue to have High Inflation.
And if China eases on the peg it will also have high inflation. The recent slide in the US$-RMB rate hasn’t made any difference to inflation. Either way inflation in China is a given.
From Germany:
The trade unions will use the 3% inflation to achieve substantial wage increases, they want 8%, I think they will get about 6%. Public opinion has turned, now the MSM think that the regular Joes should profit from the corporate profits once again, after more than a decade of sinking wages in real terms.
In such an environment, I the ECB is unlikely to cut rates.
There will be fierce debates within the ECB council, though, the French and the Spanish will call for cuts, but the northern countries will not allow that. For the time being, the ECB will do nothing.
yes, Trichet has acknowledged that 2008 will be an extremely difficult year for the ECB. The financial environment is turning into a pressure cooker and something will have to give. They have already shifted from ‘being hawkish on inflation’ (without doing anything really …) to ‘ECB will take action when inflation spills over into wages’. So, inflation is no problem as long as EU J6P does not demand higher wage. I think in most of the northern EU countries, high level / corporate incomes have been surging for years (10-15% gains yoy) while average real income is slowly declining. Now the public is waking up and demanding their share (or sometimes even more, some unions are demanding 20-30% wage increases!).
My guess is that the euro will break up somehow, either by allowing widely different policies depending on country, or the ECB itself will break up and the dumbocrats from Brussels will take over control on monetary policy (and we know how that will end …).
The medics got a 20% salary increase a year ago, now the train drivers demand 30% and will achieve some 10%. At the same time, the government is discussing a minimum wage of €7,50/h (so far there is no minimum wage in Germany).
You are right, the imbalances among EU countries are staggering, a one-fits-all approach will not work. So, we will have rates that are too high for Spain and Ireland, but too low for Germany and Finland, which means that Spain is heading for a severe recession, and Germany heading for inflation first, then the exports will start to crumble, and we’ll have stagflation for a while.
But the dumbocrats will not allow the Euro to split up, because that would be the end of their powers.
IMHO Germany and France don’t and cannot belong to the same economic bucket. They are very different societies, with vastly different strengths & weaknesses. The romantic notion would be to say that they are complementary, but the reality is that Germany is better off pulling out of the Euro zone.
Who had posted the article about German housewives wanting out of the EU? Every man knows that his home is run by his wife, no matter how much he tries to delude himself. That headline really struck me as being an important one.
Hausfrau bubble?
Germany and the EU:
The official ‘Eurobarometer’ states that Germany are more and more negative about the EU, despite all the brainwashing from the MSM. The media adore Chancellor Merkel for the new EU treaty, even though it is the failed constitution with a new name in an attempt to fool the European people. The German people will have no say in this matter. We can only hope that the British, the Dutch and the French will save the day for us again.
France, Germany and the Euro:
President Mitterand and Chancelor Kohl had the deal that France would approve of Germany’s reunification only if Germany would give up the DM for a single European currency.
In fact, the DM had already become the most important currency in Europe in the late 70ies, and the hawks of the Bundesbank were the monetary policy makers for most of Western Europe. So, when the Bundesbank in Frankfurt raised rates, the Banc de France had to do the same, to the anger of the French leaders. Mitterand’s goal was to take that monetary power from Germany. However, the Netherlands and Germany achieved a very strict mandate for the ECB: The directors are independent, they can only serve for one term.
Some countries did not get the message:
Euro countries can no longer lower the exchange rate of their currencies in order to become more competitive. Competitiveness can only be achieved through innovation, the availability of skillful workers, and so on.
The noise from the dumbocrats against the ECB is overwhelming. I predict the strict ECB mandate will be gone before the end of the year, otherwise the dumbocrats will vote the ECB out of existence (which will be the beginning of the end for the EU).
If politicians had asked the Dutch or French citizens about the new EU treaty (99% identical to the previous version), the vote would have been a clear ‘NO!’ again; if they thought otherwise there would have been a new poll … In most of Europe, governments have a very different opinion about internal EU or international affairs than the majority of the voters; that’s called democracy
I still don’t believe that Germany will approve a change of the ECB mandate. That would be suicide of the government. The memories of the voters are short-lived, but the next federal elections are already in 2009.
Frank, I think the new EU treaty no longer requires unanimous approval of policy changes. The dumbocrats will vote the old mandate out of existence in the same way that they pushed the new treaty through, despite massive resistance from the citizens in several countries.
On top of that they will continue to spend tons of money on ‘educating’ the citizens, in the spirit of 1984. We just learned that many Dutch TV ‘news reports’ over the last year about the EU constitution were not real news but actually extremely expensive government commercials …
AFAIK, the ECB mandate is part of the treaty itself. And changes of the treaty still require unanimous approval.
There will be a referendum in Ireland about the new EU treaty, by the way.
The EU can never have the competence to create competences for itself, only the member countries can do that (priniciple of conferral).
They (the Chinese) are discussing and taking many steps to curb inflation
No they’re not. There are just taking steps to make it look like they are trying to curb inflation - i.e. price controls, which will work as well as Nixon’s in the 70’s.
There is only one way for the Chinese to stop inflation, and that’s to stop importing it from the US, and that means letting the yuan float.
The only thing price controls accomplish is to create scarcity. I lived in Mexico City during the high inflation (20-40% per year) 70’s.
The gov’t would impose price controls on items such as fresh milk. As production costs soared milk pretty much vanished from store shelves (you could always get non-controlled evaporated milk, that was always in plentiful supply). Periodically, the official price would be raised and for a few weeks milk would magically reappear at the supermarket. Then, as production costs once again increased, milk would become harder and harder to find.
an excellent current example of the effect of price controls is Zimbabwe … although there is some difference as China is not opting for general price controls, only for specific items where they probably have control over both supply/demand and price.
Zimbabwe isn’t a good example of anything but disorder and collapse. The most relevant example of wage and price controls in the developed world is Nixon’s scheme which was extremely sophisticated, overseen by some of the most brilliant economic minds at the time, and failed catastrophically.
no, I strongly disagree; floating the yuan will NOT solve the inflation problem, inflation for necessary items is going to be a severe problem everywhere around the globe thanks to twenty years of currency abusement in the US.
And some of the controls like reserve requirements are for real and have a clear effect; just imagine that Bernanke or Trichet would raise reserve requirements for their banks to 15% - I think that none of them would be able to comply, even if they wanted.
I agree with nhz here. Some prices will increase globally, simply because they become more scarce. I would not call that ‘inflation’, though.
In China, we see some sort of a wage-price spiral, we also see that in some Eastern European economies.
Reserve requirements? How old-fashioned
Ooooooh Sh*t moment!
http://www.atlanticfreepress.com/content/view/3224/81/
Good article.
Not sure if I agree that stagflation is the best option…but who knows?
The nice thing is that most HBBers have already had their “oh $hit” moment. Some of us have had dozens of them. That has allowed us to be much better prepared financially and mentally. The psychological advantage itself is huge.
Two guys get laid off from their job. One guy has money in the bank, knows the family can temporarily live off his wife’s earnings, has no debt and understood that he might be looking for another job in the near future. The second guy has debts, no ability to withstand a financial downturn and never once allowed himself to believe that a layoff could happen to him. The same event happened to both people but the outcomes will be completely different. One is a realist and one is now a victim.
I think we have had a responsibility in the past couple years to help spread the word. I know I have been consistently trying to mentally prepare friends, family and co-workers for what is coming. I hammered on the truth even when nobody would listen. Denial was apparent for a long time. But at this stage, when things can still get far worse, I know there are a lot of people out there much better able to understand what is going on right now, and mentally prepare themselves, because I didn’t just give up on them. This has been a chance for us to be leaders and lead people to that “oh $hit” moment for their own good. You lose some. You win some. But this one was too important not to keep trying. The message is that things are going to get bad for all of us but you can definitely take steps to keep it from being any worse. And who knows, maybe we’ve created some more leaders in their own little circles. Keep spreading the word.
NYCityBoy!
…I think we have had a responsibility in the past couple years to help spread the word. I know I have been consistently trying to mentally prepare friends, family and co-workers for what is coming. I hammered on the truth even when nobody would listen. Denial was apparent for a long time. But at this stage, when things can still get far worse, I know there are a lot of people out there much better able to understand what is going on right now, and mentally prepare themselves, because I didn’t just give up on them.
Do I detect compassion?
Be still my beating heart!
Just because you kick somebody in the teeth doesn’t mean you don’t love them.
LOL
I’ve been heard to say “this hurts me more than it hurts you” as I’m driving home a JT.
Danni wrote
…I think we have had a responsibility in the past couple years to help spread the word. I know I have been consistently trying to mentally prepare friends, family and co-workers for what is coming.
I have been doing that since 2004. All I got out of it was being called chicken little by my “friend” who has overweighted his assets in real estate (2 Florida condos, a house in Jamaica, and Iowa farmland), added to that I was called a rent slave.
I don’t give a rat’s a$$ anymore about the FBs. My “oh $hit” moment was when I read Harry Dent’s books and concluded (on his baby boomer demographics analysis) that I should do the opposite of what the leading edge of the boomers do. I have been in a race to build up conservative assets since the early 2000s and anticipate a severe economic downturn by 2010. it could arrive 2 years earlier than I hope since it seems a recession already started last month.
But those people that you think act responsibly were not turning their debt into wealth and letting their house work for them instead of working for their houses.
Could this be a “Black Swan” event.
What if the firms concerned get charged as well as their staff?
Reuters
New York probes Wall St. banks over subprime data: report
Saturday January 12, 5:19 pm ET
NEW YORK (Reuters) - New York prosecutors are investigating whether Wall Street banks withheld information about the risks stemming from subprime loan-linked investments, The New York Times reported on Saturday.
Citing people with knowledge of the matter, the newspaper said the inquiry, begun last summer by state Attorney General Andrew Cuomo, was focusing on how banks bundled billions of dollars of exception loans and other subprime debt into complex mortgage investments.
Charges could be filed as soon as the coming weeks, the Times said. Connecticut Attorney General Richard Blumenthal told the newspaper he was also conducting a review and cooperating with New York officials.
The federal Securities and Exchange Commission is also investigating, the Times said
Last night the NBC Nightly News had a major segment on the housing bubble and how it was affecting cities around the country. Cleveland was featured, with block upon block of abandoned, foreclosed houses. Then they showed clips of various state and local officials from around the country, taking action against the many lending entities, both the banks and Wall Street firms. Some guy from a mortgage trade association started whining about how borrowers had a shared responsibility with the lenders (I don’t disagree) and how the local goverments need to stand down, because they’ll drive the mortgage business out of existence (ooh, I’m scared). At the end of the segment, the commentator announced that as bad as the foreclosures are right now, this is only “the tip of the iceberg”. Wow! First time I’ve seen the MSM acknowledge how bad it really is.
What housing bubble? Blasphemy.
2005: “All real estate is local”
2008: “All real estate is loco”
NBC Nightly News has been hammering RE for a while now. I’d say NBC was the first of the goliaths to run with the story.
I like it.
“NBC Nightly News has been hammering RE for a while now. I’d say NBC was the first of the goliaths to run with the story. ”
The bad news about declining RE prices, inner city foreclosure hell, US recessionay collapse, ect, is finally getting aboundant MSM coverage. These would also be good for MSM revenue and profits as these stories are excellent meat and potatoes ‘if it bleeds it leads ” stuff. Stories such as that poor family getting evicted by the foreclosure sherriff, rampant crime increase in foreclosure hells such as cleveland and Atlanta, ect are far more edifying and will grab the attention of even the aveage dumb J6P than the useless but titillating stories of missing hikers, teacher-student sex, and stabbed pregnant housewives.
Lest we think of the city of Cleveland as compassionate to citizens… its lawsuit is for loss of contrived tax revenue for itself.
Nothing wrong with that.
The loudest voices of concern about the housing bubble in a political vein, have come from the most downtrodden places…
RE: At the end of the segment, the commentator announced that as bad as the foreclosures are right now, this is only “the tip of the iceberg”.
Foreclosure like divorce always happens to the other guy.
I wish Andrew Cuomo all the best in his efforts to press charges against the subprime mortgage lending kingpins who have succeeded in bringing the global financial economy to the brink of collapse. And I hope he casts a wide enough dragnet to include any lawmakers who took bribes for turning a blind eye to the situation.
On the heals of gaming revenue being off in Las Vegas in November by 15-20 percent, the Viejas casino east of San Diego has announced the first layoffs since the casino opened in 1991.
http://tinyurl.com/2szue7
“The layoffs at Viejas Casino are in response to current economic and market conditions and will create efficiencies as we position Viejas for future growth, including the recently announced plans,” casino spokesman Robert Scheid said.
I had been watching WYNN to buy puts on it. I watched the think shooting up at got the heck away from it. Anybody that hammered it at 175 did a great job. The proliferation of gambling at every level of society is a disaster. What kind of government becomes their constituents’ bookie?
If I had a wish it would be to see the lottery mentality fade away forever. Some say, “all it takes is a dollar and a dream”. I say, “all it takes is a dumba$$ and his dollar”.
The lottery is a tax on the stupid. Just like smoking.
Please correct me if I’m wrong. I pay my taxes to the government. Often times this is recycled to the “underprivileged”. The “underprivileged” then take that entitlement down to their local convenience store to buy lottery tickets. Yet this is a tax on the stupid.
We have no way to control what the “underprivileged” spend their entitlements on but do we have to give them so many easy choices that are so destructive?
at least it goes back to the government after all the cuts from the *middle merchants*.
This country turned into a green felt jungle, the past 25 years…
Everything was gambling oriented, including houses.
I’m pleased to see the casinos falling on bad times, on the res.
Thanks SDGreg! The casions are a great economic indicator of dicressionary spending.
I’m telling you I’ve never seen the Coachella Valley Indian casinos as empty. The only crowds are busloads of Asians from LA that come to play cards.
Economic stimulus may be too late, per NY Times
http://www.nytimes.com/2008/01/13/business/13econ.html?_r=1&hp&oref=slogin
I’ll go out on a limb here and say that over the 18 months starting January 1 we will see a 25%+ decline across all asset classes on a mark to market basis. Perhaps 15% realized nomimal losses, with the rest waiting to be inflated away and transformed into real losses.
Rising interest rates due to inflation, a falling dollar, a lack of savings, less money from abroad reduce the values of existing bonds.
Consumer defaults — mortgage, credit card, auto — soar to historic levels. Housing values fall.
Corporate and commercial real estate defaults rise to typical recession levels, or perhaps a little less.
The stock market is already off, what, 5% so far this year?
The last time this happened — the 1970s, as inflation and recession trashed both stocks and bonds. But back then, real estate was rising. This time we’ll have the trifecta, because there is excess value in all three.
So we are in for an economic ass-kicking. What will that do to banks, insurance companies, pension funds, and public finance?
“So we are in for an economic ass-kicking. What will that do to banks, insurance companies, pension funds, and public finance?”
A lot of people are going to get better acquainted with the wrong end of a Joshua tree, even those that had little to do with the current mess.
is there a right end to a joshua tree?
thought this was the kitchen sink qutr
-your bummin me out
No way. Banks have been acknowledging losses for items still on their books due to “mark to market,” but you haven’t heard about mortgage and credit card bonds not paying off have you? The market has been moving in anticipation of what is going to happen, and not far enough IMHO.
I think we have a couple of more quarters from the banks. By that time, the real damage will be hitting your insurance payment, 401K, pension plan, tax rate, etc.
“Increases in outstanding credit card debt can indicate a strong economy, as confident consumers spend more, or it can indicate the opposite, as troubled consumers find it harder to pay their bills.”
This was my favorite clip from that article you posted. Which do you think we have now?
WT, I was going to put that same article out there. I frequently find myself talking about housing, banking, Wall Street etc. with people. I will tell them how far I think housing has to fall. We will discuss the financial stocks and their future. The conversation gets so frustrating because I can tell the other person just isn’t getting it. Finally, I say, “there is just too much f-cking debt”. The little light then goes on.
It is all about the debt. Everything we are now facing is a result of the debt that has been created over the past 25 years. Trillions of dollars of loans were made with absolutely no potential for repayment. That can’t end well for anybody involved in the debt machine.
From the article:
“Home prices have dropped by about 7 percent since the peak in 2006, but some experts suggest they could fall by another 15 to 20 percent before hitting bottom.”
Why 15-20%? What market fundamentals indicate 15-20%? Cost of rent, cost of consturciton, affordability? All those factors indicate it is much larger than 20%, atleast for the bubble areas, that seem to be just about everywhere.
Is it that if you predicted a drop larger than 20%, then Fannie and Freddie are SURELY bankrupt, the mortgage market would stop, all MBS would be worthless, virtually all banks would be insolvant, FDIC is insufficient to cover losses, insurance comapnies are toast, pensions can’t be paid, etc. etc. etc.
Well, price drops will be more than 20%.
Exactly. The entire U.S. banking system is bankrupt, we’ll all get to watch the rest of the world figure this out in 2008.
Apparently we aren’t the only ones coming to this conclusion.
http://www.europe2020.org/spip.php?article515&lang=en
An interesting global perspective. However there seems to be a tinge of built in anti-US bias to the whole article. Not the rabid middle-eastern kind, but the more enlightened euro-leftist kind.
“What will that do to banks, insurance companies, pension funds, and public finance?”
I can think of one bank (the central one) which will remain in crisis management mode for the foreseeable future…
just think of it, that must be Bernanke’s wet dream: he can keep printing dollars for the indefinite future, there’s always a crisis around the corner. Greenspan policy in turbo mode.
I just don’t get where the actual manna from heaven, part of the scheme comes from?
There are tv commercials running currently, that imply what a loser you are, if you don’t use plastic (i.e. cash or checks)when @ the checkout counter.
In the last one I saw, everybody’s dancing and singing and a guy starts writing a check, and everything stops…
So, how does one make it cool again to handle cold hard cash?
So, how does one make it cool again to handle cold hard cash?”
Not to worry, Mr. Market will soon make cold hard cash the next “in” thing.
The last time this happened — the 1970s, as inflation and recession trashed both stocks and bonds. But back then, real estate was rising. This time we’ll have the trifecta, because there is excess value in all three.
——————————————————————————
Vietnam then Iraq now. very expensive to lose wars.
Win or lose, war is expensive and wasteful.
Even plunder ain’t what it used to be.
You are smoking dope if you believe we are losing the Iraq war. I agree war is expensive but to make the claim that we are losing this one is just ignorant.
Geez, nobody seems to get it! We lost the war! Remember Vietnam? We were told we were winning before TET in 68′,
then it was we were trying to win the hearts and minds. same bull. Better expect a Gulf of Tonkin resolution in the Straits soon. Well, at least the Vets coming home today, dont get spit on.
“Vietnam then Iraq now. very expensive to lose wars.”
From where I sit we are winning the war. I would write more but I have to go fly a mission and on this mission will be just like the last several months. Boring with no fighting going on in Al Anbar. I have yet to be involved in any fighting and none of my other pilots have either. This is quite different from the last time I was here. Wake up and realize your preconceived convictions are wrong!!!
If there is no fighting . . .
. . .
then why are you there?
We had the same problem in VN. We were “winning” right up until we left.
When Hanoi had hundreds of our fliers held in inhumane conditions, control of all the major border battlefields of the conflict — Camp Carroll, Con Thien, Khe Sanh, the A Shau Valley, Dak To, the Ia Drang, the Iron Triangle, the Cambodian border sanctuaries — they had us by the shorthairs and all we could do is GTFU and hope Thieu could hold it together long enough for us not to look too bad.
I have no idea how Iraq’s going to play out but until the average US friendly politician can survive the full term of his position without getting blowed up or his extended family kidnapped & slaughtered . . . we haven’t won.
Thanks for putting your arse on the line shakes. And thanks for the news from the front. There are too many agenda filters between where you are and where we are.
Story on some of the realities of the mortgage relief efforts:
http://tinyurl.com/29v48d
“Some loss-mitigation departments, according to Gusman, delay getting involved until borrowers are seriously delinquent, 45 to 90 days behind on their payments.”
“So I find myself telling clients – look, if they aren’t working with you, maybe you shouldn’t make any payments for a couple of months. Then they’ll pay attention. That’s a ridiculous situation.”
With Countrywide, if you weren’t behind, they wouldn’t deal with you.
“Padgett agrees that the presence of home equity lines, second mortgages and other liens against a property can seriously gum up short sales – even torpedo them – if the junior lien holders won’t cooperate and take only a fraction of what they are owed.”
“As a general rule, he says, the more parties involved, the slower it goes.”
Even with an uncomplicated situation and a small number of parties, it can take 3-4 months to complete a short sale.
I found that to be the case when I attempted a short sale buy on a house that wasn’t in arrears. The owner knew he couldn’t sell it for what he owed and we agreed on a price but the bank wouldn’t even look at it because he was current on the payments.
Some of the more interesting stories of late have been those detailing how short staffed servicers are completely unable to deal with the volume or reworkings.
Does anyone think the servicers will keep beefy payrolls just so FBs can rework? Nah, that’s a potential out for them - let the FBs die off while listening to elevator muzak and voice prompts.
No, first they will staff up the first line (phones) with people from India. They will need to rewrite their proprietary systems to track this and give the phone bank people new scripts and options to check. They will need to create new departments to handle, route, process the data. There will also need to be some way to request info from other companys, and also something to tie into gov. programs.
My guess, a minimum of 2 years for coding, hardware purchases, integration, staffing, etc. Then you have the problem of how you pay for it. This doing it right which is unlikely.
Results, people give up. Frustration an anger takin out on the houding stock, their families, and random citizens. A lot of built space will become worthless as nothing is done in the way of upkeep. Certain areas will become no-go zones. Think sci-fi nightmare. Others will function almost normally. Most will be in between. A lot will depend on local gov. ability to provide services. Many will not be able to provide the minimum. Climate change, especialy water supplies will became a huge determining factor. Gov. intervention will be required but not suceed as major population shifts begin to emerge. Flake groups with simple creeds, easy to understand will begin to explode in popularity.
One thing people will not be ready for…
The best minds will leave our shores for better opportunities, elsewhere.
The culmination of our celebrity adoration culture…
The culmination of our celebrity adoration culture…
Do you think that’s true, aladin? I’d like to think so, but my guess is that the more miserable our economy becomes, the more we’ll lose ourselves in celebrity worship.
Lionel…
You are thinking back to the 1930’s, when movies reigned supreme, and made for an ideal fantasy world, perfect for it’s time.
The drivel that dribbles out of Hollywood, has been utter trash for a long time, and everybody knows it.
Add in the fact, that every film costs $100 million to make (go ahead Hollywood, make films like “12 Angry Men” again, I dare you…) and most films are of a violent nature, as befits our culture.
Soon, violence in real-life will trump anything the silver screen could think of…
Reality bites.
Again, Aladin, I’d like to agree, but I’m of the “the more things change” camp. I recall seeing the demos on American Idol and over 50% of teenage girls watched it. Staggering numbers. I’m not so sure they think that’s drivel, nor do I think most people think movies are drivel. If you’re talking about an intelligent subset of viewers, I agree, but I still think we’re in a minority.
A smaller point: As to the 30’s, I’m not sure if there was a huge difference in quality. Remember, there were hundreds and hundreds of movies produced every year (in the absence of TV). Studios recently have cut back (and studios themselves have vaporized) to the point that only a handful make it to theaters. Sturges and Wilder made wonderful movies, but there was a lot of crap back then too. I think time compression makes it seem as if the quality was much higher. (Even the 80’s, often regarded as the nadir of filmmaking, has some wonderful movies - Raiders and Diner come immediately to mind). Not defending the crappy ones made now, I just think it’s generally close in quality to what was made back then. I’m probably a little biased, having watched a number of movies in a row that I enjoyed immensely - No Country for Old Men, There Will Be Blood, Juno, Waitress, Dan in Real Life and the last Bourne. Alright, maybe I didn’t exactly enjoy Blood, but it was interesting.
As to 12 Angry Men, I’m apparently the only person on the planet who finds it too didactic to be either entertaining or enlightening. It’s fine, but… I don’t need to see it again.
I hope to hell you’re right though. I would hope that Britney and Paris would lose their appeal.
I saw “Juno” a couple of weeks ago. A clever, funny movie, made on a low budget, and relying on a solid script, great dialogue, and virtually unknown actors for the most part. No “special effects” or grotequesly overpaid Hollywood prima donas. It was #3 at the box office last week.
No “special effects” or grotequesly overpaid Hollywood prima donas.
The director, Jason Reitman (Thank You For Smoking), is quite gifted. Interestingly, he’s the son of Ivan Reitman, who made big movies like Ghostbusters.
“Longtime Hollywood publicist Julian Myers will turn 90 soon. And he worries the end may be near … for Hollywood.”
“Does a dying Hollywood need a civil war today to hasten its erosion?” he asks.”
http://www.variety.com/VR1117978915.html
I read it. Thanks, Aladin. My take on the strike is that there are so many corporate issues tied to it outside of the public’s view, that discussing whether or not a strike is necessary is nearly pointless. ABC just nuked the contracts of a number of showrunners through force majeure. It would be naive to think that the legal teams at all the studios don’t have very detailed agendas intended to shed costs. I’ve accepted that, like Mongo, Lionel just pawn in game of life.
Watching the events from an outsider’s perspective, it looks like a Kurosawa film, where the protagonists commit mutual Seppuku, but nobody loses their life, just their livelihood.
http://en.wikipedia.org/wiki/Seppuku
I’m not sure if seppuku is covered under our health coverage. I’ll get back to you.
When we had a housing bust in alaska in the early 80s (post pipeline) the majority of people just walked away and left the keys on the counter. It took a while for the banks to even find out which houses they now owned again. There weren’t the number of refis and HELOCs because that just wasn’t done nearly as much in those days. There also weren’t ARMS. People left most of the time because they lost the fat jobs and couldn’t pay the mortgage and they were upside down and couldn’t sell.
The Rochester, NY region:
http://tinyurl.com/33nmfy
“On the Farmington land where the Mandrino family once grew corn, wheat and beans, 469 houses are slated for a new subdivision.That’s almost 135 houses, or 29 percent, more than the town originally envisioned for this 308-acre plot near a busy stretch of Route 332. The development is part of a growth shift in Ontario County from Victor to Farmington.”
“And on the already densely developed west side of Canandaigua Lake, 132 townhouses, nearly three times what’s allowed by the town of Canandaigua’s Comprehensive Plan, recently cleared their first hurdle.”
That whole area will just keep being built, and built, and built… I predict in 5 years Canandaigua Lake will be, as Chip would say, “roont.”
Anyway, if anyone here knows that area, this article is so depressing.
Muggy, the local fishwraps here in South Hillsborough County, Florida are full of “news” about new developments going up. “South Shore Commons Moves Forward with Mega-Center on Big Bend” and “Huge Sun City Center project with 5,380 homes Allowed Smaller Lot Sizes”. I think the Hillsborough County Commission ought to be given rubber rooms in the local mental health facility.
“Muggy, the local fishwraps here in South Hillsborough County, Florida are full of “news” about new developments going up.”
I’ll say! Check this hype, “Mansions are still selling” piece out: http://tinyurl.com/2pvhj5
You know what’s crazy though? I actually have anecdotal evidence of the “boomer phenomenon” in that region. Many of my friends’ parents are returning to the Rochester Region for retirement. When I ask them about it, they all usually have the same “less hassle” answer.
Rochester gets an ave of 100 inches of snow a year, but the record is almost double that!..Some retirement
http://goldensnowball.com/2007/12/3-city-snowfall-records-broken.html
“Some retirement”
As Ben says, “I like to deal with facts…” the fact is that much like people made up the “1,000 people a day move to Florida” I think people just assume “boomers like warmth.” I don’t see evidence for this claim. Weather is certainly a factor but I increasingly see other quality of life factors trumping weather: good hospitals, walkable communities, less congestion, good grocery stores etc.
The days of the one-dimensional retirement are over. The trend I see is that people don’t care that Florida is warm unless they have a specific illness worsened by cold/dry.
Muggy:
True, some people like the cold, lots of snow, putting chains on the car. Getting up to minus 20 windchill. Thats not me. Been there done that, at a TV station transmitter back in the 80’s in Manchester NH…and at 430 AM…
My parents went back to MA to retrire. The weather there isn’t as bad as Rochester, but my Dad had a very good attitude about it. The HOA in the “active adult retirement community” does the snow removal. He doesn’t have to drive to work every day anymore. As long as they have enough food in the house, he can stay home and snug during a snow storm.
“1000 retired boomers move to florida everyday” doesn’t mean squat if 1001 retired boomers die in florida everyday.
Cold is not as big a problem anymore - people shop online a lot and have things delivered. Homes have garages so there’s no scrapping windshields and warming up cars. Cars have heated seats. When looking at retirement, good medical care, cultural opportunities and commuting ease seem to win out over weather. Also, if you can buy a cheaper home in a cold weather region, you can travel to the warmth during the winter. I’ve also read that for boomers, college towns are a big appeal.
“True, some people like the cold, lots of snow, putting chains on the car.”
Hey, I hope I don’t sound argumentative. I guess the point I am making is this:
“Old school” retirement destinations = sunny + warm. “New school” retirement destinations = practical.
Boomers are being practical, not wishful, about their retirement choices.
The other side of the coin can be said by extreme heat. One can install solar photovoltaic cells on the rooftop of his Santa Fe style house in Oro Valley near Tucson and generate excess energy and sell the excess back to the energy company perhaps. The best months of the year are November through April in the Tucson area. The other time of the year one can head up to a cabin in Flagstaff or just spend most summer weekends camping up at 8,000 to 9,000 feet (Mt Lemmon is nearby Tucson).
Study: Northeast winters warming fast
The reduction in days with at least an inch of snow on the ground was the most pronounced at stations between 42 and 44 degrees latitude — a band that includes most of Massachusetts, a thick slice of upstate New York and southern sections of Vermont and New Hampshire.
http://tinyurl.com/3×9mbm
I have also heard that if current weather trends continue for the next 50 years, the poor souls in upstate NY will have similar weather to what the Carolinas experience now, while Georgia and Floida will look more like the desert. Buy your grandkids a slice of tropical upstate NY before it’s too late!
“And on the already densely developed west side of Canandaigua Lake, 132 townhouses, nearly three times what’s allowed by the town of Canandaigua’s Comprehensive Plan, recently cleared their first hurdle.”
“Town officials and developers say that the zoning exceptions are legal and appropriate for proper development.”
Comprehensive Plan, what Comprehensive Plan? Exceptions are appropriate for proper development (of campaign contributions from developers?)
I looked at a singlewide shack on the east side of Canadaigua Lake last year and for this lovely 1000 sq ft, one bathroom supposed lake side retreat (it was actually a 1/4 mile from the lake without a view of the water) they wanted 70k. It was worth about 25k, so I didn’t pursue it. While Canandaigua Lake may be beyond repair at this point (the south side of the lake is still fairly quiet), the thoughts of doing development at Canadice and Hemlock Lakes are truly bothersome. The developers, retail outlets, Monroe County escapees, jet-ski and biker crowd, might as well destroy Canandaigua Lake, but please keep away from the other Finger Lakes gems.
http://tinyurl.com/2j24tb
WASHINGTON (Reuters) - Federal Reserve Chairmen Ben Bernanke will meet on Monday with House of Representatives Speaker Nancy Pelosi to discuss how they can work together to boost the U.S. economy, a spokesman for Pelosi said. We can rest easy, now. Nancy and Ben are going to work together and put our concerns at rest. Whew! Glad THAT’s over!
“Nancy and Ben”
Yep, that’ll fix us up. Seems like everyone wants to outdo shrub to see who can be the biggest loser. Oh, did anyone catch the latest shrub faux pas? Apparently, he told a little gathering in Israel that we should have “bombed Auschwitz”. ROTFLMAO! Glad to know the moron in chief has a solution for everything. Bomb It. Maybe he can order the Pentagon to bomb all the foreclosures.
That particular “bomb it” solution isn’t a Bush original by a long shot. Lots of Jewish groups in the US and what was then Palestine urged the Allies to bomb Auschwitz - sacrifice the people there to make the Nazi killing machine that much less efficient. Remember some of the concentration camps were just that - a place to concentrate people. Plenty of people died of disease and starvation and being shot or frozen, etc. at all of them, but not all were set up for extermination the way Auschwitz was. The allies never did it. They also urged that the railways feeding into the concentration camps be bombed, but the allies didn’t want to ruin the amount of infrastructure that would entail.
So, the statement was not a faux pas of any kind. Just a politician telling an audience that he agreed with them about something important.
Polly-
I was never taught that in text books, or any other books I’ve ever read. Thank you for the informative history lesson. Much appreciated.
There’s a B-17 crewman that lives in my town…
He flew 35 missions, and he’s hard of hearing, but a joy to talk to.
The little wrinkle of range is all you need to dismiss claims by ’ssshrubery, that we should have bombed Auschwitz.
Every B-17 would have run out of gas, somewhere over Germany, on the way back from the mission.
It was not bombed because of limited resources….Allied Command felt that in the long run more lives would be saved by destroying the Nazi war machine (ie munitions factories) than the camps. Same reason we Nuked Japan. Logistics. I hope I don’t have to make those kind of decisions. Hard on the soul.
“Every B-17 would have run out of gas, somewhere over Germany, on the way back from the mission.”
That’s Alad for that reality check. Also, the discussion w/FDR and later Truman, was not bombing Auschwitz, but the railway lines that led into it, per William Manchester. Decision was that Allies needed to concentrate forces to destroy the German war machine…even so, we almost lost the Battle of the Bulge, which was in 1944.
Anyways, the Bush family and Averell Harriman made plenty of money from Thyssen and Flick during WW2.
http://www.geocities.com/bushfamilynazis/
“Every B-17 would have run out of gas, somewhere over Germany, on the way back from the mission.”
Which is why you’d use B-24s from the 15th Air Force in Italy. Alternatively you could use B-17s from the 8th Air Force on a shuttle bomb mission, landing in the Soviet Union.
http://www.larouchepub.com/other/2000/2733_prescott_bush_hitler.html
Dubya’s Grand-daddy and Great-Grandpa helped put Hitler and the Nazis into power.
“…sacrifice the people there to make the Nazi killing machine that much less efficient.”
Killing by bomb attack would be more efficient than hard work and starvation, no?
“Killing by bomb attack would be more efficient than hard work and starvation, no?”
Less efficient than gas chambers and crematoriums, no?
It was tough enough getting the bombers to Berlin without them being shot out of the sky, now we were supposed to fly over Germany and into Poland?
Get real.
Let’s try one more time.
What is more likely to help this country, Bernanke and Pelosi discussing our current economic condition or a Cocker-Spaniel and a German Shepherd discussing our current economic condition? I know, for a fact, that the German Shepherd and Spaniel at the bare minimum couldn’t be worse.
Do you mean to that we’re going to the dogs?
Not sure if this has come up here before, but BOA is getting a $100m tax break by buying Countrywide…
http://money.cnn.com/2008/01/11/news/companies/sloan_countrywide.fortune/index.htm?cnn=yes
Yeah, you tend to get write offs when you lose a billion or two.
I guess if Countrywide just went BK, they wouldn’t have had income to offset their losses against. But in that case the taxpayer losses would be much greater than the lost tax revenues on what would have been BOA’s profits.
Here in NYC, there will be enough writeoffs in the hopper that city and state corporate income tax revenues (yes we have a local corporate income tax!) are going to be damn near zero for some time.
There will be a lot of talk about government tightening its belt, like businesses. But in a recession businesses lay off because they have less business. Governments have more business — crime, welfare, pension losses to make up, etc.
If they rise taxes too much it’s, “goodbye NYCityBoy, hello Someotherf—ingplaceBoy”. I won’t complain about it. I will vote with my feet.
LOL!
We’ll see how it turns out:
http://tinyurl.com/2vvu32
“BofA’s awesome Countrywide tax break
Brace yourselves, taxpayers of America. You’re going to help Bank of America finance its $4 billion buyout of Countrywide.”
Countrywide has so many foreclosures they can not process them all fast enough. Houses they own are sitting for months before they even set an asking price. Now with BofA taking over, the existing CFC employees may be hindered in their ability to get REO out the door. CFC has a policy of being the lowest price on the block, just to get the attention of new FB’s. Now it appears Freddie is picking up that ball and running with it. I predict a log jam of CFC foreclosures stacking up. When the dam breaks, it will be damn big! Fall 2008 should be very interesting for home prices.
It has been a long time since I did hard core corporate reorg tax law, but I thought that the losses were restricted to offsetting profits from the line of business that was aquired in cases of more than 50% change of ownership. At least I thought they were restricted that way for a few years. The article was not very clear and I don’t even remember the section number for this one. 367 maybe?
Any other tax geeks out there want to help me on this one?
But BofA was already in that line of business. Buying CW is like a roll-up for them.
That is, if they don’t roll over…
I visited a friend yesterday. He just moved into an upscale downtown condo. The building appeared to be entirely empty. It was like being in a resort hotel on an off-season weekday. In fact, he indicated that in order to take a hot shower, he had to let the water run for several minutes to warm up b/c no one else was using hot water in the mornings.
Sadly, the developers are building thousands of similar units in downtown Austin. I really don’t what we are going to do with them all.
did he at least negotiate a deal ?
his condo fee may be twice what he bargained for
Buying into a barely or partially sold condo must be about one of the worst situations someone can get themselves into. There’s three towers a block away from me like that. At least the few owners can skateboard in the hallways and have wild parties - other than that they’re up the creek.
Last Feb, I stayed in my company’s corporate apartment in Chicago. The 2 bedroom condo was said to be worth $1 million. It was condo-tell style place. Work actually bought it years ago for about half that. They could justify the $4-5K a month cost because it allows them, to avoid paying 2 hotel rooms for $200+ a night.
$400 a night, have people there 10-12+ nights a year… break even or come out ahead.
The tower we were in was mostly sold off. Yet, I never saw another soul on my floor. 12 units on the floor, and not once did I see nor hear another person.
There were 2 other towers. They seemed to be leased off en mass to one of the local universities. ALL packed with 18-22 y/o college kids. No way could the rent on those justify the $1 million per unit cost.
I’m curious to know where these towers are. I would have guessed the Presidential Towers just west of the Loop on Madison St. But that is 4 towers, not 3.
Anyway, the last time I heard a number for it, there were around 50,000 college students enrolled in the many (seriously, at least 5) universities with campuses in the downtown area. It’s pretty likely that there are enough wealthy children to fill up two towers. But the more likely answer is that those kids were renting small studios for high prices, but even those rents don’t come close to justifying the ownership prices downtown right now.
U.S. Treasury Secretary Henry Paulson said the U.S. economy slowed “rather materially” at the end of last year, and any stimulus package should be put into effect swiftly. Stimulating A Slowing Economy (The administration is more worried about this than it admits. Republicans will take a pounding for a lousy economy this year just as they did in the campaign of 1932. But who among the Democrat front-runners can come anywhere near filling FDR’s shoes?)
And how?
The New Deal was that the govt. agree to run a larger and larged deficit, forever.
Remember the basic flaw of our debt-based crurrency. Money is created when people borrow money, and the money is destroyed when they pay it back. When the money is destroyed, the net effect is that there is more debt than money due to inflation adding to debt.
The New Deal was largly an agreement by government to be the debtor of last resort. That the govt. sould go ever further into debt.
Well, that worked okay for 80+ years. But, now the govt. debt is so great that it costs each household $1500 a year just to pay interest on the national debt. Well, 2/3rds of that is just paying interest the the Social Security trust fund, which is purely fiction…. Social Security money has been spent. The REAL national debt is $5 trillion (public held), not the $13 trillion which includes the fictious “trust fund”.
We have a perfect storm of crashing economy and long-promised expenses actually coming due.
How can the govt. agree to spend even more when they’ve already agree to pay much more than can really be supported. Stimulus? The biggest stimulus we can hope for is smaller than needed cuts to Social Security and Medicare.
The New Deal was that the govt. agree to run a larger and larged deficit, forever.
That’s baloney. The government started running surpluses soon after the end of WWII, and right through the Eisenhower and Kennedy years. Vietnam upset that trend, but there were still some surplus years up top the end of the Carter administration. It was not until Reagan took office that deficits became chronic.
Gee… in that case, we need more tax shifts. From the wealthiest to the least among us. Let’s be honest and set aside the ideology for once and admit that the tax shifts created the 5 trillion in debt.
Ideology aside, spending created the $5 trillion in debt.
“The New Deal was that the govt. agree to run a larger and larged deficit, forever.”
Does anyone dispute these numbers and the presidents that presided over them?
http://www.lafn.org/politics/gvdc/Natl_Debt_Chart.html
I no doubt think both parties are to blame, but the lame excuse that Reagon won the cold war and that’s why he racked up so much debt is B.S. You think Putin’s Russia is a democracy and ally?
There is a clear pattern.
I thought that WWII ended the great depression more so than the New Deal.
Back from a couple days on the slopes, and had a great time…
The skiconomy looked to be in fine shape yesterday, but then again, a 4 foot base, 45 degree weather and all runs being open and a good amount of sun, could have skewed the numbers.
Here’s a D.C. couple boo-hooing because they couldn’t come up with $25,000 down on a $500,000 house.
From the article: “They’re cutting well-qualified buyers,” Tony said.
Yes, they’re cutting well-qualified buyers that can’t afford 5% down.
Also from the article:
I asked Tony if that declining-market notice gave him pause about investing in a home. “No, because you need a place to live,” he said. “We’re going to be here at least five years. We’re not under the mistaken assumption that we’re going to get rich. When you’re renting, you’re losing $20,000 a year in rent plus whatever tax breaks you miss. You don’t know what’s going to happen in the future.”
The army is paying for this officer to get a graduate degree. “At least 5 years” sounds like a PhD or even an MD to me. He knows that rent is about $20K per year. At pay grade 3 (highest for captain from my very cursory look at the chart), and 6 years service (seems about right to pause for a graduate degree) they would each make about $4500 per month. $9000 for both. That is $108,000 for the two of them making some very generous assumptions. I don’t know if they get a housing allowance, but no hazard pay in DC despite the skill level of the drivers. Looks like graduate school is an alternative you can pick instead of a cash retention bonus, so no extra cash coming in for re-upping.
They want a 0% down mortgage on $500,000. Even if you assume that all they are paying is 7% on the money (remember, this is two mortgages - an 80 and a 20) and not paying any principal or insurance or taxes, they are on the hook for $35K. I think their marginal tax rate is 25%, so counting a tax discount on the whole thing they will owe $26,250 per year - 31% more than renting. And they still have to pay principal, insurance and taxes and keep up the property.
Never mind that the mortgage is for 5x income. Paying what is probably a 50% + premium to buy a house that will be worth less in 5 years than it is now. This just nuts. I hope their army jobs don’t require math.
Excellent analysis.
Also, for people not in government, there is risk of default if you lose your job. As a renter, if I lose my job, plan B is to move in with Dad.
They do get a non-trivial housing allowance (I’m thinking a bit shy of $1k/month for an O-3 assigned to MDW (metro DC)), which is (if I recall correctly) not taxed as income (because the military would otherwise provide heavily subsidized housing, probably at Ft. Belvoir.)
Graduate school is something the military will (usually) pay for in exchange for an extended service commitment, as long as what you’re studying is something that could plausibly benefit the military.
Of course, it’s been a lot of years since I looked at the numbers and how they were calculated…
Good. Another pair of idiots who won’t be competing with more prudent, high-down-payment, creditworthy buyers, and thus artifically inflating housing prices.
The listings on Zip real estate are already heading back up. The Spring ‘08 listing (not selling) season is upon us. I still watch the listings for my hometown in Minnesota. It’s a joke. All you see are the same houses getting pulled and relisted.
How can you tell if it is a relist in Minnesota? Well, you can either watch the listings and become familiar or you can assume any “fresh” listing on January 13th in Minnesota that sports a home with trees full of leaves and bright sunshine was probably relisted. The pictures with snow might not look as good but at least it’s not so obvious. “Ooooh, this one’s only been on the market for 3 days. I especially like the fact that my foliage will stay so vibrant in the middle of winter. I think I will put an offer in.” WTF?
Got this annoucement on my Citibank statement this week:
“Effective immediately, to send a Citibank Global Transfer, please visit your closest Citibank Financial Center or selected Citibank ATM. Until further notice all domestic and international Citibank Global Transfers initiated through Citibank Online have been temporarily suspended”
Should I get a tinfoil hat?
I’d opt for a crash helmet.
I got a statement from Wells Fargo yesterday. Big letters… GOOD news… We’re doing away with the following fees.
list 4 fees I didn’t even know about….
Then the print gets smaller… and here is our list of remaing fees.*
Long list of fees… follwo the * to the bottom… smaller than most people can read.
*Some of these fees have recently been increased.
Lots of the fees were for transfers… but there were even fees to have a teller print out an account balance, get a reprint of a statement, have them investigate a cleared item and print a dupe of a check, etc, etc, etc.
Expect more bank pressure on credit unions again, the “cycle has turned” again.
That’s because Citi is getting killed by the hacker machines. I hear their ATM network is getting rocked with tons of phony withdrawals. The Eastern Europeans, and other crime rings, are robbing the banks blind.
There is no tinfoil needed. The Internet, and all of this electronic moving of money, is not nearly as safe as some would like to believe.
NYCboy my GF had 2 unauthorized on debits this week, only $80 total..but still we check out Citibank accounts daily…
Perhaps we should start a pool on when official capital controls go into effect?
OT
Bush is here in Dubai. They closed off the embassy district and some roads, the traffic situation got so bad and they’re closing more roads tomorrow so the city declared it a holiday. Some jokes flying around today, that he’s come looking for his next job, but Sheikh Maktoom (the ruler of Dubai) will only give him a residence visa if he buys an overpriced villa on one of the palms.
And another: How do you assassinate bush when he’s stuck in Dubai traffic? Answer, leave him there, he’ll die of old age
“Some jokes flying around today, that he’s come looking for his next job”
Does Dubai have a severe shortage of janitors?
Actually, I’d think the people here actually like him for getting oil up to $100. We have over 10% official inflatioin, but who cares when salaries are going up by over 40% on average. For govt. employees, last year pay hike on basic salary (usually 60-70% of net pay) was 70%.
http://tinyurl.com/2s7qt7
And what happens to that paradise if oil prices drop dramatically?
I don’t know. I don’t think there will be a dramatic decline. Other Asian countries will step in when US demand declines. Consumption also reduced in several poorer countries due to the high prices, and they will help put a lower bound.
If there is a decline, I for one hope that the recently arrived hordes real estate agent expatriates from Europe go back. Those unbearable high school drop out living the life of luxury deserve a kick in the ____.
Anyways, not all the oil money is being wasted on designer islands, and taller-than-thou skyscrapers. There has been lots of investment in infrastructure, and local manufacturing industries, especially in Saudi Arabia. I see a lot of goods in stores made over there. Abu Dhabi recently launched a home grown car, although it was mainly assembling parts for now. Dubai has less than 20% of its revenue from the oil sector. The fact is some of the Gulf countries are attracting talented and skilled workers from all over the world.
Overall I think the middle east is better prepared now to withstand a drop in oil prices.
The engineering company my bro is working for built a huge urea plant in Saudi Arabia a year ago. He told me that all the workers came from abroad, mainly from India. The only Saudis he saw were the supervisors, but they were just sitting in theit AC offices and not even supervising properly.
The climate was horrible, but he earned a shit load of tax free money there.
The Saudis are not yet prepared for the time after oil. They are trying hard, but the attitude of the Saudi people as regards real work still needs some changes.
there’s also nuclear power plants coming up.
and some help from the French with that
http://news.bbc.co.uk/2/hi/europe/7185660.stm
the supercomputers for simulations are coming from the US though.
A friend from Maine was telling me about her parent’s $600 monthly heating oil bill, that they can’t afford.
Their solution to the problem was the close off the 2nd story of their house, and get it down to $400 a month.
I wonder how many million people are in this precarious position?
1 in 5 Americans say they have to borrow money to heat their homes. Can’t remember where I read this.
Here’s one possible source for this:
One in Five Expect to Borrow to Heat Homes This Winter
Here is a creative heating idea that might be tried in lieue of burning high-priced fossil fuels which contribute to global warming
http://amateureconblog.blogspot.com/2008/01/crematorium-may-use-its-heat-to-warm.html
This type of thing is quite common in very large houses.
My grandmother has a pretty big house and keeps three of the bedrooms and a couple other rooms closed off (doors shut isolating the rooms from the rest of the house) in the winter time with the heating vents closed if they are not in use or expected to be used.
She’s been doing that for as long as I can remember and she’s got plenty of money—probably why she has plenty of money!
The century-old house I grew up in had double doors separating the parlor from the dining room. In the McMansion we rented last year, I longed for doors like that. Modern houses are built with huge gaping openings in the foyer where doors belong.
Insanity.
That’s TRUE older houses even had doors (French doors)in the living room to close them off at night…
yes, I think that is quite common in larger homes in Europe. In my city many ‘babyboomers’ are living in huge (expensive) 17-19th century homes with at least 3/4 of the home unused. Heating the whole building is not an option for most of them. Just have to be careful that the pipes don’t freeze or mold starts to grow in the walls …
A very common practice in the northeast.
I actually know quite a few people here in Maine who do exactly that. Our house is designed that way. Right now, we have the entire third floor closed up tight. We usually shut off the heat to all the second floor rooms, except our bedroom and the bathroom, unless we have guests. If the sun is shining, we’ll work in our solar-heated offices during the day. If not, we crank up the wood stove in the living room and work down there, on our laptops. As we’re doing right now (not that this is work!).
“Their solution to the problem was the close off the 2nd story of their house, and get it down to $400 a month.”
eastcoaster,
I’m so sorry to hear about your job issues. Please check the rules at the retirement community where your parents intend to move. Many don’t allow people under 50 something to live in the units for more than a reasonable visit length of time. I don’t know how old you are, but your son certainly wouldn’t qualify. If it is a problem, you may need a different back up plan.
Boy, guys. I just read that thread. Very depressing - in the emotional rather than the economic sense. I’ve always expected another recession from all this. That is one reason why I was willing to leave the NYC area at all to get a more recession proof job. I’m glad not to have my livelihood dependent on Wall Street and the investment banks anymore, but I still know and like people who didn’t hate the uncertainty as much as I did. I worry for them.
What happens when Johnny comes marching home again, from Afghanistan and Iraq?
http://www.nytimes.com/2008/01/13/us/13vets.html?_r=1&hp=&adxnnl=1&oref=slogin&adxnnlx=1200236689-VmP9QEZZ9MS4B29cK10Hgg
Yeah, well the NYT should not act surprised. Any vet or anyone who read about warfare could have seen that coming.
Maybe the NYT editiorial board should reflect on that when looking back on their opinions in 2002, and their pathetic page 8 mea culpa in 2004?
War always hurts the innocents - each and every time.
Soon, in a year or 2…
250,000 g.i.’s and 100,000 blackwaters will be coming home.
The g.i.’s have been treated like pariah-lite, upon their return from the wars, and apathy swings both ways, and once we’ve “lost”, imagine how lost, they’ll be?
The blackwaters and the like, will have to adjust their incomes down from $100k, to minimum wage.
Expect outrage.
aren’t all these blackwaters etc. retiring to Palm Island, Dubai or something similar? At least they should be used to the sand and the temperatures by now
Irambo.
This crop of G.I.s is being treated better than the Vietnam Vets were, at least. I haven’t heard of anyone spitting on them in the streets.
I hear ya.
Every time I’m in the Atlanta airport waiting in line at the Mickey D’s I buy a couple soldiers a meal. Not much granted but something seems sick to me when you see hundreds of soldiers lined up all over the airport having to buy a meal among thousands of fat azz civilians when a war is going on.
This article is a piece of crap from a liberal rag of a paper. 121 murders in 5 years from a mostly male, higher minority concentration military force of maybe 400,000 soldiers that have transitioned through Iraq and Afghanistan in the last 5 years. Thats a murder rate that would be the envy of any large city or metropolitian area in this country.
This does not indicate a problem, it indicates the overall quality of the military force.
I can not believe folks on this site that critically read articles on finance accept this article on face value.
You would have to look at actual numbers of murder rates to come to that conclusion. Have you seen any?
PTSD is a very real illness. It’s not surprising that someone who has spent over a year in a war zone with bombs going off around him, having to dodge bullets, seeing your friends and innocent civilians getting blown away right in front of you, would come home a bit shell shocked. Ask anyone who’s been there. It’s a huge adjustment coming back to a “normal” environment.
The “face value” I took away was “There they go again”. The NYTimes’ bias is so well known that few bother to comment on it any more.
“This article is a piece of crap from a liberal rag of a paper”
Good Lord. The same article could have appeared in the national review scandal sheet and you’d still deny the monstrous failure the debacle really is.
Get a grip.
Abandoning Houses, Horses and History
The mortgage crisis has caused homeowners throughout the U.S. to abandon pets or hand them over to groups like the Humane Society. In Arizona, it doesn’t stop with dogs or cats.
“People will get a notice to leave their homes and they’ll wait until a day or two before they have to be out and drop their horses off with us,” Holly says. “And not just us. There’s not a horse rescue group out there that isn’t affected. And the number of horses being taken to the slaughterhouse auctions has just about doubled.
Holly is struggling to pay for the hay needed to maintain all of the horses she’s taken in. (Those wishing to help with that can contact her through her website, rescueahorse com.)
This is all very sad. If you could see some of these horses, dogs, and cats that get dropped off, it would break your heart. I’m going to get busy helping out these rescue organizations and I encourage all to do something, if even a little, in your own areas. A hundred people in an area helping out just a little can make a big difference.
This is very sad. At least some people are dropping off their pets with animal rescue organizations as opposed to the story in the past week or two about animals being abandoned along with the homes. I can’t imagine abandoning any of my pets. They’d have to be taken from me by force.
All of mine came from rescue organizations and none are going back unless I were to end up in a situation where I could no longer care for them properly.
Thank you for posting the information, which I find one of the most depressing aspects of this fallout.
Personally, I’d be considering such actions (neglect/abandonment) an automatic disqualification from any kind of relief or social assistance for the fallout, regardless of whether the individual in question otherwise qualified. You abuse the vulnerable dependants you have and then have the temerity to demand some sort of relief for you and your friends? Not with my tax dollars.
Too bad we don’t have a national registry of said individuals.
I suppose some of this isn’t that surprising, unfortunately. Some of those marginal buyers were simply marginal people. However, neglecting or abandoning dependents is quite low.
I will give Holly a large donation. Thank you. I have been looking for someone to give the CFC money away to.
I and the GF have rescued 3 cats and 3 dogs (5 abandoned) in the last 2 years. Do we qualify Tx?
These have all turned out to be truly incredible and very smart, loving companions. It’s sad to think about all of the wonderful animals that are suffering.
Our dog was a stray. Friends found him and asked if we could give him a home. That was nine years ago, and he’s been the most devoted, lovable mutt you can imagine. There’s something deeply wrong with people who abandon or mistreat animals.
There’s something deeply wrong with people who abandon or mistreat animals.
I completely agree!! They hate their lives so they take it out on the innocent. Animals, kids, spouse. All of that gets me going to the point that if anyone did it to my family or pets I do think I could ’snap’ and then have to claim temporary insanity
My wife and I have 2 rescued dogs. They are a pain sometimes but we couldn’t give them back at all.
Another article about the same thing:
http://www.pittsburghlive.com/x/tribunereview/news/westmoreland/s_547244.html
” ‘When they built their McMansions, they put the stable out back with a fancy cupola on top and put five ponies on an acre,” said Joann Mauger, 64, who heads the Large Animal Protection Society, a nonprofit in Lancaster. ‘ “
I just listened to Marc Faber interview on Financial Sense Newshour website. Faber is very sobering and I recommend listening. He actually says Bernanke and Greenspan should be hanged for what they’ve done.
Link please?
He is in the second hour:
http://www.financialsense.com/fsn/main.html
He has a strong case against Greenie, but honestly Bennie walked into a trap that was laid by his predecessor.
Bennie should have been able to learn from observing the mistakes of Greenie. But reality is that he is trying to perform the same trick on an even bigger scale; I wouldn’t call it a trap.
First Bennie was the sorcerer’s apprentice.
yes, and I don’t think that story ended well …
Every Saturday morning @ 4AM without fail. FSN is great, but l o n g!
I took some notes:
Faber points out that the US Government is lying about the CPI numbers, and that in real terms, we have been in a recession for at least three months now. He compares Bernanke to Mugabi of Zimbabwe. He doesn’t think that international financial markets can be decoupled, and that there is a big bubble in emerging markets. He would rather buy US stocks than emerging market stocks on valuation grounds. He says that the ECB is just as bad as Bernanke about printing money. If we were on the gold standard, we would be in a massive deflation. He expects stagflation in the US, sees worse inflation in Europe than in the US currently. The gold price has not really risen since 2001, rather the dollar has collapsed. Puplova asks what happens to credit default swaps ($45 trillion worth) in a recession? Faber blames the Fed for not controlling subprime lending. Now we are deleveraging. Fed will try to stimulate, but this policy is totally misguided. Weakness in financials now means that the bull market is over, we will see high volatility but no progress in stocks, massive bankruptcies in financial companies. Long term you should be in assets that cannot be multiplied easily - energy, food, precious metals. Be out of industrial commodities like nickel. Don’t buy anything without being prepared to ride out a 20% correction due to upcoming extreme volatility - get used to it. Oil could fall to $70. But Prechter will be wrong - while we may see deflation in the near future, central banks will pump money. Hard assets will hold value. Stimulus packages unlikely to help, but the Dow could outperform gold for a short while. Thinks we have an earnings bubble which will collapse. Keep in mind that money printing does not create wealth. The economy will stop absorbing the new money as individuals and companies stop borrowing and start saving. Expects commercial property to collapse next. Recommends staying away from Treasuries. Is holding a lot of cash, prefers $US to Euros for now. Gold is currently overbought and could correct 10-20%. Sees no new big opportunities right now, prefers the sidelines. Some opportunities in Cambodia, Belarus. Says construction boom is world-wide, general world-wide boom leaves no up side, next will be a colossal world-wide bust, didn’t say when, depends on how liquidity situation works out.
====
They don’t call him Dr. Doom for nothing.
it is impossible to call the top in a mania and Faber knows that; gold and oil could easily double or triple from current levels before the whole thing crashes, if Bernanke and Trichet keep pumping out money like madmen. Savers will suffer severe damage (maybe more than most debtors who have little to loose), either by rampant inflation/stagflation or because their bank suddenly goes bust (certainly in EU). Nowhere to hide from the idiots that are in charge now
A friend is @ FLETC, (federal law enforcement training center) inbetween Savannah and Brunswick, Ga.
He’s been there since September and had never spent any time in the South, previous to this.
As a law enforcement type, he’s much more cognizant of crime, than you or I.
He told me he’s utterly shocked by how much crime there is in the South, compared to anywhere else he’d ever been. He thought it was many times that of California…
Definitely a factor to consider before moving there, he felt.
The time we went to Savannah I couldn’t believe the wretched nature of the outlying area we had to drive through.
I had to go to Oakland one time and could not believe how much crime there is in the West.
Oakland is a good place to find affordable housing in the (East) Bay Area, thanks to the general populaces’ fear of crime. Ditto for Richmond and San Pablo…
Can someone please explain so that an idiot like me can understand, why metals are going parabolic up up up, while at the same time US Treasuries keep going up?
both can be explained as a flight to safety; in case of the metals / metal stocks there is a limited supply so prices go up, in case of the treasuries there is an unlimited supply so their prices go up = rates go down.
sorry, I guess ‘prices’ is not the right word when talking about Treasuries.
Price = Present Value of Future Nominal Coupons. The relationship is completely deterministic in nominal dollars, and the only risks are inflation and sovereign insolvency.
The nice thing about Treasurys is that there is none of that pesky take-the-money-and-run management strategy risk that occasionally plagues the value of individual stocks.
Metals = bet that the solvency crisis will resolve in the direction of higher future inflation (the Fed’s unstated preferred outcome)
Treasuries = bet that the solvency crisis will resolve in the direction of deflation (bond market bulls’ hoped-for outcome)
Price of Gold = US Dollar index crashing to about 50 + continuing devaluation/debasement of all paper currencies as a result of government deficit spending + monetization of debts by central banks, and ultimately hyperinflation.
Treasuries = a place to park cash during the deflationary phase that precedes the above.
Wall Street drops sharply on AmEx earnings
January 12, 2008 1:12 AM
Wall Street stocks fell sharply on Friday after a cautious earnings outlook at American Express added to worries that US consumer spending is headed for a sharp slowdown.
The sell-off capped another difficult week for equities. Stocks floundered after Goldman Sachs said the US would fall into recession in 2008 and weak retail sales drained confidence.
Although Ben Bernanke, the Federal Reserve chairman, tried to assure the market he was prepared to keep cutting rates to stave off a slowdown, stocks struggled to find a footing amid concerns that rate cuts may not be enough.
…
“It’s becoming very moot as to whether we are in a recession. Companies are telling you, the bond market is telling you and consumers are telling you - it’s baked in,” said Quincy Krosby, chief investment strategist at The Hartford.
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=FT&date=20080112&id=8025986
“Companies are telling you, the bond market is telling you and consumers are telling you ”
Personally, I’m waiting for Larry Kudlow to tell me…
Bank of America Dives into Mortgage Cesspool
Martin D. Weiss, Ph. D. gives a quick overview of what’s happening in the financial market in the U.S. In this issue of Money and Markets, Dr. Weiss takes a closer look at Bank of America and their plan to buy Countrywide Financial.
Jupiter, Fla. (PRWEB) January 13, 2008 — Martin D. Weiss, Ph. D. gives a quick overview of what’s happening in the financial market in the U.S. Dr. Weiss takes a closer look at Bank of America and their plan to buy Countrywide Financial.
http://www.prweb.com/releases/2008/1/prweb620181.htm
Must see video: Martin Weiss flummoxes MSM reporter with a common-sense discussion of why the Countrywide acquisition is a raw deal for BofA shareholders — unless the plan is to have the govt bail them out. The reporter seems completely blindsided by Weiss’s honest and simply-stated convictions.
http://www.cnbc.com/id/15840232?video=622170606
Preemptive first strike:
“I can’t imagine that the government would be willing to do that.”
“Question for BofA: Who twisted your arm?”
Weiss speculates it was the government doing the twisting, and that BofA may need to be bailed out by the taxpayers.
Paul Miller: “I’m kind of surprised BofA did not sit on the sidelines and get a better deal out of it.”
Joe Kernan: “It seems like the word is out at this point (about the housing market)”
Seems ?
Actually, it seems like the whole world woke up to the collapsing credit bubble around August 2007.
“Martin Weiss flummoxes MSM reporter”
Where was a reporter in that video? I only saw Becky “Brain-Dead” Quick, Carl “the Cheerleader” Qunitanilla and Joe “Ken Lewis is a jenius” Kernan. Was the reporter hiding behind one of these CNBC shills?
the reporters were Kernan and Quick. I found it funny how the CNBC folks kept cutting off the guests repeatedly in order get their MSM 2 cents in.
Shiller’s take on BofA purchase of Countryside:
Shiller Says Bank of America May `Have Some Problems’: Video
“There’s a disconnect between the general level of optimism and the reality of the housing market.”
“They bought a share of Countrywide in the past at a much higher price, and they could be making a mistake again.”
“I’m saying it again, that we are in the aftermath of the biggest housing boom in U.S., and world history. It’s a tidal force that is enveloping us.”
BTW, the term tidal wave is a misnomer. Tsunamis are not triggered by the moon’s gravity, but rather by earthquakes, which are a more apt metaphor for the credit crunch that hit the global financial economy last August.
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vg07REUJHWiM.asf
It’s Inflation Stupid
by Peter Schiff, Euro Pacific Capital | January 11, 2008
…
“Given Ben Bernanke’s promise yesterday to supply substantive interest rate reductions, despite his belief that the U.S. economy is not headed toward recession (a claim that even the Fed Chairman obviously does not believe), inflation has been given much more room to run. Of course, the Fed’s free money fest will not be sidetracked by today’s data that showed the November trade deficit surging to $63.1 Billion (some export boom), limit-up moves in commodity prices (beans in the teens!), and 2007 import prices rising by 10.9%, the largest calendar-year increase since 1987. Basically the Fed is sending the message that inflation is going to get a whole lot worse and that it couldn’t care less. As the price of gold continues to climb as a result, look for more excuses to minimize the significance of the move.”
http://www.financialsense.com/fsu/editorials/schiff/2008/0111.html
Next week should offer more opportunities to buy the dip. I am even starting to fantasize about getting back into the stock market at this stage of the game, especially since BB has announced the start of a future series of FFR cuts limited from below only by the hard boundary of zero percent nominal. Inflation creation is very good for nominal share prices, in the intermediate- (but not long-) run.
Over the long run, repeatedly burning the legs of the chair one sits on to heat the room generally leads to a chair shortage.
ECONOMIC PREVIEW
Retail sales expected to be very weak
Full calendar includes CPI, industrial output, starts and more from Bernanke
By Rex Nutting, MarketWatch
Last update: 12:01 a.m. EST Jan. 13, 2008
WASHINGTON (MarketWatch) — With the resilient American consumer the only thing keeping the economy from sliding into recession, the December retail-sales report figures to be the biggest economic event in a week full of big events.
December’s retail sales are expected to be very weak following a blow-out month in November.
http://www.marketwatch.com/news/story/retail-sales-expected-very-weak/story.aspx?guid=%7BF478D21C%2D122A%2D4716%2DB399%2DEA09A761B978%7D
Bank earnings to be hit as mortgage woes spread
Provisions seen rising as more consumer loans go bad, denting capital
By Alistair Barr, MarketWatch
Last update: 7:01 p.m. EST Jan. 11, 2008
http://www.marketwatch.com/news/story/bank-earnings-show-mortgage-woes/story.aspx?guid=%7b2E530903-6EAE-43CB-8C18-816A5F9B70C8%7d&dist=TNMostRead&print=true&dist=printTop
“The story of this quarter is consumer loans,” said Zach Gast, an analyst at The Center for Financial Research and Analysis, a unit of RiskMetrics Group.
“The main focus for us and investors will be on credit quality and the degree of acceleration in loan and asset deterioration,” Mayo wrote on Friday in a note to clients. “While losses should not reach the size of the losses incurred from CDOs and other structured products, they nevertheless should continue to increase over the next few years and provide a meaningful headwind to bank earnings.”
Investors could be surprised by the combination of higher provisions and big write-downs in the fourth quarter, CFRA’s Gast said.
“The surprises will come when banks have to take specific provisions for credit quality and that cuts into capital adequacy,” he said.
Can weakening economy survive current strains or collapse into a recession
By Jeannine Aversa
ASSOCIATED PRESS
8:19 a.m. January 13, 2008
WASHINGTON – The unemployment rate leaps to a two-year high, record numbers of people are forced from their homes and Wall Street nose-dives again. Such is the fallout from a housing meltdown that threatens to slingshot the country into a recession.
The big economic question these days is whether the weakening economy will survive the strains or collapse under them.
http://www.signonsandiego.com/news/business/20080113-0819-recessionodds.html
Biggest sign the expansion is ending: BB announces the Fed’s commitment to open the liquidity fire hose to full blast, and Wall Street responds with a selloff.
U.S. Stocks Drop for Third Week as Recession Speculation Builds
By Elizabeth Stanton
Jan. 12 (Bloomberg) — U.S. stocks fell for a third straight week, the longest streak since August, after forecasts from AT&T Inc., American Express Co. and Tiffany & Co. bolstered speculation that the six-year economic expansion is ending.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aUMCsasxI.3o&refer=home
Tiffany is an interesting company that used to make masterpieces in it’s heyday, and went mainstream, appealing to a wider audience…
It’s pretty pedestrian looking baubles, compared to when they designed for the precious few, and made their name in so doing.
They’ve concentrated more upon their gift boxes, as a selling tool.
Transition Is Underway to Export-Led Expansion Despite Recession Fears.
“Less than two weeks into 2008, alarm bells have been set off in the financial markets warning of a pending recession for the US economy. Economic reports have been uniformly grim: the unemployment rate jumped by a sharp 0.3% to 5%,while December payrolls rose by a meager 18,000.Moreover, the Institute of Supply Management’s manufacturing index registered a bleak 47.7% reading, dropping below the all-important 50% threshold for the first time since last January. Many analysts have concluded that the recent batch of weak economic news is a by-product of mounting bad investments and bad loans. They argue that as lenders turn away from risk and leverage to safety and liquidity, the economy will eventually be starved of the credit it relies upon for growth, ultimately resulting in a recession. We agree that credit is crucial. Indeed, our proprietary money and financial flows index, which
underpins our economic forecasting framework, captures all the ways that banks, non-banks and capital markets provide credit and capital to the economy. However, our research has not discovered anything in aggregate money and financial flows to suggest that the financial stress has degenerated into a full-blown credit crunch and that a sharp
curtailment of lending or a scramble for liquidity is imminent. Moreover, the long history of our proprietary index shows that recessions typically
followed periods when money and financial flows weakened, not when liquidity has trended upward, as we have seen over the past year.
Our analysis of fundamental data on the US economy leads us to a similar conclusion. In our opinion, the US economy is still growing (albeit modestly) and in the process of transitioning to a more export-led expansion in 2008. One common feature of all recessions is a decline in
a broad measure of real final demand for a sustained period of more than one quarter.According to data through November, real final
demand was growing at an annualized pace of about 2.5% in the fourth quarter, slightly slower the 2.9% average of the first three quarters of 2007. Even the most cyclically-sensitive goods component of final demand still shows growth in the period. But the growth in final
demand for goods is increasingly emanating from export markets and less and less from domestic markets. This is a key distinction. Recessions are often international in scope, which usually exacerbates domestic troubles as growth in export markets is lost. What makes the current situation most unique is not only the strength in export markets but the
size of the contribution to overall GDP growth. In 2006 and 2007, the cumulative contribution to real GDP growth has been just over 2%, which equals the contribution from the boom in business investment in equipment and software in 1998 and1999 .Importantly, overseas economies are helping the US economy muddle through a rough patch by creating a favorable growth environment, while also increasing the flow of capital that is being recycled back into the US financial system. Several US financial institutions have been able to get equity capital infusions from foreign investors in recent months. This added capital strengthens the financial positions of US firms, which should enable them to
overcome recent losses and avoid a sharp curtailment of lending. Exports now account for 12% of GDP, a powerful component of the US economy that can help overcome the downward pull of a housing recession. However, exports are not big enough to outweigh a contraction in consumer and business demand. Although concern is growing that
domestic demand may drop, we believe that there is compelling evidence to expect any pullback to be brief and mild. Demand weakness is usually preceded by a tightening of financial conditions, financial instability or a crisis in confidence. Research on the causes of declines in demand has centered on exogenous shocks such as a spike in borrowing costs.
Real borrowing costs, as measured against consumer or producer prices or wages, are now relatively low, and have declined recently thanks to
the 100 basis-point reduction in official rates over the past six months. While we cannot rule out that recent financial market disorder triggers a crowd psychology of recession that eventually leads to a spell of weak sales, any decline should be shortlived due to relatively low borrowing costs.Finally, full-fledge recessions are always characterized by an unintended rise in inventories. Real business inventories grew about 3% to 4% before the recessions of 1990 and 2001. Today, in contrast, there is a lack of any meaningful inventory overhang among businesses. In fact, over the past year, real business inventory has risen by 0.4%, the
smallest gain since 2002 (Display 3), and the inventory-to-sales ratio is at a record low. Thin inventories do not rule out the possibility of a
recession, which is generally triggered by demanddriven causes. however, current data suggest that any pullback in production should be short-lived, especially when the full benefits of a strong export cycle also spill over to incremental investment needs in the US. We believe that inventory levels,combined with healthy, export-driven demand and
low borrowing costs will all help the economy overcome significant challenges and sustain a modest growth trend as the year progresses.”
Joseph G. Carson
Global Economic Research
January 11, 2008
Financial wizards and professors tell me what you thing of this.
Although I am not financial wizard, I must disagree with the article. Mr. Carson is overly optimistic about export led growth, but he had failed to mention, what USA would export to world market that would significantly keep the world largest economy growing. Last statistics shows that the physical volume of the export had actually decreased. The structure of USA export was rather feeble. Large chunk of export was made of commodities such as lumber, corn, etc …, which usually are hit first during international recession. Other, high tech products that make USA competitive in world would be hit as well. Other countries would not have money to pay for such luxuries, since I believe the upcoming world recession will be concurrent event. Export of services will be hammered as well due problem with financial sector. I will disagree that recession are international phenomena; for example, Asian crisis of 1997 and Russian in 1998 did not create worldwide recession. US economy as well, EU economy had grown both these years; while the stock market had suffered quick, deep loses. Mr. Carson pays too much attention to inventories, but many companies trying to minimize an amount of inventory with a precise delivery and just-in-time inventory strategy. I worked on development of inventory management systems in the 90’s and honestly, very a few companies would like to hoard spare items in their warehouses.
“Transition Is Underway to Export-Led Expansion Despite Recession Fears.”
I am not a specialist in international economics, but I have a hunch that in order to get an export-led expansion, one needs to have exports increase more rapidly than imports. If the opposite persists for very long, one might instead wind up with an export-led contraction, as the X shrinks in Y = C + G + I + X. (The C and I are also shrinkage-prone at the moment, so I guess it is up to G to do the heavy lifting.)
US trade deficit widens sharply
Petroleum imports hit a record
The US trade deficit expanded to its highest level in 14 months in November as imports, especially of oil, overshadowed a rise in exports.
The Commerce Department said that the trade deficit expanded by 9.3% to $63.1bn (£32bn) driven by a 16.3% jump in America’s foreign oil bill.
http://news.bbc.co.uk/2/hi/business/7183403.stm
just goes to prove how well Bernanke is doing with inflating away the US problems
hey Ben, pump up the volume, you can do a lot better than this!
OMG - Hell has officially froze over. Did anyone read the LA Times RE section this morning? They wrote an article about the falling prices in LA, how it’s only going to get worse for sellers.
They quoted Thornberg, for christ sake, saying that he predicts 30% by ‘09 and flat prices . Yes, there still was a little bit of ‘it’s different here’ in the article, but it was talking realistically about the downturn, for the most part.
Has all their RE ad money dried up and they are going for more auction ads? Did me letter to the editor a month back help persuade them to balance their perspective? Or, is it just undeniable at this point?
I don’t think the article has been posted yet, but this LAT RE blog cites some of the article :
http://latimesblogs.latimes.com/laland/2008/01/a-sellers-lamen.html?track=realestate-blogs
Check it out:
http://www.latimes.com/classified/realestate/printedition/
The Peak Prices chart is quite informative.
Lehman gave Florida a good screwing
http://bloomberg.com/news/marketsmag/mm_0208_story2.html
Food crisis dead ahead
http://www.financialpost.com/story.html?id=213343
eating the earth
http://www.whitings-writings.com/eating_the_earth.htm
“”Those who have food are going to have a big edge.”
With 54% of the world’s corn supply grown in America’s mid-west, the U.S. is one of those countries with an edge.”
Of course this won’t directly benefit your average American, who will also see huge increases at the cash register. But it might help us shrink the trade deficit.
http://www.larouchepub.com/pr/2008/080104food_speculation.html
Speculation is leading to hyperinflation in food prices.
http://www.larouchepub.com/other/2007/3435food_inflation.html
Impact of “bio-foolery” - especially the ethanol swindle - and globalism contributing to soaring food prices.
This is for Stucco. Bonus points to anyone who remembers who David Kahane was.
http://article.nationalreview.com/?q=MjVjNzljMmZlMTQ2NGIxY2VjMGMwY2NlYzdlM2EzYTk=
“The more I follow politics, the more I realize that the bigfeet reporters, pundits and opiners aren’t really journalists any more. Instead, they’re more like sportswriters, blithely predicting the outcome of the World Series during the first week of April.”
And the politicians are increasingly indistinguishable from actors, right down to the fake tears.
Advice to HC’s handlers: Keep her on message crying and talking about baking cookies and raising children, and try to dissuade her from sticking the race card foot into her mouth, or blaming any such gaff on her opponent.
THE DEMOCRATS
Clinton’s King Comment ‘Ill-Advised,’ Obama Says
By Anne E. Kornblut and Perry Bacon Jr.
Washington Post Staff Writers
Monday, January 14, 2008; Page A01
COLUMBIA, S.C., Jan. 13 — Sen. Hillary Rodham Clinton defended her recent remarks on civil rights Sunday, as Sen. Barack Obama weighed in on the controversy for the first time, describing Clinton’s earlier comments about the legacy of Martin Luther King Jr. as “unfortunate” and “ill-advised.”
Obama had previously tried to sidestep direct engagement in the debate over race. But the recent controversy has touched a nerve with many African Americans, including some sympathetic to the Clintons, and Obama chose to address it Sunday.
…
“Senator Clinton made an unfortunate remark, an ill-advised remark, about King and Lyndon Johnson. I didn’t make the statement,” Obama said in a conference call with reporters. “I haven’t remarked on it. And she, I think, offended some folks who felt that somehow diminished King’s role in bringing about the Civil Rights Act. She is free to explain that. But the notion that somehow this is our doing is ludicrous.”
http://www.washingtonpost.com/wp-dyn/content/article/2008/01/13/AR2008011303624.html?hpid=topnews
Bonds probably not best choice now
With surging prices, yields are plummeting
By Brett Arends
THE WALL STREET JOURNAL
January 13, 2008
In times of market turmoil, many investors seek a haven for their money. And right now, many are buying inflation-protected U.S. government bonds in the belief that they are the safest investment around.
The markets are volatile amid worries about a recession, even as signs of inflation pressure emerge.
The best funds investing in these bonds, meanwhile, offer low fees and a straightforward exposure. Among the most popular are Vanguard’s Inflation Protected Securities Index fund and an exchange-traded fund, Lehman TIPS iShare.
The only problem is that everyone has the same idea. Huge demand has sent the price of these bonds, known as Treasury Inflation-Protected Securities, or TIPS, soaring. And while investors may not realize it, at current valuations they offer much lower returns than normal.
http://www.signonsandiego.com/uniontrib/20080113/news_lz1b13bonds.html
DEAN CALBREATH
Less FDR, more Hoover in governor’s budget plan
January 13, 2008
…
Schwarzenegger’s problems pale in comparison to those that faced FDR. The governor’s main problems are fiscal mismanagement in Sacramento and a screwy tax structure that has developed a heavy reliance on capital gains and other items that are particularly susceptible to the boom-and-bust cycles we’ve been enduring lately.
With less money coming in from the troubled real estate market, there is now a $14 billion gap between revenue coming into the state’s coffers and the money flowing out to government programs. Since Schwarzenegger abhors the idea of raising taxes, his only option is to cut expenses.
http://www.signonsandiego.com/uniontrib/20080113/news_1b13dean.html
BlackVader inspired a new tv show that has it’s 1st airing, tonight…
Terminator: The Sarah Connor Chronicles
You can’t make this stuff up.
Who is pumping in money to Countryslide these days? Still the FHLB of Atlanta? I cannot imagine private sources of loanable funds would be flowing their direction at this point in their existence.
Business as usual
Countrywide customers likely won’t see sweeping changes as a result of deal
By Amy Hoak, MarketWatch
Last update: 2:23 p.m. EST Jan. 11, 2008
CHICAGO (MarketWatch) — If you’re among the millions of homeowners who are customers of Countrywide Financial Corp., you’re probably wondering how the sale of the troubled lender to financial-services giant Bank of America Corp. affects you.
The answer is, not much.
Borrowers shouldn’t lose sleep over Bank of America’s $4 billion deal to acquire Countrywide, both the companies and outside experts say.
“Loans are closing just as usual,” said Cari Kerns, spokeswoman for Calabasas, Calif.-based Countrywide (CFC: 6.33-1.42-18.32%), which originated $408 billion worth of mortgages in 2007 and is currently servicing about 9 million loans worth about $1.5 trillion.
http://www.marketwatch.com/news/story/countrywide-customer-b-deal-likely/story.aspx?guid=%7B9510EB2D%2D3FAE%2D4F4B%2D92A4%2D1548C5A6E82A%7D
This is not merely a subprime crisis
By Wolfgang Münchau
Published: January 13 2008 19:06 | Last updated: January 13 2008 19:06
If this had been a mere subprime crisis, it would now be over. But it is not, and nor will it be over soon. The reason is that several other pockets of the credit market are also vulnerable. Credit cards are one such segment, similar in size to the subprime market. Another is credit default swaps, relatively modern financial instruments that allow bondholders to insure against default. Those who such sell such protection receive a quarterly premium, based on a percentage of the amount insured.
http://www.ft.com/cms/s/50d659d2-c1f3-11dc-8fba-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F50d659d2-c1f3-11dc-8fba-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
http://www.sprott.com/pdf/marketsataglance/12_2007.pdf
Deriding Deriving: Theory versus Reality
Throughout the credit bubble, we’ve been deriding the increasing propensity of the financial
world to derive. Has any of this abated during this year’s credit crisis? Not at all – in fact, quite
the contrary. Two new data points have recently been released that lend credence to our belief
that the global growth of financial derivatives continues to run out of control. The first is that the
notional amount of over-the-counter derivatives outstanding as at June 30, 2007 (see chart
below) now stands at $516 trillion, up 25% since the beginning of the year (56% annualized) and
up fourfold in the past five years. Far from slowing down as the rest of the financial world seems
to be, the explosion of derivatives continues unabated – remarkably, at an ever increasing pace.
Banking bonuses
Published: January 13 2008 20:01 | Last updated: January 13 2008 20:01
John Thain might want to wear a crash helmet this Thursday when he presents Merrill Lynch’s results for the first time as chief executive.
Merrill will not just reveal another mind-blowing loss on its mortgage portfolio and probably announce it must raise yet more capital to plug balance sheet holes. The results may also draw ire from some quarters over seemingly excessive “discretionary” bonuses being paid to staff after such a terrible year.
The argument from struggling Wall Street banks is typically that recent heavy losses stem from just a small mortgage-related area of the business. The rest performed well last year, so healthy bonuses must be paid to prevent angry bankers walking out the door.
…
Clearly, no bank wants to lose key people. Slashing bonuses unilaterally, if everyone else on Wall Street is paying up, is very risky. But raising capital to pay bonuses is hard to defend. With net revenues under so much pressure at Merrill, the bank should avoid being too cavalier in exploiting Wall Street’s “heads I win, tails you lose” approach to pay.
http://www.ft.com/cms/s/1/b413a75e-c20f-11dc-8fba-0000779fd2ac.html
Secret bonuses double salaries of Northern Rock staff (while our billions are propping it up)
By GLEN OWEN
Last updated at 01:13am on 13th January 2008
Northern Rock bank chief executive Andy Kuipers
Senior staff at beleaguered Northern Rock have received secret bonuses doubling their salaries – at a time when the bank is being propped up by billions of pounds of taxpayers’ money.
http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=507897&in_page_id=1770
How to Unbreak the Banks
By David Wessel
Word Count: 917 | Companies Featured in This Article: Citigroup, Merrill Lynch, UBS, Bear Stearns
The business model for big U.S. banks is broken. Let us count the ways.
http://online.wsj.com/article/SB119991977060979137.html?mod=todays_us_page_one
Trading in Deal Stocks Triggers Look at Banks
By Mark Maremont and Susanne Craig
Word Count: 2,586 | Companies Featured in This Article: J.P. Morgan Chase, Verizon Wireless, Citigroup, Credit Suisse Group, Goldman Sachs Group, Merrill Lynch, Morgan Stanley, United Parcel Service, Royal Bank of Canada, Motorola, Philips Electronics
In the spring of last year, two investment arms of J.P. Morgan Chase & Co. began accumulating shares in Rural Cellular Corp., a small Minnesota provider of mobile-phone service. The bank units, which hadn’t previously owned any shares, reported a combined 2.4% stake at the end of June.
The timing turned out to be fortunate for J.P. Morgan. On July 30, Rural Cellular’s stock jumped 34% after the company announced it was being acquired by Verizon Wireless. The two sides had been negotiating since at least early May. The investment bank that advised Verizon Wireless in the deal: J.P. Morgan.
http://online.wsj.com/article/SB120027840975287629.html?mod=hpp_us_whats_news
Countrywide Draws Ire of Judges
By Amir Efrati and Kara Scannell
Word Count: 695 | Companies Featured in This Article: Bank of America
More federal bankruptcy judges are calling into question the business practices of Countrywide Financial Corp., as Bank of America Corp. prepares to buy the ailing mortgage lender.
According to court documents in a bankruptcy case in Houston, Countrywide didn’t properly credit a borrower’s payments made during bankruptcy but instead applied them to prebankruptcy debt, which isn’t allowed. In the same case, involving a debtor named William Allen Parsley, Countrywide represented to the court that Mr. Parsley owed fees that turned out to be unsubstantiated and in error. These included an improper $450 fee and a $65 unsubstantiated fee.
http://online.wsj.com/article/SB120027204884687351.html?mod=hpp_us_whats_news
The SEC’s cup runneth over so far in 2008…
SEC Looks at Merrill Trading, In Search of ‘Front-Running’
By Kara Scannell
Word Count: 428 | Companies Featured in This Article: Merrill Lynch, UBS, Morgan Stanley
The Securities and Exchange Commission is investigating whether several current and former employees at Merrill Lynch & Co. improperly placed trades for the brokerage house’s own account ahead of client orders, people familiar with the matter said.
The probe is the latest twist in a look at information-sharing across Wall Street and heightens the regulatory scrutiny into Merrill Lynch. The SEC already is investigating how the firm valued securities tied to home mortgages as well as the timeliness of those disclosures.
http://online.wsj.com/article/SB120027943317587783.html?mod=hpp_us_whats_news
ASIA MARKETS
Asia turns volatile, Taiwan gains post elections
By V. Phani Kumar, MarketWatch
Last update: 10:00 p.m. EST Jan. 13, 2008
HONG KONG (MarketWatch) — Asian markets were volatile Monday, with shares in Australia, South Korea, China and Hong Kong see-sawing between negative and positive territories, but Taiwanese shares posted strong gains on opposition party Kuomintang’s decisive electoral win at the weekend.
http://www.marketwatch.com/news/story/asia-turns-volatile-taiwan-gains/story.aspx?guid=%7B69C46E49%2D3721%2D4076%2DA746%2DF728C2DB9823%7D
WEEKEND EDITION
Warehousing bullion for gold’s supermarket
As metal hits new highs, exchange-traded fund’s $18 billion cache only grows
By John Spence, MarketWatch
Last update: 5:20 p.m. EST Jan. 11, 2008
BOSTON (MarketWatch) — Imagine being forced to buy gold in such quantities that you run out of adequate space to warehouse all of it.
That’s been the high-class challenge confronting the folks at StreetTracks Gold Shares, a wildly popular exchange-traded fund so awash in investor cash that its backers recently scrambled to find a bigger vault to accommodate their ever-growing horde of the precious metal, now valued at $18 billion.
http://www.marketwatch.com/news/story/surging-gold-etf-holds-more/story.aspx?guid=%7B378D71CA%2DFDCF%2D46F9%2D969B%2DD94847B8BBCA%7D