Bits Bucket And Craigslist Finds For January 15, 2008
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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The Word… Stagflation.
http://www.usatoday.com/money/economy/2008-01-14-gold-stagflation_N.htm?loc=interstitialskip
OT but I thought I’d get this out there to anyone using a laptop. Seems our gov’t can’t seem to respect privacy.
http://www.nationalexpositor.com/News/904.html
http://www.snopes.com/computer/internet/dellbug.asp
False.
ya better sniggity-snopes yo’ self before ya wriggity-wrecks yo’ self.
ha ha.
There is fiber feeds from hubs directly to NSA. Yeah…. they’re monitoring alright. Everything. I believe the system is call “carnivore”.
http://www.securityfocus.com/news/10307
The FBI now uses commercially available software.
False again. Anyone who has a concept of scale we operate on will tell you it is bullshit.
False as pointed out.
Take comfort in knowing that most laptops do not have anywhere near the internal free space to install a board like the one shown, nor the keyboard connection mechanism/cable.
Good, one more issue I can’t put to bed. Thanks for setting me straight.
Well, just imagine trying to cram that thing into a Macbook Air.
Honestly, almost all notebook manufacturing is done in China / Taiwan / etc, and they have engineers as sharp as you’ll find here. Besides the fact they wouldn’t leave that much unused space, can you imagine such a thing going un-noticed on the production end?
I could poke even more holes in that story (USB keyboards too? and just how??)
Occam’s razor - if the US government really intended to do such a thing, it would have Microsoft implement a core input logging service into the Vista OS.
Down the crapper…
http://www.worldnetdaily.com/staticarticles/article59693.html
We are SubPrime Nation
Citi Cuts Dividend…
http://biz.yahoo.com/rb/080115/citigroup.html?.v=1
Next Citi will close tons of branches. But they had open houses last week paying Sign on Bonuses and higher starting pay for tellers who can speak Hindi, Cantonese, Russian, Greek, Spanish, even Swahili and Creole. I think those jobs are safe. I know the tellers at my branch hardly change at all. And quite a few of them live with-in walking distance.
Moin from Germany,
if i´m reading the release correctly they still have over $ 37 billion in subprime related exposure….
Lets hope their internal models have imprived during the past 6 months……
I wonder how many other financial institutions will be cutting as well.
How in the world can banks justify building so many branches at a time when the savings rate is negative?
Wait a tick, silly me, they’re not bank branches at all - they are “loan stores”.
Ding, ding, ding, ding!
Just a step up from the payday loan places.
Didn’t we see this before? Wasn’t there another explosion of branches in the somewhat recent past, followed by a bunch of closures? Does anybody remember when that was, and what the catalyst was for it?
(I would guess the closures were in ‘90-91, but I really don’t remember.)
Banks aren’t even one step away from Payday lenders. My checking account has a “Direct Deposit Advance” button online. I didn’t sign up for anythnig so I assume it’s universal for online banking. A few tidbits:
Dollar amount must be a multiple of 20 (e.g., $20, $40, $60, etc…)
Advance up to $500 or your current advance limit.
For every $20 that you advance, your Finance Charge will be $2
Has the stench of a payday loan to me. You don’t even have to visit one of those shady organizations anymore, you can do it right from home! This same bank told me I was pre-approved for a HELOC last time I called, even though I’m a “bitter renter”
responding to anonymous coward:
didn’t we see this before? Sure, just as recent as around 2000, with another sector of the US economy that was operating on an ‘entirely new business model’. Most of the branches were virtual then, but apart from that dot fin looks very much like dot com.
Thanks, nhz, but I was thinking of an even stronger parallel. There was a big boom in banks taking commercial space for new branches, and then a sharp pullback. I remember reading about it a few years ago, but I don’t remember the details.
If you plot new bank branches vs new gas stations you will get dizzy from the interlocking sine waves.
Lest we forget, there is a lot toxicity still left in the mortgage sausage. There will also be replays of ’subprime crisis’ in credit card & auto loan portfolios.
They went to so many sources to get the capital injection this time - almost looks like they went trick or treating around the world for capital.
Is the well running dry for the next bank that needs a few billion?
As badly off as Citi is, why pay any dividend at all?
haha
I got a letter from citi, they were offering me a personal loan of 7000 dollars at 18.% they were even soo nice as to explain that my monthly payments would be about 180 dollars for 60 months.
Isnt in the best interest of those that loan money to make sure that they can get payed back. Not blindly offer people money they dont need.
Construction worker killed at Trump Soho construction site…
http://www.wnbc.com/news/15045924/detail.html?dl=mainclick
The Soho Preservation Society has been fighting this project, so they were in a big hurry to finish it. That’s probably why it happened, there were many other safety violations.
I just heard this on NPR. This building is really awful. I had reported that my wife and I walked by this last month. It is an awful idea. It is not a residential neighborhood. I believe, if I recall correctly, it is right on Hudson Street. It towers over everything else. I’ll have to walk by this again to refresh my memory. Whoever buys into this is either a foreigner, a greater fool, or both.
Do it before they resume work. They got caught neglecting to close the street while hoisting materials up. If you read the violations, it’s clear that it was an accident waiting to happen.
I doubt anyone would buy one of those condos if they knew how shoddy the work was. And now everyone knows.
Ah but the rich foreign buyers don’t!
Just curious, but don’t the costs of those violations, and any “accidents” that occur eventually end up in the cost to purchase or ownership fees?
INFLATION, what inflation?
PPI out today.
Cut interest rates and $5 dollar per gallon gas?
There is NO inflation because the GUV just looks at retail prices NOT unit pricing.
Even Paul Newman has gotten into the “make the Sockarooni sauce 2 ounces smaller and keep the same price.”
And Entemann’s cakes are being very stingy on the icing. My Fav “Louisiana Crunch cake” is now so dry i had to get a glass of milk.
Mmmmmmmm…Louisiana Crunch Cake
I used to LOVE that cake! Can’t find it out here on the West Coast…. I also miss those Stella D’Oro “S” shaped cookies that they used to bake up in the Bronx. Are those still around?
Entenmann’s, Stella D’Oro…
We can still get both in Philly,
Does anyone know of any website that has been tracking this sort of stuff over time? (like a large-scale version of CR’s ‘Selling it’ page)
I had the idea to make such as a site some time ago, but ideas are cheap and the time to do so is anything but.
lol!! that is too funny. Damn them all!!
I just bought some sockarooni last night as a matter of fact. Didn’t notice it being any smaller.
its 24oz not 26 oz… at least here in nyc
No gas prices are coming down! Our “friends” in Saudi Arabia are going to cooperate with our fearful leader…
http://news.yahoo.com/s/ap/20080115/ap_on_re_mi_ea/bush_mideast
/sarcasm off
do you mean fearless?….
wait, no you’re right.
Movin’ along.
And you critics didn’t think Bu$h had an energy plan. Now who feels silly?
Can’t we get them to buy B of A?
cynicalgirl: when I was 10, I went to summer camp in the Muskokas with the Emir of Kuwait. I could ask him to increase production.
Those wild & crazy Saudis aren’t going to give their oil away.
Price increases in the necessities which are kept out of the headline inflation statistics (food and energy) will naturally have the effect of killing household expenditures on other goods, keeping headline inflation under control even while households feel squeezed by inflation.
Before heading off to the mall, people need to eat, put gas in the tank, heat their home and pay the mortgage. Unless some generous banker throws wads of money at them, they have to subtract food, energy and housing costs out of the labor-income-derived family budget.
Consumers hit brakes on spending
Tepid sales spread recession concerns
By Anne D’Innocenzio
ASSOCIATED PRESS
January 15, 2008
http://www.signonsandiego.com/uniontrib/20080115/news_1b15retail.html
I frankly don’t understand where people find the extra savings to invest in gold coins after they pay for basics.
Prof:
You just explained why there is no bubble in physical Gold, the average joe cannot play the game.
No bubble yet, have you seen those ridiculous ads showing up on CNBC? I think Realtors found new jobs selling Gold.
Computer blip gold is fool’s gold…
I assume that’s what they are peddling, not the real thing?
Heh, in 2005 everyone was saying there’s no housing bubble.
They take it out of the stock market, treasuries, etc.
Even though the average savings rate for Americans is horrendous, there are still those of us that do save, and have to put the money somewhere. Gold is as good (or better) as any these days.
(though perhaps your statement was tongue-in-cheek)
The money I have in PM’s is my down payment, well, not all. So for the last couple of years it has done well. I’m hoping that with house price drops and gains in PM’s a cash offer is in the future.
Frankly, I have to agree with you. I don’t need a professional to tell me about the state of the average family’s budget; I look at my own $70k/yr, which easily supports a family of four in our rural setting. We are still comfortable, but the fun budget is shrinking quickly as prices for the basics are rising. It doesn’t feel like the seventies yet, but I have that tingling feeling that won’t go away. The silence is deafening.
large can of tuna in our local store: $5.89 - inflation or because the tuna are fished out?
Hedonic adjustment Replace tuna with spam , see no inflation.
Germany: first bugdet surplus since 1969
The GDP grew 2.5% in 2007, main driver were the exports, which grew 8.3%. Consumer spending sank 0.3%.
The trade surplus for 2007 is estimated at about 190bn Euros.
So, Germany’s economy is still very export-driven. The global economic slowdown, the likely US recession and the overheating in China will have a strong impact. Growth in 2008 will be much weaker, at about 1.5%.
The budget surplus is mostly thanks to the raise of the VAT from 16% to 19% (food 7%).
The CPI grew 3.1% yoy in November, because of energy and food prices.
I expect wages to rise about 6%, so that consumer spending can increase a bit, but it will not compensate for the declining exports.
The bright sight is that there is no housing bubble, so the economy will be relatively stable. But all the talk about a decoupling is nonsense.
Note:
The German statistics office does not use hedonic methods yet.
The surplus doesn’t appear to be making the German people any happier:
German Investor Confidence Dropped to 15-Year Lowhttp://tinyurl.com/2s8doo
All true. The budget surplus is from tax increases, of course, the people don’t like that.
And, all the regular Joes don’t see any growth, their real income has been stagnant at best for a decade. Only corporate profits have grown about 10% yoy for years now.
Maybe they ought to try out a bubble economy just for fun?
“The bright sight is that there is no housing bubble, so the economy will be relatively stable.”
It’s due to a vast oversupply built up during the reunification era, plus the Soviet-era flats still left around. The fact that Germany’s population is rapidly aging and is in fact declining also helps. Few Germans want kids, so goodbye Germany.
I’m not sure about that oversupply, except maybe in parts of former Eastern Europe. And one should add that German real estate was relatively expensive in the eighties compared to most neighbour countries. Now German RE is 2-3 times cheaper than in Netherlands, around the Dutch-German border prices for comparable homes drop by more than 50% over a 20 mile distance. The only exception to the rule are some of the wealthy big cities in the south of Germany.
This is a good overview of the situation in Germany:
http://www.globalpropertyguide.com/Europe/Germany/Price-History
As in Germany, in my part of the world real estate prices have been flat this decade except for a few small pockets. Prices seem cheap, but that doesn’t make real estate a good investment. It boils down to oversupply.
Nice to see you Lou. Haven’t seen you in a while.
Hmm, the birthrate in Germany has grown in 2007, but it is still very low indeed. And, population is growing in the South, where the jobs are…
Germany needs to be the new place for illegals then. The Gov’t will just look the other way.
It is They call them turks
Dutch statistics office (that has been using hedonics for a long time already …) reports that depite an average 3.5% wage increase in Netherlands this year, real incomes will decline by 1% on average (probably more in real life, as the estimates always seem to be a tad optimistic). No, that decline in real income is not because of inflation which officially is still 1.6% in the Netherlands ;-(
Some groups of workers have seen 5-10% wage increases last year, and of course higher government workers, politicians and business managers are comfortably ahead of inflation with 10-20% pay increases. I guess these groups, despite being relatively small in numbers, are skewing the average to the upside …
Germans don’t have a cultural bias towards ownership - I think only about 50% of households are owner-occupied. Also renters have very strong legal rights. Because of this, they are reluctant to pay more to buy a property than to rent it, and if nobody is willing to pay more to buy than to rent, you can’t have a bubble, by definition.
I don’t think the ownership % says anything - in Netherlands with one of the biggest housing bubbles worldwide it is around 50% as well. As far as I know in Germany the % of homeowners is a bit larger though. Dutch renters have extremely strong rights as well (and often huge rental subsidies), but because of that the rental market has ceased to function and there are 4-12 year waiting lists in most areas. So it’s either buy at a ridiculous price or wait for many years (or get to know the right civic servants or politicians…).
In Europe in general the countries with high % of homeowners tend to have less of a bubble (but it depends very much on other factors like economy/job market, tax structure, HMD etc.).
There are several factors why there is no housing bubble in Germany.
One is the stagnant population. Another one was the long stagnant econonmy after the tech bubble. Then, the builders were in a severe recession after the reunification boom. The banks did not offer subprime mortgages at all. Germans don’t like debt, they are savers. The saving rate was 10.5% in 2006.
Last, there seems to be a paradigm shift. For decades, young families used to move into the suburbs, just like in the US. But now, a lot of young families want to stay in the cities, because there are more cultural activities, nightlife and so on. The government has cut the commuter tax breaks, and gas has become more and more expensive.
I heard from a German friend that the practice of (a) refinance and (b) sale of a house before it is paid off is not usual in Germany. Is this really true? I found it hard to believe. Basically my friend said that there was only one possibility with a mortgage, which was to pay it off in full and that restricted the mobility of Germans.
You can sell a house before it is paid off, but only with the consent of the lender. Else, when selling the house, the lender would loose the collateral.
You can refinance, but you have to pay off the former mortgage. Basically, the new lender pays off the former lender. You can take out equity, though.
It is still very common in Germany that people build a house only once, and then stay there for the rest of their lifes.
Thanks for the info. It’s exactly what I thought - but the way he put it, there was no alternative but to actually put the money upfront before making any transaction. It’s a subtle difference - but what you are saying is in line with what I believed to be the case. Regardless, the concept of buying a house with the intention of living there for less than a decade is foreign in Germany.
You can sell a house before it is paid off, but only with the consent of the lender. Else, when selling the house, the lender would loose the collateral.
Why does he need the collateral? You pay him off in full after you sell the house. This makes no sense to me.
Deutsche Bank CEO Ackermann:
RMBS prices to sink further, will have impact to ‘real’ economy, especially in the US.
Deutsche Bank: no further write-downs in addition to the already known 2.2bn.
Greenspan going to a hedge fund. I know you all will be shocked.
http://www.reuters.com/article/businessNews/idUSN1544348220080115?feedType=RSS&feedName=businessNews&rpc=23&sp=true
Greenspan is the most dangerous and destructive 81-year-old man ever.
Nobody can even begin to kid themselves that this man isn’t a greedy pig.
No kidding. Does he really need any more money?
No he’s giving his entire fortune away to charity, he started a while back. He doesn’t believe in trust fund babies, he wants all his kids to do well on their own. WB is probably the most honorable business man there is in the high wealth club imo. He has never split the stock of BH for quick gains, he keeps huge amounts of cash on hand for purchases instead of playing the trump shell game, he’s also a contrarian. He buys when there are panics, and sells when there is greed.
We’re talking about Greenspan.
lol..
Hey Greenspan, we just shorted a load of financial stock, we need you to come out with a statement talking about how bad the economy will get.
Ok, we just bought a bunch of stock on the cheap, we need you to come out and talk about the rebound that is happening.
Seriously. People listen to the fool. This will be atrocious…
let’s see how fast he can crash this fund; he has a proven track record for trashing the US economy
Who in the h*ll would buy a hedge fund managed by that idiot? Maybe the same dolts who bought those 11% Bearstearns funds are that stupid. But still…
But eventually all the stupid people will be broke and out of credit. What’s going to happen then? I think we’re about to find out.
Ironically, he is going to a hedgefund that made money betting that Greenspan added to the problem
http://online.wsj.com/article/SB120036645057290423.html?mod=hps_us_mostpop_viewed
Funds he runs were up $15 billion in 2007 on a spectacularly successful bet against the housing market. Mr. Paulson has reaped an estimated $3 billion to $4 billion for himself — believed to be the largest one-year payday in Wall Street history.
Now, in another twist in financial history, Mr. Paulson is retaining as an adviser a man some blame for helping feed the housing-market bubble by keeping interest rates so low: former Federal Reserve Chairman Alan Greenspan. (See article.)
On the way to his big score, Mr. Paulson did battle with a Wall Street firm he accused of trying to manipulate the market. He faced skepticism from other big investors. At the same time, fearing imitators, he used software that blocked fund investors from forwarding his emails.
It should be noted that Paulson was a hedge fund who bought CDSs’ on mortgage pools early on. Paulson has been bearish (and right) on housing for the last 3 or 4 years.
Wall St. Journal today reports that rents are dropping in some of the most overheated housing markets.
I thought that rents were going to sharply rise in the big bubble markets, supporting the insane prices indefinately? These people are such idiots, as rents continue to fall, the price of a home must fall further to bring the price/rent ratio back in line. Of course rents (and also prices) are going to drop sharply, we have a massive oversupply of housing, the only thing left to do is LOWER THE PRICE.
Hater!
USA Today ran a story a few months ago on how rents would be rising because everyone who was losing their home would need a place to rent. They forgot to factor in the extreme over-supply of housing and the fact that those trying to hang onto their “investment” would need tenants.
We had many discussions on this topic a couple of years ago. My take then (and is still now) that the short-run effect of the bubble price collapse would be higher rents, as would-be new entrants to the housing market suddenly recoil and reinvent themselves as renters, and would-be sellers either stay out of the market or add to the ever-growing inventory pyre by listing at a price where there are no buyers. Eventually supply of both rental units and for sale units drives down purchase prices and rents, as the housing market inventory flood inundates both markets.
Put simply, over the long run an over supply of housing (per household) means lower housing costs.
If household formation goes into reverse (kids move back in with the parents, retirees move in with their kids, singles and couples share housing…) housing costs will drop even faster.
My only comment is that I don’t expect rents to follow any path of rationality, either up or down - just as prices did not follow a path of rationality during the bubble. We’ll just wait and see what happens.
ps: so far rents are up slightly and regularly in sacramento.
“as rents continue to fall, the price of a home must fall further to bring the price/rent ratio back in line…”
Not necessarily. For a lot lot people rent & house prices are not related. Buying house at any price is justified because renting is p!ssing your money is away. Or, paying rent is the same as throwing money in the trash. Also, since renters are not respected at all, rents have to be quite low.
BTW, we told our landlord that we will continue our lease for another year. Apparently, sellers in the Southshore (MA) area have not received the memo about housing price crash that is unfolding. Still asking for about 250 - 300 $/sqft.
Well, certainly, in the short term, you are absolutely correct (as evidenced by the past 5+ years). However, long term, I just don’t think that the expectation of “appreciation forever”, especially now that is has been proven as a total falsehood, will continue to life home prices.
The only reason that renting is “throwing money away” is because you are unable to capatilize on the potential gain in the home price. When people being to realize that there is also a HUGE downside risk to housing, I sincerely believe that rents will come back in line with home prices. Who can say for sure; if they don’t I will never buy, but others will (they have already proven this through the past few years)…
As long as rents remain a significantly lower percentage of the cost of ownership (here in Palm Beach, between 50 and 25% of the cost of ownership to rent the same property) I don’t see myself buying. Does that mean never? Hope not, but leveraging myself to death to buy an asset that cannot carry itself in bad times (by covering the MTG/Taxes/Insurance through rental income) is just not in the cards for me.
The only reason that renting is “throwing money away” is because you are unable to capatilize on the potential gain in the home price.
How do you figure this? If you buy a house, every mortgage payment you make, you get back when you sell the house. All you need is enough appreciation to cover closing costs and fees. Taxes, insurance, maintenance etc are at least somewhat cancelled out by tax breaks and “pride of ownership” whatever that is.
(this does not apply to HOA and condo fees, which I think are the REAL cash in the trash. It’s like paying rent on top of the mortgage.)
It’s only in THIS bubble environment when buying is a bad idea. With insane prices like this, savings between rent and mortgage + HOA fee + taxes — plus investment returns on savings — is enough to offset a normal mortgage payment.
“If you buy a house, every mortgage payment you make, you get back when you sell the house.”
But what of the portion of the payments that cover interest? Flippers can sell and not really get anything out of what they paid.
In “normal” times, property is only a partial hedge against inflation. Houses do not “appreciate” on average. My grandmother’s house was built for $10K 60 years ago. Twenty years ago my mom and dad took it over and put $50K into deferred maintenance and paid roughly $4K per year in taxes. 20 x 4 = $80K. Who know about the previous 40 years expenses. Stable area, no boom or bust, house sold for $140K. I don’t see much there in the way of “appreciation”, even in this bubble.
Unless you have paid cash for your house, “every payment you make” is primarily interest taxes and isurance.
I rent a similar house for $525 per month, less than the interest on $140K in the bank. Cash in the trash indeed.
$4K per year in taxes? On that price of home? I call BS on that.
Nah, she’s in New York State. When I paid $163000 for my colonial a few years back the tax bill was around $4800. My last tax bills totaled over $5200. But I’m in a cheaper county. Others you can add $2-3k for an equal house. Newer 2000 sq ft homes in Onandaga County can pay close to $8k
Flatlander,
It was not a dump in an expensive town, it was a slightly above average home for the community. You have to pay for the same infrastructure if the average house price is $100K or $1Mil. What is the average tax on a 2000 sqft 3/2 on a large lot in a desirable location where you live? I see some of the Californians here quoting numbers like $7K.
NY is not the home of low taxes.
There is some BS in my numbers because I didn’t think about the STAR exemption they were getting. My argument is still the same.
There’s really not much difference between renting property, and renting money (a mortgage). Except that the government gives a tax advantage to renting money. Either way, you’re paying for the time-value/usage of the asset. Neither is “throwing money away”. Neither should be looked at as an investment strategy.
Well said.
“If you buy a house, every mortgage payment you make, you get back when you sell the house.”
Oh if only that were true. Check out the amortization schedule of a typical 30 year loan. The first several years hardly any of your money goes towards principal - the whopping majority goes towards interest. Paying interest on a loan is no better than renting. So in a market that is depreciating and with a loan where you’re barely paying any principal, you are WAY better off renting.
The thing that tips the scale either way is usually the direction of the market. Check out a rent/buy calculator to investigate further.
You aren’t kidding… asking prices are barely moving in the desirable towns here (SE Mass). Some new (spec) construction still going on at the higher end, $600K+. I’ve said it before, prices won’t drop by the amounts necessary to regain affordability in Mass unless/until we take a hit on jobs. There is no affordable housing here and the rental stock for SFH is almost nonexistent.
My take, a long slow decline in prices for Mass…
My response above was for NeilT comment… Apparently, sellers in the Southshore (MA) area have not received the memo about housing price crash that is unfolding. Still asking for about 250 - 300 $/sqft.
We live in S. Florida. In ‘06 we had a rental increase of $100/mo or 10% which was just insane. The next year we had an increase of $50. This year we have been told there will be zero increase! Also in ‘05 there was a waiting list of 25 people to get into my development, now there are at least 15 empty units and the management is having move-in specials.
Some British inflation numbers:
http://tinyurl.com/37uvyr
“British industry also reported continuing inflation in input costs. The index of input prices rose by an annual rate of 11.3 per cent in December, up from 10.9 per cent in November, and by 0.5 per cent last month alone. Home-produced food materials were up by 28 per cent annually, and imported food raw materials by 12.4 per cent, the most severe inflation since 1996. High wheat prices were the main driver of this trend, pushing up bread and, via the cost of animal feedstuffs, meat.”
I want to tune up my rent vs. buy calculator. What is a good way of estimating maintenance costs? Percentage of purchase price? What percentage? Fixed dollars/year per bedroom? I am thinking about houses on Long Island or in New Jersey (close to New York City).
Age of the house HAS to be a factor. My 30 year old house sucks up quite a bit more than something 10 years old would, I would think. New water heater, solar water heat repairs, garbage disposal replacement, dish washer broke, replacing plumbing valves that are locked shut by hard water deposits, carpet replacement, replaced all sprinkler control valves and heads, …
Both showers need retiled. The vanities/counters are in bad shape.
And then there is the updating that needs done. My windows leak heat/cold like a sive. not nearly enough insulation in the attic. Press board kitchen cabnets are on the verge of falling apart.
I doubt a 10 year old house is in this bad of shape…. unless it was built on unstable ground and the slab is coming apart (like many 10 year old places here in AZ.
Darrell, you just described MY house…..love/hate it. Oh, well, maybe I’ll mop or something, spray some furniture polish around. Everything’s gonna be alright.
I have a friend here on the South Shore that loves to say to me that her mortgage payment is 1900 and how could I throw my money away on rent….
Of course then I find out on top of that she’s paying 650/mo in taxes, oh and her credit cards and store credit in order to update the kitchen and bathrooms at ikea were ONLY 400/mo (shall I continue)
I never have understood why people feel the need to impose their “values” on others. It’s like the kid people who can’t stand it if a friend or acquaintance doesn’t share their enthusiasm. To each his own. I don’t care if people buy houses. Why would they care if I don’t.
Two things I hear all the time. “You have to buy” and “you guys need to have kids”. Most parents are so lame and worthless that I’m afraid I would have to strangle them if I were forced to be around them on a consistent basis. We don’t tell people to stop breeding but most should. Note to most parents: your kids are ugly and you are annoying with all of your little stories about the rotten little brats.
Being child free, we get the same misery loves company guilt trip. I concluded a long time ago, those of us without children are more fit to raise them, then many who have them.
For instance, I would never tolerate a screaming brat in a store. Most parents don’t dicipline their kids properly.
As George Carlin points out, those ‘my kid is an an honor student at such and such elementary school’ bumper stickers,say what, your kid knows his alphabet and basic math. BFD. He’s no Einstein, get over it.
My quibble is with the push for multiple kids. One would have been sufficient for most parents to get the experience. Why have so many kids and then complain about the expenses? It is insane, the amount of resources these kids consume.
we get it all the time- we are social misfits what with our renting and child free lifestyle (we have a dog)
i love kids especially when they go home to their parents
i have plenty of nieces -nephews and cousins
my wife and i are both in the same boat we do not want kids- to each his own i guess
Always said that people who bred performance and conformation show dogs put more thought into breeding the dogs than the masses do about having kids.
Responsible breeders (dogs that is) have 7 different tests done to screen the breeding stock for hereditary health problems. (It does help reduce the chances of health problems - and if the gene was rescessive and does show up in the pups, those become very nice neutered/spayed pets.) Can’t say the same for people.
People keep telling me I need a wife. I keep running the rent vs buy calculations and i just don’t see it.
Kids belong in the suburbs, and animals (pets) belong on the farm (or similar environs) - where both have room to run and play.
Enough with the hipster/yuppies trying to recreate Seasame Street at every turn. Workers once raised kids in apartments because it was affordable - but paying north of $400,000 for an apartment nowadays is daft. And those who do make that choice best stop complaining about the expenses they encounter along the way.
How has it come to this, comparing buying a house to having kids? The former should mostly be a financial decision, the letter only to a certain degree but mostly a decision about what you want in your life. I love my kids and I encourage people in doubt to go for it, but I wouldn’t push it on anyone. And no, you don’t have to be in the suburbs to have kids.
Happy renters with kids
> People keep telling me I need a wife. I keep running the rent vs buy calculations and i just don’t see it.
:-))
LOL @ Blue Skye. Same here.
Rofl Blue! People said the same thing about needing a husband. I put it off as long as possible. Once I figured in home maintenance, the rent/buy made sense as long as I shopped for a slightly used model with good bones >; )
“I don’t care if people buy houses. Why would they care if I don’t. ”
We had friends over for dinner on the past weekend. The persistent question was when we will buy a house. As an answer, I disclosed that we we just renewed lease for another year there was disbelief. Why, oh why? I could almost see the frustrated angush in their voices. Too bad for them. I horde my savings and sleep like a baby each night. No repair bills, no heating bills, just one small rent check each month to write.
I have begun to use the phrase, “Maybe never.”
It’s quite sweet. They know I could afford it but they know I know that they screwed up big-time, and their finances are perilous.
My life is a living hell since I bought a house. When are you going to join me?
My identity is partly wrapped up in being a home owner. It’s a measure of my success. Please don’t reject me, friend.
“kid people ”
VG, I’ll be using this one.
“Why would they care if I don’t.”
Deep down inside they know they screwed themselves and they want affirmation from you that they did the right thing. Safety in numbers or some such thing.
There’s no safety in numbers if you’re in the midst of a lemming stampede going over a cliff…
Well said.
well txchick I have had to deal with that as well, its simple your casing them to consider that they might be wrong. Its what they are doing so it must be right. Very few people can handle dealing with others that dont share their values. especially if its life style.
One of my friends is getting married his wife to be doesnt like me around, because my life style and values arent hers, and by default now his.
Same thing when addressing problems like how to handle shelter, buying a house or renting your chose it different from hers, therefor your challenging her, your saying by the way you chose to live your life that she is wrong.
Honestly throws me for a loop too, be nice if that stuff didnt go on.
typical long island family-debt up to eyeballs
thanks but no thanks
2-3% of transaction price is a rough yearly estimate of maintenance.
In addition to maintenance expense you need to consider replacement reserves. Furnaces, roofs, carpeting, driveways, water heaters, etc. don’t last forever. On the web you can find useful life estimates for these components. For example, if the useful life of a water heater is 10 years and the one in the house you buy is 5 years old you need to set aside money to buy a new water heater in 5 years. If the house you buy has many old components then replacement reserve accretion can be more expensive than maintenance expense.
As for pure maintenance (fixing broken things and preventive measures), it is labor-intensive. Maintaining a house in the NY metro area will be more expensive than maintaining a house in Knoxville, TN. Also, areas with weather extremes (cold winters, hot summers) will require more maintenance that areas with more constant weather.
I have owned older and newer houses. In each case it came out to about 1% of the purchase price per year, or less. This included a new roof on the older house which I had for 8 years.
A lot of the maintenance can be deferred, so I found myself spending most of the money when it came time to sell. For
example, new carpets and paint.
commodities surge:
The price of copper has tripled in five years. Zinc has doubled. Wheat and soybeans rose 70 percent in 2007. Futures prices of crude oil, gold, silver, lead, uranium, cattle, cocoa and corn are all at or near records.
A global boom in the cost of commodities, the staple ingredients of a modern economy, is entering its sixth year with no end in sight.
http://tinyurl.com/yp545r
After seeing this this morning, I promptly went out and shorted some copper stocks (after doing some research) - PCU and RTP. Seriously.
They shouldn’t lump copper in with cattle and corn. Cattle, corn, and oil are staples, copper is not. Primary uses for copper are:
A. Electrical wiring
B. Electronics
C. Plumbing
D. Machinery
The first two use 75% of copper, with the bulk going to building construction. The latter two are also construction/economy driven. IMO copper is about to take a big fall. It’s already fallen a bit, but IMO has a long ways to go.
Just FYI, the copper mine near Moab, Utah just laid off 100 plus people right before Christmas. 2/3 of their labor force.
Transit panel urges gas tax increase
http://tinyurl.com/375sj5
But the 12-member commission’s proposals, which are expected to cost $225 billion each year for the next 50 years, face internal division. The commission’s chairwoman, Transportation Secretary Mary Peters, and two other members oppose gas tax increases and were issuing a dissenting opinion to the report calling instead for private-sector investment and tolls.
The oil states are buying U.S. banks, so they might as well buy and maintain roads and bridges. I wonder if Quatar Transportation Services would be run more effectively and have less expensive tolls than the NYS Thruway Authority?
Jan. 15 (Bloomberg) — The dollar traded close to a record low versus the euro before a report that economists expect will show U.S. retail sales growth stalled in December.
The dollar has declined versus 14 of the 16 most-active currencies this year as traders start to price in odds the Federal Reserve will cut benchmark borrowing costs by as much as 0.75 percentage-point this month. The Mortgage Bankers Association yesterday forecast U.S. existing home sales will fall 13 percent this year before recovering in 2009.
And Bernanke wants to keep lowering interest rates. I guess he thinks higher gas and food prices will get us out of the funk we’re in.
I’m sick of Larry Kudlow talking about inflation being low and then citing as evidence the price of flat screen TV’s. Ok Larry, we don’t need gas or food, but we need that flatscreen TV every week. Dennis Neal and Jim Cramer are just as bad. Where do they find these people???
Rehab!
Tom,
Keep in mind that it is been long known that Kudlow distorts facts and is a cheerleading globalista. His mantra is to flatten wages and salaries of everyone by way of union busting and understating and underreporting the rampant inflation we’re seeing right now.
when you make as much money as these talking heads, the price of expensive toys and other luxury items is probably far more important than the price of food and energy …
Yep, the disconnect of Main St. and Wall St. Granted, the price of electronic toys are coming down (they always do), but I can’t eat a circut board. It might give me ‘intestinal congestion’ (my phase for constipation).
Could any foreign infesters in U.S. residential real estate please report on how the falling dollar is affecting the value of your infestments?
Yes, take the shotgun out of your mouth and give us a report.
What will break the back of inflation is higher interest rates and cheaper energy prices.
I think higher interest rates alone will do the job. High energy prices have important benefits in the current situation, e.g. for making the transition to a more energy conscious society (time to get rid of some of the extravaganza of today like the McMansions, gas guzzlers etc.).
I’m not arguing for a higher energy tax per se, because (EU experience …) most governments use that for funding their pet projects and subsidies instead of spending it on issues related to energy conservation or new energy sources.
I think higher energy prices alone in conjunction with meager wage increases will do the job, in much the same way as unaffordable housing prices broke the back of bubble price increases. Bubble markets eventually autoregress themselves towards affordability!
hmmm … don’t think stellar energy prices will make a dent when Bernanke keeps rates at 1% or so, or if people can just put it on their creditcards and nobody worries about how high the debt load on those cards goes.
Will we do what Germany eventually did? They wiped out all debts and started with a clean slate? Could we be headed that way?
Merrill Lynch to China, “Sorry, but we don’t owe you anything now, it’s the law. Oh, those Dollars are worthless too. We now have the AMERO.”
well, the US got away with something similar in 1971 when Nixon closed the gold window…
The window will close again for Americans, soon.
There is no endless supply of physical metal and you just can’t make more…
You mean I wasted my money on this Casey Serin Alchemy Kit?
The only problem with Casey’s alchemy kit, is he successfully turned Gold into Lead.
I know I’ve already harped on the disconnect but it’s worth mentioning. Main street thinks it is FB’s and financially irresponsible individual who will bear the burden of the mortgage fallout. My point is that the underlying asset value of ALL who have a stake in said asset has fallen and in turn taking out FB’s everywhere. It IS the falling valuations that created the mortgage FALLOUT which effects all owners of said asset in the same way in terms of valuation. There is still alot of “not my house” attitude out there among those who didn’t participate in the frenzy.
Everybody wil be affected by the mortgage fallout.
For example, taxes will not be collected, thus municipal services will be cut back which will lead to infrastructure deterioration.
Decreases in the RE associated employment ranks will ripple throughout the rest of the economy. Wages previously earned and spent as a direct result of the expansion will vanish. Peripherial businesses indirectly associated with the expansion will be next, and on and on will the ripples spread out until it affects all of us in one way or another.
how about they get rid of some “programs”
my couinty is dredging a duck pond for 3+ million w 2005 fb money
Speaking of disconnects….
Will they be building blinds so that hunters can shoot the ducks?
I always wondered how the University of Washington’s huge duck population survived when I was there in the recessed early 80’s.
Wages previously earned and spent as a direct result of the expansion will vanish. Peripherial businesses indirectly associated with the expansion will be next, and on and on will the ripples spread out until it affects all of us in one way or another.
I think the reverse of what you say is true… the past 5 years all things were good.
Which is why I keep pointing out that we really did have a good economy in the USA from 2001-2007 and hopefully you got your share and saved up.
Everyone keeps talking here about how gloomy and unhappy people will be - were you ignoring how giddy and happy everyone WAS after start of 2003 and the party started?
“Which is why I keep pointing out that we really did have a good economy in th USA from 2001-2007 and hopefully you got your share and saved up.”
No arguement there, and yes I did get my share and I did save it up.
But the economy we enjoyed during the years you described were good because the good times were borrowed from the future. And yesterday’s future is becoming today’s now, chickens coming home to roost and all that.
The party is over and now the bills are arriving.
Any idiot can look like a genius with the banks money…… hmmm…..
Didn’t these cities and counties reap a windfall with the new property taxes on 500k sfh? The last 5 years should have put them all in the black, and now I hear them complaining that with the decline in property values they are underwater. You would think SOMEONE would know they couldn’t count on that cash cow forever. Sheesh, who’s in charge anyway? Set the ill-gotten gains aside for a rainy day, no?
“You would think that SOMEONE would know they couldn’t count on that cash cow forever.”
Those who did know were shouted down by those who didn’t know.
By the same token, one would have thought that the wiz kids at Citibank (etc.) should have known that good times going to end at some point. The problem is that they will behave the exactly the same way if another bubble were to start this year. Govt, WallSt people and J6p - all of them live for the present.
That would make too much sense. It is much easier to increase salaries of teachers and do other things for the children
Every property owner will be paying for the malinvestment of government for many years to come. The beautiful courthose we built with borrowed money, just cause we could afford it, will hang on our taxes for decades.
The west is dotted with dozens of ghost towns that sprung up into existence due to the discovery of a vein of ore. Some of these towns, flush with money, spent enormous sums on courthouses, opera houses, etc. because … because they could.
Then the ore veins ran out and the ore-based economies collapsed and everybody left.
So, the question needs to be asked: Just what were they thinking? Everybody knew - or should have known - that the existence of the town was entirely dependent of the existence of the ore vein which everybody knew - or should have known - would eventually run out.
People are smart.
Jan. 15 (Bloomberg) — Citigroup Inc. posted the biggest loss in the U.S. bank’s 196-year history as surging defaults on home loans forced it to write down the value of subprime-mortgage investments by $18 billion.
Thanks to whomever saw to it that this loss was not dumped on the U.S. taxpayer.
Meredith Whitney, a financial analyst for Oppenheimer & Co., in early November predicted Citi would have to cut its dividend. In a video interview today she predicted future severe losses for Citi, and mentioned in passing, “The housing market has only started to turn down.”
For saying that, she received death threats.
I was kind of hoping that tit-for-tat exposure/downgrade deal that got started there would continue into a kind of metastasis thing, but it was not to be. Firmer minds prevailed.
Dutch bubble update:
a recent survey shows that the Dutch are getting less optimistic about their housing market. Potential buyers are more worried about their financial situation, and the problems in the US market make them feel more insecure. Sellers are worried about the longer time it takes to sell a home, and think they can no longer get a good price for their home (as in 10-20% higher than previous year …). Although officially average prices are not yet declining, it seems that the Dutch home ATM is near the end of its life - after about 15 years of providing their owners at least a nice second income.
This seems like big news, like the tide is starting to shift.
Excellent news, nhz!
I know you’ve been waiting a long while. Hope it’s the real deal this time.
Southeastern Michigan homebuilders have slowest year ever. only 3,482 [residential building] permits for new homes and condominiums were issued in 2007 in Wayne, Oakland, Macomb and Livingston counties, a 48.1 percent drop from 2006.
That’s the lowest recorded number of permits issued since the region’s county governments began reporting the numbers to the Southeast Michigan Council of Governments in 1969.
That’s the lowest recorded number of permits issued since the region’s county governments began reporting the numbers to the Southeast Michigan Council of Governments in 1969.
Wow, that took me back. I used to work for SEMCOG back in the mid 90’s…
That’s just incredible. I grew up in the midwest and remember the 1970’s seeming like there was no construction at all. And this is worse than that, and in absolute numbers (not per capita) after 4 decades of growth!
A friend of mine is a local politician and also on the township planning commission. A few years back it was one of the fastest growing areas around here. Now, IIRC other than a couple requests lately for some kind of heating/cooling installation, no one comes calling for permits or ok’s for future plans anymore. Not a thing.
The Tax They Didn’t Tell You About
The CAFE standards embedded in the Energy Independence Act require fuel efficiency to jump to a fleet average 35 miles a gallon in 2020 from about 25 mpg now. That means you will soon be paying more — a lot more — to buy a car.
Fine, say the populist politicians. Stick it to the automakers. But do they really think Ford and GM will pick up the tab? Of course not. It’ll be you, as GM’s Lutz made clear in comments Sunday.
“We’ve done even more research,” Lutz said, “and (the cost per car of new CAFE standards is) going to be in the range of $4,000 to $10,000, with an average of about $6,000.”
It’s also bad economics, which is a typical outcome of congressional meddling. Through shortsighted, feel-good policies and excessive regulation, our government continues to drive up the prices of many things — oil, food, cars and homes among them. Then it blames others — stupid consumers, greedy businesses, shady foreign operators — for the bad results.
http://www.ibdeditorials.com/IBDArticles.aspx?id=285206321703284
That isn’t a difficult target to meet. It’s not nearly aggressive enough. Typical whining by an American auto maker. Maybe GM doesn’t want to do it, but other auto makers will for far less, probably less than $1000 per vehicle. Considering the cost of gasoline, that’d be a bargain and long overdue.
exactly, the 35 mpg target for 2020 is FAR too easy. It is close to what current cars in Europe use, and most of those are NOT special/expensive cars but relatively cheap ones (in Europe expensive cars like those from the big German companies, are usually the real gas guzzlers). I have already seen prototypes of normal family cars that could be on the market in a few years and that get 80-100 mpg. If US (and German) car manufacturers want to stick their head in the sand they are going the way of the dinosaur.
Obviously, if you want to make a Humvee or similar ridiculous product that drives 35 mpg you are going to see a serious cost increas.
Comparing the US to the European auto market is comparing apples to oranges.
2 years ago diesel cars were 49% of the European market, far, far larger than in the USA. Most of these cars would not meet USA (particularly CA) standards of that time. Of course diesel gets better mileage, but is more polluting.
Ford and GM both produce and sell (in Europe) smaller displacement turbodiesels, but can’t sell them in the US due to air quality standards. (don’t know about Chrysler).
BTW, California is suing to restrict total carbon emissions from vehicles in addition to increasing mpg.
If the US wanted to increase fuel economy across the board, a stiff tariff (import) tax on petroleum in all forms ($20-$50 a barrel) would do it, right quick. Of course, some parts of the economy, like leisure travel would suffer greatly, but that segment is going to suffer greatly no matter what.
The emissions issues for some of the diesel engines is not so much total emissions, but the type/mix of emissions.
In any event, I am really hoping one of the diesel cars the BMW brings to the US next year is the 535d Wagon. Meets all 50 states emissions standards, gets a combined 35.3 MPG, has phenomenal power output (286hp, 405lb/ft), and apparently is quieter than the gas V8.
Engines like those I hope will appear in large vehicle applications (truck/suv/towing), while smaller cars see even better results from smaller versions.
BMW is bringing the 335d sedan and x5 4×4 in diesel for 2008. No plan for 3 or 5 wagon unfortunately. The x5 has slightly more room than the 5er wagon but much worse mpg, handling, ride due to the excess weight. But it looks more butch than a wagon so is more popular in the usa. To be fair, you can also have 7 passengers if 2 are children in the 3rd seat.
A good start nonetheless.
I have a 3er wagon, and a 3er wagon diesel would be nice. But I’d prefer the 330d over 335d, “only” ~200hp but better mpg.
Most of the deisels already meet or exceed the newer, more strict emissions regulations. Lower or no sulfur diesel fuel and urea injection catalytic converters to reduce particulates.
Crap. I had heard from my dealer source that were expecting the 535d wagon to make it over, but couldn’t confirm.
In the interest of disclosure, today I am driving a ‘99 540i Wagon. It gets about 18.8 MPG combined. 4 less peak HP and 82 fewer lb/ft than new 535d wagon which gets almost double the fuel economy. (18.8 vs 35.3)
The 3 series wagons are nice, and I’m glad you like yours. It’s a shame we don’t have half the options the Europeans get. You couldn’t get me into an X3/5 or SUV, but we love the wagons - before the 540i Wagon, my wife had a 525i Wagon, and I had a privately imported ‘95 M5 wagon for 4 years (it was written up in the Roundel a few years ago).
Current cars?! The smaller european cars were doing that in the late eighties.
Petrol price goes, indicating reduced supply. Cars adapt to use less petrol as a desired result. What exactly is it about free market economics that the american Auto Makers don’t get? Sheesh.
Heck, there are plenty of cars sold today in the US that can do that (35 mpg). Sheesh, my big fat Buick gets 30 mpg on the highway. My old Prizm (a Corolla with a Chevy bow tie) got about 42 mpg on the highway.
I had an ‘89 Honda Civic 5 spd that got 43 mpg highway. I measured it all the way from LA to Montana, and it was always 43. And I was doing 70-75 mph.
Why can’t they do that anymore?
US cars have put on too much weight, just like their owners and their mansions …
The cars aren’t so bad. Its the addiction to pickup trucks and SUVs that is the problem. The sad thing is that a lot of people buy trucks and SUVs because they thing they are safer. Never mind that their high center of gravity makes them far more likely to roll over in an accident. Every time I see a roll over of the freeway, its usually a truck/SUV. I personally knew someone who eventually died of neck injuries incurred when her “safer” SUV rolled over in a freeway accident.
There was a recent article, on CNN I think, explaining why older cars (they used a Honda CRX HF as the example) got better mileage than most new cars. In a nutshell, it came down to safety features (more weight), consumer demand for more features (AC, power steering, etc.), and auto-makers constantly trying to push their brands “up-maket”: bigger cars.
To say it can’t be done is stupid. My ‘01 Beetle TDI 5spd regularly gets about 50mpg HWY.
“Every time I see a roll over of the freeway, its usually a truck/SUV.”
No $h!t..every news story ends with “when she lost control” or “overcorrected” her Ford Explorer, Grand Cherokee or whatever. Why do people think they are safe? I have no stats but the Navigator looks like the biggest rollmeister of all of them.
I love the way people move to Montana, buy some remote place or a place up on the hill and have to use our idiotic roads, so they throw a big Expedition at it and figure they have it “handled.”
Esp I wonder, if you hit some black ice and decide to shift-on-the-fly, don’t you risk spinning out the tires at that point?
But people are adamant that they’re “safer.” I think it’s basically Big Metal versus Little (mine).
One is almost certainly much safer in a full size, FWD sedan. A Chevy Impala or Buick LeSabre come to mind.
The hi-tech company I used to work for provided the s/w database for Jeep/Chrysler, so I got to see a lot of their records when testing. Unbelieveable the number of accidents Jeeps get into, with that high center of gravity.
I have a Toyota FJ Cruiser, gets about 20 mpg, but I use the darn thing for what is does best, 4×4 in the backcountry. On a typical backroad, going 25 mph, I can get 40 mpg. And I often do go that slow, as it’s impossible to go faster. I put about 10 miles per day on it.
i would love to get your suv: 1 hour 40 minutes of driving at 25 mph for a mere one gallon of gas!
The CAFE standards will affect US automakers more than the imports because the imports have been working on fuel-efficient technology and vehicles for a longer period of time and are willing to invest in boring fuel efficiency vs. US automakers being more inclined to Hummerize the fleet for those gaudy SUV profits. A Prius can get 60 mpg now, so why will it take Detroit another 12 years to merely average 35? It’s embarrassing that US automakers are the only ones complaining about the 35 mpg average.
my 10 1/2 year old honda still gets 35 mpg.
Actually the Prius gets 46mpg (48/45) on average according to the 2008 EPA ratings that more closely mimic normal driving behaviors. Still much better than every other maintstream car though. I’d love to get one used in a couple years. Buddy of mine just bought a new one for 20k.
“Actually the Prius gets 46mpg (48/45) on average according to the 2008 EPA ratings”
My husband’s 2000 diesel Jetta got that and for a lot less $$$$ upfront. It was expensive to maintain however due to diesel dirt clogging everything up.
I took a look at the Jetta diesels once at the Ft Collins VW dealer. 28K and up! Of course they had every conceivable factory option installed.
Didn’t my ‘79 diesel rabbit that got more than that?
About twice that as I recall. As did my ‘83 Honda Civic. It got 55mpg on gasoline. I saved the window sticker. Of course it was 48 hp, but it only weighed 1800 lbs. And it really did get 55mpg, but only if driven at nationally mandated 55 mph. Great car, but slow.
Rob, you are correct about the 48/45 EPA estimates for the 2008, but I have read where some drivers get 60 mpg but most are happy with high 40s - mid 50s as shown at Edmunds.com:
http://tinyurl.com/27w5sp
Lutz should have just come out and said, “who do you think we are, Toyota?”
My 2007 Corolla gets 28/42. When I bought the car in May, one of the mechanics said Toyota is coming out with a hybrid Corolla in 2009. I told them “They better plan on making a LOT of them.”
“Lutz should have just come out and said, “who do you think we are, Toyota?” ”
LOL, well, Toyota had better cut their V8’s from the lineup, or slap a hybrid in them pretty quick. I think Honda has a better average, but I am not sure.
Here we go wheeling out the boogeyman again.
Yeah, OK, they’ll be able to raise prices when Honda and Toyota and even Hyundai offer cheaper vehicles.
Keep whistling past the graveyard, sparky!
“Keep whistling past the graveyard, sparky!”
They won’t be able to raise prices and won’t be able to reduce costs significantly, which is why I plan on holding on to my puts on GM for a good while into ‘08.
It is a catch 22 for the auto industry.
Because of unionization, they have a much higher cost basis, not only for today’s workers but for people that were working for them 20-30 years ago.
What are the number again? The $15 an hour worker costs Toyaota or Honhda $25 an hour in total benefits, but the same $15 an hour worker costs Ford or GM $45 an hour? Going off memory, but I think those were the figures.
Well, the ONLY way the U.S. companies can be profitable with that cost structuter is by selling HIGH margin products.. the SUVs. They mass produces crud, high limage, low end cars and sell them near cost, only to keep their MPG up, but the REAL money is made on the turcks and SUVs.
So, make them raise their milage…and you are taking away their high margin markets and making them do more low end, high milage vehicles that they can’t compete with Japan making.
U.S. auto manufatures will HAVE to go through an airline style bankruptcy where they dump all their pension and health insurance for current workers.
Bring on govt. health care paid for by a sales tax. That way you pay for the healthcare of Americans whether you buy an American car or Japanese.
U.S. auto manufatures will HAVE to go through an airline style bankruptcy where they dump all their pension and health insurance for current workers.
If you look at the demographics of the big 3 auto workers, it is not the current workers who are causing the problems with health insurance and pensions, it is the retirees. The retirees out number the current number of workers. It is similar to how Social Security will look in a few years. If they can hold on for another 10 years or so, the retirees will be gone and they will be in great shape.
I’ve said it before, and I’ll say it again: Most “American” cars are made in Canada and Mexico now, and most “Japanese” cars are built in the USA.
I call BS on this. Right now, TODAY, I have a VW TDI that gets 37mpg city. Not sure what it does on the highway because I live on Maui but have heard 45mpg. Honda is coming out with nextgen TDIs in the US next year. This whiny crap from industry lobby groups is truly pathetic.
Maybe we should rename him Bob “P”utz?
Oh sure, Bob. Add $4K to the price of your Malibu, $6K to your minivan, and $10K to the Tahoe. You go right ahead.
Accords and Camrys won’t increase in price at all, nor will Fits, Corollas, Versas, and probably most BMWs and Benzes too.
Suddenly a 3-series will be cheaper than a POS minivan.
Yeah, that will sure help your sales. What moronity. He’s just squawking for the shareholders, who probably aren’t as stupid as he thinks.
Some minivans already ARE more expensive than a 3 series.
FYI: the Honda Fit is actually bigger than the original Accord.
Back to March 2004 prices — before inflation adjustment. (Adjusting for subsequent inflation would push the prices back even closer to pre-bubble levels.)
http://www.signonsandiego.com/uniontrib/20080115/news_1n15buy.html
A close look at the price chart on p. 1 of the SD Union Tribune shows that price declines went into high gear around May 2007 then continued at roughly the same (straight line) rate of decline through December 2007, with only the slightest hint of concavity (increase in the rate of decline).
Here is a rough calculation, based on my best effort to guesstimate numbers from the graph (go to DataQuick’s web site if you want to use the actual figures to get a more refined answer):
May 2007 median = $495,000
Dec 2007 median = $430,000
Decline in median over seven months = $65,000
Recent rate of decline in median = $65,000/7 = $9,286 / month
Annualized rate of decline from May 2007 through Dec 2007:
((430/495)^(12/7)-1)*100 = -21 pct
hey pb does your rent cost $9286 a month?
doubt it-maybe you were on to somnthing with this rent thing of yours
You can pay our monthly rent three times and have spare change left over out of the opportunity cost of one month’s worth of price declines. (Of course, this does not even consider the many components of PITI…)
One thing you don’t see in the web version (on the front page!) of today’s UT is the layout of the paper version. There are two boxes. One is marked “Winners in the market”, the other “Losers in the market”.
The one marked “Winners” has a picture of a happy (recent) buyer with the text “Gary Tillinghast, 55, a retired fire prevention supervisor, recently purchased a home in Point Loma for just more than $1 million”, the article explains that not only did he just buy a house for “just more than $1 million”, but he’s going to rent out his old house…. what a winner! Now’s a good time to buy!
He’s probably thinking, “wow I must be doing great with all this attention I’m getting!”
Transit Panel Urges Gas Tax Increase
http://apnews.myway.com/article/20080115/D8U6725G2.html
A special commission is urging the government to raise federal gasoline taxes by as much as 40 cents per gallon over five years as part of a sweeping overhaul designed to ease traffic congestion and repair the nation’s decaying bridges and roads.
Shouldn’t we just borrow more, so we can still have infrastructure without paying for it? That’s been the NY/NJ solution until now, when will will pay without infrastructure.
“Shouldn’t we just borrow more, so we can still have infrastructure without paying for it?”
Absolutely. But only in conjunction with massive tax cuts (tax shifts) as a means to blow even bigger holes in budgets. That means we can pay even more interest on the mounting debt…… it would be great!/sarcasm off.
If the gas tax is raised high enough, an improvement in traffic congestion is sure to follow, along with much less wear & tear on roads & bridges, just by discouraging drivers.
“Pennies From Heaven”
http://www.townhall.com/Columnists/RichLowry/2008/01/14/pennies_from_heaven
“Subprime Nation”
http://www.townhall.com/Columnists/PatrickJBuchanan/2008/01/15/subprime_nation
Buchanan (wow!):
“Since it began to give credit ratings to nations in 1917, Moody’s has rated the United States triple-A. U.S. Treasury bonds have been seen as the most secure investment on earth. When crises erupt, nervous money seeks out the world’s great safe harbor, the United States. That reputation is now in peril.
Last week, Moody’s warned that if the United States fails to rein in the soaring cost of Social Security, Medicare and Medicaid, the nation’s credit rating will be down-graded within a decade.”
This is a scary piece from a demagogue, but the reality is that those entitlement benefits can be diluted without eliminating them completely in order to reduce their share of the future budget. Increasing the social security retirement age to 67 is but one example.
(This is a scary piece from a demagogue)
The Financial Times broadcast the same information to the whole world last week.
pat buchanan has been scaring us since the 80s.
Last week, Moody’s warned that if the United States fails to rein in the soaring cost of Social Security, Medicare and Medicaid, the nation’s credit rating will be down-graded within a decade.
Funny how Moody’s neglected to mention the trillions wasted on “defense”.
Total Defense spending for the last 6 years is 4% of the problem. Medicaid and Medicare are 50% of the problem. I would ignore defense spending.
Defense is 4% of GDP plus Veteran’s Administration plus the outsourced CIA and 16 black budget intelligence agencies. That is all equal to the medical agencies, which include treatment of long term military health problems. We know what is spent on Medicaid and Medicare while just hoping on the defense front that they don’t bankrupt us.
If you wish to read the congressional budget to get your facts correct, then I will debate you. But you are spewing garbage.
guess which one employs more and have direct benefits to most of us? i would take the 6 pc of health care anyday.
Defense spending is huge, and should be reduced (as should our involvement in other places). But the fact is, that defense spending is largely current, while entitlement programs today generate obligations far into the future.
I took a government accounting class recently, and the first day we heard the head of the GAO (I don’t recall his name) give a speech at a national CPA conference. In that speech he was discussing the financial issues of the federal govt. He pointed out that the current values of future obligations just for all the entitlement programs exceeded something like 90-something percent of the net worth of every american.
I think future obligations related to defense spending would be almost non-existant as those are more short-term expenditures. Therefore, in terms of the long-term future of this country’s financial health, entitlement programs (and the long-term obligations implied) are the real problem with large recurring expenditures such as defense coming in probably second.
Don’t forget that they (military) start collecting pensions after only 20 years of service.
THAT has got to end REAL FAST, we cant afford this luxury anymore. Military & civil service its the new TABOO subject
Either it has to be raised to 30 years for a full pension, or retire at 20 years but you dont get a dime of it till your 65
————————–
Don’t forget that they (military) start collecting pensions after only 20 years of service.
Increase retirement age.
Eliminate cap on income subject to SS taxes.
Enact some sort of means testing (howl away, Darwinian capitalists).
I’d like to pick up a new thought from the end of yesterday’s bits bucket, the relationship between the housing bubble and the gambling explosion. I don’t mean gambling by speculating in real estate by buying 10 condos with nothing down, or getting an Option-ARM and gambling on refinancing. I’m talking about casinos, lotteries and sports betting, along with poker as described in this article.
http://www.bloomberg.com/apps/news?pid=20601093&sid=aZn7RsvBbG_Q&refer=home
“When watching “High Stakes Poker” or the World Series of Poker on television it’s easy to assume that all these people with mountains of chips in front of them are millionaires and living the American poker dream. The sad reality is that a reasonable number of them are broke or, even worse, deep in debt to their fellow players, banks and loan sharks.”
The thing that makes this housing bubble different from the 1980s is not only do we have recent buyers stampeded into buying before being “priced out forever” and excess construction, but also people HELOCing their way to poverty in their previously paid off homes.
We’ve talked about Hummers, boats, second homes, cruises, etc. What about gambling, which has exploded with the approval of desperate state and local governments (especially during the severe fiscal contraction after the dot.com bust) since 2000?
Perhaps the people who went broke gambling with HELOCs would have gone broke gambling without them, just earlier and with less credit losses. But perhaps more people have been swept up by the combinantion of increasing access to both gambling and debt.
Any evidence? And what does this say about older policies intended to protect people (and the rest of us) from themselves on gambling and debt?
I took part in a telephone survey here in California. Here was the question. Since Native Americans were so badly treated in the past, shouldn’t that justify a major casino in the Los Angeles metropolitan area? Politicians = organized crime
Aren’t Native Americans responsible for millions of deaths from nicotine addiction?
Smoking or alcohol, which is the better societal weapon?
I view the gambling addiction in our country in a similar way to the problem China had with opium addiction.
As it becomes obvious that far too many people heloced their houses, for gambling money (standard gambling lie: lose in Vegas, tell your friends you broke even or won a bit, when you get home) there will be a backlash against it, in addition to the fact that nobody’s going to have any money to wager with, causing many casinos to fold.
It used to be $100 represented 1 days labor for a typical worker. Now we have people throwing around 100s at the casino like its nothing. Getting 1000s from credit cards, and 100,000s from their HELOC. As a society we have forgotten that money represents a unit of labor, and gotten to the point where its an arbitrary numerical abstraction to be used in a game. Add to this 50% taxes on labor, and you are a sucker to actually work at a W2 job for $10 an hour. As a society we have totally devalued labor and glamourized bling, gambling, and consumption
Aladinsane: Pun intended?
David: My wife is one of those that makes $100 a day (after taxes). In your example, to some $100 is nothing. Now, if you took the same people, and told them what my wife does for a living to make that $100 (again, after tax) a day, they’d most likely scoff at “another overpaid healthcare worker!” She’s an XRay tech. Funny how the opinion of the value of a $ can change so drastically depending on point of view and information available.
Excellent post, David!!! So true.
I would add that the hedge fund explosion is also part of a gambling bubble, and it was made possible by loose financing as well. Up until very recently (and even now, to some degree) Wall Street firms were falling all over themselves to be the prime broker to new hedge funds.
Did the hedge funds manage to de-leverage? Other than Bear Stearns example, isn’t that the 4th horseman riding in late?
Gold at $908.60, Silver at $16.35. There’s your true inflation guage.
The gold gauge may be confounding panic with inflation at this point. Let’s compare notes a year from now to see which was the dominate force.
Buy AUD right now, I think a lot of selling to cover losses in other markets. AUD problems will lag the USA issues for about 6 months. should see payoff within a week or so (+2%).
Why search for a fiat currency that will do better than the greenback?
The payoff on gold has been over 10%, since xmas.
Currency market trading is all about back/forth. You can day trade (which I do not) or you can ‘year trade’.
The decline of the USD is not from x to y. It goes back/forth across various currencies at various times.
Of course in currency trading the brokers give out margin like crack cocaine. 100:1 is common. I personally use no more than 5:1 and trade season to season / year to year.
The real point: You can often make the same 10% gain multiple times… The back/forth moves give you chance to repeat the same opportunity especially with no real change in fundamentals. 10% done 5x over is pretty good
I’m not expecting: the entire global economy to go to zero. End of the world as we know it.
I do expect: Serious adjustments, 10 to 20 year decline of the USA in favor of China and who knows who else {I can predict we are going down, don’t know for sure who will pick up - too many choices}.
The USA sold itself out. Giving away factories, turning food into processed boxed goods, blowing money on housing, putting way too much value on what’s on your iPod.
“putting way too much value on what’s on your iPod. ”
Uh, a buck a song?
More like $0 per song. I believe even Jobs acknowledged that the vast majority of stuff on Ipods wasn’t bought through itunes and presumably wasn’t “bought” at all, but instead picked up through a p2p network.
Speaking of the US selling itself out, notice how the big record labels are mostly owned by foreigners. It seems sick to me that the rights to American cultural treasures like Louis Armstrong, Buck Owens, hell - you name it - are mostly all owned by foreign corporations…
Actually, almost all the music on my Mac and Archos (not iPod) is from cds I have bought and converted to mp3s.
Almost all the movies and other shows have been recorded from cable as they were broadcast. The TV stuff is recorded at the worst quality (not best) to preserve hard disk space.
I wish the UT article’s graph would show prices back to the late 90’s so San Diegan’s would know how much further prices have to fall.
The graph should have three lines — average sale price, average income, and average rent.
More kitsch-and-sink accounting, as the gentleman’s $3 bn writedown balloons by a factor of six. This portends a great day for Wall Street bulls, as all the bad news is clearly priced in at this point, and a bottom must be close at hand.
Citigroup swings to loss on $18 bln write-down
By Greg Morcroft, MarketWatch
Last update: 8:03 a.m. EST Jan. 15, 2008
INDICATIONS
Investors feeling pretty Citi
Pre-market’s decidedly lower, playing off capitalization moves by Citi and Merrill.
Oh, for those days of mere $3 Billion losses…
the southpark asian dude comes to mine. citi-wok, he pronounces it shiti-wok.
shiti-bank.
Wholesale Prices Rise 6.3 Percent in ‘07
http://tinyurl.com/2vntew
Wholesale inflation shot up in 2007 by the largest amount in 26 years even though falling gasoline costs allowed price pressures to moderate in December.
Just like the credit and housing problems, inflation is also contained (sarcasm off).
Yeah, and the talking heads are calling for an emergency 50BPS cut. WTF is the matter with them? Don’t they realize that those two things are related, and not in a good way??
This means Bernanke can cut rates. Oh wait, the main FED mandate is to protect the currency and control inflation. Oh wait, they will just stop publishing the M3 and strip out all the necessities rom CPI. That will leave flatscreen TV’s and everyone needs those. (eye roll)
or maybe they will adopt the new official ECB policy to not care about inflation as long as it does not spill over into wages (for the average worker).
BULLETIN APPLIED MATERIALS CUTTING ABOUT 1,000 POSITIONS, OR 7% OF WORK FORCE
Dr. Irwin Kellner
IRWIN KELLNER
The right stuff?
Commentary: This is not your father’s recession
By Dr. Irwin Kellner, MarketWatch
Last update: 8:39 a.m. EST Jan. 15, 2008
PORT WASHINGTON, N.Y. (MarketWatch) — Unanswered in the growing debate over the need for monetary and fiscal stimulus is the question can conventional remedies cure an unconventional economic problem?
http://www.marketwatch.com/news/story/not-your-fathers-recession/story.aspx?guid=%7B8C76B496%2D43E9%2D49EF%2DB8D7%2DA86144687A93%7D
Didn’t Warren Buffet say he isn’t worried about a recession as long as unemployment stays low?
Citi laying off 24,000, Applied laying off 1,000. Countrywide annihilating practically everyone. You know the car companies and airlines are next. Count all the illegal construction and unemployment is going to shoot higher.
Merrill’s NYC layoffs start Feb. 1. Employees there are already getting the notices from dept. bosses. This from a friend who works there, who is still waiting to hear her fate.
Does this mean that NYC and specifically Manhattan RE prices are going to fall now?
Decline seems to be slow. Growth in housing will stop… but a lot of places have seen it hold there for a year or more before it starts to drop…
What dept. is she in? I’m curious if their is some dept. that are getting axed and others retained.
My dad worked for Merrill for years until he was axed (with a decent compensation pkg) in 1988. He was a computer anaylst. It took him 10 months of getting up at 6am and going to the city everyday looking to get another job.
I think it is the equivalent of 1988 in NYC again. Let’s just hope it isn’t 1973.
Not to mention the 1099 people out there. We own a small firm, and we work to pay taxes and our health insurance premiums. A lot of small business owners were forced into it (skilled professionals).
That life/death computer modeling cr*p from the BLS, isn’t worth the paper its written on.
If you factor in self employed, the 1099 folks, the illegals, the long term unemployed and under employed, the unemployment #’s are pale to reality. Who believes such nonsense?
There are a lot of quiet lay-offs done in waves, so the press isn’t get a wiff of the magnitude.
There are a lot of quiet lay-offs done in waves, so the press isn’t get a wiff of the magnitude.
That’s what happened where I work. We used to have a flamboyant but inept CEO (some called her a “Rock Star CEO”). At first the press ate out of her hand and proclaimed her a genius. Then she announced the company’s first mass layoff in history (8000+) then announced that we were buying out a competitor. The big layoff left us with a major black eye, so from that point on the layoffs were done in stealth mode: 100 here, 50 there. No press announcements. Eventually close to 40,000 got the axe. Eventually investors realized that she couldn’t deliver the goods, and she too was let go (with a severance package for a King.
The new CEO is much better, and things have been much smoother since then. Amazingly, Ms. Rock Star publicly took credit for our current success, claiming she had laid the groundwork for it.
So you work for HP or Lucent?
I’m betting HP.
6 months ago, my boss’s wife, an accountant, got fed up with her job and jsut quit. She expected to find another job very quickly as she’d not had problems before. Well, it actually took her many months to get a new job. The job she finally took was with the state of AZ.
Well, as many know, the state is looking at a $2 billion deficit this year.
Couple weeks ago she was furloughed…. don’t come in for the next 2 months ’cause we are not going to be paying you…. Maybe (but not likely) you can start coming in again in March if the state has the budget fixed without perminantly cutting your position.
So, they were stuck wonderinjg how they were going to meet the$3000 monthy nut on their $500K house that they only owe $400K on. Answer? They put it on the market. At $450K, $50K under any other house in the ‘hood.
So, are you going to buy a less expensive house, I ask? Nope. We’re going to rent. Lots of houses in our area looking for tenants at $1700-1800 a month.
Couple weeks ago she was furloughed…. don’t come in for the next 2 months ’cause we are not going to be paying you…. Maybe (but not likely) you can start coming in again in March if the state has the budget fixed without perminantly cutting your position.
The one time I was laid off an elderly gentleman asked me how long until they expected to call me back. I explained to the kind fellow that I was not “furloughed”. I was terminated, no longer an employee. If I ever wanted to work there again, I would have to apply for a job just like any other “outsider”. Poor guy, he was stunned.
There are generations of people who think like that. We get to hear lots of “how tough it was in the old days”, but when it comes to employment, loyalty and stability is much worse today. I’d take ‘48, ‘58, ‘68, ‘78, ‘88, or ‘98 over ‘08 any day. And shortly, ‘39 over ‘09.
test
Comment by Darrell in PHX
“Age of the house HAS to be a factor. My 30 year old house sucks up quite a bit more than something 10 years old wouldAge of the house HAS to be a factor. My 30 year old house sucks up quite a bit more than something 10 years old would..”
Yeah, I hear that. Before moving to AZ I had a late 1940’s NY colonial with wet basement, sump pump, septic tank, thin insulation, single-pane windows, exposed wood deck, wood burning stove a-n-d baseboard heat ala basement furnace. Every winter was exciting. Loved those heating oil prices. Loved refinishing the deck every few years, loved using the roof rake after the snow loaded it up with tons of the white stuff. The year before I sold the house I returned from a trip to London to find my sump pump went 86, and I had four inches of water in my basement with the waterline just below the top of the cinder blocks under the furnace. My neighbor had their yard excavated when their sptic went out and it looked like Falluja over there. Those fun times I can do without.
Just be grateful the furnace installer put it on cinder blocks, and not directly on the basement floor which is the practice in my neck of the woods.
I’ve noticed they are (finally) putting AC units a foot above the ground instead of on it.
Here’s a logistics question for all: For those of you that have lived in places with and without a basement, do you notice any difference in hot water availability and duration? I’m convinced that it would be more energy (not space) efficient to put a HWH on the floor where most of your usage is. In my 2 story house, I’d put it in a closet upstairs, rather than pump the hot water from the basement HWH about 30 - 35 feet away from main usage point. Also, has anyone had any experience with tankless - good and bad? My HWH is about to go kaput.
There was a tankless in our house when we moved in. It supposedly had been recently fixed, but the pilot light kept going out. I’d run a bath and come back to a tub of cold water. Hubby’s showers would suddenly go cold. He got it “fixed” by the vendor and it kept happening. I begged him to put in a regular water heater. It’s such a waste but we couldn’t get the thing to work. I forgot the name but it was one of the French companies..I’d know it if I heard it.
At Gardenweb some Canadian posters told me it happened to them all the time too, that the tankless craze there was all a crock.
I recall a visit to Mexico in the 60’s. The place we stayed at had a tankless job right in the bathroom. And it worked like a champ. It was cool to open the hot water tap and watch that sucker flame on all by itself.
Hmm, so 50/50 so far.
Another problem I had was blending hot and cold. For some reason I couldn’t get warm mixtures, it was all hot, all cold.
I agree that the thing really ought to work great. Makes me want to try another one but they’re not cheap and if the same thing happens I’d feel pretty stupid.
Here’s an observation I’ve made that could be HUGE. Zillow seems to be “revising history.” I succinctly remember a point last summer when it said my house was worth around 420K. NOW its chart says my house was never worth over 390K! Has anybody else seen this happening?
I’ve noticed Zillow acting like the UniBlab on the Jetsons. Shifting valuations, crazy pricing in both directions. They need to go back and rework their model.
To this Astro would say….”Rut ro Rorge”
Maybe you don’t understand something about basic Internet economics: The more you USE Zillow the more money they make. Directly in advertising, indirectly in selling their service to do partners by showing how they are growing in traffic.
If it sucks: Stop using it.
Way to much attention paid here
This site is an indirect Zillow supporter by the mere constant mention.
They revised the calculation recently. Too many people were complaining that their homes couldn’t have possibly decreased in value.
One woman was threathening to sue if they didn’t remove her home from the database because they got the comps “wrong”. Aparently she subscribed and listed her house on Zillow thinking she could pay to get her value raised.
I like Zillow just because it makes all those HGTV bluehairs crazy - I mean red-faced, blowing spittle, veins budging in their foreheads crazy. It’s definately worth having around just for sheer schadenfreud entertainment value >; )
Hmmm… Didn’t know that. Yes they do suck and thanks for the heads up.
I noticed that the 1 year price change in the zip code I’m following switched from negative to positive the last time they updated prices. I know prices have declined every month for the last year, so I don’t see how the 1 year change could be positive unless they revised historical prices lower.
Yes, I recently had a 100K drop in the value of my home on Zillow. I know things are going down, but I was still surprised at that one month drop. Then I looked at the comps, and they were from the next county over. A few days ago, it was back up again, with comps from my town. I’m sure it is getting less and less reliable as there are fewer comps to pull from and they have to go further out geographically or further back in time.
Yes mine when from 269 down to 209 up to 279 and the graph doesn’t show the dip at all. Nothing’s changed around here either that I can see, in the way of comps.
UK inflation:
Jan. 15 (Bloomberg) — U.K. inflation was above the Bank of England’s 2 percent target for a third month in December, adding to the case for fewer interest-rate cuts this year.
Consumer prices rose 2.1 percent from a year earlier, the same as in November, the Office for National Statistics said in London today.
http://tinyurl.com/3dw3c4
japan feels the pain:
TOKYO: Japan’s central bank chief said Tuesday that the U.S. housing loan crisis is having a greater-than-expected impact to slow the Japanese economy, reducing the chances of a rate hike any time soon.
http://tinyurl.com/38pmer
And still the yen gains against the dollar. USD took a knee to the groin today, can’t get up.
The Yen is tremendously undervalued and the MTOF has decided that it is in Japan’s interest to let the Yen appreciate to keep oil prices down. Since the US only accounts for 20% of Japan’s exports and exports account for 16% of Japan’s GDP, a maximum direct loss from a 5% slowdown in the US would be 0.5%. Japan made up the loss of exports to the US in 2007 through exports to other parts of the world. A US slowdown will have a much smaller effect than is currently projected by the street. The Yen in my opinion will rally to purchasing power parity of 85 during the year. The cheapest bank stocks to buy are in Japan.
Watcher I just read your link and it is amusing for what the IHT skipped.
Toshihiko Fukui, Bank of Japan Governor
“Rising raw material costs are making companies somewhat more cautious about business conditions…Economic growth is expected to slow for some time, although after that the economy will continue to gradually expand…The outlook for the global economy remains uncertain and downside risk to the US economy is growing. We must continue to pay great attention to the development of the global economy and capital and financial markets, and their impact on the Japanese economy.”
January 14, 2008
Hoz, how did you do your calculation? I only got .08%??
I wrote and calculated MAXIMUM. In a slowdown and exports dry up, the direct loss of sales also impacts job loss at the manufacturers and resulting negative cash from the system. In Japan the leverage is 1/16th so the direct loss number is multiplied by 6.25 resulting in maximum impact. The converse is also true when the export numbers increase. A huge potential boost to the economy.
http://mainebubble.blogspot.com/2008/01/lori-dobson-maine-senate-candidate.html
A platform of outlawing foreclosures
We should repeal the law of gravity too. Some people get hurt when they fall down.
The next impending disaster:
Financial Times
“…There are three potential hits to banks and others from a crisis in the credit derivatives market. First, there will be market price losses as risk is repriced as corporate and household credit quality deteriorates. Second, there will be corporate default losses on the loan or bond underlying the credit default swaps (CDS). And finally, there could be counterparty losses if financial intermediaries in the market go under….
The most likely place for this to happen is among financial guarantors, the so-called “monoline” insurers.
Monolines write insurance on debt. But here is the trick. Entities with a worse credit rating than the monoline company can get their bonds insured so that they can have the same rating as the insurance company itself (mostly AAA). So relatively poor-quality debt becomes investment-quality debt because the monoline will pay the interest and principal if the borrower defaults. ….
If the monoline guarantees on bonds and credit derivatives were to be removed, the rule of thumb is that every 1 per cent decline in the price of insured bonds would give rise to $10bn of losses on bond portfolios elsewhere in the system. We estimate bond portfolio losses of $150bn-200bn were this to happen – or equivalent to the impact of the subprime crisis on the US banks….
So the impact on risk appetite and liquidity creation by brokers, hedge funds and investment banks is even bigger. In all, we reckon global liquidity is set to shrink by 8-10 per cent. As we have shown elsewhere, most of this liquidity gets used to boost financial asset prices.
So the inevitable consequence for a credit-junky world is a thumping bear market in equities and a world economy in recession.”
http://tinyurl.com/2ol44c
So Bill Gross ‘rough guesses’ $250B, now the ante has been raised again.
Hey Leigh, Did your hubby escape from the closet and is he holding you hostage? We’ll rescue you with our tractors!
I hope the powers that be are using a $250 Billion test, monoline.
lol! I like that!
Chaff from the Chaff
http://www.stockmania.com/index.php?showimage=134
Subprime Nation
http://www.worldnetdaily.com/staticarticles/article59693.html
“Looking at 2008, there’s the presidential election, there’s the Beijing Olympics, which will probably be the most spectacular Olympics we’ve seen … and there’s the European football championships. So ‘08 is not the issue; ‘09 is.”
MARTIN SORRELL
WPP GROUP CEO
“Beer has traditionally been among the more recession-proof industries. We believe our portfolio is well-positioned, and as consumers continue to show that they are willing to trade up in the beer category, we will continue to migrate our portfolio to the higher end to deliver growth for our business.”
RANDY RANSOM
MILLER BREWING CO. CHIEF MARKETING OFFICER
“You can smell recession. Dealership traffic is down (across the board). There is more negative equity in cars (being paid off through loans). New loans are being made for extended loan cycles of 72 to 84 months, longer than most marriages last. And none of us have seen the impact of $100-a-barrel gas prices. It’s a train wreck.”
IAN BEAVIS
KIA MOTORS CHIEF MARKETING OFFICER
Advertising Age
Recession Hits: What It Means for Ad Biz
http://tinyurl.com/2ymq5b
New loans are being made for extended loan cycles of 72 to 84 months, longer than most marriages last.
I’ve ranted before about how high people are wanting for used cars. At least here in San Antonio area on Craigslist. I looked for 4 weeks and just no great deals. Went out and got a great deal on a new Scion (Toyota) that gasp: decent size, reliable, full warranty, great price. Scion is no-haggle price, but doesn’t mean you can’t talk them into throwing in free add-ons
All these people FINANCED their car, and I think that they actually believe they can sell them for what they paid! Tons of “take over my payments as I need a newer car” (yha, you probably beat the crap out of this one, and you expect it to be worth 92% of the original price, with warranty worn out?)
New TV show: Flip that car!
I agreed with Randy Ransom, and I was going to get my own business going with the beer that I brew. Dreadfully, most states have a 3 tiered system for controlling alcohol sales. You can be a manufacturer, wholesaler, or retailer, but no combination of the three, with the exception being brewpub. I don’t have the $ to start a freakin brewery / restaurant. Cost per unit doesn’t work when I have to buy bottles (I re-use old ones that I can cap). I’d have to sell each one for $1.03 per, just to break even, NOT including my time and utilities. I was doin’ this out of my kitchen, for crying out loud. Too bad too, my beer is REALLY, REALLY GOOD. Oh well, more for me.
Talked to one of the bigger dealers in precious metals in Los Angeles, yesterday…
He told me the U.S. Mint stopped selling Gold Eagle coins for the year 2007 a few months ago, and the premiums on Krugerrands went up to like $25 over spot, on 1 oz coins, demand is so strong.
For about 15 years, Krugerrands have traded right around the spot price, but @ this point of the game, people are happy to buy anything.
Mostly buyers nowadays he told me, although $900 Gold shook loose a few sellers, with many of the sellers telling him they needed money for taxes/house payments.
I posted here when the mint stopped selling but was told it was year-end inventory. I doubt it. My last order of Canadian maples took 2 months to receive; Canada is also not producing much supply. Got physical?
I’d guess it’s a more sinister reason…
We “leased” out a lot of gold to the financial majordomos, who sold it onto the market years ago.
No metal, no Eagles.
The US Mint online catalog is currently down ‘for a couple days’. I never was a big fan of Eagles (22 karat), think I will stick with Phils or Maples (ah, pure 24 karat heaven) and would love a $100 dip to buy some more.
Watcher, I think that dip might be coming, we need a bit of a correction, and then I doubt we will see $800 again. Do either of you know the karat of the Buffalo coins? I like me some buffalo!! When you get so many Eagles accumulated, they almost seem cheap.
Kitco?
Citi Underpins Consumer Struggles
http://www.minyanville.com/articles/MER-C/index/a/15541
I’m going to stop myself out of my index long positions with a profit about big enough for a nice cheese pizza
I don’t like the news we’ve had today and have made enough already this year on scalps to just wait and try to time a reentry on the short side.
There, I probably just ticked the bottom.
I’ve had a bit of fear at times about being some sort of contrarian indicator myself, as I get ready to take the plunge again.
Unfortunately my pondering last week of shorting CFC the day before the BAC deal was announced and CFC went up 40% didn’t help that.
We’re dropping into panic mode here. Should get interesting around S&P 1375
Where was your base support line again?
The markets are not rallying and keep bouncing off the bottom support and it could go either way. If we can get through this week without another leg down I think next week will be good. If the floor continues to drop then we will be hading down for a while.
chick,
do u see some bad technical with spx or ?
No, not really, just think if I want to be long, I can get in lower.
Okay, gonna try long again. Very small positions, about 20%.
“… Our credit conditions index, which looks at the ability to get financing compared to three months ago, remained unchanged at a weak 28% in January. Over the past month, lending standards continued to tighten. This month is the fifth month that roughly half of the groups which fall into the ‘borrower’ category (~80% of sample) have faced sequentially tighter lending standards. Of the lenders, three-fourths have tightened standards, up significantly from 33% in December….”
Morgan Stanley
http://tinyurl.com/2xyg9c
Jan 11, 2008
Good Luck young lady!
My mantra “He who picks bottoms, ends up with stinky fingers.”
I’ve gotten the last three, in March, August and November. So statistically I should fail this time. That’s why it’s very small.
lol
I never get it right! I hate paying commissions. I rarely day trade stocks. I’m bored - nothing for me to do - I’m going 4-wheeling.
LOL,
I’ll add “Investor who picks bottoms, ends up with stinky fingers” to my collection of Chinese proverbs.
Traveler who hurries through revolving door is going to BangKok.
commissions are so low that’s not a deciding factor
We just have a different way of doing things. I “read” waves and so forth. It’s wierd, I could never explain it satisfactorily to someone in writing.
Tom, if I’m going to Bangkok, it will be the counterparty to the trade
We just have a different way of doing things. I “read” waves and so forth. It’s wierd, I could never explain it satisfactorily to someone in writing.
Sounds like the way I do Forex trading.
It comes down to good money management. I tend to be considerations and am prepared to hold trades for months or even years if I bet the wrong way. I aim for long-term trading but take advantage of the waves of medium-term and sometimes short-term trading.
But again, the key is to be prepared to go wrong all along. Not trade too much at any one time.
“I tend to be considerations” = I tend to be conservative
Tom, this is what happens when the money is done buring a hole in your pocket:
“Man with hole in pocket feel cocky all day.”
I’ll add “Investor who picks bottoms, ends up with stinky fingers” to my collection of Chinese proverbs.
My favorite Chinese proverb is:
Panties not best thing on Earth But next to it!!
got some Jan oex call as well. we’ll see what happen
Got my Ciena back too.
siri’s trying to go green too
Should be interesting to see how the mkt closed in the next hr.
“PMI Winter 2008 PMI U.S. Market Risk Index
1 Riverside-San
Bernardino-Ontario, CA 94
1 Las Vegas-Paradise, NV 89
1 Phoenix-Mesa-Scottsdale,
AZ 83
1 Santa Ana-Anaheim-Irvine,
CA 81
1 Los Angeles-Long Beach-
Glendale, CA 79
1 Fort Lauderdale-Pompano
Beach-Deerfield Beach,
FL 78
1 Orlando-Kissimee, FL 74
1 Sacramento-Arden-Arcade-
Roseville, CA 73
1 Tampa-St. Petersburg-
Clearwater, FL 72
1 West Palm Beach-Boca
Raton-Boynton Beach, FL 71
1 San Diego-Carslbad-San
Marcos, CA 69
1 Oakland-Fremont-Hayward
CA 65″
Embarrassing that San Diego barely makes it to “group 1″,
we were #1 just 6 months ago. Anyway, how about the 94% chance of further declines in Riverside-San Bernardino-Ontario?
Forgot to mention that the report is at:
http://phx.corporate-ir.net/phoenix.zhtml?c=63356&p=irol-Publications
Under Economic and Real Estate Trends (ERET).
BTW, the risk index is the probability (in %) that prices are lower 2 years from now.
just another way to keep americans spending money.
Just Put It on My 401(k) Debit Card
Monday January 14, 12:50 pm ET
BySimone Baribeau, Editorial Assistant
http://biz.yahoo.com/ts/080114/10398317.html?.v=2&.pf=retirement
You almost get the idea that the powers that be, want to suck every last Dollar out of people lives, so they can keep on shopping.
“they can keep on shopping”
All of the economic stimulus packages being talked about are said to target those “that spend the most” (as opposed to those that will save or invest any extra money). The US government is trying to keep the house of cards from falling by keeping Joe Sixpack spending, instead of doing financially disasterous things like actually saving. What a sick world we live in.
“just another way to keep americans spending money”
You got that right. And those of our society who will fall for it will be the ones who can least afford to.
Ethanol Plant’s Bust Offers a Preview to Bond Buyers
In December 2006, Saunders County, Nebraska, sold $45.7 million in tax-exempt industrial development revenue bonds and $4.7 million in taxable revenue bonds to help finance a new plant that would produce 20 million gallons of ethanol a year. The plant opened in June, and in November of 2007 entered Chapter 11 bankruptcy.
From cradle to grave in one year? Quite an accomplishment!
`Future Is Here’
http://www.bloomberg.com/apps/news?pid=20601039&sid=aIDZ.W2jAOOw&refer=home
Corn was a staple of the native indians in the new world, and look what we’ve done to it…
High fructose corn syrup and high loss ethanol products, that have increased our waistlines and waste, dramatically.
My husband’s family were corn farmers in Nebraska. He goes red in the face everytime the subject of ethanol comes up.
Embarassed or angry?
Excellent National Geographic article on the Drying of the West…
What’s a house worth when you turn on the faucet and nothing comes out?
http://ngm.nationalgeographic.com/ngm/2008-02/drying-west/kunzig-text.html
Interesting article.
“People are not yet suffering, but trees are. Forests in the West are dying, most impressively by burning. The damage done by wildfires in the U.S., the vast majority of them in the West, has soared since the late 1980s. In 2006 nearly ten million acres (four million hectares) were destroyed—an all-time record matched the very next year. With temperatures in the region up four degrees F over the past 30 years, spring is coming sooner to the western mountains. The snowpack—already diminished by drought—melts earlier in the year, drying the land and giving the wildfire season a jump start. As hotter summers encroach on autumn, the fires are ending later as well.”
It feels more like mid-Feb. out here in Utah right now.
US stocks still down about 2%…question, isn’t a 50 to 75 basis point drop in the fed funds rate already “baked in”? Is there a growing loss of confidence that the fed can ride to the rescue?
Please show title as what day of week. i.e, B & B Tues, Jan 15, 2008. Thank you - an oldtimer who does not always have a calendar in front of him.
Cash is king?
“The currency changer, brazenly plying his illegal trade in the Bank of China lobby, pulled out a thick wad of cash from around the world and carefully removed a bill.”
“The 2003 series U.S. $100 bill was a fake, but not just any fake. It was a “supernote,” a counterfeit so perfect it’s an international whodunit.”
http://www.kansascity.com/news/nation/story/441167.html
It’s very easy to counterfeit currency nowadays, with the quantum leap in technology…
It’s not easy to make a decent copy. Making the right ink and paper would be very hard, and a criminal outfit would pump out as much fake money as it could. Probably this is a government tweaking Uncle Sam, and making sure they can produce a high-quality copy if they want to; psychological warfare.
It’s North Korea.
http://www.nytimes.com/2006/07/23/magazine/23counterfeit.html?pagewanted=all
The best part?
They figured out that it was counterfeit because the fake money was “better printed” and “superior” to the US original.
SoCal Median Home Price Plummets
Tuesday January 15, 3:26 pm ET
By Alex Veiga, AP Business Writer
Southern California Median Home Price Sinks More Than 13 Pct to Lowest Level in Almost 3 Years
http://biz.yahoo.com/ap/080115/california_homes.html?.v=4
13,240 sales in 12/2007, versus 36,865 in 12/2003. wow.
But it’s just b/c the jumbo’s are freezing up! hahhahhah; what bank is gonna loan Joe Blow $500k for a depreciating asset. When I graduated from college in the eighties, I couldn’t even get a credit card with a $250 limit until I worked full time for two years.
Hesitant buyers, accelerating foreclosures, worsening economy, tightening credit, historical low savings rate = plunging volume and volume.
Way off-topic, but I can’t resist.
This post is for palmetto, who can now add one more thing to his list of reasons why globalization was “the worst idea ever.”
http://www.bloomberg.com/apps/news?pid=20601109&sid=aTONYqsRaw7Y&refer=home
Columbus Probably Brought Syphilis to Europe, Gene Study Finds
“Syphilis was a major killer in Europe during the Renaissance,” said George Armelagos, a skeletal biologist at Emory and co-author of the study. “It could be argued that syphilis is one of the important early examples of globalization and disease, and globalization remains an important factor in emerging diseases.”
Intel a mess. Bought some spy at 1371, MSFT at 32.65 (breakout point) Tomorrow bet you get the gap down and bottom.
well maybe but this won’t be your father’s recession. I think we still need another 10% or so down.
http://www.marketwatch.com/news/story/not-your-fathers-recession/story.aspx?guid=%7b8C76B496-43E9-49EF-B8D7-A86144687A93%7d&print=true&dist=printTop
I’m only in 30% of a normal position and operate in a very short time frame. Things are grossly grossly oversold and a bounce will occur at some point.
hmm sounds like 2000-2002 to me….granted we did have bounces…but they were all dead cats. Rate cuts won’t do much here as its wages and income to the masses that are the issue. This recession (or whatever you want to call it) will separate those companies with cash from those with lots of debt/credit on the books.
I know. I’m not an investor. This is also op ex week don’t forget.
let’s hope it bounce before my Jan options expires
This one’s not good about Intel. My sister is a consultant at one of its many sites doing web development. She had a better deal at SAIC and walked out of that job. My mantra to my relatives is: I have no money!!!!!!!!!
Intel a mess.
It will be interesting to see how PC makers, Dell and HP in particular, fare in tomorrow’s trading.
HPQ way down after hours…
This one’s worth reading…. (info on Santa Clara County, CA, South SF Bay)
http://www.creeksiderealty.com/bay_area_real_estate/2008/summary/1jan.htm
Sample quote:
December 2007 had only 488 completed sales (closings) in SCC. That is the fewest of any month not only since 1998; but all the way back to 1984, when the MLS first started publishing statistics. Lower than September 2001, when the nation was stunned with 9/11.
And then there’s this quote:
Since 1998, the real estate market within Santa Clara County has normally been fairly homogeneous. 2007 has seen dramatic geographic and price splits. The expensive communities (Palo Altos, Los Altos, Mt View, Sunnyvale, Cupertino, Saratoga, Los Gatos and Almaden Valley) are doing well and are at or near their record high prices. The affordable and out laying communities (East, Central, and South San Jose) are doing poorly. These factors artificially increased the median prices.
I think their revenue guidance drove a stake into the heart of the “tech is the place to hide” thing. I’d love to see it trading over 20 in the premarket to whack some out. There’s no way it will close over 20 on Friday.
This one’s worth reading…. (info on Santa Clara County, CA, South SF Bay)
http://www.creeksiderealty.com/bay_area_real_estate/2008/summary/1jan.htm
Sample quote:
December 2007 had only 488 completed sales (closings) in SCC. That is the fewest of any month not only since 1998; but all the way back to 1984, when the MLS first started publishing statistics. Lower than September 2001, when the nation was stunned with 9/11.
And then there’s this quote:
Since 1998, the real estate market within Santa Clara County has normally been fairly homogeneous. 2007 has seen dramatic geographic and price splits. The expensive communities (Palo Altos, Los Altos, Mt View, Sunnyvale, Cupertino, Saratoga, Los Gatos and Almaden Valley) are doing well and are at or near their record high prices. The affordable and out laying communities (East, Central, and South San Jose) are doing poorly. These factors artificially increased the median prices.
Scariest stuff I’ve ever seen written by a realtor. And a good explanation of why medians in the area are holding firm.
All the damage to date has been done with a mere 10% down move in house prices!
What happens as reality sets in and housing drops 30%+ and in some areas of California and Florida drops 80%?
capitulation, panic selling, mass arson, probably start hearing about more suicides.
I’ll be tilling the garden, chopping down trees, and layin in the new french drain. Mrs Voz will be doing tax returns, painting, and tendin the animals.
Course, those are the part-time jobs at home…
well this is it.
uncle admiral in hawaii, off-shoring telecom platform builder for At&T, CPA, and myself agree…
its a deep inflationary recession…everybody is bleeding.
From contained to unraveled in one short year…
ASIA MARKETS
Asian markets hit hard by Wall Street drop
By V. Phani Kumar, MarketWatch
Last update: 11:05 p.m. EST Jan. 15, 2008
HONG KONG (MarketWatch) — Asian markets suffered steep losses Wednesday on fears about the health of the U.S. economy and an overnight tumble on Wall Street. Shares of Japanese exporters such as Honda Motor Co. and Nintendo Co. also were hit hard also by the yen’s steep advance against major currencies, while Australian stocks were led down by financials such as Macquarie Group, and miners.
“Right now, fear is driving the market,” said Lucinda Chan, a division director at Macquarie Research in Sydney.
Citigroup’s “big write-down has hurt sentiment across Asia. I think going forward, until we see more skeletons coming out of the subprime issue, this market will remain fairly weak,” she added.
http://www.marketwatch.com/news/story/asian-markets-hit-hard-wall/story.aspx?guid=%7B8C0377C2%2DF564%2D468B%2D93E3%2D4790B0D241A7%7D
Why regulators should intervene in bankers’ pay
By Martin Wolf
Published: January 15 2008 17:35 | Last updated: January 16 2008 05:16
You really don’t like bankers, do you?” The question, asked by a former banker I met last week, set me back. “Not at all,” I replied. “Some of my best friends are bankers.” While true, it was not the whole truth. I may like many bankers, but I rather dislike banks. I recognise their necessity, but fear their irresponsibility. Worse, they are irresponsible partly because they know they are necessary.
http://www.ft.com/cms/s/0/73a891b4-c38d-11dc-b083-0000779fd2ac.html
Citigroup clears the decks
Published: January 15 2008 14:30 | Last updated: January 15 2008 22:59
Citigroup is still deep in the woods. That is saying something given yesterday’s painful clean-up operation. Getting investors to swallow a capital raising – and its potential dilutive impact – in the interests of future growth is one thing. But there is no positive spin that one can put on two large capital raisings in quick succession, coupled with a dividend cut. This is the price of huge past mistakes, coinciding with a quick and scary downturn in the US economy against the backdrop of an already tight balance sheet. The end result was yesterday’s carnage.
But investors cannot waste too much time being outraged. They need to save some of their emotional energy for fear of what comes next. For Citi’s results were alarming in the deterioration in consumer credit quality. Credit costs rose by $4bn in the fourth quarter for the US consumer business, with a surprisingly large rise in loan-loss reserves.
http://www.ft.com/cms/s/620ec61a-c376-11dc-b083-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F1%2F620ec61a-c376-11dc-b083-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
I think they put an Indian CEO in charge just to start moving major operations to India. When its all said and done, the storefront will still be in America but everything else that possibly can will be overseas.
Newfangled conundrum: Too big to fail plus too big to bail.
World Rides to Wall Street’s Rescue
By David Enrich , Robin Sidel and Susanne Craig
Word Count: 2,259 | Companies Featured in This Article: Mizuho Financial Group
In the latest sign of America’s sinking financial fortunes, investors from as far afield as Japan, Korea, Singapore, Saudi Arabia and Kuwait have come to the rescue of Wall Street.
The list of players that agreed yesterday to pump a combined $19.1 billion of capital into Citigroup Inc. and Merrill Lynch & Co. spotlights a dramatic shift in power. After flooding the world with capital that fed both economic growth and excess, battered U.S. financial institutions now are turning to countries and companies that not so long ago were suffering through their own disasters.
http://online.wsj.com/article/SB120044526135892909.html?mod=hpp_us_whats_news
Silver lining: Still 13 days to buy the dip before Jan 28 stimulus package announcement!
Stimulus Deal May Be Possible
By Sarah Lueck and Michael M. Phillips
Word Count: 878
WASHINGTON — A top House Democrat said Congress and the White House can come to an agreement on an economic-stimulus package — provided Republicans don’t insist the plan includes making President Bush’s signature tax cuts permanent.
http://online.wsj.com/article/SB120044957977693229.html?mod=hpp_us_whats_news
Anyway we can get this to 400?