Bits Bucket And Craigslist Finds For January 16, 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.
January 16, 2008
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I found this graph from the most recent Fed Flow of Funds data most illuminating.
I call it: Flight of the Challenger II.
I graphed the reported net borrowing from 1985 through 2007. Q407 is estimated by re-using Q307 numbers.
But I thought a home mortgage wasn’t borrowing - it was tapping the mine of unused home equity!?!
“If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years,” said David Lereah, chief economist of the National Association of Realtors and author of “Are You Missing the Real Estate Boom?” “It’s as if you had 500,000 dollar bills stuffed in your mattress.”
He called it “very unsophisticated.”
Anthony Hsieh, chief executive of LendingTree Loans, an Internet-based mortgage company, used a more disparaging term. “If you own your own home free and clear, people will often refer to you as a fool. All that money sitting there, doing nothing.”
You unsophisticated heathens! HELOC damn you- HELOC, I say!
I think it depends strongly on the situation, for some people Liarreah will be right; a lot of homeowners will be doing extremely well while Bernanke papers away their debts (as long as they can hold on - which should be no problem if they have a conservative mortgage and purchased before 2004 or so). These debtors will probably do far better than savers who have seen their real purchasing power crumble every year for the last 10 years or so (even more in Europe).
Inflating your debts away only works when your salary isn’t being inflated away too.
Good Grief. Anyone that promotes debt as a good thing is nuts. Cash is king. Living debt free and with lots of savings is the only way to live. Just think how much better off this nation would be if its people and government were not to in debt. Live BELOW your means and you’ll find that you’ll NEVER be inslaved to anyone else.
To all you savers out there, our time is coming. We’ll be buying everything under the sun for pennies on the dollars in the very near future. 1990 housing prices on the way.
I’ve been saving a lot of money and paying off debt. Now that I can afford some new toys, I find that the desire has suddenly waned. It’s funny how that works, thus I’m not sure that people will be buying toys. What good is having a boat if one doesn’t want to pay for the gas?
The less junk cluttering up my life the happier I am.
It’s not “liberating your home equity” - it’s going into debt and putting your house up as collateral.
The financiers sophistication has far outstripped the financial sophistication of significant segments of the populace. I think there needs to be some kind of basic financial education in high school covering the various forms of debt, compound interest and basic banking.
Getting people to believe that going into debt and putting your house up as collateral is sophisticated, is a triumph of modern marketing, built on deception and misdirection, and a failure in financial education.
Yeah, I’m sure all those multi-million dollar homes in Vail and Aspen, owned by CEOs and the super rich, are mortgaged.
You would be surprised, because a great many of them are. I have friends who are in real estate in Aspen, and a lot of rich people use mortgages for the tax write-off on the interest, even though they could pay cash.
and a lot of rich people use mortgages for the tax write-off on the interest, even though they could pay cash.
Sounds crazy, AMT kicks in to reduce/eliminate the mortgage deduction.
The only way in which it would make sense for someone wealthy to pay out the interest is that they have another investment that will pay higher return than the interest rate over the life of the loan.
With inlfation AMT is hitting middle and upper middle class owners as well. I can only deduct 25cents of every dollar I should be able to deduct because I have kids and live in a high tax state. Thus I hit AMT very quickly.
in the Netherlands it is easier for the rich: mortgage payments are fully tax deductable (no ceiling) and because of the 50% income tax, effectively the tax office pays half of the mortgage. So many rich homeowners buy the most expensive home they can get for their income level and mortgage to the hilt - despite the fact that they could easily pay cash. Then they put the money on a savings account, yielding a risk-free net 1-2% every year (even more when rates are higher) with all costs for the taxpayer. Of course some invest everything in the stockmarket, but that’s usually people who are not really rich and just playing with the virtual home equity (quite common with the Dutch middle classes). That is why the average Dutchy has something like 100K euro on a savings account (the median Dutchy has far less of course …).
I understand what Lereah is saying but this is what I don’t get. Definitely if you have high interest debt you should pay that off first. But that is really another issue altogether.
Sure you can invest in something else rather than paying your mortgage. But there is no guaranteed investment that would return higher than the interest on the loan. If there were, the guy lending you the money would have taken that investment instead. You can go for riskier investments that pay higher but not everyone wants to do that or if they do they don’t want to do it with all of their money.
Now, if I got a 6% fixed 30 year mortgage and interest rates jumped like they did in the late ’70s so that even CD’s were paying > 10% then, sure, I’d pay the minimum on the 6% and put the rest in CD’s. But that definitely is not the case now and it would never be the case at the time you first get the loan.
There was an article in one of the finance mags about a year ago, maybe Kiplinger if I remember correctly. It suggested to some poor soul that he HELOC his California house to the hilt and invest the money in the stock market! WTF!? on California real estate! I actually looked on the cover to see if it was an April Fools issue. Nope, “real advice”. Oh boy, would he be sweating bullets right now.
I was seriously considering Helocing our home and sticking the proceeds into mellow yellow, 6 months ago…
Forgot to do it, though.
OK, that would have been (in retrospect) a good move. But you’re still taking a big chance with borrowed money that you have to pay interest on. I guess it’s the same idea as buying stocks (or gold) on margin, though, right?
I’d have no problem with it as long as the guy knew the risks he was taking and knew his prospective investments well. You, aladinsane, at least appear to have firm convictions about gold (and have been proven right); the guy asking for advice in the mag/rag would have been blindly investing the borrowed money into a market he probably knew little about. Recipe for trouble.
I was an FB for a while in the early 90’s, and I’m a “fool” now. I sleep so much better at night since I became a fool. Silly me.
There’s nothing quite like the satisfaction that comes from paying off a mortgage.
There’s nothing quite like the satisfaction that comes from paying off a mortgage.
I agree. It felt really great to own my house after 13 1/2 yrs.
Obey, Conform, and Consume. How DARE you not be in debt? How DARE you not provide a steady revenue stream for business leeches to use to line their pockets until they’ve so badly mismanaged your life that they get to kick your out of your house and then sell it to some other shmuck at a 50% higher price and pocket more fees. How DARE you not participate in the eCONomy by being the mark? Hahaha!
A seditionist speaks the truth!
RE: “If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years,” said David Lereah
I remember my Harvard MBA father gettin’ fired from his VP Finance job in ‘72 with 4 kids, a pair of which were in college at the time, and a non-working spouse. The only thing that saved the family’s azz was havin’ a paid off mortgage.
Lereah’s credibilty is absolutely zero.
I believe the phrase was, “liberating your equity”.
From my Oxford dictionary
Own -
Origin
Old English AGEN ‘owned, possessed’,
past participle of AGAN ‘owe’
I think these FBs truly believed that money they can borrow, based on some nit-wit “valuation/appraisal” of their house, was their money! The fact that it was a loan meant nothing.
And, sadly, the FBs may have gotten the leg up! Bushy signed the “Deadbead specuvestor Tax Relief Act of 2007″ into law (giving huge tax breaks to FBs), and almost all the candidates talk about “doing something” about falling home prices.
Our government is confiscating money from people who have saved, in the form of inflation and lower interest rates, to comfort the FBs.
This is disgusting.
The bubble’s footprint stands out very prominently from that graph. It looks like from 1996 through the peak, the amount of mortgage debt rose by a factor of five, after staying near a steady level for years and years. Roughly eighty percent off the bubble peak should suffice to restore the steady state level of mortgage debt. The ride down has only just begun.
On the bright side, high muckamucks have suggested the whole mess could be remedied with an emergency $100 bn cash infusion helicopter-dropped out of the thin air straight into American shoppers’ wallets (or is the correct figure $150 bn?). I am sure that will be sufficient to offset a deflation in outstanding mortgage lending which appears to have already reached $250 bn and appears to have another $500 bn or so to go to return to long-term trend — NOT!
Related question: Do investment bankers cannibalize their young?
Jan. 16 (Bloomberg) — U.K. real-estate professionals said December was the worst month for the housing market since the aftermath of Britain’s last recession in 1992…
An end to the U.K.’s decade-long housing boom may threaten economic growth as falling home values discourage consumers from spending. Economists forecast the Bank of England will cut the benchmark interest rate for a second time next month after a reduction in December to guard against fallout from the collapse of the U.S. subprime mortgage market.”
Wha…wha…what?
You mean it’s not different there?
interesting how the UK central bank now clearly follows the FED strategy where the only purpose of the central bank is to prop up the housing and stock markets, and inflation is irrelevant. And despite the hawkish talk, I expect the ECB to follow soon (as soon as home prices in mainland Europe start falling).
And if the Fed cuts .75 then Japan will match it…….ooop’s…..that means Japan will be at -.25.
Now that should be fun
“Don’t worry. The Fed will save us. No, no, wait. The candidates will save us. They will give us each a check for $250. Don’t ask where it comes from. Deficits don’t matter. No, no, the foreigners will save us.”
It’s nice to see that the PTB have a clear vision of the future and execute it so well. No panic here.
$250 is really going to save these fb’s??
i was reading the cali thread from last night and people saying 2 bedrooms were renting for 2k a month.
i agree nycboy it would sweet to get that deal in nyc
i would never leave
$250 is really going to save these fb’s??
$250/$500 who cares? They spend that much for lunch and it’s supposed to save us?
How about all the elderly relying on fixed income investments. Anyone care about the millions they will lose on their depreciating dollars. Where’s the AARP when these people really need them.
Rant off!
Hillary Has not talked about giving any money away. She has talked about developing green collar jobs.
What the stimulus should be about is developing solar power - give tax breaks to jump start this. Give consumers tax breaks to install solar power on their roof.
Nanosolar says that they can deliver solar power at .99 per watt. With that system in place 4.5 kW will not only power my house, but also my car.
Not only will this be good for the climate, it will also create jobs. Another benefit is that the announcement of this plan by the government would send oil prices much lower.
they should just skip the middle man and give the 250 per person straight to starbucks.
I am all for them giving back the tax money they have stolen from me. The problem isn’t them giving back the money, it is the spending they are doing. We all know that no one has proposed an economic stimulus package that included LESS government spending. The government is the borrower of last resort, and borrow they will!
As far as I am concerned I am more than happy to let them give me $250 or MORE! Taxes never helped an economy.
We just need to know the scheme and put the $250 (with the rest of our inflation hedges) and we will be fine.
Hillary has too talked about giving money away–50 or 70 billion to help pay peoples’ mortgages. She’s been talking about it for a week now.
God I hope Nanosolar catches on. I’m still rusty on the coversions, but the figure I read was that Nanosolar can do solar for 10% the price of conventional solar. In other words, you can power your house for $6K instead of $60K. That’s a really BIG difference. You can put that on a credit card.
nanosolar (or equiv.) and a plug-in hybrid….oh please oh pleeeze..
There’s an interesting convergence happening at the moment - the cost/efficiency of solar power generation is quietly improving, and the energy usage of many household items is decreasing. Couple that with some decent insulation, and building standards, and central power generation gets marginalised. Now that would be an economic revolution…
According to nano solars website, they are sold out for the next 12 months. And they are spending $100M on a new plant. This and wind power look very encouraging.
2008: Solar and wind power look very encouraging.
2003: Solar and wind power look very encouraging.
1998: Solar and wind power look very encouraging.
1993: Solar and wind power look very encouraging.
1988: Solar and wind power look very encouraging.
1983: Solar and wind power look very encouraging.
1978: Solar and wind power look very encouraging.
1973: Solar and wind power look very encouraging.
Same story. Same results. Ever since I’ve been alive, solar and wind were going to take off in the next few years.
“According to nano solars website, they are sold out for the next 12 months. And they are spending $100M on a new plant. This and wind power look very encouraging. ”
This revolutionary 3rd wave solar thin film technology which promises far cheaper production of solar panels(Or solar film) does not appear to be available for average SFH owners as of moment as all current production and usage is going to large scale solar power plants. Looks very promising thou and if I can get it for under 5 grand installed i will do so.
I checked at Home Depot for a solar powered generator and they said they don’t carry them at this time. I’m going to hold out for a nano system.
True, heavy price reductions in solar panels is a breakthrough. All these Chinese vendors seem to ask competitive prices compared to the US and foreign panel manufacturers.
I don’t know… on the one hand, we’ve been talking about alternate energy for years now with few results (remember “fusion is the power source of the future and always will be”)
On the other hand, consider how far we’ve come in other areas, such as computing, and one can’t help but wonder how far we could advance in the areas of energy production if we put our minds to it. But, that would involve more work than flipping houses and playing carry trades with interest rates, so who knows if it’ll ever happen.
RE: They will give us each a check for $250
Obama’s plan…so fookin’ pathetic.
” … one can’t help but wonder how far we could advance in the areas of energy production if we put our minds to it.”
Yeahbut that would require our government setting up a Department of Energy …
Oh!, wait …
“On the other hand, consider how far we’ve come in other areas, such as computing, and one can’t help but wonder how far we could advance in the areas of energy production if we put our minds to it. But, that would involve more work than flipping houses and playing carry trades with interest rates, so who knows if it’ll ever happen.”
http://www.itulip.com/forums/showthread.php?t=608
”
For obvious reasons, no one in power ever makes this simple link between the U.S.-dominated global speculative financial system and the diminishing motive for Americans to innovate and create new goods and services. This is the reason why clearly needed economic, social, and political changes are not forthcoming.”
What the stimulus should be about is developing solar power - give tax breaks to jump start this. Give consumers tax breaks to install solar power on their roof.
This doesn’t work.
When I was shopping for a PV (solar) electric system for my home, CA had a rebate program, and an “installer certification” program. Only systems installed by certified installers would get the full rebate.
It was CHEAPER for me to buy the same hardware (inverters, panels) in a neighboring state, Nevada, and truck them over, and have them installed by a licenced electrical contractor than to buy in CA through a “certified installer” and get the rebate.
The CA companies simply RAISED THE PRICES because our howmuchamonth society doesn’t care about net cost any more. They all had these little charts showing how you can finance it either through them or your own homeequity loan and the payments would equal the savings, so the system was “free.”
Because I was a cash customer, these flipcharts with the howmuchamonth numbers didn’t fool me. I called dealers in Nevada and got a *much* better deal for the exact same system EVEN WITH NO REBATE.
The government shouldn’t try to prop up any industry, whether it’s houses (with mortgage interest deductions) or solar electric.
Remember a month or so ago when the last round of the U.S. going hat in hand all over the world looking for cash to prop up the financials, and the Japanese said, we do not see why we should have to bail out the U.S. Someone here answered, because you want us to keep buying your cars, cameras and computer chips.
Well, yesterday there was a story about Japan preparing a fund to dump into U.S. financial companies.
Yeah, the rest of the world isn’t quite ready yet to pick up the slack if the US residents back off on their conspicuous consumption.
Same story. Same results. Ever since I’ve been alive, solar and wind were going to take off in the next few years.
Wind is definitely taking off in Colorado. There is a waiting list to buy wind power out here, they can’t put the windmills up fast enough. And Vestas is building a windmill factory here. BTW, wind power out here costs under 8 cents per kwh, only 1/2 cent more than coal generated juice.
Can’t one of these bright guys say, “It isn’t working. Do something different.”
I guess if everyone follows the same strategy, regardless of whether it works or not, they can’t be criticized because they followed accepted practices.
Beggar thy neighbor, anyone…?
Bugger thy neighbor, more like.
I think this is the worst time to be able to think outside the box or be a change agent. Yet America is in desperate need of us.
What is a Change Agent?
http://en.wikipedia.org/wiki/Change_agent
Prices are already falling, particularly Spain. Spain is mainland. The strong euro is meeting a political goal (reserve currency of choice), so the ECB won’t be in any hurry to raise rates. Despite squeals of protest from political leaders.
But they will cut them later this year, hard and fast. But for now I think they are content.
falling prices in Spain, do you have any credible source for that? My family in Spain thinks otherwise, and they are usually well informed. Pricegrowth has slowed significantly in Spain, just like almost everywhere in Europe now. But the average is still climbing, only in some highly speculative areas (mostly the coast, probably parts of Madrid etc.) there are mild price declines (like minus 10% - which is nothing after a runup of several times 100% in previous years).
“MADRID: With sales slumping, prices faltering and property developers despondent, Spain’s housing market evidently failed to get the soft landing in 2007 that the government and experts had predicted at the start of year.”
http://economictimes.indiatimes.com/News/International__Business/Spains_real_estate_sector_suffered_a_hard_landing_in_07/articleshow/2661830.cms
just like I said: sales are down, prices are NOT down (they are up by 4% in 2007); same story as most of Old Europe. When they are talking about a ’soft landing’ in Spain they hope for a slowing of pricegrowth from double digit to single digit without any serious consequences (so nothing about real declines).
Deutsche Bank expect Spanish home prices to go down by 2-8% next year which sounds like a good guess to me, but that is nothing after the stellar runup of the past 15 years or so.
Prices are falling, nhz.
“But the government predicts a more modest 5 percent rise for 2007, and in some areas of big cities like Madrid and Barcelona, prices have already started to fall, according to a survey released in October by http://www.idealista.com, a major Spanish real estate portal.”
http://www.iht.com/articles/ap/2007/12/17/news/Spain-Housing-Worries.php
nhz,
You’re just lagging the U.S.
Same pattern here: slowing sales, price increases moderating, inventory increasing, etc.
Unless the govts of the world stage a massive bailout (currency or major inflation), you will see significantly lower prices.
I think you might even see the movements are faster than they were here, because the global lending mechanism is now broken.
Thanks for keeping us updated over the years!
Europe is not “just” lagging behind the US. That’s only one aspect of the story across the pond. Every government in the EU, even the most conservative, is much more interventionist-minded than our own.
There’s lots of speculation here about possible payouts, bailouts, federal “fixes” and safety net plans — well, I’m guessing any plan that has a remote chance of being enacted in the US would be mild compared to the schemes a really interventionist government might cook up if (or when) the boom goes bust.
I think we’ll see more aggressive propping of RE by EU governments, so that in addition to lagging behind us, their drops may be either softer (through smoke, mirrors, intervention) or more prolonged — possibly to the overall detriment of their economic health, of course.
I’m curious to see how things play out in the EU once the going gets rough.
to Lou Minatti: yes, some hotspots in Spain are going down slightly (I heard something similar about some big cities on the Costas), hardly relevant considering the runup. Still the average price in Spain is going up, like in the rest of Europe, and that is what is most important (for the banks, governments etc.). Probably the RE mob in Europe is mostly worried about slowing sales and not so much about price declines.
ET-Chicago: yes, I agree. Europe is definitely NOT lagging, the EU bubbles are FAR older and often bigger than the US housing bubble (going up for 10-20 years now in Old Europe). I think in Europe the government intervention prevents the market from working and slows any changes; compared to that changes in the US market are VERY swift. I guess in the end this will only make matters worse and the EU economy will be heavily punished for the next 10-20 years because governments keep fighting the housing downturn tooth and nail. Too bad a whole generation is going to suffer badly for propping up the assets of a relatively small group (mostly our babyboomers, and some yuppies that are leveraged to the max in RE).
RE: Every government in the EU, even the most conservative, is much more interventionist-minded than our own.
Gotta luv the French.
The world’s comin’ unglued and their Prez is off shaggin’ Mick Jagger’s and EC’s old flame behind the Pyramids.
Vive la France!
And of course the official inflation rate isn’t what ordinary people are experiencing:
http://tinyurl.com/2ua6yz
“Research by Capital Economics suggests the middle classes are being hit much harder than the official data say, with “Middle Class RPI” running at close to 7 per cent, not least because of sharp increases in private school and university tuition fees. About the only thing that isn’t going up is the value of their homes.”
“The new inflation also provokes fears that Britain might return to the sort of industrial strife last seen then, especially in the public sector. Then as now higher inflation is leading to higher pay demands from a Labour government trying to impose a pay policy with mixed success.”
“The police are once again leading discontent. Rapidly escalating inflation makes the Government’s pay policy look stingier by the month; but by the same token even more crucial to Gordon Brown’s survival, as to give in to public pay demands could lead to a splurge in public spending and borrowing, and thus, possibly, even higher inflation, a spiral that could prove difficult to control.”
same story in Germany and Netherlands; while the economy has been ‘booming’ for several years, real incomes for 90% or so of the population have been declining and it is getting worse. Calls for higher wages from all kinds of groups are in the news everyday, and those with some influence (high level workers, train drivers, pilots, teachers, police etc.) usually get most of their demands accepted. But this will only increase the inequality and make matters worse
regarding the British RPI: I guess that the value of the UK middle class homes has been going up by more than 7% yoy for the last 10 years or so - so at least homeowners have no reason to complain, they simply should adjust their spending.
ahhhh…those folks hurting are just eating too much and using too much gas.
I was in London recently. They have a severe affordability problem. Even the high end will be stressed and it will magnify the losses. Instead of losing thousands of pounds, they will lose millions of pounds.
would be good if all those twenty-somethings making 10-50 million pounds each year in the City get an expensive education; I hope they are leveraged to the max in real estate (but I doubt they are THAT stupid …).
now we shouldnt be wish hard times on others
Jan. 16 (Bloomberg) — HSBC Holdings Plc, Europe’s biggest bank by market value, dropped the most in six years in Hong Kong trading on concern it may have to increase U.S. bad-loan provisions after Citigroup Inc. reported a record loss.
HSBC fell 4.8 percent to HK$115 at the 4 p.m. market close, the lowest since August 2004. The decline came as Hong Kong’s benchmark Hang Seng Index slumped 5.4 percent, the biggest drop since the Sept. 11, 2001, terrorist attacks on the U.S.
Citigroup’s $9.83 billion loss and its $18 billion writedown on mortgage-related investments sent financial stocks from Tokyo to Sydney tumbling today. HSBC may need to add $13 billion to its provisions for subprime loans, Goldman Sachs Group Inc. analyst Roy Ramos said in a report yesterday.”
All those Singapore funds are dumping their money over here to buy up American finance. Maybe they should think about keeping some of their money at home to prop up their own messy financial firms?
The early bird gets the capital. If the foreign capital well starts to look like it’s drying up, will we see a surge of companies shopping for capital?
is it still contained?
sounds like europe is starting to crumble as well
will this have any effect on the irish carpenters buying up all those snazzy nyc condo’s at $2000 psf????
will the wall street bonus baies save the real estate market in nyc? should be an interesting 2008
I think that if the Irish carpenters are clever they can still cash out on their extremely overpriced Irish homes and exchange them for FAR cheaper US homes, and maybe switch back again in five years or so. Although I doubt that NYC condos would be a good investment. The room to the downside in Ireland (and most of Europe) is currently far bigger than in the US.
Not sure I understand - Singapore is not Hong Kong. Do you know of any specific Singapore banks that have been so badly affected?
HSBC is a british bank. It was established by a brit. It was operated to finance british interests in indo-china, especially China. So the locals there think it is a Chinese bank, which HSBC highly encourages by hiring lots asian-looking front-line staff everywhere in the world.
isn’t hsbc used to be called hongkong and shanghai banking corp?
Yes, it was. It was, none the less, a british bank out of London. Most of its operations were in indo-china.
3am?…When rain turns to hail…
Auto Angst….
http://online.wsj.com/article/SB120035787694089777.html?mod=todays_us_page_one
The posted article talks about weakness in the high end. Made me wonder if buying preferences will change; even for folks that have money. Most american cities have clusters of huge victorians from the early 1900’s. But, you don’t typically see large, grand homes from the 30’s, 40’s, and 50’s. The explanation I’ve heard is that during and after the great depression, conspicuous consumption was considered to be in very bad taste; as there were so many on hard times, and flaunting your wealth was just rubbing their nose in it.
If things get tough, would we expect a similar shift in attitudes? I’m wondering what the risks to the (now booming) luxury good markets are.
There will most definitely be a backlash against those that flaunt their wealth, vs. thems that got nothing.
The 50’s (and early 60’s) were a very different time. The rich were heavily taxed. Ordinary people could afford homes using ordinary loans.
Whereas the future will have all the workers heavily taxed and nobody able to afford homes if our “leaders” get their way. Such “progress!”
feudalism, anyone?
A couple things come to mind; Post-war income tax policy was used to encourage and discourage behaviors, and like all tax policies had consequences both intended and unintended.
I think a big factor is that people living then had less stuff, and were subject to less of a constant media barrage telling them about the Joneses and why they need to keep up with them. Simpler times and they didn’t have the ability then to shove information around like we do today. Can you imagine middle class people mostly happy with what they have?
Plus they didn’t have a wallet full of CC’s and and HELOC line that they could tap into. There were certainly “must have” items back then. I am old enough to remember when color TV entered the main stream. In todays dollars a 20″ set (built into a huge console) cost as much as today’s plasmas. IIRC, my dad paid cash for our first color TV. He was driving a 6 year old Chevy at the time.
“Can you imagine middle class people mostly happy with what they have?”
Different times. Workers then had affordable health care and housing, and job security. Companies looked out for their employees, rather than laying them off every quarter to juice their stock price. Many workers actually produces stuff of value, rather than serving others or working in nebulous financial manipulations. This in turn gave employees a sense of pride in their workplace and jobs, and loyalty to the company. Pretty much all of that has gone out the window in the last 40 years. Real wages have stagnated, there is no job security or safety net, any large illness can quickly ruin you and your family, no loyalty and no job security, little job satisfaction.
One of the only “improvements” in the life of the average joe since then is the proliferation of technology. Toys and gadgets. Cell phones and GPS, Ipods and labtops. Can you really blame J6P for latching on to these items? They represent the only thing that has really improved over his parents generation in terms of day-to-day living.
Agreed, Bub. Nice summary.
Prosperity, yes — but part of it is family size, too. There’s definitely some correlation between the two. The average family was much bigger in the 19th century, then declined into the 20th century.
The peak per-child average of 3.7 kids was reached in ‘57, the height of the Baby Boom.
Average household size (all US households):
1900: 4.60
1910: 4.54
1920: 4.34
1930: 4.01
1940: 3.68
1950: 3.38
1960: 3.29
1970: 3.11
1980: 2.75
1990: 2.63
2000: 2.59
So-called “non-family households” rise steadily as the average size of the household decreases.
Source: US Census: PDF link
Of course, none of this explains the rise of the McMansion.
And don’t discount the fact that we’re a nation that likes to tear down buildings and begin anew. Many Victorians have survived because they’re big, ornate, beautiful, well-crafted beasts. Many of smaller and lesser homes of the same ear were demolished in the name of progress.
Many of smaller and lesser homes of the same ear were demolished in the name of progress.
Crap.
Should be “Many smaller and lesser homes of the same era …”
About 3 months I noticed something changing in the ultra-high end auto segment.
If you are not familiar with Autoweek, it is a 50-year old publication that’s sort of like a 1/4-sized, weekly version of Car & Driver, with a significant classifieds and racing coverage.
I’ve been a subscriber for about 16 years, and each week scan the classified section just for grins. I’ve got a pretty good feel the exotic and unusual car listings there over time.
Since it’s introduction, the Ferrari F430 - especially the Spyder version - has been sold out and trading at premium often 20%+ over list. With the deliberately limited and managed supply of ‘one less than demand’, and the flexible wait-list policies of Ferrari dealers (You a A-list celeb? we got one coming in next week. You just a successful J6P? check back in 3 or 4 years - maybe we’ll know something then), that model has been sold out and unavailable to most, even though they have the cash.
About 3 months ago, I suddenly started seeing *a lot* more F430’s for sale in the Autoweek classifieds, including a number of spyders. Some listings were staying a lot longer, and asking prices are trending down - even below list for the coupes.
This flimsy, anecdotal observation, tells me that the herd of people who can drop $200K+ on a show toys has either (1) been hit hard by predators and their ranks are thinning, or (2) is huddling up and suddenly acting a lot more conservation. It also means that a lot more people are finding reasons they need to divest themselves of their pricey toys.
This flimsy, anecdotal observation…
I can vouch for part of this. I was listening to a story on NPR about six months ago about how these cars were so popular and so unavailable that USED ones were selling for more than new ones, because new ones couldn’t be had at any price.
Also the service depts. aren’t crowded either. My son called to get something fixed on his car and they told him they could take him the next morning. The other son, different garage, called about a repair and they also told him they could take him the next morning. Anyone else noticing this.
Yes
RE: This flimsy, anecdotal observation
I think the flimsy ancedotal offers more than what it appears.
It’s the word from the street
But surely, the info is nothin’ that the high and mightly are tuned into since their math & economic genius’s with their quants and derivative alogarithm super computer programs got it all right.
My guesstimate: 14.5 million auto sales this year, well below the most pessimistic forecasts of almost anyone. With the car buying binge that happened the past five years, who needs to buy new?
My car is 8 years old and still feels and looks brand new.
Blue Collar Jobs Disappear…
Factories close, jobs left are fast-food or big box retail, adults in their 40s move in with relatives, the working class now the working poor.
Increasing hard times in the midwest.
http://www.nytimes.com/2008/01/16/us/16ohio.html?_r=1&oref=slogin
“Her 20-year-old son went to college for two years, earning an associate degree in information science, but cannot find any jobs nearby. He still works at McDonald’s and lives at home as he ponders whether to move to a distant city, as most local college graduates must.”
Would have liked to ask the son just what he was hoping to accomplish by returning to his home town of no job prospects when he could have looked elsewhere. If he’s 20, he can’t be long out of school, and that part of Ohio has had a marginal economy for many years.
Well, at least we will be in a national recession soon. For those who don’t know these things, extended federal unemployment payments have not been available in the Midwest, because the U.S. unemployment rate has been low. The theory is, people should just move away from their friends and family to a place where there are jobs (but they can’t afford the housing).
Once the bust reaches the rest of the U.S., federal unemployment payments will kick in.
japan saved jobs 1990 to ?
government medicine is bad medicine
got Volker?
These MORONS also forget if you are new in town, no landlord is going to rent to you without first last and a deposit… so 3 months plus food, gas,car insurance, before you could get that first paycheck.. which probably takes 3 weeks from the day you start due to a bi weekly pay schedule.
————————————————–
The theory is, people should just move away from their friends and family to a place where there are jobs (but they can’t afford the housing).
You can’t get unemployment unless you get laid off from a job. Mickey D’s isn’t firing him. He never had a computer job from which he could get get laid off.
The guy should have studied nursing.
Good luck getting into nursing. The waiting lists for decent programs are very long. It wasn’t so bad 10 yrs ago but it’s just crazy.
Yep. That’s one thing I’ve suspected for a while: the reason for these dense and grossly overcosted areas is that they are the only places with jobs that remain. So, you can live an area you can afford, but not have a job (oops!), or you can move to an area with jobs, but you can’t afford to live there (oops!) Great system, and once we move onto the no jobs at all phase, it’ll be even more interesting.
i am sure this kid wil be in williamsburgh or bushwick brooklyn living in some bedbug infested craphouse creating some pseudo art or crappy garage rock.
maybe this recession will get these knuckleheads back to palookaville with their asymetrical haircuts and bad hygine
good riddance
Nah, he’s coming to Chicago, where the likes of him will convince our condo developers that “everyone wants to live here”. There are so many MI, OH, IN, and WI plated cars on our streets nowdays - not long ago you only so those plates on the interstate. The Upper Midwest is rotting from within - has been for decades.
The MSM is really stuck in the stone age. I was listening to NPR a few years ago, and they had a slice of life story about a factory closing in some small town. The company was moving production to Mexico.
I was like, what is this, 1983? Hello…”Roger and Me” is almost TWENTY YEARS OLD…
Every single blue-collar worker I know has fully adapted to the changes in the economy. They aren’t happy about the changes, but they are dealing with them.
The MSM, on the other hand, just can’t seem to adapt. The workforce moved on years ago, but they are still reporting stuff like this as if it is timely.
The housing bubble, OTOH — how many stories about young families priced out of the housing market has the NYT ran lately? I’ve seen the usual limousine liberal fare, like “Welfare Mother Loses House Purchased With Option-ARM” several times. “Rutgers Graduate and Family Living in One-Bedroom Brooklyn Apartment With Two Children; Struggling With Student Loans, Layoffs” — now THERE’S a story that is right beneath the MSM’s nose, but one they’ve never reported.
People moving back home with the elderly parent/s isn’t just a flyover issue…
My mom knows of 5 women in her surrounding neighborhood that have taken back in failed sons and daughters, in California.
And we are supposed to care why? Oh right, they are entitled to have their own place. They are entitled to go out to dinner. They are entitled for Comcast cable and flat screen TV. If there is a problem with this country, it is that the native population here feels entitled to live middle class lifestyle. Guess what? It is not the case.
Jobs are worth not what you or me want them to be worth they are worth what two parties agree on. If I can get stuff done cheaper in India I would be outsourcing my development work to India. There are TONS of jobs available in IT sector in the US if one bothers to -apply- and do a good job. Do you think I want to hire Indian monkeys to write code on a tight deadline when I can’t make sure they are doing the work? Nope, I do not. But I’m not paying someone in the US $60/hour to sit on his/her ass and surf the web half of the time while producing the code that makes me want to barf.
More angry whining.
With rents so high, is this surprising?
If you grew up in “palookaville” then at least your $10/hr goes farther. If you grow up in SoCal unless you make over 50K you should probably plan on staying home with mom and dad. We also know a SoCal family. Their adult son (very clean and responsible guy) has a job at a grocery store. The truth is that he will never be an engineer, accountant, etc., he just doesn’t have the brains. He is their only son, and currently lives with them. He will almost certainly inherit their house someday, but in the meantime he lives with them.
No, exter, it is not whining. It is a reality. As long as americans continue to have entitlement complexes, I will continue to hire fresh immigrants and continue to outsource american jobs to India, China and former Soviet Union. And if it becomes impossible for me to do here, I’ll pack up the shop and move to another country which would certainly appreciate my tax revenues much more than an entitled american blue collar worker with a sweet gig working draping tables in the convention center while being paid $80/hour.
I know lots of people who moved back in with their parents or parent in order to survive. These were pretty screwed up people, though, like my brother who was an alcoholic. He eventually drank himself to death. I have friends who moved in to “take care” of mom and took control of the SS check. It works out well sometimes, sometimes not. It’s been going on for a long time with the losers, the dropouts and druggies and morbidly obese who can’t do most entry level jobs. So we’ll just see more and more of it among the formerly independent types..
please go
lmao. My thought too.
Evil Capitalist says:
“But I’m not paying someone in the US $60/hour to sit on his/her ass and surf the web half of the time while producing the code that makes me want to barf.”
Sounds to me like they actually need to be managed. A trend I’ve noticed is that many U.S. managers no longer manage anything but their own careers. So will your hypothetical overseas employees actually get competently managed by somebody so that they can deliver a better product at lower cost? Or will you just get what you pay for and spend the rest of your life complaining about the habits and productivity of the poorly managed?
“But I’m not paying someone in the US $60/hour to sit on his/her ass and surf the web half of the time while producing the code that makes me want to barf.”
I have to agree with EC. I am on the other side of the equation. As soon as I was willing to move, I found a decent job - and, I’m a programmer in my fifties! As soon as I decided that a job was more important than a house, my life changed 180 degrees.
Additionally, I have talked to a guy near me who runs a web pharmacist business and he couldn’t get anyone in the US to do a decent job on his initial website. He outsourced to India, and got most of the job done but then got jerked around for the rest.
He just now, finally, got a fully functional system going after over a year of trying.
My non-hypothetical overseas employees get paid on delivery, so for slow projects I do not care if it takes them 100 hours to get something done or 70 hours. Since they want to get paid sooner rather than later, what can be accomplished in 70 hours gets accomplished in 70 hours and not 100. That also raises their ‘per hour’ rates. That would be the group #2.
My non-hypothetical non-fired US employees do not need to be hand-held or “managed” when something has not been done yet. It comes to them naturally, partially because they like what they do and partially because they like seeing their paychecks increase as the company does better. That’s group # 1. Most of people in this group happen to be recent immigrants.
The non-hypothetical fired US employees all had the idea that someone must be nagging them to be doing what they were assigned to do. It did not fly well with the group #1. The idea of hiring a full time manager to “supervise” careers of the group that was opposed by group #1 as they thought I could spend money hiring group #2 to do it cheaper, give group #1 more money and still have some cash left every month.
Amazing, isn’t it?
Amazing, isn’t it?
Amen.
RE: But I’m not paying someone in the US $60/hour to sit on his/her ass and surf the web half of the time while producing the code that makes me want to barf.
$60.00 for someone who can write computer code?
And your bitchin’?
Cops here in Mazzholeland collect $42.00 per hour in detail pay and elevated pension benefits to drink coffee and wave motorists by Verizon repair trucks.
Why should any private sector worker expect less than these stiffs who do virtually nothing.
Thanks for the additional detail.
OK, so just curious…if the average American worker doesn’t function well in the structure (or lack thereof) that group #1 is functioning within, have you given any thought to offering work locally under the same deal as group #2? As the dollar falls and the cost of work done overseas rises, I’m wondering when we’ll reach a point that the true cost to you is equal, and you could offer Americans contract work to be paid on delivery at no additional cost to yourself?
hdman:
$60 * 40 * 52 = $124,800/year for doing -coding- work on year #1 is little money while generating code that uses for(i=0;i
grrr; some of the reply got eaten. Anyway, the point is that being paid $124,800/year on a year #1 for writing code that makes stuff on http://thedailywtf.com/ look clean simply shows how out of touch with reality so called american IT professionals are.
Former FB:
I’d love to be able to contract stuff locally (one needs to be insane not to choose local staff over those in other cities, not to mention other countries), except that IRS won’t let me 1099 these people as they won’t pass the 1099 eligibility tests. Since they can’t be 1099, they have to be on W4, which requires me to pay them weekly or bi-weekly, even if they do absolutely nothing.
EC-RE: $124,800/year on a year #1 for writing code that makes stuff on http://thedailywtf.com/ look clean simply shows how out of touch with reality so called american IT professionals are.
$124k for a small town cop shows how out of touch with reality public union employees are.
Evil - I will agree with some of your comments. I do some techie work and find that in general, the lazy people were the ones who became Java programmers in 1999, prior to that they were playing guitar, working in a grocery store, etc. The poeple I’ve found that are good are those with college degrees in engineering, computer science, or similar fields. And this is a 4-year degree, not some online certification exam type stuff. Certs are good in addition to degrees, but worthless without.
Immigrants are great working back office apps, but what about gathering requirements and wokring with end users? Nothing makes a business person (typical fat white slob middle-aged coffee-drinking, foreign suv driving, McMansion owning….I think I’ll stop there hehe) madder than having to work with someone in IT who can’t communicate.
When I call a company and get transfered to India call center my blood begins to boil.
Joe Schmoe,
how I agree! They NYTimes likes the high and low end, but the middle class, struggling and working, is too dreary for them to bother with reporting.
For what it is worth, that’s how the Chicago Tribune is too. Elitists who hawk their globalista neo-liberal agenda with adorations of conspicous consumption while “playing Jesus to the lepers in their head” with sob stories about the lower rung.
Mike Royko R.I.P.
Another way to look at it is NYT is a paper for the elite. So that’s where the reporting is skewed. What do you want, food reporting with comparisons of McDonalds vs Taco Bell, who gives the best value? Well researched business articles about the local strip mall? The common people already have their newspapers — or actually TV news — that covers that garbage.
Also, to the comment about how Chicago Tribune workers are elitists blah blah blah. Unlike you, I have actually worked at newspapers in Chicago. Many of the people I worked with went on to the Trib and elsewhere. Majority of the reporters come from modest, regular backgrounds, and are members of the middle class themselves. Most likely you are slamming them because you perceive them as “liberal” and therefore, in your mind, out of touch. Go watch Fox News if you don’t like getting good reporting in your newspaper.
“Go watch Fox News …”
That’s the best retort you can come up with - to resort to red herrings? Where in my comment do I mention the company’s workers? Is it not the editorial board that determines the content of a newspaper and therefore is the implied target of my comment?
Good for you, you worked with a couple of reporters once - was that even at the Tribune? If so, were you around when the liberal (your word) Tribune busted its union in 1981 and broke many people’s careers? My guess is no.
MattR,
The NYTimes imagines itself the newspaper of record, in competition with the Wash Post. In reality, it has descended to a consumer-driven daily magazine, with its’ features far better written and researched than its’ news well. Take a look at the Wed. food section which exhaustively follows the careers of fairly minor chefs and compare that to the daily business coverage. It’s laughable. It has also closed down most of it’s bureaus in Africa, and Lat. Am. depending on, largely, Brit stringers for coverage. It ain’t the paper it was in the 60s and 70s. Newsweek, in its’ redesign by Roger Black, admitted they were following the lead of USAToday with very short pieces, lots of photos and graphics, and language deliberately pitched to a high school vocabulary.
Don’t believe me? Grab an old issue from 15 years ago from the public library and read it. It’s stunning how dumbed down it’s become. What was once perhaps “elite” ain’t no more…and the difference is telling.
Every single blue-collar worker I know has fully adapted to the changes in the economy.
Yeah, they were working in construction. Next stop, a fast food job.
Would have liked to ask the son just what he was hoping to accomplish by returning to his home town of no job prospects when he could have looked elsewhere.
What you are really missing is that he has a degree in information science. Although an Associates?!
Anyway, jobs are flying right past him in packets on his cable modem line. He could have it made if he would wake his mind up to the global economy and telecommute. There are plenty of information jobs out there (like this blog Ben is running).
Of course, that requires you have passion about something in your life and combine it with information science…
RE: Of course, that requires you have passion about something in your life and combine it with information science…
LMAO…You cubicle people kill me.
“You cubicle people kill me.”
BINGO
Would have liked to ask the son just what he was hoping to accomplish by returning to his home town of no job prospects when he could have looked elsewhere.
He probably graduated from a local school. I think if you don’t have money and neither do your parents it is difficult to relocate — no rent deposit, no emergency fund, no gas money, no living expenses etc. I’m sure he could do it, but it’s a lot harder when you are poor already.
“Her 20-year-old son went to college for two years, earning an associate degree in information science, but cannot find any jobs nearby. He still works at McDonald’s and lives at home as he ponders whether to move to a distant city, as most local college graduates must.”
The parasitic-poor don’t have to move, so why should this loser kid man-up?
Looks like the total number of households are going to decrease during the recession, creating even more of a housing supply overhang. It’s happening already.
It is not fun but they need to pull up stakes and move, same as my family did and millions of others. If an area has lost its economic core, go elsewhere. We’re a mobile society, except for those trapped in their mortgages.
Lou, I agree with you, but where could they go in this day & age?
People are reluctant to move. We have had friends visit us who get all googly eyed over “how cheap houses are here”. They are lower income but bought their socal house in the 70’s, and had tons of equity at the peak. I told them to sell their termite infested shack for 500K and buy a much nicer place out here for only 200K, and save/invest the balance for their retirements.
They sighed, and said that “they just couldn’t do it”. I told them that the bubble would pop and that they would regret it. I also mentioned that someday SoCal would eventually become Aztlan, and then they would really regret not getting out when the getting was good.
Colorado,
My wife was just telling me last night that in the 2 weeks at her new job, she has already met 6 patients that moved here (Council Bluffs, Iowa, Omaha, Nebraska) from Colorado. Know what everyone’s reason was? It’s too expensive in Colorado. Same reason we moved out of Colorado, same reason my sister did. Interesting difference in perspective.
Those places are probably cheaper than Denver, and especially cheaper than select areas like Boulder and Cherry Creek. But even metro Denver has more affordable communities like Aurora. Even some nicer burbs, like Westminster, have lower prices.
Just took a quick look at Omaha on Realtor.com. Prices look comparable to the Loveland/Ft. Collins area. And according to Wikipedia the median HH income there is lower than either Loveland or Ft. Collins.
That can be subjective.
Estimated median household income in 2005: $40,484 (it was $40,006 in 2000)
Omaha $40,484
Nebraska: $43,849
Estimated median house/condo value in 2005: $124,400 (it was $94,200 in 2000)
Omaha $124,400
Nebraska: $113,200
Estimated median household income in 2005: $44,261 (it was $44,459 in 2000)
Fort Collins $44,261
Colorado: $50,652
Estimated median house/condo value in 2005: $229,700 (it was $169,600 in 2000)
Fort Collins $229,700
Colorado: $223,300
Yes, the mediam is higher in Ft. Collins, but it seemed to me that 200K bought the same house in both communities, at least from what I saw on Realtor.com. The median might be lower in Omaha simply because the median house is smaller. We have 120K houses out here too, but they tend to be small and/or old (Or in Greeley, LOL).
After a quick peak at Realtor.com in Omaha, it looks like a 125k house out there is equivalent to a 150K house in Loveland.
Also, the median income for a family in Ft. Collins is 59K, as opposed to 50K for Omaha.
Anyway, it appears to be a wash. But I suppose that for some demographics (say retirees on fixed income), that Omaha might be the way to go.
This is probably way too late to post, but the comparison between Ft Collins and Omaha is driving me nuts. Ft Collins is an awesome little town. Omaha? Forgetaboutit.
Property taxes in Omaha are about twice what they are in Ft Collins.
Where in Colorado are houses 200k? The only thing for that price in SW colorado is an 850 square foot moldy condo from the early 80s.
200K is the median price in Loveland.
Just look in Realtor.com. Use zip 80537. Plenty of very nice house in that price range. Many are over 2000 sq ft.
For the life of me I don’t know why the SW Colorado is so expensive. There are no jobs there.
I don’t understand it, either. We have a fair-bit of tourism, but that is it. I know plenty of college-educated folks making $9/hour.
FWIW, at lot of people commute from Loveland to jobs in Denver. Since the mass layoffs at HP and Agilent it has turned into an ex-urb, which is probably why the prices have been flat. Another fact that points to Loveland turning into an ex-urb is that most new residential construction during the bubble was on the east side of town, close to I-25 (for easier communting). The much nicer (IMHO) west side has been dead since 2001.
I also mentioned that someday SoCal would eventually become Aztlan, and then they would really regret not getting out when the getting was good.
Colorado is rapidly going Aztlan as well, with a huge influx of Hispanics flooding into places like Colorado Springs. I suspect that’s why a lot of Anglo Coloradans are fleeing north, to places like Omaha.
One more reason it’s bad policy to subsidize homeowners as much as our government does. Downturns become worse becasue the workforce is less mobile.
At Christmas in Michigan this year I saw a glimmer of hope. My cousin-in-law, an engineer at Ford, had opted for a buy-out package and has started his own company with a couple of other engineers. Thank the Lord. He said he was fed up with the constant prospect of lay-offs and the companies poor performance.
The auto industry has a lot of smart folks in the Detroit area. I hope we get a lot of these guys starting their own creative, smart ventures. U-S-A! U-S-A!…..
Asparagus, I have a lot of hope for Michigan. Some of the finest, smartest people I’ve met are Michiganders. If the US recovers, and I think it can, the recovery will begin with Michigan.
I agree, the midwest is full of hard-working, underemployed folks who’ve been shafted by the globalist’s agenda…and many are deeply patriotic and tend to believe the government’s hooey. As for moving, I think a lot of folks just don’t have a few grand to put gas in the car and pull up stakes right now.
And where should they go? Where is the hiring happening for somewhat educated, somewhat skilled folks? These are our countrymen after all…we depend on them for the armed services among other things. They’ve been priced out of a lot of jobs–meatpacking for instance, by illegals working for cheap wages.
Its actually amazing how many people are living like gypsies, going from town to town, searching for a “good job”.
My wife works at the local public library, and this churn is very eveident there. Lots of new people are constantly apllying for library cards (mostly its for using the computers to surf the web). After a few weeks these people vanish (the number of inactive library cards has been steadily growing), most likely after they realize that contrary to what money magazine says, the streets of Ft. Collins and Loveland are not paved with gold.
My mom is quite civic minded and volunteers at the library in her town, in so cal…
She tells me more and more ex-middle class homeless people are spending a lot of time hanging out.
If you think about it, where else would you go where people wouldn’t hassle you, for being there?
So far that hasn’t been a problem out here. I do recall that 15 years ago when we lived in Escondido, CA that the homeless did hang out the library.
I have yet to encounter any “middle class homeless.” The variety here in Colorado Springs are lowlifes, derelicts, and substance abusers. More solid people down on their luck can almost always count on family to shelter them and help get them back on their feet. Of course, with dysfunctional families - the kind that disporportionately create street people - that’s not the case.
Sammy:
It’s pretty freaky when you encounter your 1st ones…
Normal people don’t do homeless very well.
I have always said this to the naysayers that write off the US and say the next century belongs to China. Poppycock I say, the US has all of the educated, industrious people with a 200 + year of history of success through invention, capitalism and self directed citizens; backed by the constitution and supported by the US military. China will remain a poor back water for many many centuries to come.
China will remain a poor back water for many many centuries to come.
FWIW, people used to say the same of Japan, and later of S. Korea.
A friend of mine from South Korea goes back several times a year. He says they STILL live like they are poor, just not as poor as before. Well, to be honest, his relatives have lots of house gadgets like we do, but they live in tiny apartments cheek by jowl with everyone else, many don’t have cars (yet want them), and they work like dogs. That’s his view (I haven’t been there), and he says he is no way ever trading in his DC suburban life to go back.
That said, in my lifetime I can see China eventually attaining the same lifestyle level as Korea or Japan, assuming they play their cards right.
if you talk about history you should read up about Chinese history as well … China was a world empire for many ages. The last two centuries are the exception to the rule, don’t count on that exception to continue for long.
And as far as the US goes: they have some good points, but I think the US empire will be gone as soon as the money for the military runs out - that’s going to happen very soon. Without that military power the US will suddenly find itself in a far worse position - lacking many resources and getting the backlash from many years of trashing nearly all other peoples and nations in the world.
Ah, the European dream, the USA “empire” receding. Sorry I don’t think so. Trust me things were much worse during the 60’s and70’s and we came back just fine thank you. China has a lot of potential but many problems. The nice thing about freedom of the press is you all get to see us warts and all, try taking a camera crew to China and report on the corruption, pollution, class dispartity and see how far you get.
Trust me things were much worse during the 60’s and70’s
Quite the contrary, the US was in much better shape back then. It had a positive savings rate, and was still the industrial giant of the word.
The switch to a borrowing and de-industrializing nation came in the 1980’s. But it appeared that the US was getting stronger simply because it coincided with the inevitable collapse of the USSR. The absence of a superpower rival gave the illusion of US vitality, when in fact is was running on fumes.
This period of illusion is about to come to an end.
Poppycock I say, the US has all of the educated, industrious people with a 200 + year of history of success through invention, capitalism and self directed citizens…
I agree, with this caveat - that innovation isn’t smothered by patent and copyright abuse.
You beat me to it lavi d! I’m glad I’m not the only one who sees this as a major problem.
All that success through invention and innovation will not come until we reform patent and copyright law to be a LOT LESS drakonian than it is now.
I have a number of ideas I would love to try and bring to market, but I can’t afford a patent attorney to give me the green light.
Patents should be reserved for monumental new inventions like faster than light travel, or the incandescent light bulb.
Getting sued for patent infringement because your website lets people click on stuff with their mouse a certain way that someone else thinks they should be able to “own” is absurd.
Patents supposedly are there to encourage innovation but they are now having exactly the opposite effect since only very wealthy individuals and corporations can afford to cover themselves legally from the barrage of lawsuits that can now be brought over the tiniest changes in any technology. Even when they’re completely obvious.
Don’t believe me? Well take a look at this:
Patent No. 4022227 “Method of Concealing Partial Baldness”
http://www.patentlyo.com/patent/2004/10/the_combover.html
With the average patent fight ranging in the milllions of dollars, if a big company doesn’t like the competition from something you invented, all they have to do is patent something close and then claim part or all of your invention infringes on their patent.
If you don’t have millions of dollars to fight it, YOU LOSE. whether you are in the right or not doesn’t enter into it.
This is not the freely innovative America of yore. Things have changed for the would be innovator/inventor.
Put it another way: If the Wright brothers were doing their thing in today’s legal climate, they would be sued into oblivion by the bicycle parts company.
Edison would be sued by the thread manufacturer, etc. etc.
Unless we fix this, we will fall further and further behind.
RE: Patent Link…
(tears in my eyes) That pic of “The Donald” next to the dog as comb-over patent infringers is priceless.
The world (and things in it) gets smaller:
Adopted girl, 8, given up by Dutch diplomat in HK
“The diplomat gave no explanation for his decision except to say ‘the adoption had gone wrong’,” the paper reported.
http://www.reuters.com/article/worldNews/idUSHKG8962420071212
Oh….My….God…..
I don’t care if the kid is possessed by the freakin devil, you don’t return her like a old model tv that it doesn’t fit in with the decor!!!!
Read or see “The American Dream” by Edward Albee
You are right, Danni. You only do that with wives.
I could see wanting to do that but actually doing it . . . .that’s why I ain’t involved in that scene at all.
I want to return my old iPod Nano for a new one.
“that’s why I ain’t involved in that scene at all.” Wondering, what does that mean exactly?
No kids. No want no kids.
I think it means she doesn’t have any chilluns, that’s all.
Ok..
some days, I dusn’t wants any either.
sadly, there are quite some stories like that about Dutch adoption parents. A child is an entitlement here, just like every subprime J6P is entitled to their own a McMansion. If you can’t have children yourself (often parents that were too busy accumulating money before they thought of having children), a child is something you can simply buy and own, apparently
We have a bunch of trust-fund kids in my Town. One of them, in her 30s, adopted a child a couple years back. She left to go to one of her other homes for the Winter and begged a number of families in Town to take her child for the Winter.
I feel bad for the kid.
I wouldn’t be so quick to judge. Any time you’re adopting a child, you’re talking about someone else’s DNA. A lot of the young women who give their kids up for adoption are pretty unsavory - I mean, what kind of mother willingly gives up her own flesh & blood? - and the fathers are even worse. Friends of ours went through a horrific nightmare with the Russian child they adopted - the kid was just mentally deranged from infancy. it’s kind of like an organ transplant that rejects the body it was grafted into - at some point, I can understand why a couple would say, “Enough!”
This is incredibly offensive. We have the absolute most wonderful child from Russia. I hope you don’t have kids… you’d make a horrible role model.
What can happen with a 6 year backlog?…Got bird virus?
“The Airbus orders were valued at $157.1 billion at catalogue prices and brought the European company’s backlog to 3,421 planes or six years of production.”
http://www.reuters.com/article/marketsNews/idUSL165655120080116
The meaning of this isn’t at all clear to me. Your comment suggests that the “backlog” means an overhanging inventory. If I had read the article in a newspaper without seeing your comment, I’d have interpreted the “backlog” as a backlog of unfilled orders, i.e., unsatisfied demand. Or are you just saying that the backlog of unfilled orders could be killed off very quickly (by the economic equivalent of bird flu) ?
In the industries where items are made on-demand, backlog is the order book.
Both Boeing and Airbus have a record number of orders on the books, most of which have some form of deposit. However, as the industry is cyclical there is no guarantee that all of these orders will be fulfilled. Many will end up being canceled.
This order cycle is over. I think you can see that in the price of BA.
Many will end up being canceled, yes, but not as many as you might thing. Many airlines will move ahead because they have no choice. Higher fuel costs associated with older airplanes makes newer models very attractive, even for strapped airlines. And, many types of aircraft are in extreme demand. The 757 for example, which is no longer made, is extremely desirable as a used aircraft because it excels at long and “thin” routes. For example, flying transatlantic to second tier cities. Few airplanes can make this economical. The fact that these aircraft like the 757 cannot be found on the used market is driving a lot of 787 demand, and soon, Airbus A350 demand as well. Orders for larger aircraft like A340, A380 are likely to suffer, though, and thats an Airbus weakness. Boeing has bet a lot on a flexible, fuel efficient airplane (787) and will probably do ok.
Both A380 and 787 are very fuel efficient.
Aerospace orders are pretty much never canceled. Remember, most of multi-plane order are two tier. A company orders a plane and takes an option for delivery of 3 more. That places the company into a specific place in an order book. As long as
Aerospace orders are pretty much never canceled. Remember, most of multi-plane order are two tier. A company orders a plane and takes an option for delivery of 3 more. That places the company into a specific place in an order book. As long as someone needs a plane the “empty” solid will be resold.
the local wharf for luxury yachts (10 million+ price range) just reported that they are more than doubling their production capacity this year by building new production halls. Last month they had a real backlog until 2012. And you can’t just cancel the purchase of such a yacht, as far as I understand orders are paid in advance or buyers have to put up some collateral with the bank for the full price. Who says the economy is in trouble? ;-(
RE: Who says the economy is in trouble? ;-(
Simply a return to a time of feudal aristocracy.
Once the debt endentured serfs get worked up enough, the pitchforks aka guns and guillotines will come out again.
“Oceans of liquidity are disappearing, leaving small puddles…”
Shilling with some suggestions for riding out the storm, he expects to last until 2010 or longer….
http://www.marketwatch.com/news/story/14-winning-strategies-bear-market-recession/story.aspx?guid=%7BE54A9E3B%2DE4E6%2D4B2F%2D91A2%2DC82DA7057AE2%7D
I’m confused about selling the consumer discretionary spending companies. The one stock I own that I’m really unsure of is Disney. I’ve been in their DRIP program for years which means I earn more shares when the price drops. The dividend isn’t that great but it’s multinational and I was under the impression that entertainment companies do well in depressions.
If the products they make are really entertaining, yes.
Yeah, like American Idol, which had its season premiere last night. I must admit I took a bit of a peek, because the tryouts are the best part, forget the competition itself. There’s some weird, really weird folks out there.
Disney’s core money maker now is the networks. Spring season just got cancelled due to writers strike. Reruns and reality shows through at least Fall. Ouch.
Disney’s backup is studios. They’ve had some decent movies and DVD revenues. Problem is that they are out of classics to bring out to DVD for the first time. They made serious bank on VHS back in the 80s when all their classics came to video for the first time (good thing since everything esle was sucking). They then rolled that cha-ching in again in the late-90s, early 00’s as the classics rolled to DVD for the first time.
So, studios is HEAVILY dependant on the new movie stream. A few bad movies in a row and revenue could take a big hit.
Next up is the parks. I LOVE Disneyland and have had an AP for the last 4 years. I’ve made 6-9 trips a year out to CA to visit Disneyland. BUT… this year I let my AP lapse. Gas is too expensive, food is too expensive, hotels are too expensive, and it was the easiest thing to slice from my budget. They have increased the price of the AP by close to 100% in those 5 years I had an AP. It started at $200 for an unlimited AP. It is now something above $380. I stopped getting the unlimited and went with the one that has 30 block-out days and doesn’t have free parking or shopping discounts. That is like $260 now.
But, honestly the AP price was one of the cheapest parts of the 6-9 trips a year. It went from $800 for 4 for top pass, to $1000 for 4 with blockout. Gas went from $60 a round trip to $120. ($600-900 for the year.) Hotels went from $70 a night to $100 (for cheap hotel across Harbor) a night (meaning a good $1500-2000 a year). And food was costing well above $100 a day for 4 people ($2K a year).
Yeah, $5K a year for 6-9 trips to Disneyland (each trip being 2-3 days in the parks) is a pretty good deal, but it is also one of the easiest expenses to slice from my budget.
Darrell,
I think you’re right, a lot of Zonies aren’t going to be going over to So Cal this summer. We’re currently in negotiations on where, maybe instead camping in mountains of AZ.
That would be OK with. We are thinking of a road trip to SoCal this June before our APs expire. I wouldn’t mind getting a nice deal on the hotel.
OT, but related to your post:
We went to Disneyland for four days in December and stayed at the Anaheim Sheraton (the old school, two/three-story Sheraton, not the high-rise).
Probably the best hotel experience I’ve ever had for the money (and we’ve stayed at some pretty expensive hotels). Not Motel 6 cheap, but reasonable, VERY large rooms, decent food, free shuttle to Disneyland and excellent service.
Just thought I’d pass that on…
Is that the one on Ball Rd.?
Disneyland Drive (but they’ve re-named all the streets around Disneyland over the years).
Here’s the link:
http://www.starwoodhotels.com/sheraton/property/overview/index.html?propertyID=995
But, honestly the AP price was one of the cheapest parts of the 6-9 trips a year. It went from $800 for 4 for top pass, to $1000 for 4 with blockout. Gas went from $60 a round trip to $120. ($600-900 for the year.) Hotels went from $70 a night to $100 (for cheap hotel across Harbor) a night (meaning a good $1500-2000 a year). And food was costing well above $100 a day for 4 people ($2K a year).
I agree with you. It wasn’t so long ago that you could get a room at the Howard Johnsons on Harbor for $50 a night. Now its $100 and up. We have stayed with the Deluxe AP’s and just avoid the 30 block out days (mostly Saturdays, which are best avoided anyway. But you are right, the increases just keep adding up. We too won’t be renewing our APs later this year.
It is said that there are 600,000 Disneyland APs. I wonder if that number will drop significantly this recession?
But, honestly the AP price was one of the cheapest parts…
Can’t stand it - what’s an AP? Access Pass?
Annual pass.
And, get ready for this, there is more than one kind of AP:
Premium: Go any time you want, 365 days a year. Plus you get discounts on meals and Disney hotel rooms. Includes free parking. $379
Deluxe: 50 blocked days. $259
So Cal AP: 150 blocked days. Only for So Cal residents. $169
So Cal Select: 195 blocked days. Only for So Cal residents. $129
It is said that on a typical day half the guests at Disneyland are AP holders.
195 Blocked days!? You get a season pass for less than half the year?
They can re-release all the classics on Blue-Ray and HDDVD, perhaps the normal edition followed by the special edition. Then maybe the gold box edition with louder audio or something. Milk it like the man George Lucas.
Plus, every 10 years or so there is a new generation of kids, whose parents will certainly buy Winniethe Pooh and other Disney classics for them on whatever the format du jour is.
My kids loved “Song of the South” (the old, politically-incorrect version with the Tar Baby and other “offensive” story parts), remastered on DVD.
Disney’s biggest money maker is ESPN, until people cancel their cable this will continue to drive a core of earnings (studio and park revenue are likely to take a hit).
Mr. Hoz,
Is this number related to the Tao?…I mean the Dow?
“The new sunspot, identified as #10,981, is the latest visible spot to appear since NOAA began numbering them on January 5, 1972. Its high-latitude location at 27 degrees North, and its negative polarity leading to the right in the Northern Hemisphere are clear-cut signs of a new solar cycle, according to NOAA experts”
http://www.noaanews.noaa.gov/stories2008/20080104_sunspot.html
I am the benefactor of cosmic dust..I can just feel it in my bones.
hwy50: Hillary said she doesn’t support more sunspot activity.
And the Republican frontrunner at the moment said he doesn’t believe in sunspot activity, they are not in the Bible. On the other hand, maybe those spots are actually patches of crude oil…
Yes that is where the Dow will be in 2 months as it goes to 8,500. lol
There is a study that was done a number of years ago on sunpot activity vs stock markets. I do not know if it is on the internet, I remember reading it in the ’80s. It is probably in a box in the barn.
If we get a sun flair similar to the one that hit in the 1840s (prior to large electrical systems), the world will go dark. Fact not fiction.
History of Stock Market Astrology
by Bill Meridian
http://tinyurl.com/27ylc8
Just goes to show that it is still out there.
Trying to get our arms around it…
http://www.bloomberg.com/apps/news?pid=20601103&sid=agVxAwmAlygY&refer=us
Isn’t it funny that banks are “surprised” to find commercial lending also faltering — as though loans to builders and developers have nothing to do with Real Estate?
Now this is getting very interesting……..carry anyone?
http://quotes.ino.com/chart/?s=FOREX_USDJPY&v=i
Russ Winters’ post this morning has some food for thought:
“Despite all the pain now caused by failing to circumvent the creation of old Bubbles in housing, and financial assets, the US central bank, the Fed, still hasn’t figured out that Bubble containment should be an important part of their mandate. That is especially the case when the Bubbles are in essentials like food and energy that impacts every person on the planet. ..”
Peoria Journal-Star: Commodity prices in ‘Star Trek’ land quotes Rich Sauder, manager of the Tremont Cooperative Grain Co: “Foreign countries are buying U.S. grain with purchases boosted by a weak U.S. dollar.” He said continued speculation and skyrocketing commodity prices also threaten the business of agriculture. “We’ve got all the makings for the destruction of the marketplace here,” he said.
“Normal market channels can’t handle what’s trying to happen. Those of us who use the Chicago Board of Trade for risk management could find that it just doesn’t work anymore, but I don’t think that will happen”
“We’ve got all the makings for the destruction of the marketplace here,” he said.”
That’s the idea, IMHO. The Fed knows exactly what it is doing. But nobody really wants to acknowledge that, because it would bring us to the stark, staring realization that the destruction of the US economically is deliberate.
Bingo!
Immpossible Bernake said the lower dollar does not affect US consumers because they buy and sell in dollars. There just Lying left and right aren’t they .
Who “enforces” FED mandates? Oh yeah, the FED. Who sets FED mandates? Yep.. the FED. Why everyone thinks that government oaths, unenforceable mandates, and “equal time rules” for the media can make these organizations act on anything other than their own self interest is beyond me.
Next up…JPMORGAN…..swing and a miss!
NAR’s new campaign-
Heres the centerpiece of their latest propaganda campaign—-> http://www.housingmarketfacts.com
Since yesterday morning, I’ve heard their latest propaganda on 7 different radio stations, even Bloomberg Radio. They’re definitely putting strong effort into this one. I’m sure they’ll find more victims but I seriously doubt this campaign is going to reverse any trends. These NAR asshats are no doubt desperate.
“At an annual appreciation rate of 5%, a 10% down payment will return 94% in three years.”
(1) Wonder where they get 94%. Are they actually accounting for their own 6% commission?
(2) Need I say it: at an annual depreciation rate of 5%, a 10% payment will be wiped out in 2 years, AND you’ll have to pay any sales commission out of your own pocket.
typo: “10% payment” meant “10% down payment”
Lets assume a loss to inflation at 3% and a 5% nominal price decline and you lost your 20% down in less than 2.5 years.
Nice “investment” huh? But thats exactly what they’re pointing to. They’re implicitly giving investment advice.
Nice. Carrying costs, taxes, interest are nil, eh?
I can put the down payment in a 5% CD and guarantee that return. Will NAR put its guarantee in writing, and back it by the FDIC?
I can? I DID do exactly that 3 years ago and I’ve been collecting $1000/month interest ever since. Now had I believe the NAR Liars and bought because it’s such a great investment, most of that cash would have evaporated.
This morning I heard one of their commercials on Sirius. It’s pretty funny because at the end of the commercial they read off a long fast disclaimer. Something about how all markets are local and no investment is guaranteed. What a bunch of morons.
I saw the commercial on TV yesterday morning.
They were driving the point home that 60% of the average homeowner’s WEALTH is in home equity. (allcaps theirs)
I wondered how this ad would play given the RE meltdown happening all around us. Then I remembered that most of the folks I know will be receptive to that siren call. People around here still desperately want to believe they can get rich by just buying a house.
“They were driving the point home that 60% of the average homeowner’s WEALTH is in home equity. (allcaps theirs)”
Ugh, your primary residence is a liability. When will they learn? Given what we’re learning about this global economy - the only housing strategy that really pays off is the one that uses the smallest percentage of your cash flow possible - whether or not that means renting, or buying something really cheap - depends on individual circumstances.
I think technically your primary residence would be called a “depreciating asset”.
People around here still desperately want to believe they can get rich by just buying a house.
Not surprising, given that they don’t have any savings, any pensions waiting for them and are probably stuck in a dead end jobs with stagnant wages. That’s the source of the desperation. They don’t have 10K to salt away year after year.
Here’s my reply to this from yesterday, illustrating that their ‘facts’ are wrong:
Saw this last night when watching the TV. Made me screem “BS!” when I saw it:
The commerical said “On average, the value of a home doubles every 10 years”
My first thought was “yeah, if you include the last 5 anomalous years”. But, rather than relying on a gut feeling, I decided to do a little fact checking.
So, I grabbed OFHEO data for two cities,(my data goes through Q2, 2007 — I don’t know if they’ve updated it) one bubblicious (DC), and one less so (Knoxville, TN). Then, I went back through all of the data (31 years for DC, and 21 years for Knoxville), and calculated the average 10 year gain. Then, for fun, I calculated the average yearly returns. Keep in mind that this data contains the bubble years:
DC 166%, or 5.2% a year, or 15 years to double
Kn 147%, or 3.9 % a year, or 20 years to double
Keep in mind, that the average for the US is going to be less than that of DC and closer to Knoxville.
And for fun, let’s exclude the last 5 years.
DC 143%, or 3.7% a year, or 22 years to double
Kn 143%, or 3.7 % a year, or 22 years to double
Yes, if you ignore the last 5 years, DC appreciation is nearly identical to Knoxville’s.
http://www.realtor.org/press_room/news_releases/2008/nar_campaign_relates_real_facts.html
“Over the past 30 years, the median price of existing homes has increased an average of more than 6 percent every year, and home values nearly double every 10 years, according to historical data from NAR’s existing-home sales series.“
If you are going to keep making posts like this, you might want to hire a body guard;-)
Just a thought.
Velo
That’s why we post anonymously — so the realestate mafia can’t get us!
research from Shiller etc. clearly shows that over long periods of time, home prices rise at just a little more than inflation (about 0.5-1% yoy); certainly not enough to cover the extra costs like taxes, upkeep etc.
the trouble with homeprices from the last twenty years or so is partly that inflation numbers are extremely understated, so it appears homes are doing extremely well. But in the long run that is not really important, because the real economy will finally catch up with the real inflation
If real estate rises more than the rate of inflation, people can’t afford to buy homes. It’s that simple.
Unless, of course, you offer them ARMs with teaser rates so it appears that they can afford them until the ARM resets. Herein lies the problem
can’t afford to buy: yes, but that’s very longterm. RE can rise or decline for one generation or longer - thats another problem.
Over a shorter timespan (like 5-10 years) anything can happen; crazy lending and low rates are just one of the factors that influence this.
Cynicalgirl, not quite..
if RE goes up higher than GDP then people can’t buy. In inflation adjusted terms people’s income generally goes up over time. (last few years were an exception). E.g two car families were not common in the 50s, they are now. Number of tvs/computers/gadgets per home has gone up. How many people took trips to europe or asia in the 50s compared to now?
So, if the %age of income spent on RE is constant over time, the $s would go up faster than inflation.
And it could even go up more - as people have more money over and above subsistence level they could choose to spend more on a home. For example I make about 2x what I did 10 years ago. But I don’t have a car that cost 2x as much, nor do I spend 2x as much on food. I could therefore spend more than 2x on housing if I chose to. In fact I do, since 10 years ago I rented a room and now I own a house.
it is true that in the last 5 or so years prices got out of whack, but to say that prices must exactly track inflation is an understatement.
I agree, over the long term if overall real estate appreciated 1% over inflation, in 70 years home prices would be double (inflation adjusted) what they are today. Even that is not sustainable as they would not be affordable.
But, as I said below, same home prices may increase a percent or two above inflation. Simply put, the average/median should not change but as the population increases the closer in houses will become relatively more and more expensive and people will live farther and farther out.
I think when Shiller said .5%-1% he may have already been looking at same house prices. I know his indexes do.
If real estate rises more than the rate of inflation, people can’t afford to buy homes.
Yes they can, if wages rise faster than inflation. Or in other words, if real wages rise. And that’s the way it used to be in the US, which is the reason why each generation was better off than the one before.
But that stopped a generation ago, which means the 1% historical real appreciation of housing must end too.
How much of that historical “it’s always been that way” relationship (ignoring the bubble) is due to the pressures of increasing population? What happens if the sign changes on that input?
I don’t believe that house (not home) prices can appreciate at faster than the rate of inflation. That’s because any change in the price of houses is part of the rate of inflation. It’s not like the two exist independently of each other.
By definition, then, any increase in the price of houses will be exactly the same as the increase in the price of houses. This defines the inflation rate for houses.
I believe any such studies are therefore faulty, and perhaps do not include maintenance and tax costs, expenses incurred even if there is no mortgage.
Also, keep in mind that those are not gains I posted, but the average price of a house relative to the price 10 years prior. So, 166% = 66 % gain (e.g. 100k house is worth 166k 10 years later, or 166% x 100k = 166k).
Good analysis. However, to play devil’s advocate, it’s only fair to do some type of same house analysis similar to what Shiller’s index does.
Example from DC. If I’m looking at median house prices in the DC metro area now vs 30 years ago, the appreciation numbers would be a little lower than most people would experience. That’s because 30 years ago Fairfax was a far out suburb. Now it’s Leesburg. It wouldn’t be fair to compare the Fairfax house to the Leesburg house. The Fairfax house (because the location is now relatively more desirable and close in) probably gained some based on location whereas that was a negative 30 years ago.
If by “DC” that is only within the city itself, then I think that would be totally valid. Either way, you still have a great point.
From accross the pond……….
Confidence in housing market plummets
http://www.ft.com/cms/s/0/a8287980-c3a7-11dc-b083-0000779fd2ac.html?nclick_check=1
Nikkie 225 dropped 468 points last night. That is 3.35%. That puts them at 13,504. That means they have dropped over 26%. The DOW is at 12,501. The high was 14,280. That means the drop is 12.4%. Hardly as bad as Japan.
So my question is, when will the Chinese bubble burst? When will the commodity bubble burst?
Mr. Smuck…
http://www.nytimes.com/2008/01/16/realestate/16texas.html?_r=1&ref=business&oref=slogin
“For people who remember the Equity Group, Mr. Smuck’s failed real-estate syndication business, MBS’s woes have a familiar ring. A lawyer who represented investors in an apartment complex in Baton Rouge, La., remembers a swimming pool there that was so clogged with debris that the shopping carts at the bottom were not visible.”
Quite the innovator in creating the Katrina experience before there was a Katrina.
In Northern Virginia,
The price of buying a home:
$500,000
The price of renting something similar:
$2,000/mo
The sense of safety felt knowing one can give 60 days notice and move in with Dad if job is lost:
Priceless
here in Bethesda, MD. you can rent a million dollar home for about 3k - a much better deal then buying!
lol, especially after one son and DIL sold in NJ, moved to NOVA for their jobs, and rented - all in the last two months.
Those numbers are right on the money as far as the ratio of rents to price.
in 22151 rent was 1700 in 1991 when I bought now 2000
express bus service to the pentagon
In 1998 ~1300 sq ft condos in the Kingstown area (22310/22315) rented for about 1200-1300 USD/month. They sold for the 100k range and w/ interest rates of ~7% and condo fees in the 100-200 USD range, you could own one for about 1k/month. Thus purchase was favored.
Fast forward to 2007 and the same condos rent for ~1500 USD per month but are offered for sale (and use to sell but now do not) for ~300-350k and have condo fees of ~300 USD/month resulting in a monthly payment of almost 3k USD/month, thus renting them is favored.
Joe:
That type of logic is wayyyy over the heads of most Americans today.
My rent just increased to $1350 a month after being at $1300 for the last 3 years. The townhouse next door is for sale at the bargain price of $439K. Decisions, decisions.
From the Orlando Sentinel:
http://tinyurl.com/2rnt7b
“55 West on the Esplanade, the troubled condominium high-rise in downtown Orlando, has been foreclosed on by the lender and is now being developed by a South Florida-based company that vows to finish the project by the end of the year.
Of the original 405 condo units planned, about 75 percent of the space was sold, but about half of the sales were to speculators who rescinded their purchase contracts or are in the process of doing so, said Bob Hensley, CEO of Grosse Pointe Development Co.
“It’s a friendly foreclosure. We’re trying to make the best of the situation,” Hensley said. “This means that it will get built on time and everyone will get paid.”"
This is really not surprising, but to give you a bit of background, 55 West and The Vue at Lake Eola were supposed to be the crown jewels of downtown Orlando condos. And if I recall correctly, 55 West started pre-selling in late-2003/early-2004. So they’ve had problems for quite a while. As a side note, “friendly foreclosure?” I think that’s my favorite new term.
It is an uncontested foreclosure. Fee holder and creditor go through the motions and wipe out a lot of subordinated creditors, former fee holder eventually gets a small cut of the action.
I have done this before — boy did my client get some interesting lawsuits out of that manuever!
Mr. Watcher: now there’s a techincal setup to short gold. At least in the short term.
Thanks. Got my eye on it. I could short GLD to hedge my physical…we will see.
How do you trade gold like this? In the normal market, the average person can’t buy or sell gold anywhere near spot. Perhaps you two aren’t normal, but are you able to trade gold near spot and if so how?
When I say “normal market” I mean out on the street, buying/selling physical gold.
We are talking about the gold ETF, symbol GLD.
Oanda FXTrade allows you to buy gold and silver on margin, 50:1 leverage. you can buy/sell in 1 ounce units. The spread (buy and then sell at same price, broker fee) is $0.45
now they DO charge you daily interest fees on holding it
Pretty high.
Zillow shenanigans?
I’ve been looking at zillow.com for about a year, not because I want or need to buy or sell, but because I found it interesting.
Over the last 8 months my own 4/3 on half acre here in Mesa, built in 2000, 3000 SF showed a fairly steady decline from about $570K to 490K.
All the houses in the neighborhood showed a similar chart. This morning, it shows my place at $575K, and all the houses in the neighborhood are zillow estimated ABOVE where they were 6 months ago. I think the REALITY is, they would sell LOWER than the lows they showed a month ago. So what’s up with zillow all of a sudden? Are they part of a new, make the public feel more CONfident scheme? Or has some local realtwhore somehow gone in and tweaked everybody’s numbers? Anyone else notice anything strange with zillow spiking values recently?
Call me a loon but with “spring selling season” just weeks away, NAR’s massive campaign, Century21’s new TV commercials in conjunction with a supposed rate cut, the entire thing seems a bit more than coincidence.
I’m seeing similar with trulia numbers locally. All of a sudden their median sales and price numbers were changed for Sept -November and they were moves up. Either their previous numbers were based on incomplete data or something is wrong with the current numbers.
Maybe the comps in your area got skewed by a few large home sales. My Zillow address is pretty close, maybe 5-10% high, but much closer than it was months ago.
In my area, Anthem 85086, the country club homes over $1,000,000 have been selling moderately well, but a local publication just came out and said that there were 90 homes in foreclosure just in the CC. Note, I do not live in the CC, but have friends that do.
I heard somewhere that they changed their methodology. My house just went from $323k to $369k.
My idea of fun is checking the foreclosures in the paper and then looking up the property tax record to see how much they paid for it. Now *that’s* interesting.
Changing methodology translates into: “housing only goes up!”
On Zillow, the house we rented - San Diego 2/1 - until July last year was 383K showing a 6% decline YOY until last week when it went to 507K overnight. Wow.
Yeah, I’ve noticed the same thing. Zillow is up to no good. No doubt about it. They weren’t liking the way the charts looked, so they tweaked the data.
I’ve been watching three properties: Tucson, AZ; McLean, VA; and Phoenix, AZ. All show negligible price changes last 30 days.
If Zillow is up to something hinkey it hasn’t caught up with these three areas–at least these specific properties. However, I would not be surprised if Zillow et al were trying to game the system.
Are you looking at Zillow’s 30 day price change, or are you tracking it yourself? If they revised historical prices in addition to current prices, you wouldn’t necessarily see any 30 day prices swings (using their number).
I just noticed this as well. A house I’ve been tracking (an FB) has moved from about $880K to over 1.2K. The house is in westwood and it’s comps are in beverly hills! Also, a house I track in Sherman Oaks moved from just below 1mil to over 1.2 mil. It’s comps are in westwood. Total scam.
Same thing going on in Santa Monica - Zillow is giving comps from outside the area, ZEstimates are way over actual sales locally, dates are no longer available on “recent” sales, Zillow now totally unreliable, where they were just mostly unreliable before.
I was amused to see that a condo was listed as a “recent” sale when the sign went down six months ago. Some FB allegedly “recently” paid over $1 million for a 2/2 condo (not even a townhouse) south of Montana. I seriously doubt it.
Zubmitted for your approval…
You are about to enter another dimension, a dimension not only of comps and sales but of mind. A journey into a wondrous land of imagination. Next stop, the Zillow Zone!
“Also, a house I track in Sherman Oaks moved from just below 1mil to over 1.2 mil. It’s comps are in westwood.”
Yeah, but Sherman Oaks is the Westwood of the SF Valley.
Yup. My brother’s Tucson house went from $750K to $850K this past month
re agent -to mtg broker-
if it wasn’t for those meddling renters we might have gotten away with it!
it is officlal renting is the new black!!
Perhaps it isn’t different here:
http://www.nytimes.com/2008/01/16/nyregion/16taxes.html?ref=nyregion
“The robust growth in real estate values in New York, a trend that helped fuel years of record budget surpluses and city spending, has nearly skidded to a halt, city officials said Tuesday, and that shift could bring new pressure on Mayor Michael R. Bloomberg to raise taxes.”
Actually, property values are not the problem here. One- to four-family homes have an assessment increase cap per year, so will be under-asssessed — and rising each year at the cap rate — even if values drop 40%. And commerical property assessments are based on fundamentals — rent, vacancy, costs — not what some REIT is willing to pay. The fundamentals should hold up fairly well in NYC, since they didn’t get as out of line as prices.
What will really kill us is:
1. Real estate transfer revenues. As sales dry up, these disappear. The future of the region’s MTA may hinge on this question — are real estate transfer taxes collected on foreclosure sales?
2. State and local corporate income taxes. Our financial companies will be writing these losses against future income for tax purposes for years.
3. Personal income taxes. I don’t expect mass unemployment, because labor force growth isn’t what it was when the baby boomers were flooding in. But (gasp) perhaps Wall Street bonuses will fall! And lots of people who were making big bucks will have to settle for much less for a while.
“3. Personal income taxes. I don’t expect mass unemployment, because labor force growth isn’t what it was when the baby boomers were flooding in. But (gasp) perhaps Wall Street bonuses will fall! And lots of people who were making big bucks will have to settle for much less for a while. ”
maybe these high flying i-bankers will see how the other half lives.
time to short the escort services and gentleman clubs
We have presidential candidates running on platforms of low taxes and low interest rates. I could understand the low taxes if they actually would cut back on spending, but they don’t. Something doesn’t make sense but I guess your American idol crowd goes for it because hey, they get to watch American idol and that’s all that should matter, right?
National map of foreclosure rates by county for January through September 2007. It’s not just the coasts.
http://tinyurl.com/29wgg8
Damn! Doesn’t look like Summit and Eagle counties in Colorado are lighting up yet!! My county in Iowa is, though (Pottawattamie).
I don’t think that the rich worry about mortgages. What I found interesting was that the highest rate of forclosures in Colorado are in the mostly rural eastern counties.
Oh, come on, I’ve lived in Summit County twice. There are MANY properties that have been bought by locals that actually have to work for a living. Most barely make enough to live in Summit Cove, or even Dillon Valley. Not EVERYONE that lives there is rich. Been looking at Craigslist often, and there are several properties in Tiger Run that have been on the market for months, with prices finally coming down.
Here’s a snap of Silverthorne
Estimated median household income in 2005: $58,900 (it was $58,839 in 2000)
Silverthorne $58,900
Colorado: $50,652
Estimated median house/condo value in 2005: $308,400 (it was $264,300 in 2000)
Silverthorne $308,400
Colorado: $223,300
No income increase, while prices moving up. I’m sure none of Silverthorne’s 3,733 residents bought homes (at 6x their income).
Source:
http://www.city-data.com/city/Silverthorne-Colorado.html
Here’s a better one:
Breckenridge
Estimated median household income in 2005: $44,000 (it was $43,937 in 2000)
Breckenridge $44,000
Colorado: $50,652
Estimated median house/condo value in 2005: $677,000 (it was $580,100 in 2000)
Breckenridge $677,000
Colorado: $223,300
Only 15x income!
Source:
http://www.city-data.com/city/Breckenridge-Colorado.html
If you take a look at Fairplay, you will see median home price estimate in 2005 @ $171,900. I DARE you to find something in Fairplay for that price.
Not EVERYONE that lives there is rich.
True. But how many of the non-rich actually own a place? I keep reading stories in the Denver Post about how working class folk commute from far away to their resort town jobs.
For $9 an hour?????? I worked for Vail Resorts (in Keystone) and for Vail Valley Surgery Center. Nobody commuted from any farther than Leadville or Fairplay. And even the surgeons griped about high housing costs. Several I knew had ARM’s. More locals own (rent from the bank) than you think.
Then all I can conclude is, that unlike people in Greeley, that they can actually afford their homes.
Is there any article to go along with that? What’s the source? Thanks.
Uncle Buck down and out:
TOKYO (AP) — The dollar sank to a 2 1/2- year low against the yen Wednesday in Asia as investors sold the greenback due to concerns over the U.S. economy and financial system.
The dollar was trading at ¥105.98 at midafternoon Wednesday, down from ¥107.07 late Tuesday in New York and hitting the lowest levels since May 2005. The euro rose to $1.4842 from $1.4833.
http://tinyurl.com/yrcalc
The dollar dropped to a record low against the Swiss franc and its weakest level in two and a half years against the yen on Wednesday as tumbling stock markets drove investors to the safety of low-yielding currencies.
http://biz.yahoo.com/ft/080116/fto011620080602320378.html?.v=1
If you think cash is king, better think again.
the uptrend of the euro against the yen was also terminated this week (probably predicting more easing from ECB). Maybe the yen and swiss franc carry trades are endangered again?
Michael B. Smuck was one of the leading real estate syndicators in New Orleans in the 1980s until his limited partnerships began unraveling, causing large losses and unleashing years of legal battles with unhappy investors.
But now, Mr. Smuck’s real estate empire is coming apart for the second time. Most of his $900 million in loans are delinquent, some are in foreclosure, and his management company filed for bankruptcy protection on Nov. 5.
http://www.nytimes.com/2008/01/16/realestate/16texas.html?ref=business
I think his name is Mr. Schmuck.
drowning in dollars:
Rumours of an emergency rate cut over coming days by the US Federal Reserve have swept the global markets, setting off a fresh plunge in the dollar.
Gold surged to an all-time high of $914 an ounce in New York on bets that the authorities will flood the global system with further liquidity to stave off a mounting debt crisis.
http://tinyurl.com/yujcar
But it’s getting hammered today. Even gold bugs like me know there needs to be a correction occassionally.
It appears to be quite malleable today.
The Recession Election
“Democrats were obsessed with Fallujah and Baghdad and were appalled at Bush deficits. Now they want big stimulus packages to keep the economy from tanking”
“The collapse of Citigroup stock, the continuing write downs on Wall Street, the looming credit card crisis–you don’t have to be a Perennial Bear (another name for Prof Bear?) to be worried.”
“But the enduring issue is the economy and the candidate who has a compelling economic message like Reagan in ‘80 or Clinton in ‘92 will be sworn in on January 20, 2009.”
http://www.portfolio.com/views/blogs/capital/2008/01/15/the-recession-election
The only one I know who has any sort of a compelling economic message is Ron Paul, perhaps Kucinich as well. McCain looks like a doddering corpse, and I think he gets a real bang out of telling the American people they’re screwed, get over it.
Ron Paul got my vote yesterday, though it didn’t do any good. Was glad to see McCain get beat. Watch him turn into the crybaby he really is if he keeps losing.
McCain is nuts–do we really need a war with Iran to compound our troubles? Also, is that the same wife he had last time he ran for prez, or is she a new model? She looks half his age.
It’s the same woman and she had some health issues after the last election to boot. I’m glad to see her looking so well. (Take a closer look at Mrs. McCain…the-make up isn’t exactly the sheer variety but she’s lucky to be like Candace Bergen with a bone structure that will allow her to look good till she’s 70.)
She’s several decades younger. Dunno about McCain age x .50, however.
Way to go Blano! Though, it would not surprise me AT ALL to see the MSM ignore Ron Paul some more, while yakking on and on about Fred and Rudy, though they were both beat by Ron. Same thing happened after Iowa, and Ron was left out of the NH debate by Fox. In the vein of John Lovitz: when he was interviewed on a nightly talk show for his then-new cartoon where he was the voice over: “Fox, they should spell it with a “U”".
like a rock:
Jan. 16 (Bloomberg) — Northern Rock Plc fell to an all-time low in London trading after Prime Minister Gordon Brown made his clearest indication yet that the bank may be nationalized.
http://tinyurl.com/224wwb
British taxpayers are going to be very happy about this for sure
even more fat fees for the incompetent fat cats at the Rock management team !!
Rock is dead they say…
Dang aladin - you come up with some good ones!
Pet Rock?
Sinks like a stone.
Neil:
All I’m saying is, just be cautious……
http://www.guardian.co.uk/usa/story/0,,2241624,00.html
The Hang Seng down 5.37%. It’s all contained to the galaxy.
I’ve already had some good flips in the S&P futures this a.m. You can make money long if your time frame is 5-10 minutes
HOW LONG ARE YOUR SHORT TRADES?
Traveling Wilburys:
“She wrote a long letter…on a short piece of paper”
Latest news: Inflation for 2007…..4.1 percent. Big jump over 2006.
Good thing the Fed is myopically focused on economic weakness, or else they might not be able to reduce interest rates by the predicted 1/2 point move at their next meeting…
“Inflation Rate is worst in 17 years”
http://biz.yahoo.com/ap/080116/economy.html
“Higher costs for energy and food last year pushed inflation up by the largest amount in 17 years, even though prices generally remained tame outside of those two areas.”
hmm…Food and Gas…Is that what we consume the most?
everyone’s seems to have forgotten about inflation. any additional money in the system will be eaten up by rising food and energy prices…in essence it doesnt matter what the Fed doesn..its game over for everything except commodities, oil and precious metals.
No, you don’t understand. According to the media, rising gas, food, college, and medical expenses are what is CAUSING the Fed to lower rates, increase ‘liquidity,’ and so on. I guess increasing inflation will have the consequence, per the media, of decreasing inflation.
and the media is always right :>
Futures looking like they are going to be overbought by the time the market opens if this move up continues. Maybe even green. Rate cut imminent or a good time to put a short on at the opening if this continues?
Looks like a Bear market to me. day to day trading I don’t know? but the next 6 months - 1 year out looks ugly. I have been selling.
Are you suggesting it is time to buy the dip now? Or wait until January 27th?
haha I’m suggesting we are in a recession and most stocks will continue down through mid-year.
And of course home prices will fall but I don’t even talk about that anymore its “baked in the cake” as they say.
I’ve made my daily take already. I love days like this.
Banks are cutting back on HELOCs and in some cases not pursuing those who are delinquent in their payments.
http://online.wsj.com/article/SB120044716100193017.html?mod=todays_us_nonsub_pj
Looks like a 100% loss 100% of the time.
Would this be a great time to be running a collection agency?
No, can’t get blood out of a turnip. Unless you are a secured creditor, you can’t garnish wages. Repo agent would be better.
Back to the future: Are you enjoying the stock market’s return to the Roaring ’20s?
But no worries, the cavalry, er, I mean, Fed, is riding to the rescue. Besides that, it’s different this time.
Citigroup woes fuel fears for economy
$9.83 billion loss forces bank to seek investors
By Jenny Anderson and Eric Dash
NEW YORK TIMES NEWS SERVICE
January 16, 2008
Citigroup, the nation’s largest bank, reported a staggering fourth-quarter loss of $9.83 billion yesterday and issued a sobering forecast that the housing market and the broader economy still had not bottomed out.
…
Growing pessimism led to a sharp sell-off in stocks, which fell about 2 percent for the day and are down about 6 percent since the beginning of 2008, the third-worst start for a year since 1926.
More bad news is coming, with Merrill Lynch expected to report sizable losses this week and major financial institutions like Bank of America retreating from their investment banking business. These moves add to concerns that financial institutions will be forced to pull back on lending at a time the economy most needs access to credit to help cushion against a downturn.
“It looks like the financial sector as a whole will see a big decline in profits, and the only time this happened in the last 100 years – financial firms’ going from making good profits to negative profits – was the Depression in the 1930s,” said Richard Sylla, a professor of financial history at New York University. “I don’t think it will be as bad this time; the Federal Reserve is fighting the problem as hard as it can.”
http://www.signonsandiego.com/uniontrib/20080116/news_1b16citi.html
We are looking to buy a Bellanca Super Viking, in the next year or 2…
It’s amazing how many used planes are coming on the market and prices are dropping steadily.
$5 a gallon av gas is definitely a factor…
Hi Aladin- did finance a few SV’s in my time- All I can say is Prebuy, Prebuy, Prebuy. Just a suggestion- find a someone with SV knowledge (he’ll be in his late 70’s or 80’s) and pay for a FULL annual as the prebuy. You pay for labor, the seller covers the squawks. $3,000 now or $18,000 later.
How about a TB-20 instead?
IFR…
Thanks for the advice~
Hey Colorado, “I don’t the the rich worry about mortgages”. Is it because they get rid of their planes? Oh, Lamborghini, Maserati, and Ferrari listings are going way up on eBay too.
Its only the wannabees that are having to sell the toys.
LOL, ok, I see your point.
The good thing about weak openings is that you just know a market bottom cannot be far off from this point…
http://www.marketwatch.com/
Be cynical if you want. I got 10 points off those sps I got in the aftermarket yesterday. Sometimes the obvious is just too obvious.
Just kidding around — you know the refrain in the housing market: If prices fell in the latest data (again!), it suggests there will be a bottom within a year…
Ive thrown that 1375 number out there about 50 times lately. What is the low today? 1375. They were selling at 1368 in the aftermarket yesterday. This is a giant support area. It’s gonna break eventually and when that happens, watch out. Just not sure that today is the day.
What explains that weird flat spot on the DJIA this morning around 11am EST before the race back to the flat line?
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=INDU&time=1&freq=9&comp=&compidx=aaaaa%7E0&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtstyle=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.asp
T-bond yields gone wild…
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=TYX&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=2&freq=9&startdate=&enddate=&hiddenTrue=&comp=tnx&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013
Broke back T-bond yield curve:
3-mo = 3.14
2-year = 2.53
30-year = 4.28
Why would anyone want to buy a 2-year bond whose yield does not even cover current inflation?
Perceived flight to safety?
Could any of our gold bulls in the virtual room please comment on what the 2-year T-bond yield portends for gold prices over the next two years (maybe nothing?)…
All it means is one heck of a lot of people have decided that 2 year t-bills are the financial life preserver of choice.
Trarians always do the most obvious things…
You said it well. There’s a rush to securities for safety. Back in the 1970s investors distrusted government so much they ignored securities, thus the rates on them went up high. This is enough to convince this is going to be a long Precious Metals boom. Other than that, when it’s finally obvious that oil is finite and production drops significantly, there will be additional credit expansion to help the economy - more good news for precious metals.
I think it means the market expects much lower rates from the FED. Not good for the dollar = good for Gold. Gold is a hedge against a falling dollar. There maybe better hedges out there maybe that should be the next question? And if the FED gives up and stops lowering rates the dollar will go up and Gold will crash. Do you think that will happen?
“Not good for the dollar = good for Gold.”
Whatever is not good for the dollar cannot bode well for 2-year T-bonds, which are a fixed series of nominal dollar payments with the largest payment two years in the future. So my interpretation is that that very low 2-year T-bond yield shows that at least some findividuals would rather hold paper than metal for the next little while.
The 2-year note is the favorite vehicle for traders/speculators. I always ignore its yield. When evaluating yield curve shape and shifts just ignore the 2-year T-note.
As for Treasury yields and gold I look at it as follows. Rapidly declining yields indicate a flight to safety and traditionally gold is the ultimate safe vehicle. Rapidly increasing yields indicates inflation/dollar fears and traditionally gold does well on rapidly increasing inflation, falling dollar. For all treasury movements in between these two extremes I have no idea what it means for gold. I suspect there is no good correlation between non-extreme yeild movements and the dollar price of gold.
It’s funny that Jim Cramer thinks the FED can just fix all this with a rate cut. What a freakin moron.
Mr. Cramer knows the Federal Reserve is not able to solve the financial problems for the country, but the Federal Reserve can solve the financial problems for Mr. Cramer’s friends.
going up to 40% long in june index calls
You are incredible Tx, young lady I wish the best for you!
They’re cheap, Hoz. I wouldn’t get stung too much if they went to zero.
Listening to Hillary right now on CNBC. She just said that “the Fed is lowering interest rates” but that “home ARM’s are raising interest rates” and the two “don’t add up” so we need some new wacky solution.
I guess a smart politician is still pretty dumb. She really doesn’t get it…. you can’t “fix” this problem, without people having some PAIN from their mistakes. Our government just can’t stand up and say “ok, we will have some hard times, but it will make us stronger. Learn from the mistakes.”
What else would you expect from a Marxist?
Laugh.
If you think Hillary is a Marxist, you ain’t met many Marxists.
Hillary is about as left wing as Richard Nixon, and makes 60’s Democrats like LBJ and JFK look like pinkos.
Hillary is a Marxist. She was quoted in Newsweek four years ago addressing a group of stupid wealthy supporters and said “we are going to take things from you to give to the common good.” If that is not Marxist, then what is Marxist?
stopped out on my CDE(miner) short near open at 4.62 for .33/share.
Now I’m looking for my long entry.
Hey, dude, are you looking at HL too? Let me know when you find your long. (that didn’t sound right?)
I look at it, but mostly as an indicator for CDE. I found over time that I made more money/$ on CDE. I’m waiting at least until after the 11am break in the spot market to take another look.
Hoping PAL swoons again tomorrow so I can load up the truck.
Non-containment…
Recession fears spark global equity sell-off
By Neil Dennis and Peter Garnham
Published: January 16 2008 10:02 | Last updated: January 16 2008 12:31
Fears of a US recession led to a sell-off in global equity markets on Wednesday, while rattled investors digested the latest earnings report from a Wall Street bank.
JPMorgan Chase disappointed after the New York-based bank reported lower than expected fourth-quarter earnings and said it was “extremely cautious” entering 2008. The company was less exposed to credit and subprime markets, however, writing down only $1.3bn but provisions for losses from credit losses doubled to more than $3bn in another indication that US consumers are struggling to pay their bills.
http://www.ft.com/cms/s/0/6aeb2de6-c416-11dc-a474-0000779fd2ac.html?nclick_check=1
Anna Schwartz speaks.
“…The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. “The new group at the Fed is not equal to the problem that faces it,” she says, daring to utter a thought that fellow critics mostly utter sotto voce.
“They need to speak frankly to the market and acknowledge how bad the problems are, and acknowledge their own failures in letting this happen. This is what is needed to restore confidence,” she told The Sunday Telegraph. “There never would have been a sub-prime mortgage crisis if the Fed had been alert. This is something Alan Greenspan must answer for,” she says….”
http://tinyurl.com/3289yc
Telegraph
“This is what is needed to restore confidence,”
Uh yea, OK.
to me she seems just as stupid as Greenspan and Bernanke; they all believe in the same gospel of lower rates forever.
Yep, anything but regulation. It was not just the 1% rates that created this huge speculative bubble, it was also due a long period of financial deregulation. Wall Street hates financial regulation, but without it the herd mentality carries everyone over a cliff. THere is no way things would have gotten this far out of hand had Lenders been forced to lend within conforming guidelines, 20% down, 28% of monthly gross, documented income and SAVED downpayment.
There may be another wave of credit-rating downgrades of subprime-mortgage securities.
Standard & Poor’s Corp. yesterday sharply raised its projected losses for subprime mortgages made in 2006 to 19% from 14%, as loan delinquencies are rising. Those mortgages were important building blocks in billions of dollars worth of mortgage-backed securities issued that year.
WSJ
Money Out of Thin Air
[url http://www.stockmania.com/index.php?showimage=135
Dr. Estranged Love has been conspicuously silent for quite awhile now…
Cat got your tongue, Maestro?
Money Out of Thin Air
http://www.stockmania.com/index.php?showimage=135
“Commentary: Sell stocks, realty, commodities, and buy bonds, dollar
O.K., so you’re a perma-bull, a perennial optimist convinced there’s always a bull market somewhere. Plus, you’ve got the time and the smarts to find that bull.
Warning: Stop reading now. You’re going to hate what we say today. You’ll hear the word “sell” a lot. Why? Because if you don’t sell, a lot of you smarties will lose big bucks. Remember: In spite of all the optimistic cheering during the 30-month long 2000-2002 recession, the S&P 500 dropped 43% and investors lost $8 trillion in market cap. …”
http://tinyurl.com/2slg5b
Marketwatch
Paul Ferrell
14 January
an. 16 (Bloomberg) — Wells Fargo & Co., the biggest bank on the U.S. West Coast, said fourth-quarter profit declined 38 percent as borrowers fell behind on $1.56 billion of loans.
Net income dropped to $1.36 billion, or 41 cents a share, from $2.18 billion, or 64 cents, a year earlier, the San Francisco-based company said today in a statement. Wells Fargo rose as much as 6.1 percent in New York trading as profit exceeded analysts’ estimates.
“They have been able to skirt around some of the bigger problems affecting other financial companies; investors are starting to migrate to the stronger names,” said Peter Dunay, investment strategist at Leeb Capital Management in New York. His firm manages $160 million, including Wells Fargo stock.
The bank suffered its first decrease in profit since 2001 after making it easier for some borrowers to receive home equity loans. The result was higher defaults amid a housing slump that Chief Executive Officer John Stumpf has called the worst since the Great Depression. The company said today that more borrowers are now falling behind on consumer loans.
But the stock is up…. go figure!
that’s called a “tell” It means generally that all the negative news was already priced in.
Interesting to see that spy bouced twice off 1375 to the downside in the last half hour.
Yeah but now its at 1467 and below the August swing lows. So far an orderly decline.
this is an uncommon buying opportunity imo for folks with a little money and a big pair for a swing trade back up. I probably should be worried but I’m not.
news is always best at the top, worst at the bottom. Remember the “duct tape” bottom in March of ‘03?
I agree.
I think this thing should bounce back any day now and expect a bounce of at least 100 pts back to say 1450 or so heading into the FOMC.
Right. That’s my target.
You wanna see a funny chart that has a bunch of recent bull market geniuses trapped and getting blown out left and right:
FSLR
I think you’re probably right. I was all set to hold on to my puts for a longer horizon, but I just had to sell out and wait to see where this goes from here.
don’t you mean 1367?
they always seem to break the support everyone is looking at to get a few more to capitulate.
Hey, it’s just my opinion and worth what you paid for it.
this is one strong bull…seems like TPTB don’t want this thing to get really ugly like 2001-2002. I think its the invisible hand of money from the Caymans (i.e. Fed and Treasury) at work
I think it will get like ‘01-’02 later in the spring.
Ok, Tx you convinced me, so I sold my FXP and hope I can get back in later. Greed and fear.
I read an interesting take on the vix which hasn’t risen much given this selloff. It’s the inverse etfs causing that to happen.
You nailed it, shake. Today is intervention day. Somebody went in and yanked the USD up by its bootstraps. This drops the price of gold (but not enough to buy more, yet). So what’s the goal? Well, they are just setting up the ’surprise’ rate cut, which will probably come this rate. The only question is how much, 50, 75, more? Only the Fed and Treasury gangsters know for sure.
I am surprised since there is so much Hedge Fund liquidation. Are they actually hedged? I don’t think so.
“Are they actually hedged?”
Yes — by the high transactions fees they charge for getting into the game. By the time the fund blows up, those who run it have already enriched themselves with limited downside risk.
Another CEO bites the dust — and presumably walks off with a pile.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGCjZqgOaur8&refer=home
I have a great real estate idea — ex-CEO island.
An entire offshore, tax haven island with property ownership limited to CEOs who walked off with at least $200 million as their companies tanked, plus a rental property with occupancy limited to servants imported from desperately poor countries, and a barracks for Blackwater guards for the ex-CEOs.
The servants would be imported for a variety of countries to make it difficult for them to organize and communicate. Most, perhaps all, would be female.
Think Napoleon on Elba.
The island could be run as a giant co-op board, with Blackwater serving as a de-facto police force reporting to the ex-CEOs.
If not a good real estate idea, it would at least be a good novel. It could end with the island going under due to global warming, and no country still above land agreeing to take the CEOs back.
Would you prefer Alcatraz or Chateau d’if?
I personally prefer somewhere that will quickly succomb to the rising oceans of global warming.
yes, good idea; I opt for Tuvalu as their destination, should be very cheap within a few years. Just make sure all boats, planes etc. are removed from the island before they move there.
I think Singapore should buy all these companies, then cane the CEO’s. Which begs the question: What color does orange skin turn when whacked with a cane?
RE: (From article)…The loss of the AAA stamp of Ambac, MBIA, FGIC Corp. and other insurers would throw into doubt the ratings of $2.4 trillion of municipal and structured finance debt that the companies guarantee, potentially causing losses of as much as $200 billion, according to Bloomberg data.
And the market’s in tizzy with Citi losin’ a paltry $18bil?
…$200 bil-now we’re talkin’ some real bucks.
It’s all contained!
They already have one, it’s called “Dubai.”
http://www.bloomberg.com/apps/news?pid=20601109&sid=a1Kn6xGSdDWE&refer=home
A rebellion by U.K. dentists against the latest government contract has led more than 7 million Britons to avoid state-subsidized dental care in the past two years.
A Citizens Advice Bureau survey released today reports that 4.7 million people were forced to use private care since April 2006 at twice the cost of a state-funded dentist because so many practitioners refused to see National Health Service patients.
Another 36 percent of people, or 2.7 million, who responded to the poll by London-based Citizens Advice have gone without any treatment for almost two years. Under the NHS, every resident is eligible for care by a local dental practice.
Patients’ frustration has reached the point where thousands seek dental care outside the U.K. Dublin-based Reva Health Network, a Web-based referral service, estimates 35,000 Britons a year travel to countries including Poland, Hungary, Thailand and Turkey for dental treatment that would cost more or require too long a wait at home.
Can’t wait for socialized medicine.
Austin Powers: Oh, smashing, groovy, yay capitalism!
Michael Moore’s next movie, a sequel to Sicko, will be called Dude, Where’s My Teef?.
Intel and the housing bubble
http://www.minyanville.com/articles/AAPL-GOOG-INTC-MSFT-rimm-CSCO/index/a/15559
S&P near 1368. Oil under 90. Gold off 25 today, 35+ off the intraday high.
Where is the money going? Treasuries.
I’m sooooo glad I flipped to treasuries last July. Finally got my report from my 401(k) manger. I had 14% RoI last year.
Gold went up over 30% last year, oil up 56%. Your treasuries are still behind.
And my 401(k) doesn’t have a gold or oil option.
Work matches 33 cents on the dollar and I can’t pull the money out of the 401(k) unless I changes jobs and roll-over to an IRA. So, as long as I work here, I have to keep the money in the 401(k) with its limited investment options.
Yea but I just got stopped out on my oil so only about 46% profit for me.
The dollar dropped 17% against the Brazilian Real, 13% against the Euro, 18% against the Ringitt. Out of 57 world equity markets the US equity markets finished LAST! It is not possible to deflate your way to prosperity.
A better investment strategy would have been to throw darts at the map of the world excluding the US.
See above….
gottcha my friend, my bad! Can you buy into some mutual funds? There are a lot of excellent international ones.
American Funds Am Balanced A
American Funds Cap Inc Bld
American Funds Cap Wld G&I A
American Funds Cash Mgt Tr A
American Funds Europacific A
American Funds Growth Fund A
American Funds Inter Bd Fd A
American Funds New Economy A
American Funds Smallcap A
American Funds Wash Mutual A
American Funds AMCAP Fund A
American Funds US Govt Sec A
I want nothing to do with the WaMu, the New Economy, SmallCap, growth, etc.
I rode the American balanced large cap, the world large cap and the EuroPac large cap for the first half of the year, then did a 100% transfer to U.S. Govt. Securities the first week of July.
Separate minutes of the Executive Board, meeting on 18 December 2007
“…What we are now experiencing is far more than a crisis in the mortgage market. It is a confidence crisis with an ensuing liquidity crisis in the international bank market. It has much more to do with the way in which the financial markets are built up and how they function than it has with the mortgage market. One reason is that the financial instruments which were created in the past decade, and where the volumes have exploded in the past four years, have proven to be overly complicated and difficult to evaluate in terms of credit. The write down needs of the banks will therefore be far greater than is motivated by the underlying housing credits.
Since the crisis stems from the way in which the financial markets function, the shortcomings in the market’s function must be addressed before confidence can be fully restored. Among other things, this involves the return of substantial credit volumes from the markets to the banks, which places considerable demands on the supply of venture capital. This process is in full swing, but may take some time. For that reason, it is likely that the costs of bank financing may remain high for a longer period than previously assumed, perhaps for a large part of 2008….”
Riksbank
http://tinyurl.com/379fqn
This year is going to suck.
“You’re always so negative. Why can’t you be more positive.”
Okay, I’m positive this year is going to suck.
It isn’t a “lack of confidence” problem.
It is an “I’m confident you’re taking huge losses and I’m pretty confident you’re insolvant” issue.
Bottom line is that the U.S. economy runs on the consumer, and for the last 30 years the consumer has been running on debt. Really, for the last 7 years the economy has been ALL about consumers borrowing from banks to buy from China and the oil states, then banks packaging the debts into securites and selling the securites to those countries. Debt in exchange for goods.
Problem is, the consumer is now up to their eyes in debt, and the value of the colateral is dropping rapidly. The securities are falling in value, so no one wants to buy them. Consumers can’t get loans to allow them to pay minimum payments on their existing loans or to keep buying stuff.
The flood of debt that fueled the economy has been turned down to a smaller flow, and that is killing the economy, which in turn will constrain the flow of debt, further killing the economy….
Game over man! Game over!
RE: Game over man! Game over!
Mazzland AG is goin’ for debt moratorims.
It’ll be the last game at the table before the Titanic slips under the waves.
We have to nuke the Fed from orbit. It’s the only way to be sure.
Supreme Court decision could immunize many from investor lawsuits in mortgage debacle.
http://www.nysun.com/article/69631
“Yesterday’s ruling puts strict limitations on when lawyers, accountants, and other professionals can be sued in securities fraud cases…The court said private plaintiffs couldn’t bring such suits against defendants for ‘aiding and abetting fraudulent bookkeeping. While the decision’s most immediate effect is expected to be felt in lawsuits by Enron’s investors against investment banks, the decision could also put limits on suits by investors in mortgage-backed securities over the ongoing subprime mortgage crisis. ‘There are a lot of people, credit rating agencies, mortgage consultants, and others who are immunized by this decision,’ an expert on corporate governance at Columbia Law School, John Coffee, said.”
So stealing is ok then?
Good Lord.
9AM (PST) and there’s already 284 comments in the Bits Bucket??? I don’t have time to read all this! You people are prolific
Justed watched a snippet on CNBC. CBNC was interviewing a person and to shorten everything, he basically said that the numbers weren’t good. Before they ended the interview, CNBC sarcastically said, Thanks for joining, he’s in the “it could be worse club”
These CNBC people are a bunch of jokers. They don’t have any skin into the game hence no reprocussions if they keep calling for good times.
Quite the contrary. They pay and jobs are highly dependant on ad revenue, wich in turn is highly effected by ratings. Ad revenue and ratings are good when the markets are up and SUCK when markets are down.
Their job is based on talking the market up. It is almost is if that IS their job. Providing info the the public is secondary.
Yeah, when 1/2 their ads are for Countrywide and Ditech, their conflict of interest is huge.
Single family homes will flirt with $500K this year in Calgary according to the REB.
http://www.canada.com/calgaryherald/news/story.html?id=736e5ed8-1c67-44e9-925c-77066a50aa92&k=9483
Never mind that inventory is through the roof and prices have fallen from their previous highs.
http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=26c5f748-87f6-461f-b575-65cd8fa3bffc&k=42233
Doesn’t say one word about inventory levels. Silly !
Considering that you can have a choice of 5 bedroom houses for rent at less than $2,000 per month, who the hell is going to buy anything at those prices?
spx 1375 will melt like butter
not
yet
Good morning hbb!
343 comments before 10am pt, WOW!
Keep up the good work, Ben!
I covered a lot of my trading shorts on this mornings gap down cause I’m fearful of an emergency fed cut. And it feels like we’ve seen this picture before around these pivot points. But the short side could be too fearful to press it and after option expiry we could hit a big air pocket. We’ll see… And just cause we’re oversold doesnt mean we can continue being oversold, ie. the flip side of the end of ‘03 where long time frame stochastics were at 80 for months.
do it in real time, dude
Where is Jas Jain ?
cooking up some deflation
LOL. But I do agree with Jas on being into T-bills and precious metals. T-bills offer a much higher rate of return than passbook savings and tend to keep up with inflation (if you pay no taxes on interest).
frankly, this market action is like a mix of the 1987 and 1974 rolled into one.
so when inflation and deflation get into a fight…who wins ? I think we’re about to find out.
Fed (inflation) vrs. Mr. Market (deflation) sounds like a classic heavyweight title match to me. Not sure who wins, and the answer may depend on the time horizon of the comparison and the sector of the economy you focus on (e.g., housing is currently deflating while consumer necessities are inflating).
http://www.eluniversal.com.mx/wcarton8386.html
An interesting cartoon that illustrates how Mexico vies NAFTA (they call it TLC or TLCAN). The context of the cartoon is that NAFTA just reached a milestone that liberalizes food imports to Mexico from the US and Canada.
Other cartoons on the same topic:
http://www.eluniversal.com.mx/wcarton8382.html
Note: EU means Estados Unidos (US), not European Union (which is UE in Spanish)
http://www.eluniversal.com.mx/wcarton8385.html
Where is the technical short of gold here?
Depends what youre looking at. I see 980 as the next level.
Also, this could be one of those points where technicals go out the window. BB panics and eases emergency or more than 50bps. imo, gold could really take off and blow off as high as 1150, very very quickly. I trimmed some gold cause it did seem frothy at 915 but you could easily get caught not holding enough…
Ben, I miss your gold blog. I was one of the few posting on it.
wheres the technical short in gold? i dont see it. 960 here we come with a shot at 1150 if BB really panics.
Rally fizzled
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=GC08G&sid=2275790&dist=TQP_chart_date&freq=9&time=1
that’s actually a good thing. Last thing needed is something obvious like a big hammer bottom we had the other day.
i think tradeable gold on the exchanges like gld and iau is being manipulated today similar to just before the last rate cut. Check out CEF which holds a substantial chunk of gold and other precious metals today and it was even steven. I smell emergency rate cut just like last time this happen with gold.
From Builder Online
As Baby Boomers Retire, Home Markets Will Hurt
Source: USA TODAY
Publication date: January 16, 2008
By Noelle Knox
The next housing downturn is already on the horizon — and it looks like it’s going to be a long one.
In the next two decades, as millions of aging baby boomers put their homes on the market, they’ll put downward pressure on prices, and their exodus will reshape neighborhoods and cities coast to coast, according to research to be released today.
In some states, the trend has already begun, making it harder for areas to recover from the real estate recession, which isn’t expected to bottom out until the second half of this year at the earliest.
…….
The count of bits buckets posts may be a good crash-o-meter. Ben — do you keep a tally?
buttah. but who cares. of course, an astute trader will not take a position “all at once” like a level like 1375, unless one is trading a small retail account. scales is the preferred mode.
wow, how did I ever manage to make it through 20+ years of trading without that sage wisdom
PB/GS, to answer youre earlier question since I’m a gold bug is that I think the FI market will sell off huge at some point (could be very soon), at the same time that the dollar sells off. This will indicate massive panic by foreign investors to me. Also, if you go back and read BB’s scholarly writings, he has no problem with buying bonds with funny money, especially 10 yrs. There have been mysterious increase in flows of “hedge fund” money buying Treasuries from the Carribean. We’re pretty sure he has used this method already. But just like BofJ protecting yen 105, eventually the mysterious hands fail to move markets. And that’s what we could be looking at right now.
I am wondering how the $100 bn bailout, er, I mean, economic stimulus will be funded. I guess ’someone’ will have to buy $100 bn worth of T-bonds to fund it, whether it be above-board foreign creditors or mysterious (and lightly-regulated) Carribean hedgies.
This graph is certainly consistent with intra day intervention in the l-t T-bond markets, though it does not prove anything…
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=TYX&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=2&freq=9&startdate=&enddate=&hiddenTrue=&comp=tnx&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013
what’s with the ad hominem attacks? try gamblers anonymous or your husband will shut off the funds pretty soon.
Your comment is riddled with ignorance.
money.cnn.com has just admitted (shudder) that maybe, just maybe, rents are stagnant, and might even come down in price!
http://money.cnn.com/2008/01/16/real_estate/rents_flat/index.htm?postversion=2008011615
HB, a very shrewd colleague of mine that is head ot the deriv trading desk at a large firm and has 30 yrs exp and survived LTCM, has switched clients out of Treasuries and into Swiss govt bonds denominated in swiss francs, a very wise play. Treasuries will get scary.
Brother, can you spare $100 bn? If not, no worries — have printing press, will print.
Bernanke ready to support fiscal stimulus
By Krishna Guha in Washington
Published: January 17 2008 02:00 | Last updated: January 17 2008 02:00
Ben Bernanke, Federal Reserve chairman, is today expected to offer his qualified support for the idea of a fiscal stimulus to support the US economy.
The Fed chief will tell Congress that a fiscal stimulus could be useful if well-designed, implemented quickly and has no adverse long-term consequences for the budget deficit.
His testimony, which will also address the general outlook for the economy, follows private meetings with members of Congress in recent days.
Chuck Schumer, one of the top Democrats in the Senate, said Mr Bernanke told him on Monday that a stimulus “could have a very positive effect on the economy”.
It is likely that the Fed chairman’s comments will reinforce political momentum behind a stimulus. Yesterday Democratic and Republican leaders in Congress said they would work together to reach agreement on a bipartisan plan.
Nancy Pelosi, speaker of the House of Representatives, said she hoped to find “common ground” with President George W. Bush at a meeting planned for Tuesday.
“There is an urgency to do something and to do something now,” she said. Ms Pelosi discussed the possibility of a fiscal stimulus with John Boehner, the House Republican leader, yesterday. Mr Boehner told reporters they reached “an agreement that we will work together to try to bring forward a package”.
Reflecting the new mood of urgency and hope for bipartisan co-operation, Steny Hoyer, the House Democratic leader, said: “I think it could be done in 30 days.”
Lawrence Summers, former Treasury secretary, told the joint economic committee chaired by Mr Schumer that Congress should quickly enact a $50bn-$75bn package of tax rebates and transfer payments.
http://www.ft.com/cms/s/0/10d89378-c49f-11dc-a474-0000779fd2ac.html
$75 bn — do I hear $100 bn? $100 bn … do I hear $150 bn?
When Summers Speaks, Congress Listens
By MARK PRATT – 4 hours ago
BOSTON (AP) — His turbulent tenure as president of Harvard University well behind him, former Treasury Secretary Lawrence Summers is still considered an important voice in setting the nation’s economic course.
Members of Congress are being particularly attentive to Summers’ views as they consider economic stimulus proposals to help jumpstart the struggling economy.
“Fiscal stimulus is the single biggest issue on the economic policy agenda of the president, Republicans and Democrats, and it was put on the agenda by Summers,” said Jason Furman, director of the Hamilton Project at the Brookings Institution, a Washington-based public policy organization.
Summers was invited to testify Wednesday to a congressional committee on an economic stimulus plan. He said Congress should pass a stimulus bill of up to $150 billion.
“If delivered in the second and third quarters of 2008 it could have a material impact on consumers and on confidence more generally,” Summers told the Joint Economic Committee.
http://ap.google.com/article/ALeqM5iNE5o67e_yKneKxpek4XxLsY8ZZwD8U78IV03
Crunchy credit bites commercial RE:
Las Vegas Default Highlights Commercial-Property Crunch
By Jennifer S. Forsyth, Michael Corkery and Tamara Audi
Word Count: 1,026 | Companies Featured in This Article: Deutsche Bank, Merrill Lynch
The credit crunch that roared through the residential real-estate market is starting to bite commercial projects, too.
Yesterday, Ian Bruce Eichner, the developer of a twin-tower casino resort in the heart of Las Vegas, defaulted on a $760 million loan from Deutsche Bank AG after he failed to get refinancing. The default on the loan supporting the $3 billion Cosmopolitan Resort Casino is a signal of trouble for Mr. Eichner, who gained notice during an earlier real-estate downturn in the early 1990s when he lost several projects in New York City.
http://online.wsj.com/article/SB120054012983095939.html?mod=hpp_us_whats_news
Deal Fees Under Fire Amid Mortgage Crisis
By Liam Pleven and Susanne Craig
Word Count: 2,208 | Companies Featured in This Article: Merrill Lynch, Citigroup, Credit Suisse, Moody’s, Standard & Poor
To understand a root cause of the financial crisis shaking global markets, take a look at Kevin Schmidt’s paycheck.
Mr. Schmidt arranges mortgages in Shreveport, La. He earns his money upfront, taking a percentage of each loan once papers are signed. “We don’t get paid unless we can say YES” to loans, his firm’s Web site says.
The problem, which Mr. Schmidt says he sees clearly: Brokers have little incentive to say “no” to someone seeking a loan. If a borrower defaults several months later — as Americans increasingly are doing –it’s someone else’s problem.
http://online.wsj.com/article/SB120053371948296235.html?mod=hpp_us_pageone
I have a scary thought for Wall Street bulls:
You can only grow money on trees using bullsh!t for fertilizer over a limited period before the money tree shrivels up and dies.
DAVID CALLAWAY
Wall Street losing its own confidence game
Commentary: Fear of risk is rare, but deadly among bankers
By David Callaway, MarketWatch
Last update: 9:38 p.m. EST Jan. 16, 2008
SAN FRANCISCO (MarketWatch) — If it wasn’t so scary for the rest of us, the once-in-a-generation crisis shaking Wall Street right now would be a joy to watch.
After all, how often does the average Joe get to see the masters of the universe shaking in their pinstriped suits, filing out of Mammon’s New York fortresses with pink slips in their hands, brows furrowed as they calculate how long their last bonus will pay the rent on the Park Avenue duplex.
http://www.marketwatch.com/news/story/wall-street-losing-its-own/story.aspx?guid=%7BF5977278%2DA549%2D4717%2DB7CB%2D3EF75276E676%7D
ASIA MARKETS
Nervous Asian markets turn volatile
By V. Phani Kumar, MarketWatch
Last update: 11:53 p.m. EST Jan. 16, 2008
HONG KONG (MarketWatch) — Asian markets turned volatile Thursday, a day after they suffered heavy losses, on lingering concerns about the health of the U.S. economy and weak investor sentiment.
http://www.marketwatch.com/news/story/nervous-asian-markets-turn-volatile/story.aspx?guid=%7B60F82603%2D77A8%2D4588%2DA77E%2DF071F922FF63%7D
I am sure this instance of a 50 percent drop in durable goods orders is a rare anomaly not representative of the otherwise-robust global economy’s health…
Airbus warns of 50% fall in aircraft orders
By Kevin Done in Toulouse
Published: January 16 2008 22:01 | Last updated: January 16 2008 22:01
Orders for new commercial aircraft are expected to fall by more than 50 per cent in 2008, warned John Leahy, Airbus commercial director, on Wednesday.
http://www.ft.com/cms/s/0/1d22e7f4-c469-11dc-a474-0000779fd2ac.html
Weird coincidence that peak aircraft orders would correlate so well with the onset of the credit crunch, no?
Jetmakers see headwinds approaching
By Kevin Done in Toulouse
Published: January 16 2008 22:01 | Last updated: January 16 2008 22:01
Airbus and Boeing, the jetmakers, are going through confusing and complex times.
Tom Enders, Airbus chief executive, on Wednesday reported record aircraft orders for 2007, the climax of three years of unprecedented levels of demand from the world’s airlines and aircraft leasing companies.
http://www.ft.com/cms/s/0/2bf7f78e-c463-11dc-a474-0000779fd2ac.html
Bear necessities
Published: January 17 2008 02:00 | Last updated: January 17 2008 02:00
Faced with a bear market, the gut reaction of many investors is to pile into “defensive” sectors - global tobacco stocks beat general retail by 32 per cent last year. But discriminating among companies matters, too. In a bleak 2002, the best performing stock in each US sector outperformed the worst in its sector by 63 per cent on average using FTSE’s index. Avoiding blow-ups is critical also. Ericsson and Nortel jointly cut about one percentage point off global equity returns from their 2000 peak to trough.
Selecting defensive stocks means abandoning the bad analytical habits that have prospered over the past two years (fans of buy-out simulations, that means you). Instead, scrutiny of three factors may prove important. First, operating leverage, or the sensitivity of profits to changes in sales.
…
The second factor, financial gearing, amplifies operating leverage for equity holders.
…
How quickly this process takes is largely determined by the third factor, liquidity - or the cash and unused borrowing facilities a company has access to.
…
There are other rules of thumb - profits can fall much, much, farther than once seemed possible; the more troubled a company gets, the more economical its executives tend to be with the truth. And sector selection and valuation are critical. But if 2008 does mark the beginning of a bear market, owning high margin, undergeared companies should help.
http://www.ft.com/cms/s/1/74104ff8-c49f-11dc-a474-0000779fd2ac.html
Former FB said:
“A trend I’ve noticed is that many U.S. managers no longer manage anything but their own careers.”
Sounds like our politicians these days as well. Worried about the next term while Rome burns.