Bits Bucket And Craigslist Finds For January 24, 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.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
November 2024 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
To strapped to spend… Really?
http://www.startribune.com/business/14014546.html
“The interest rate drop could encourage spending because the rates of many consumer loans are tied to it, including most credit cards. The president’s hope is that Americans will go out and spend any rebate check that comes their way.”
That doesn’t mean the rates that consumers pay will go down. I received a notice on one of my BofA CC’s yesterday. Rates doubling from 13.5 to 27 percent effective April 8th. Never a late payment. In the fine print, I can reject the new rates, but must do so in writing by Feb. 29th and must make no more charges after that date. Otherwise the new terms apply. We were seeing some stories on things like this back in Oct/Nov. Credit terms matter little if the borrowers are insolvent.
I have not paid over 2.9% on a credit card in over 7 years. Why is your BofA rate so high? I am at 0% until October 2008. Oh (slaps the head) you are funding my 0% rate.
I have cards with rates as low as zero and none, until possibly now, with an effective rate above 14.
The point of the post is that it appears CC companies are continuing to make significant upward adjustment in rates, often with little or no explanation or obvious reason for doing so.
I carried a low interest CC from my local CU for years. Each year they upped the limit until at $10K I thought is was crazy to have such a limit if I lost the card. Since I wanted only to use it on the internet (didn’t tell them) I asked that the limit be reduced to $300. They said that the minimum limit was $700 and that if I did a lower limit that they would raise the rate to %13. Their arrogance didn’t bother me as I always pay in full and get the last laugh.
I pay zero! And I don’t know what my credit card interest rate is. I simply pay it in FULL each month. My fidelity card gives me 1.5% cash back on all purchases (refunded each quarter) even though I carry no balance.
So I guess I pay -1.5%
Deadbeat… (I am also a deadbeat
)
Count me (and many other HBBers I know) also amongst those who couldn’t care less what the rate is on their card. I’m all for higher rates actually, if it means they can offer more cash back.
We might not care what the rate is on our card, but we might care what it is on J6P’s cards. Unless of course we won’t be upset with the idea of a CC bailout package, which I think that we will be certainly hearing about.
now if a specuvestor bailout package (like the already-passed Deadbead Specuvestor Tax Relief Act of 2007) is obscene, how can you possible describe a “credit card” bailout plan?
There’s a real moral hazard here. Otherwise moral people who would never have considered doing things like this are going to start trying to make and save money under the table so the government won’t confiscated it to prop up irresponsible borrowers….
Another real danger is that fact that 50% of the taxes are paid by 5% of the people. If these folks decide to take a vacation for a few years–and they’re the ones who can most afford to–the government is sunk. Raise taxes a little more, and you’ll provide a good incentive for them to stop working and to sit out the recession.
For those of us who are already paying a marginal rate on ordinary income of about 45%, the temptation is already strong.
I don’t see this as a moral hazard, but I don’t quite know what to call it.
Your cash back is worked into the purchase price of the goods you buy.
Your cash back is worked into the purchase price of the goods you buy.
That’s exactly right! So if you don’t take the cash back, you’re actually getting screwed. You need to get a cash-back card to stay even
Promo rates don’t count for new purchases and of course they do these promos since they apply payments to low rates first and I guess most people are too dumb and/or strapped for credit to use them correctly.
/”2.9% 4 Life” from Citi
Don’t be too happy about high rates: just watch as the credit card companies “forget” to mail out a bill or “forget” to cash your bill on time, and oh, look at that - you’re late! Time to jack up your rates, drop your credit score, and make you pay various fees and fines.
The credit companies make the old-school money sharks look like nice guys.
You should go to cash or debit card. 27% interest? They will go after you if you can’t pay
I can pay. I’ll send them the required written notice, then pay it off at the current, lower rate. I’ve got other cards with better terms I could use in an emergency or for non-cash purchase situations. No way I’m going to pay usurious rates for the privilege of making additional charges on their card.
Providian was notorious in the state of CA and others for getting the payments ONTIME but NOT crediting the accts until AFTER the due date. CA DA went after them and then the US Fed decided ( gee wonder who was funding the lobbyists and someones campaign) US FED decided to make it -or they are still trying - to make it only a Nationwide DA that could go after a CC company. The FED wants one thing and that is control, BUT if it comes out of the Fed pocket, then they bully states into taking over responsibility for bills due on statewide levels.
Beware, as the a previous poster stated, even if you pay on time,in full or whatever, the CC company is protected NOW by the Fed and that CC co may not note that your payment was recvd until long after due date…gosh, one office to another didn’t record. whoops.
It Could happen to even the most responsible CC user.
Serious
Rates doubling from 13.5 to 27 percent effective April 8th. Never a late payment.
You can learn all about this kind of thing on forums like FatWallet.
You have bad credit elsewhere? It is common if you are having credit problems that they now consider you high risk.
If you are a typical cash saver like most on this forum: Identity theft?
The cc debt was accumulated to stay afloat while trying to unload an ill-timed housing purchase near the peak of the bubble. If only I’d found the HBB 15 months sooner. I did have a couple of late mortgage payments which was unfortunately necessary to push Countrywide toward an eventual short sale. Otherwise, all other bills have always been paid on time. So far this hasn’t affected any of the other cc’s including others through BofA. When I still had the condo, Chase did reduce the credit line on some cards in August due to the falling value of the Condo, but no rate adjustments. All I want to do now is pay off the debt and get back to operating on a cash basis. As long as the rates don’t adjust upward too much, I should be able to do so now that I’m back to renting.
Then what happens is BofA ran a credit report on you (they can do this free as a credit reporter on you with an active account).
They saw balances on your other credit cards… and the increasing problems people are having with credit in general… so they put you into a higher risk rate.
Expect other credit cars you own to do the same.
Today it is a lot more complicated than just late payments, they take proactive steps. Wish they were as smart about housing foreclosures… where they drag things out.
Congrats on getting out, SDGreg. I know it probably still feels like a sucker punch when you think of that condo, and that you’re still paying for it, but think how much worse it would be if you were still there as the slide continues.
Buying the condo was easily the worst financial decision I’ve ever made. However, I’m grateful for what I’ve learned on this blog. It’s been very helpful for extricating myself from this situation. Otherwise, my story might not be all that different from those we read about here every day.
SDGreg,
congrats on digging out. I’m also a deadbeat cc user. Fulling in full each month is fine, but HSBC has another line of tricks they’re using. They seem to be mailing the bills out later and effectively reducing the grace period to a matter of a few days. I pay online so I don’t worry about the mail service, but clearly they’re gaming their card holders.
I’m canceling the card anyways…but they are probably not the only bank playing this game.
HSBC has another line of tricks they’re using. They seem to be mailing the bills out later and effectively reducing the grace period to a matter of a few days.
I noticed this trend, too, when I was digging out from post-divorce debt. My solution was to move all my payments online and mark my electronic calendar with the approximate due dates for both of the cards I had. Worked well; no more worries about their shortened cycle.
I noticed this trend, too, when I was digging out from post-divorce debt. My solution was to move all my payments online and mark my electronic calendar with the approximate due dates for both of the cards I had. Worked well; no more worries about their shortened cycle.
Watch out for the due date moving up a day or two every other month. My wife uses a citi rewards card that did this.
RE: They seem to be mailing the bills out later and effectively reducing the grace period to a matter of a few days. I pay online so I don’t worry about the mail service, but clearly they’re gaming their card holders.
This shit should be prosecuted by a state AG as consumer fraud. Seems Capital 1 got bagged for this like 8 years ago and got nailed for a class action 9 figure pay-out.
Every card is doing it. Particularly the bank that rhymes with Shitti.
Someone provided a link a few months back to a story about some credit cards adjusting rates up simply for one’s debt/income ratio changing. In other words you didn’t even have to miss a payment anywhere for them to make you pay….just have enough credit outstanding relative your income to make them nervous
With the condo gone, I’m in better shape now than I was 6 months ago. It just looks like more general tightening of credit. I was aware of the debt/income ratio issue as that’s the reason Chase gave for reducing the credit lines in August.
The FED is cutting interest rates. That means the CC company should cut rates too!
There losses are gonna be pretty bad, so they have to cover then somehow, but who knows, I know pletty of poeple who finance a life style beyond there means on credit cards, and basicly move from one 0 percent card to another, but I can’t see the 0 perent for the ifrst year offers continuing….
What “Should” happen and what will happen are two different animals. The plan is to bail out the banks by lowering their cost of money, while they charge a lot more for same money (by higher interest rates) from John Q. Public
I just got off the phone from “Card Services.” They tell me that because of my credit history, I can get a lower interest rate on ALL of my cc’s. Because I’m a deadbeat, I could care less, but in case of some sort of emergency, I’d like to have that option of having low interest rate. The only time I have had a late pay was three months ago. I made an online payment to Citibank, but it was not posted for 10 days, and made the payment late. I got on the phone, sent documents, proving that the payment was taken out of my checking account and sent to Citibank, then sat around Citibank for 10 days. They acted all high and mighty about removing a $40 late charge and told me that wouldn’t give me the benefit of the doubt in the future. I closed the account. F*ck ‘em. Too bad the “Card Services” people were so snotty to me today. Woman wouldn’t give me her name or where they got the information that I had such great credit. We don’t allow telemarketers to call, so when I asked to speak to her supervisor, she told me that she will mark my account “declined offer,” and that I wouldn’t be eligible for this “special offer” for another 6 months. Fine. B*tch. Whatever.
I have been getting more notices from my CC lenders and banks on raising their fees for late charges, overdrafts, etc. I always pay on time and in full so this has no effect but does show that banks are getting desperate. My son is in the Army now in Iraq and gets CC offers every day (1 to 6). Can anyone tell me where to write to stop the offers from rolling in? (Could look up but haven’t had the chance yet).
Thats why many people use debit card. Just don’t deplete all your balance in the bank or they charge like $35 each “overdraft”
Security Freeze link didn’t make it in last post.
http://www.consumersunion.org/SecurityFreeze.htm
never never never use a debit card. what happens if someone buys $8,000 of crap on it? You get to argue with your bank for MONTHS, best case scenario.
btw American Express has a Blue Cash card that pays you 5% back on Groceries and Gas, and other purchases.
I use Citi’s dividend card, which pays 4% cash back for purchases at gas stations, grocery stores, and drug stores. Perhaps more than the cash, I enjoy the thought of doing my little part to bring this evil, arrogant company to its knees. Although, they seem to be doing a bang-up job of that themselves.
I concur with Chilidog - I never use my debit card anymore. Somebody stole my number and one day when I went to get cash I found my balance was waaaaaay off. It took a couple weeks to get the money back, and then there was the threat that the bank could rescind the money if they decided the charges were legit later. I did get it all back eventually, but what a hassle! This kind of theft is increasingly common - anywhere you use your debit card is one more place where they can have access to your number and pin. Think about the digital “security” or lack thereof at some of the restaurants and gas stations you visit. All it takes is one savvy waiter or check-out clerk to gain access to all your stuff.
Anyway, the moral is, use your credit card because then if there’s a theft it’s THE BANK’S MONEY that’s lost, not your hard-earned cash. If you like the convenience of the checkcard, pay for everything with your credit card and then pay off the balance immediately. But don’t go wavin’ yer checkcard around. Lesson learned!
ditto.
and if you have a paypal acct for ebay etc
beware ebay/PAYPAL is having problems with people hacking into your paypal accts withdrawing $ for supposed ‘buys’ etc. PAYPAL is putting out Frozen accts because this is starting to be a very very regular activity.
and if any of your bank accts/ cards are tied into this, well gosh, you are charged and have to fight back.
Rampant. Otherwise, Paypal/ebay wouldn’t be contacting people.
Cash, Go back to cash. Local retailers, small businesses who need our business, and it puts $ back into Local= YOUR local economy.
JMHO
RE: All it takes is one savvy waiter or check-out clerk to gain access to all your stuff.
At the behest of her BF a 21 YO college student waitress pulled this off with the use of held scanner at an area restaurant/micor brewery in Salem, MA.
She got the encrypted data from both credit and debit cards and fooked things up pretty good for around 200 patrons.
The story made the front page of the local fish wrap.
which was devastating publicity for the owner’s.
With eaterties/drinkin’ joints by the bazillion out there who’s gonna patronize a place with dishonest staff.
https://www.optoutprescreen.com/
I opted out several years ago. I get maybe 2 credit card offers a year. I also suggest a security freeze on your credit report especially if you happen to be out of country. It only costs $10 for each reporting agency. You can read about it here.
Just recently received an American Express Platinum. Why pay the fee, I expensed it and used the card work business. Anyways, I guess I hit a “limit” because they called me once I hit $10K charges and they said they can’t approve anymore until I pay it before the due date (no issue and just recently paid it off). It was an interesting conversation but I figure the credit crisis and the risk of card holders not paying is too great for CC issuers. They’ll probably increase my spending power in time once they figured out I’m not a deadbeat CC user. We’ll see….
Put their offer back in their envelope, write NO THANKS, and send it back to them. That’s what I do.
1-888-5-OPT-OUT. Gets them all out of your mailbox. Ahhh! Makes them crazy when you have good credit and they can’t send you an offer. Awww.
I got the same letter… but my rate only went from 10% to 12%. I also sent the “I reject letter” and will pay off at old rate.
“I received a notice on one of my BofA CC’s yesterday.”
I received a similar notice way back when BofA and MNBA became one.
RE: Rates doubling from 13.5 to 27 percent effective April 8th. Never a late payment. In the fine print, I can reject the new rates, but must do so in writing by Feb. 29th and must make no more charges after that date.
Want to do something for the economy? Then put a muzzle on these blood sucking vampires.
This is the back alley loan sharking that the politico’s should be be stopping.
Get the heck out of your BOA - it’s a criminal outfit. They did the same thing to me, raised my interest rate from 10% to 30% for NO REASON AT ALL because in this laxly regulated “free market” business environment they can. I’ve had my share of nightmare experiences dealing with companies before but nothing came close to BOA - no customer service whatsoever - at least to those without the big bucks - rude, dismissive, and completely oriented to squeezing as much $ out of you as they can.
No problems with my previous CC company until it was taken over by BOA in December, which immediately upon taking over preceded to lose my monthly online payment to them, whereupon it started to harass me with pre-recorded online phone messages, leaving a non-answerable phone #. So I immediately sent – by fax and snail mail - and had my bank from which I made the online payment – proof that I had paid and that they had received and cashed the check. I To no avail – they “lost” my letters and kept up the harassing phone calls. Finally, weeks later someone “finds” they letter, but they need time to resolve it in their legal department…2 months later, it’s still not resolved, they ding my once near-perfect credit with a “late payment” charge, and triple my interest rate.
I must have spent close to 50 hours on the phone with them being switched back and forth from various unhelpful lackeys, re-explaining my story each and every time as you’re never allowed to talk again to the same person and the history of my case somehow kept getting “lost”, being disconnected and bait-and-switched, trying to 1) explain that I had paid and had sent proof of payment, then 2) trying to find out the status of my case, then 3) trying to get them to clear my credit, next 4) find out why they raised my rates (finally got someone to admit there was no reason whatsoever – but they still would NOT lower it) and, 2) trying to close my account (which at one time was closed then mysteriously re-opened).
I still to this day am not sure that my account was ever closed, but at least I’ve stopped receiving the phone calls. I’ve had my share of nightmare experiences dealing with companies before but nothing came close to BOA - no customer service whatsoever - at least to those without the big bucks - rude, dismissive, and completely oriented to squeezing as much $ out of you as they can.
My hunch, from having met some credit-card addicts over the years, is that people who are consistently at their limit on all their cards, and pay only the minimums, don’t care at all what the interest rate is.
I’ve actually encountered people who treat a new card with a 10K limit as if someone just handed them a check for $10K. And with the way our BK laws work, that’s effectively the case. (Of course, the credit card companies are no saints here, either!)
“Don’t count out the American consumer’s” stupidity”…..eh, I mean “resilience, said Michael Englund, chief economist at Action Economics, a Colorado-based market consulting firm.”
*words outside quotations not part of original statement
gotta learn PBs cross out skills!
Dutch bubble update:
the Dutch statistics office today reports the first monthly decline for home prices in many years, 0.3% down in december (but still up 4.1% from previous year). For free-standing homes (usually the most expensive, but relatively small numbers) prices declined 2.9%, the biggest decline in 13 years, while sales numbers increased. Who knows, maybe this IS the start of the biggest decline in history… The historic trendline for homeprices is about 85% down from current level. I guess this also means the statistics office will base its CPI calculation on homeprices instead of (artificially fixed) rents in the near future …
In the newspaper discussion is increasing about production of new homes in my area. Production has lagged enormously over the last 10 years or so but lately it is catching up (although they are still building the wrong homes, almost everything is priced at 10-20x median income). Officially there still is a severe shortage of homes in the Netherlands, but in reality I think the number of empty (speculator) homes is bigger than the official shortage. The RE mob, local politicians and some citizens are now trying to stop production of new homes because it ‘threatens home prices’. The pyramid game is clearly starting to crumble.
On another note, the Dutch stock index today opened with a 4.5% gap up, it’s now nearly 10% up from mondays low. Never underestimate the speculators from tulip bubble country
“(although they are still building the wrong homes, almost everything is priced at 10-20x median income)”
Is it “wrong” mostly in terms of price or also location and type of housing as well. If it’s just price, prices can come down and that housing will serve a needed purpose. However, housing of the wrong type or in the wrong location is of lesser value even if prices come down.
You should relocate till this madness is over. Lots of people fleeing expensive locations
the problem is mostly price, even with the crazy loans out here 10-20x income is too much. And these homes are relatively big (but small compared to your McMansions…). There is strong demand for starter homes for small 1-2 person households, but no ones builds them. It is perfectly possible to build nice homes at 3-4x average income, but the whole RE mob makes sure that does not happen.
I don’t think the ‘free market’ prices of these homes will come down much. When the bubble pops the builders will get some kind of huge subsidy from government so they can sell them at discounted price, or rent them out at a profit to illegal immigrants, single moms and all kinds of other people that live on social security. Our government is extremely good at keeping the housing market from functioning.
“social security” == Euro welfare.
Just pointing this out because “social security” has a different meaning in the US. Its the old age pension program that all private sector workers pay into. Unlike a real pension, social security “invests” in US treasury type bonds, and nothing else. Up to this point receipts have exceeded disbursements, so the “trust fund” has remained untouched. When the day of reckoning arrives probably in the the next 10 years, current receipts will be insuffucient to cover al payments, and heaven knows where Uncle Sam will get the cass to cover the “trust fund” IOU’s.
Here or in Europe? I’m confused.
In Europe “social security” is what we call “welfare” in the US. I’m not sure what their equivalent of our “soical security” is called over there.
Here in the Golden State, we had So Cal Security…
Real estate never goes down, dontcha know?
I’m happy to report another MILESTONE regarding the Dutch housing bubble today:
a well watched TV program just discussed the Dutch housing bubble (! first time in many years it is openly mentioned on TV) and had an expert explaning that both the income to homeprice ratio and ratio of outstanding mortgage debt vs. savings in Netherlands are FAR worse than in the US. Both ratios are probably amplified by the huge Dutch HMD but it is still the same debt (only partly on the account of the taxpayers instead of the homeowner). He also explained that many markers are worse than in 1980 just before the last Dutch housing crash (-40% in 1.5 years) and that although no one can predict crashes, people should seriously take the risk into account. He also mentioned that the strongly growing inventory for sale and time on the market are pointing to possible trouble ahead. And because the Dutch have a very open economy (based mostly on financials nowadays, just like the US) it could prove vulnerable to a slowdown in the US economy. He suggested not to buy now if you don’t have to. WOW!
The ‘housing always goes up’ mantra is still everywhere here (many TV programs, newspapers etc.) but some of the sheeple might sniff trouble in the air
I would of course note that most of the money taken in by the Social Security Administration isn’t “invested” in anything but old folks. MOST of the money flows immediately back out the door to current retirees. Only the amount excess to current demand , the surplus, is “invested” in non-negotiable government securities.
Of course every “asset” (bond) in the trust fund is also a “liability” for the U.S. Treasury. We could make sure that the trust fund NEVER ran out of money if we simply raised the interest on the bonds held. If the interest rate was, say 20% the fund would never run out. Of course this would do little to find the money to pay the retirees, it would still need to be taxed or borrowed.
Wow, that definitely seems like a turning point. Some bigwig had to actually sign off on this guest, I’m sure.
I’m curious: That 40% crash in 1.5 years… was the a 40% decrease in price, or in volume? If it is price, that is amazing. Do you have any ideas on why prices fell so quickly in that crash when it seems like in Japan (and now here) prices were so sticky?
AC
AC: that was a 40% crash in AVERAGE home prices; I think volume went down strongly at the same time but don’t know details. As they say, the bottom just fell out of the market. Many homes sold for even bigger discounts; a friend of mine purchased his first home (a brand new luxury home) just after the crash with nearly 60% discount; there were no other people interested in the property …
this -40% pricecrash happened after a 100% price runup in the previous five years. We now had a 600-1000% price runup over about 15 years, just wonder what the crash will look like this time …
Some intresting points made in the article.
Last week, Mr. Greenspan joined the payroll of the hedge fund, Paulson & Company, which last year made $15 billion in profits betting that poor people’s homes would be foreclosed on while using the unregulated over-the-counter contracts that Mr. Greenspan assisted in making possible.
I wonder if the “poor people” the author is refrencing are the same folks who bought houses or HELOC’d the house and knew there was no way they could service their debt unless prices continued to appreciate.
http://www.counterpunch.com/martens01212008.html
“…betting that poor people’s homes would be foreclosed on while using the unregulated over-the-counter contracts that Mr. Greenspan assisted in making possible…”
It warms my heart to a retiree who is able to continue the mission begun during his active career right on into his golden years.
“to see a”
(Time to brew coffee…)
I was thinking about this very issue the other night. I was in a finance class, and the professor made a comment that the Fed “through the financial markets a bone today” (tuesday). I pointed out after class walking to our vehicles that it was at the expense of savers and fixed incomers. While talking a bit, he commented that some people think the housing bubble was engineered. I said that while the monetary policy engaged in by the Fed would predictably cause an asset bubble, one cannot normally predict (or control) where that extra money goes. He replied that it could possibly be directed to a specific asset (in this case housing) if the loan requirements for housing were made easier.
So, is it possible that the housing bubble was engineered? The fed poured tons of dollars into the economy knowing it would create an asset bubble and the banks colluded to lower lending standards for housing to help direct that moeny into housing? If so, who benefitted? Was the job for Greenspan his reward?
Tin-foil hat stuff, I know, but still worth thinking about I think.
good point; I think in many anglo-saxon countries the mortgage requirements AND fiscal treatment of homes were changed deliberately over the last 10-15 years in order to make homes the only sure bet for asset appreciation. e.g. in many countries costs of the mortgage and other costs associated with buying/owning a home are tax-deductible, while proceeds from selling a home are tax-free. And sometimes (e.g. in Netherlands) the asset value of a home is taxed at far lower rates than money on savings accounts or in stocks. If you add the ease of using leverage in the housing market for the normal public (just try to get free 1:10 leverage on a savings account or with your broker), there was nothing that could beat housing …
who benefitted? that’s easy, the FED gets 1% or so of all money they print into existence from out of nowhere; they can never loose. And the other banks made the biggest gains ever thanks to the worldwide housing/debt bubble. Government benefits because this game drives rates down as long as the game is running.
Yes, the Bubble was engineered. Why?
- To hide the destruction of our real economy (production) via outsourcing, insourcing, and looting. Give the sheeple the FEELING of wealth by flipping houses and distract them long enough, and maybe they won’t ask any tough questions.
- To raise the property tax base. We can’t double the tax rates, but we CAN double the “value” of your house, which has the same effect. Such a sham, I mean, “shame!”
- To destroy savers and responsible people. I’ve come to believe that those in charge just hate people who try to get some degree of freedom via saving and proper investing.
- To get more illegals into the nation. They are “consumers” too, which is all that matters, even though they bring crime and poverty with them. Having them build lots of cruddy houses is a nice way to exploit them, lower our standard of living, and make some extra money on cheap labor.
The way I see it is this: if a bunch of random “nobodies” with full-time jobs outside the economic and financial world such as all of us here could see this disaster coming, the people in charge had to know. But, it suited their agenda - and they made money from it - so here we are today… screwed.
TInfoil? Doubt it. I suspect it was definitely engineered to a large degree another major relocation of wealth in the US and the globalization of economies/ repatriation of control.
I don’t see any tin foil aspect at all.
through = threw
duh
“So, is it possible that the housing bubble was engineered?”
Don’t put words in my mouth.
Monetary policy is far too blunt an instrument. My take is the Fed did what it could to reflate after 9/11 and the housing bubble was an unintended consequence.
Don’t put words in my mouth.
Huh? Not sure what you mean here, but I don’t think I ever referred to you.
Monetary policy is far too blunt an instrument
That was my position initially as well. However, this professor pointed out that the dollars could be somewhat directed if the PTB pumps dollars and then simultaneously lowers lending requirements for a specific asset. It may not be as precise as one might like, but might increase (significantly) the probability that housing is the next asset to be inflated.
This professor actually teaches at a US university? You are very, very lucky. Most economics professors know nothing but dogma. I believe it was with Keynes or Galbraith who said that economists are most economical with their ideas; they tend to make the ones they learn in grad school last a lifetime.
I have long believed the bubble was 100% planned.
Whe would benefit?
Well, take a look at corporate profits and executive compensation since 2001. While J6 was buying toys (going further and further into debt) with his new-found “wealth”, the wealth disparity in this country has reached a record high.
No, your professor (and you) are not wearing tin-foil hats at all. You are using your head and following the trail of money.
Some lone voices were trying to warn the PTB as early as 2002 and 2003, and were summarily ignored and ridiculed. Those who wanted it to happen knew full-well what they were doing.
Not sure what their exit plan was, though…unless all their dollars were converted to other currencies and gold (?). In that case, we just might see that “global currency” before long.
Buy your professor a beer and thank him/her for the honesty.
djia futures down a bit
I understand the FBs have to qualify and actually have equity but it’s too bad they caved in to this.
Rep. Barney Frank, D-Mass., said negotiators also were near an agreement on an overhaul of the Federal Housing Administration that would make it easier for thousands of homeowners with ballooning interest rates to refinance into federally insured loans. That measure might advance separately of the tax relief package, however.
Both sides agreed to allow Fannie Mae and Freddie Mac — government-sponsored companies that are the two biggest U.S. financers and guarantors of home loans — to buy loans much larger than the current $417,000 limit, aides and lobbyists said. Frank said that lending cap might reach as high as $700,000 in areas with the highest home prices.
it will help US housing over all, but there is no way this scheme will make the FB to stay in home and keep pay the mortgage.bcos the only reason the FB is bought the house is to CASH out the appreciation.
if they raise the limit enough I’m sure appreciation will start all over again; this has worked miracles in the Netherlands for almost 15 years (median home price kind of tracks the government insured mortgage limit), no reason why it wouldn’t work in the US. The dollar will plunge even more as a result, but that’s part of the plan now.
No, it won’t.
This is not a landlocked country. They will build into the apocalypse, and prices will settle back right where they should next to incomes.
This is a totally false belief. Besides, as we have already pointed out, you could make the limit infinite but the borrowers couldn’t even pay back the loan at 0%.
New buyers. Get transactions happening again. All’s well with the world. Voila, you have the seeds for a counter trend rally. The old 1375 floor will maybe be the ceiling now but if they regain the trendline, they could run the shorts off again. That’s a long way away though.
netherlands is not land-locked at all, that is just myth from the realtor mob; in most of the country there is land available as far as the eye can see (about 88% of total area is still unbuilt land).
And I’m sure that many of our homeowners will never be able to pay down their loan either. Everything gets financed with I/O mortgages (usually with additional leverage using the stock exchange or other crazy deals) and eternal price growth does the rest. If homeprices start falling, well … as long as the government backs the full mortgage amount (currently applies for about 75% of all homes with a mortgage) who cares?
IMHO the limit could be raised to $2MM and it would not make a significant difference in the price dropping. Full Doc is du Jour. A 700K house will still need 20% down and verified income.
This will save some individual homeowners, with equity that do have substantial incomes, from having to pay higher rates.
These 3 individuals will be able to refinance.
Hoz — I agree with your analysis 100 pct. The GSE loan limit increase will primarily (if not solely) benefit wealthy coastal bubble zone homeowners. It will not be sufficient (without further bubble reflation measures) to jump start price appreciation for the $500K+ McMansion segment of the housing market.
This is not a landlocked country. They will build into the apocalypse, and prices will settle back right where they should next to incomes.
I just recently took a train ride from Amseterdam to Bruges. There’s a lot of land in Amsterdam!
Anyway, about building into the apocalypse (or, as they say in Central Florida, the Apopka-lypse) I remember remarking to a friend of mine after seeing condos go up in an outlet mall parking lot: “They’re just going to keep building until the day comes when no buyers show up.” And that’s exactly what happened.
The question isn’t how much undeveloped land there is - it’s how much undeveloped land there is that’s developable.
A large part of the reason prices are so high in CA is because of open space restrictions - i.e. lots of open land that can’t be developed. For the most part at least - sometimes open land can be transitioned to developments, but it’s a royal pain and very seldom happens.
This is the case for pretty much all the coastal areas of CA, which is why the coast has always been very expensive, even for several miles inland. It’s not so much the case for the “Inland Empire”, however prices there recently have been driven by the extreme coast prices.
There are a couple of other pockets like that around the U.S., though not much. For the most part there is *tons* of open land available for development in every state and region, thus home prices are naturally driven by the cost to build, not by land costs.
So that being the case - nhz what can be said about the Netherlands - is the open land really developable, or just open? Just wondering.
packman: you are right, the situation in Netherlands is similar to CA; the real problem is zoning (and something similar is going on with rents - no free market either).
This is an issue called ‘grondpolitiek’ in Netherlands and it is the most sensitive political issue by far; three governments went down because of this issue. There is lots of unused or relatively poor farmland that could be developed into building ground at a profit (even when land for building went down by 90% from current price - building land is about 100x more expensive than farmland here). Trouble is local government, working with farmer organisations, big developers, housing corporations etc. - decides what land will be developed and they use this to push prices up. There is no free market for land, you have to buy from local government (extremely difficult) or from the big developers.
An interesting report last year showed that if total built area in Netherlands would be increased from 11% (current) to 12.5% there would be enough land for the indefinite future, even if current population predictions turn out too low and more people want a free standing home with a garden. But the financial elite (including most of the farmers, which are all multimillionaires here because of land prices and EC subsidies) will never let that happen.
“These 3 individuals will be able to refinance.”
Hoz - LOL - great way to put it.
“Apopka-lypse”
Reuven - another LOL - difficult to appreciate unless you’ve driven through Apopka and particularly the development on the west side.
Well, what concerns me is that it might stem the price drop. It won’t help the FBs that are hopelessly underwater and can’t qualify but might loosen things up for new buyers who are too dumb to know that things are still overpriced.
My guess is that by the time the plan is announced everyone will know that the SHTF.
It will probably stem the drop some but nowhere near enough. Layoffs, divorce, etc. will do their part too.
Too little, too late.
I assume this means refinancing rates will be cheaper for folks in trouble. Fewer high end foreclosures, a lot more obnoxious refi adverts and prolonging the whole situation.
I am thinking lots of coastal real estate infesters must be licking their chops at the prospect of having their losses salved and some new chips placed before them on the table for the next round of gambling. Yep — the real estate infestment craze that has already succeeded in sinking tons of collective national wealth into unneeded white elephant housing could get the whole REIC malinvestment process cranked right back up into overdrive in short order.
they have to qualify. that’s the kicker for them
Qualification would seem to be a kicker in nhz’s U.S. housing reflation theory as well. I was explaining this to a friend last night — with 100+ subprime lenders up in smoke plus a rekindled interest in not making loans to folks who can never hope to repay them (and who hence would soon become tomorrow’s foreclosure statistic), raising the GSE limits would appear to be window dressing without the additional financial engineering measure of rapid wage inflation to increase the number of folks who can afford to buy $700,000 homes.
It won’t help the FBs that are hopelessly underwater and can’t qualify but might loosen things up for new buyers who are too dumb to know that things are still overpriced.
———————–
This is my fear as well. Here in San Diego, there are plenty of buyers just waiting for the right opportunity.
By setting up taxpayers to take all the risks made by the lenders (by refi’ing the toxic loans), the flood of foreclosures will slow down for a while.
By giving away govt loans at discounted rates, and raising conforming limits, they just might bring in some more idiots who think things are at the bottom.
They will prolong the pain for as long as possible, dragging us through a multi-year recession/depression, just because they refuse to let assets sell at market price.
BTW, although they say borrowers will have to “qualify”, I’ve seen enough proposals trying to reduce qualifying standards (lower FICO scores, **zero** down payments/higher LTVs and higher debt-to-income ratios).
This is NOT good.
OK, seems I misjudged the qualification issue. Very strange IMHO that this is the real problem, because it still is totally irrelevant in Europe. Over here you don’t even need to pass the fog-the-mirror test, loans are as crazy as ever (although there is some verbal push from the government on the banks to be careful with crazy loans - they know that the banks won’t listen anyway because government has made it clear that they will do nothing).
I wonder, wouldn’t these EU mortgage companies start selling in the US now that they have less competition there? I would say the risk in the US is currently a lot smaller then in Europe…
I wonder, wouldn’t these EU mortgage companies start selling in the US now that they have less competition there? I would say the risk in the US is currently a lot smaller then in Europe…
The knife is already in free fall in the US, so I think that the Euro lenders might choose to stay away. Of note: my mortgage used to be with ABN AMRO, but they sold it last year to Citibank.
yes, ABN AMRO (happens to be my bank …) was out of the market just in time; but that was more luck than wisdom I think, probably because of the proposed merger. The other Dutch banks are still buying all the RE/mortgage crap they can get, especially ING.
Was’nt the who purpose of the FHA to help lower income poeple buy homes, since when is a lower income person buying a 700K home, and if they are they they should’nt need the FHA….Why are’nt poeple up in arms about this….Sure they supposedly have to qualify but it’s only a matter of time till this nit wit polliticians remove that hurdle as well….
Jeeze!! You hand wringers, get a grip! And TEX, I’m surprised at you! NO ONE IS GOING TO QUALIFY! Say it over and over again until you’re convinced. Have any of you ever worked on a FHA deal? Well, let me tell you, it don’t matter if FHA ignores LTV requirements or raises loan limits. FB’s are still going to have to source down-payments, meet stringent reserve requirements, and fully document income with at least 2 years W-2 average. If your self-employed, you get the 2 year average of your schedule C bottom line (which essentially means no self-employed qualify). So, in other words, now, as wasn’t the case in the past, you actually have to AFFORD THE HOME. Sorry, no soup for you!!
As for the sinking home-owners needing to refi, by the time anything gets passed they’ll be soooo out of the LTV range (not to mention the factors above) that they shouldn’t even bother.
if Ben Bernanke and friends get their way, within a few years even a 7 million dollar home will qualify as lower income housing. The voters (at least those who own a home or a mortgage) love it … I agree with you that the kleptocrats will find a way around the qualification hurdle soon; gotta keep those mortgage mills churning.
Now this convoluted economic stim package has rebates of 300 and more for childern up to 1200 per family, but they now included a provision to all the GSE to back loans greater then 700k, this is rediculous considering both GSE are loaded with tons of bad loans already…
*sigh*
Raising the loan limits is “letting the camel stick his nose into the tent.” Once the nose is in, the rest of the camel follows; point being, don’t place too much faith in the FHA limits stopping them from reinflating the Bubble. Those limits can be easily destroyed, and will be if that is what is required to keep the Bubble going and people drowning in debt. T
The end goal will be the government taking over housing and forcing people to pay via taxes for other people’s over-priced McMansions. People will still be drowning in debt, but they’ll JUST be able to afford their McMansion, so the fees keep flowing. Oh, and renters will no doubt be punished in some way to make sure they get with the program and get debt, too.
“Jeeze!! You hand wringers, get a grip! And TEX, I’m surprised at you! NO ONE IS GOING TO QUALIFY! Say it over and over again until you’re convinced. Have any of you ever worked on a FHA deal? Well, let me tell you, it don’t matter if FHA ignores LTV requirements or raises loan limits. FB’s are still going to have to source down-payments, meet stringent reserve requirements, and fully document income with at least 2 years W-2 average. If your self-employed, you get the 2 year average of your schedule C bottom line (which essentially means no self-employed qualify). So, in other words, now, as wasn’t the case in the past, you actually have to AFFORD THE HOME. Sorry, no soup for you!!
As for the sinking home-owners needing to refi, by the time anything gets passed they’ll be soooo out of the LTV range (not to mention the factors above) that they shouldn’t even bother. ”
Thanks for the clarification EX. Nice to have your experienced input on this. I think even the dumbest, thickest headed sheeple are beginning to see shrub, the FED and crew are trying the futile “shotgun” approach of throwing everything they can at the wall to see what sticks.
DOC
The end goal will be the government taking over housing and forcing people to pay via taxes for other people’s over-priced McMansions. People will still be drowning in debt, but they’ll JUST be able to afford their McMansion, so the fees keep flowing. Oh, and renters will no doubt be punished in some way to make sure they get with the program and get debt, too.
I agree it is the goal. People have not been saving… so they consider the stock market or their house equity as their savings. So the idea of a loss is impossible.
Not sure if it will work, but it does seem to be their goal.
What are you yelling at me for? I said that qualification was the sticking point.
My Gawd is there no hope for us?!?!?
Why can’t they just let well enough alone and let things sort themselves out without trashing the value of the dollar?
Some economic stimulus package - trash the dollar so that food and fuel cost increases eat up what little disposable income the average and lower end income folks might have had.
Yeah that’ll really help things out. Geeze, I’m sick of this crap. All I want is a decent place to live without having to bend over and take it up the yinyang on price.
Is that so much to ask?
Hell, I thought living below your means and saving money was the responsible/right thing to do.
“Hell, I thought living below your means and saving money was the responsible/right thing to do. ”
That is so 1930’s. Wake up and smell the “New paradigm”
No. What will happen is the banks will be able to off load risk.
So they will extend more BS loans to people with cash back. Just enough to get them past the point where the loan will be bought back.
The garbage loans will continue till the GSEs fail.
Given exponential growth it will not take very long.
By the time this cast of clowns implements some plan/scheme it will be way to late for the vast majority of FB’s and “investors”. As to a springtime rebate, again way to late not to mention to little. Next will be the great guvmint house buy back program. These folks just need to step aside… But they won’t!
This is a bank buyback program. They are trying to preserve the infrastructure.
Every time Frank spouts off, I send him a relatively polite email explaining that housing is too expensive in Mass. I explain how I as a relatively young professional with an income about 30% above the median income for his district, I have been priced out of buying. I ask him how any of his actions help me afford to stay in his district long term. It has to be over a dozen by now. Strange how I do not get a response.
You need to leave Taxxachuttes. That state sucks!
FL / PA is better?
I’ve lived in both Mass and Fla and IMHO, I’d rather be here in Fla, even with all its current problems. But that’s just me.
I think FL is great if you like working in the services sector.
State taxes are not the problem in Mass. The problem is that 30% of our federal taxes get invested out of state, propping up the sunbelt. We’ve been bled dry by the rest of the country.
Why are you upset? You live in a state with lots of lovers of socialism. You are supposed to help poorer states - they are in a disadvantageous position. It is only fair that money is taken from your state and given to the poorer ones.
give me a break… VA taxes were much higher than MA when I lived there… MA hasn’t been the ‘most heavily taxed’ in a very long time.
You can’t even spell “Massachusetts” (or “Taxachusetts”) but you’re full of opinions. Interesting.
GP: That’s the problem with Frank. He thinks he’s smarter than you, so once he makes his mind up, that’s it. Overall he’s a good rep, but those few times I disagreed with him, I discovered it was futile to try to persuade/dissuade the man.
RE: You need to leave You need to leave Taxxachuttes. That state sucks!
Now,now…you’re gonna pizz off Not A Gator.
Mazzland really isn’t Taxxachusetts anymore.
That title belong to Maine now. 1st in collective level of taxation …39th in per capita income.
Mazz is now, “Land of Corroding Infrastructure” aka BIG DIG COUNTRY!
Roads, tunnels, and bridges crumbling while Mazzport & DOT highway hacks loot the pension till.
WE are SUBPRIME NATION
Right - Patrick Duval has accomplished ? Privatize the roads. Tolls everywhere.
(Rep. Barney Frank, D-Mass., said negotiators also were near an agreement on an overhaul of the Federal Housing Administration that would make it easier for thousands of homeowners with ballooning interest rates to refinance into federally insured loans.)
Nothing for young buyers who don’t own a house already, Mr. Frank? Does everything have to be done for members of your generation who have lived large and spent all their equity?
The right policy is to direct federal funding to new purchases, with a “do over” for credit mistakes in madness. It might not keep people in their houses. But it might allow them to by the house down the street for half as much.
Problem here people. Redoing a mortgage is not going to jump start this economy anew. CC debt and other debt too high. Disposable income is drying up. Frank like the rest is trying political window dressing going into election season, but by election time it’s going to be a case of ‘protect my job or get me a job time’.
Frank was on the radio today. He continually stressed how the low man on the totem pole needs help. He went out of his way to mention those on social security. He knows his base.
I can’t see how people on SS will benefit in any way from these measures.
1. Their property taxes are kept at artificially high rates due to specuvestors and fools who buy high.
2. The cost of goods and services stays inflated via inflation of credit (low rates & “free” money).
The only people who benefit from keeping prices high are FB’s, who would otherwise lose their homes; municipalities who like the fatter property tax collections; and flippers.
Many, many more will lose.
New buyers of overpriced crap. That is what will jump start things. They’re there, they just can’t get money right now.
And when they finally can, they won’t have job.
Comment by WT Economist
“Nothing for young buyers who don’t own a house already, Mr. Frank? Does everything have to be done for members of your generation who have lived large and spent all their equity?
Amen brother! I’m REALLY TIRED of everyone in power ignoring the fact that housing is WAY OVERPRICED.
You hear that you selfish, cretinous, tunnel visioned craptastic CONgressional F#cktards?!?!
The very “customers” you are depending on to keep the housing market even limping along are saying the prices are way too high.
Here’s the best part - this problem has an incredibly simple solution: DO NOTHING.
Simply let those who acted irresponsibly deal with their own fate and the market will take care of all this for you.
Oh but that would be too simple…..
F*ckwads the lot of them. I’m voting third party from now on unless there’s a REALLY compelling reason to vote otherwise. I refuse to be part of the problem anymore.
How do the folks in the red state heartland feel about having their hard-earned moneys used to artificially prop up wealthy coastal blue state bubble zone McMansion prices?
And about them subpoenas? Never mind — this is an emergency, for Chrissakes!
P.S. Where did you see the story on the GSE limits? This was the only interesting recent GSE story I could find w/ Google…
Fannie, Freddie May Face $16 Billion Losses, Credit Suisse Says
By Jody Shenn
http://www.bloomberg.com/apps/news?pid=20601087&sid=axvNnmqtx_6c&refer=home
P.S. Whatever became of that false rumor that the GSEs do not touch subprime?
Actually, most of the wealth flows in the opposite direction: from the blue states to the red states. Red staters get more tax benefits. Blue staters pay more taxes, because we make more money. At least, this was true during the 2004 election, when all the data about this came out.
“How do the folks in the red state heartland feel about having their hard-earned moneys used to artificially prop up wealthy coastal blue state bubble zone McMansion prices?”
And your point is…?
That what goes around comes around…? Sometimes the hard-earned monies flow from blue states to red, sometimes from red states to blue. I imagine the red staters will feel kind of like I do when I see my tax dollars going to prop up agribusinesses in the heartland.
“And your point is…?”
Which constituent group would benefit the most? Residential builders? Real-estate infesters? Hedgies? Lenders (the ones that are still in business, that is)? IBs?
Dodd seeks ‘ambitious’ financial rescue plan
By Jeremy Grant in Washington
Published: January 24 2008 03:03 | Last updated: January 24 2008 03:03
http://www.ft.com/cms/s/0/d4e9902a-ca1a-11dc-b5dc-000077b07658.html
“Frank said that lending cap might reach as high as $700,000 in areas with the highest home prices.”
This may work to our favor, HBB’ers. So now anyone buying up to $700K would have to fully document their income, make a down payment, qualify under income to loan ratios, etc. No bank will want to touch a non-conforming loan up to $700K with a ten foot pole.
It could bring “entry level” housing on the coasts to a screeching halt. And without entry level, the rest of the chain freezes up as well.
Given recent policy decisions from the GSE’s, I can’t see them touching jumbo loans with anything greater than 80% LTV. If so, this is a meaningless change. The people with 20% equity in their $700k homes already have fixed rate loans on good terms. How many new buyers have $140k cash to put down?
I agree with everyone above, between documented income ratios, FICOs and downpayment requirements… no one will qualify.
RE: Rep. Barney Frank, D-Mass., said negotiators also were near an agreement on an overhaul of the Federal Housing Administration that would make it easier for thousands of homeowners with ballooning interest rates to refinance into federally insured loans.
I’m reading FHA fixed rates for 30 year instruments @ 1/2% with valuation deficiencies to be structured as tax write-offs for the lenders.
Plus the guarantee you’ll never be evicted from your home.
Loans will also only be made to minorities and single women.
BSE(india ) is down 2%
Hang seng down 2%
75 basis pt cut lost its charm, they are looking at BB again
Dutch stock index up more than 10% from monday, all losses of the last three days except for a small gap down are fully erased now. Speculators and banks have learned nothing, there we go again thanks to the new and improved Bernanke Put
Just wonder when the doubt creeps back in the market again …
P.S.: and another all-time high for euro gold today, fourth day in a row that gold is making new highs in euros. Can’t be long before we see new dollar gold highs as well.
Gee, can I take my gold coins across the border and get the dollar exchange rate too for a little more profit or is that already figured into exchanging the gold here in the US (ie. are all gold prices around the world on par after currency exchange figured in?)
gold prices around the world are on par after currency conversion yes, exept for minor fluctuations (like 0.1%). Euro gold is making new highs this week because the euro lost some % relatively to the dollar lately; I’m sure dollar gold will catch up in a few days.
1 Euro = 1,4733 USD again, so it’s up against the dollar. Maybe, the fact that the ECB won’t cut rates for about 5 months.
yes, some recovery today - although if you look at gold, it only means that the euro is plunging just a bit slower than the US dollar … the currency depreciation race continues at even higher speed but most people don’t notice.
No they are not - some countries impose customs duties on gold imports, others don’t even permit importing of gold in bullion form.
Hamburger parity must apply to gold as well, no?
http://www.stlouisfed.org/publications/re/2004/a/pages/international_econ.html
it works just “as if” gold is another currency.
Except they aren’t printing any more gold…
Remember, its better because its mined….
For the benefit of younger HBB’ers, this is a reference to an old SNL skit that that made fun of Grape Nuts. The parody cereal was made of gravel and was called “Quarry”.
where are all the top callers in gold today?
They are still here; in fact some very regular posters don’t understand the nature of gold. It is not a commodity, it is the only real money in the world. I told this board a couple days ago that it was a screaming buy at $850. Hopefully some people got in.
Those who don’t understand the nature of a thing can’t understand what drives the price. Not to worry though, the same gold bears who have been calling a top here since 700 will be back calling a top when gold plummets from 1400 to 1300, ad infinitum.
Barclay’s Deux?
http://www.msnbc.msn.com/id/22818054/
Mea culpa. Should be Barings.
OK, book deal should be in the works. Ewan McGregor should be contacted for the movie role too.
Nice.
Do you really believe that nobody there knew what this guy was doing? I don’t.
Me neither.
This is generally tacitly or explicitly endorsed. It’s only when the SHTF that everyone steps away.
I knew people who worked with Brian Hunter at Amaranth. His trading was explicitly endorsed from the very top, and “risk management” was overruled for him.
Barings was very different. Computer technology was in its infancy then (in banks anyway), and it was easier to conceal trades.
These days, no way. Not even for Soc Gen.
Exactly. As long as they’re making money, everything is peachy.
Well, it’s the institutional mindset in general. He who makes the money calls the shots. (Even smaller firms have the same mindset.)
Basically, money-making becomes the arbiter of decision-making not common-sense or caution.
The attitude always is “Well, he made X last year. What are your qualifications for judgment? You only made Y.”
And so it goes.
and this is why the IBs are in the mess they’re in
It’s the most bizarre form of collective group-think I have seen (and I have seen a few!)
I have even seen normally sane smart people fall into that trap. They justify it as “having to sell it politically” but they never seem to doubt that it is fundamentally broken as a decision-making process.
One word: Cover-up.
It was just one lone trader that caused us to blow that $7.5 billion and we have got the situation under control now folks. Everything’s cool. One time event.
It wasn’t the complete shit portfolio of MBS, CDS, RMBS and other investments with alphabet soup names that are worthless and crap counter party risk on our hedges that might imply a systematic problem in the broader financial system. Nope. It wasn’t that.
How big of a line does a guy have to swing to burn $7.5 billion in the “plain vanilla” futures over the last two months? The markets only down say 15%-20%. This smells.
There’s never just one cockroach.
this smells … but who knows, maybe Societe Generale got an unexpected margin call when the market plunged this week
I don’t get it. Was he paid to play the bank’s money and lost? How is that fraud. The article does not state that he was trading for himself. The scapegoat suggested above sounds more believable. We fired someone, it’s all good now.
L’chevre’ scape’ as they say in French.
I was surprised to read in the Daily Mail article that Nick Leeson apparently is now the manager of a major Irish sports team.
A subtle reminder that Gold is the ONLY financial instrument that will appreciate, because of fraud.
Everything else will be painted with the broad brush of dishonesty.
look for the unnamed SG rogue trader to surface as manager for a top level sports team in a few months time …
Did I read that the sent him home??? On a yahoo post
ie shouldn’t they have sent him to jail
Question
If it’s fraud maybe they have an insurance plan to cover the losses. If it’s piss poor management, my guess is insurance won’t cover that.
P.S.: strange how the numbers keep climing, it started out as 2.5 billion loss yesterday and now the number is already 7.1 billion.
That’s just currency trade changes
Typical reporting, numbers are often poorly reported by the press on initial reports.
The 2.5B was from MBS, CDO and such. The $7B is on top of that…. And despite this $9.5B loss.. they managed to eek out profits of $600 million.
At least one of the newspapers is implying that size/timing of the Fed rate cut was in large part due to the market’s reaction to this, so they must mean that the Fed knew on Friday or Saturday. No idea if all that is true, but if it were it would seem to bolster the view of Ben B. as a premature jack-the-rater.
I have read many comments from traders who think the rate cut had extremely bad timing; the selloff would probably have exhausted itself by tuesday anyway. Would have been far more clever to surprise with a (smaller?) cut once the snap-back rally got going. Now all traders are anxiously waiting for the next big cut from Uncle Ben to keep them happy.
If it weren’t for that one durned rogue trader, the global financial economy would be purring like a pussycat about now…
Rouge eCONomy
I also think fwiw, which is nothing, that Pelosi really screwed up throwing back extension of unemployment benefits in favor of a lousy $300 rebate to lower income households. People who are currently on unemployment or whose benefits have run out need the money now, not in 10 weeks and even if the total amount “given” is nearly the same, smoothing it out would be more beneficial, at least I think so.
Money for unemployment benefits would almost certainly be spent and presumably on items more central to one’s survival versus just going out and buying more crap.
It could be a political calculation on her part that she’ll be able to come back and get the extension of unemployment benefits in a few months as unemployment increases.
I too was surprised by this. Perhaps they think that they will be able to get the extended unemployment benefits approved later in the not too distant future.
The rewards of underachievement
Under the deal, according to the aide, individuals would get a maximum rebate of $600 and married couples could get up to $1,200. The rebates would phase out for individuals making above $75,000 in adjusted gross income (AGI) a year or married couples making $150,000 or more in AGI.
http://news.yahoo.com/s/nm/20080124/pl_nm/usa_economy_stimulus_dc_7
… the absence of an equitable distribution of these funds is by default a tax increase on the middle class… meaning the proverbial policeman married to a school teacher with a couple kids, who are going to be making well over $75k.
So all this scheme is is yet another forced redistribution from those that produce the most to those who produce the least. The silent implication being that the latter group will be more prone to spend every last penny on whatever.
Kind of a cynical, condescending, even insulting attitude toward that group.
So what “income” numbers are they using to determine amount of a check? 2006 taxes? 2007 W2s? What?
I’m assuming they’re not going to wait for everyone to file ‘07 tax returns… Gotta rush this injection out so people can buy, buy, buy!!!
If you won’t borrow and spend
The Gov will force you to borrow it.
Yep I get killed at the top with AMT and at the bottom by missing out on all the perks.
Is this based upon last years income (2006) I hope so since 8 out of the 12 months I received my income tax free. I otherwise don’t think I would qualify due to I save too much and therefore make too much.
French Fraud…
http://www.ft.com/cms/s/0/bd9f55d6-ca4b-11dc-a960-000077b07658.html
“French Fraud”
Isn’t that redundant?
French Fried Fraud…..triple redundancy…
Freedom Fraud?
“A Dorchester woman facing eviction following the foreclosure of her home won a reprieve yesterday morning after dozens of activists gathered outside to impede a constable from removing her and her possessions.”
Is this not illegal? The article mentions that city councilors are involved and names names.
http://tinyurl.com/292he7
My Mom and Dad told me about this being done during the Depression.
Not to mention sheriffs too scared to evict on the idea of being shot by the owner. Sheriff’s would just not repossess houses on this premise and let the owner leave when they couldn’t even afford food or utilities (Grapes of Wrath style)
Ah, but that’s what we have illegal immigrants to do now that we don’t need them to build so much anymore.
There’s a lot more to this story than the article lets on. Remember, this is the Boston Globe which is owned by the New York Times, which has openly stated it’s position that the working middle class in this country should fund a bailout of deadbeats and losers (see yesterday’s editorial page on nytimes.com).
Apparently, the woman was (or is) a Realtor. I have more than a sneaking suspicion that she was a willing party to mortgage fraud and now she thinks she should get to keep the house without paying a dime? Not many people in Dorchester have the income to qualify for a $470,000 house.
These community activists that rush to defend her are actually operating contrary to the interests of these neighborhoods. These struggling neighborhoods need honest hard working people, interested in improving the quality of their surroundings. Not moronic, selfish deadbeats and fraudsters.
I really would like to show up at one of these foreclosure rallys with a huge sign that reads “Personal Responsibility”.
I have more than a sneaking suspicion that she was a willing party to mortgage fraud and now she thinks she should get to keep the house without paying a dime?
Additionally, she will collect a handsome settlement after she torches the house. Good job, community activists!
Remember, everyone: in order to demonstrate your social conscience, you must - Enable a Deadbeat Today!
If this becomes more common, I wonder what it will do to the enforcement of contracts in the US. What would risk premiums on home loans rise to?
My former landlord, who is a (high end) RE agent, decided that he did not like our rental agreement anymore and wanted me to sign another one. His secretary tried to explain the meaning of a signature but he did not get it. Seriously. I politely declined to throw away our contract, and gave written notice instead.
Solution: Hire protesters as loan workout specialists. Problem solved.
Watched the history channel this weekend. They said that during the depression that families in middle America were being evicted at the rate of 200 per day. I believe that it was profiling Okie’s.
Wait ’till she gets ‘tractored out by the cats’.
/tom joad
There are some stories about farmers rallying for each other to the point of physically intimidating those that showed up to foreclose. I believe one story I read spoke of a near lynching (or perhaps it was supposed to be just a close call warning to law enforecement–nothing like a rope burn around your neck to inspire a little “crowd enforced” compassion)
Dorchester??? The bank was doing her a favor by evicting her…
What I heard yesterday a.m. on the radio was that they were going to let her stay in the part of the house she lives in (it’s a two-family), and pay rent to the bank.
At the Mayor’s Conference in Wash, 250 city mayors are begging for Fed money to help in the RE downturn. Want it in 30 days…lower tax revenues, vacant houses, destabilized neighborhoods.
And, following Cleveland’s lead, Baltimore is now suing Wells Fargo.
http://www.nytimes.com/2008/01/24/us/24mayors.html
All the cities need to do is dust off their budgets from 2001/2002 and fund at those levels. If the department or service didn’t exist in 2001/2002 than it needs to be eliminated. Problem solved.
Hell, 2001/2002 and then increase at a rate of population increase, and you’re still problem solved.
We’d have to tear down a bunch of public works and default on the bonds.
That’s exactly right, Popper. I was very happy with the level of services in 2000 here in my part of FLA. And I don’t know what they did with all the money, because IMHO, services have declined since 2001. So going back to 2000 wouldn’t hurt my feelings.
Popper - amen to that.
Test
Here are the birthpangs of the real downturn. The wise predictions are all looking at 2011-2012 for the bottom and the entry point to go bullish on stocks and real estate. When the government’s grim reaper slashes, we’ll be in the middle of a living Poe story.
And, following Cleveland’s lead, Baltimore is now suing Wells Fargo.
And long term they’ll forget? Maybe. Or otherwise, its Fannie and Freddie forever.
I do think the conforming limit will be raised.
However, I also think higher downpayment requirements will be imposed by the various mortgage insurance companies. This is slipping out of the governments hands…
Got popcorn?
Neil
Neil,
did you read this suit. this is really a discrimination suit paid for by taxpayer money. (baltimore)
House resales due out at 10am. (fun)Yuns for brunch.
looking foward to that number.
i’ll bring the mimosas and bagels.
Yesterday’s Merrill Lynch forecast that housing would devalue 15% was just the appetizer.
And Yun nearly had an aneurism.
Hillary and Say’s Law
“Mrs. Clinton wants to intervene in the housing market by freezing interest rates and invoking a 90-day moratorium on foreclosures. The freeze, i.e., price controls, worked beautifully for Richard Nixon and a Democratic Congress in the 1970s, plunging the economy into chaos.”
“Keynesianism crashed in the 1970s, when the U.S. suffered slow economic growth and high inflation: “stagflation.” There was nothing in Keynesianism to explain this phenomenon. But there was an easy explanation available in classical economics, the simple principles that Ronald Reagan — who learned at an early age that he had to work to eat — understood very well. The so-called “supply-side” movement was nothing less or more than a return to these simple principles.”
IMO the kleptocrats (both sides) in Washington are going to try the old Keynesian methods again, trying to pump up the economy, and spending our (and our children’s) tax money until there’s nothing left. Already the Government’s unfunded liabilities are what? $55 Trillion? What’s a few more trillion?
http://online.wsj.com/article/SB120105051672608359.html?mod=opinion_main_commentaries
The so-called “supply-side” movement was nothing less or more than a return to these simple principles.
Puh-leeease.
Keynesian tactics might not work to re-right this economic ship (others with more knowledge can speak to that), but supply side is a ridiculous, not especially funny joke — the current administration has been supply-siding our working class, our middle class and our economy as a whole right up the poop-chute.
It’s Time to Save the Housing Sector
“What’s needed is a government body like the Home Owners Loan Corporation of the New Deal era, when America last faced mass mortgage foreclosures. The HOLC issued tax-exempt bonds, and used the proceeds to refinance distressed mortgages at low rates.”
“According to Alfred DelliBovi, president of the Federal Home Loan Bank of New York, writing in “The American Banker,” by 1935 the HOLC had refinanced 20 percent of all qualifying US mortgages. It saved close to 1 million Americans from foreclosure.”
“Today the problem is trickier, because so many mortgages have been packaged into bonds. But a new HOLC could buy back the bonds, at a steep discount, from large financial institutions that can’t find anyone else to purchase them. Most bondholders would gladly take the deal.”
http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/01/24/its_time_to_save_the_housing_sector/
Hmmm, a new governmental agency, not exactly what we need, but possibly the solution that our kleptocrats will agree on.
“But a new HOLC could buy back the bonds, at a steep discount, from large financial institutions that can’t find anyone else to purchase them. Most bondholders would gladly take the deal.”
So we are suppose to believe that a governmental agency will sell “tax exempt” bonds and then use the proceeds to purchase mortgages from current holders/infestors at some “discount”. How can the discount be determined when there is no market? And who the hell is suppose to buy the bonds from this new agency to get this thing started?
Got news for these clowns that all participants in a circle jerk need to have at least have one hand in order to pull it off.
PP, yeah I don’t agree with it, but what I meant to say,
“possibly the solution they’ll eventially arrive at”
No matter what, the responsible savers in this country will be paying while the people that were reckless will be coddled by our father the Fed Gov.
The Fed appears to be the “market” now, and is buying the bad loans at the discount window. Oh, sorry, they call it a loan at the discount window. Somehow, the time to repay the discount window loans keeps getting longer and longer.
What’s really scary is watching the govt and Fed panic, trying to save their jobs, and to reflate the balloon again.
Also ,it makes me sick that the government thinks it should provide a outlet for bad loans ,so the Lenders can get this junk off their books .IMHO ,a bad loan is a bad loan . I use to think that lowering rates to a fixed 3.75% for these bad loans was the short term plan of some of the government powers ,but I thought that plan would be a joke . Every day the government moves closer and closer to a plan along these lines . I ask myself ,”How can the government save this bust after the boom ?” The answer is to lower rates to nothing ,and take the bad loans off the books of the struggling Banks and Wall Street Mob Boys . The government knows that there will be public support for these bail outs if they market it right and sneak it on one piece at a time .
Right off the bat ,the powers were trying to paint this situation as a rescue plan for the poor FB’s and foreclosures are bad for the community .This approach does not address the true problems that created the fake real estate boom .This “Save The
Loans” mandate has a extreme cost that will be felt for decades to come in the form of inflation and higher taxes in the future .
I’m sorry ,but everyday I see more absurd proposals by Senators and Congress that spell out B-A-I-L O-U-T .
Exactly, Wiz.
If they are worried about foreclosures being bad for the communities, they could force the banks to off-load foreclosed homes within 60 or 90 days.
It’s only when f/c homes are allowed to sit for extended periods of time that they become a problem (squatters, drug addicts, etc.).
The SOLUTION TO THE WHOLE PROBLEM is to get things marked to market as quickly as possible and get the recession/depression over with more quickly.
The participants with 2 hands can help the others without hands. If there are too many with no hands then they need to get the octopus of gubmint involved.
I keep thinking about all those people relocating. It appears that “location, location, location” is BS fed by realtors to get you to buy ripoff houses when other locations appear good with houses at a fraction of the price!
What matters are jobs.
If retired, what matters are amenities that you care for.. Healthcare, family, friends, interests, etc.
Everything else is garbage.
If everyone has to sell before they buy, only renters and those with paid off houses can move. There are a lot fewer non-poor renters than there used to be, and a lot fewer older folks with paid off houses.
Why does it have to be paid off? Just have to not owe more on it than it’s worth.
I don’t know….my husband just checked out a lower price home this a.m. With railroad tracks in the back yard, a cement business across the street and the home right on top of the road in CNY where picking up a few acres isn’t a big deal, we just laughed. Location will always matter w/in the affordability calculations.
What do you think about the plan to have the government give businesses back all the corporate income taxes they paid from 2003 to 2007, based on their subsequent losses?
http://www.msnbc.msn.com/id/22808753/
In theory this is justified, based on the idea that subsequent losses proved the earlier profits were not, in an economic sense, real.
But the money to pay the businesses back will be borrowed, and tomorrow’s less affluent Americans. There will be higher taxes for them to pay, and public services and benefits they will not get.
Meanwhile, are the mega-wealthy going to be required to pay back the bonuses they paid each other based on those unreal profits? If my children have to give money back, why not them?
Every plan proposed by the goof balls in Washington, New York and from the Wanna be presidents is shifting the risk from businesses to the middle class and lower income population. I will be fine with that. Most mopes won’t know what hit them.
“Most mopes won’t know what hit them.”
But what about their children, and their as-yet-unborn future generations of children? I guess it will be up to HC to lead the charge to protect these groups from economic fallout.
Prof,
I am very cynical this morning. That the bread and circus crowd will ever get off their fat a**es to attempt to change the electoral process in this great country is not possible. As long as politicians can be bought, any meaningful programs are impossible. As Germany and the German population was held hostage by the Nazi party in the 1930s, so to will the American people be held hostage by unreasonable fears and expectations.
rest assured that things are not a bit better in Europe …
“rest assured that things are not a bit better in Europe …”
Have you checkout out our (U.S.) balance of payments lately? Also, I’ll bet you are not paying $1.1 trillion a year for ‘defense’. We have dug ourself quite a pit…
“rest assured that things are not a bit better in Europe …”
Well, each time I visit Europe I’m struck by how much better off the average European appears than the average American. And when I return I’m struck by how much American resembles the movie “Idiocracy”…
Gawddammit. The laughter you caused me to undergo just interrupted “Owe my Balls!!”
Go away - ‘baitin’!!
Idiocracy is a documentary.
Probably not a terrible idea as long as bonuses, dividends, and stock buybacks are deducted from the tax benefit but that probably wouldn’t leave much of a benefit.
“Meanwhile, are the mega-wealthy going to be required to pay back the bonuses they paid each other based on those unreal profits?”
But but but. “we ‘need’ the wealthy to give us our jobs”. lmao.
We do. Ever got a job from a poor person?
Yes. And they were much better tippers.
Only if the CEO’s and others give back all the bonus money they made
This morning Gasperino on CNBC was talking about what went wrong with the MBS ratings. What the rating agencies are saying to him is that they totally missed on the estimate of fraud. Fraud was assumed to be minimal, but really it was rampant.
AND, when the fraud deals go into foreclosure, recovery is about 30%.
As I have been saying for a year, it isn’t JUST the number of foreclosures. It is also the amount lost on each.
Assumption was 2 million foreclosures with a loss of $20K each = $40 billion.
10 million foreclosures with a loss of $200K each = $2000 billion… also known as $2 trillion.
Paladin will get the fraudsters….
I don’t understand why the Wall Street Banks and Lenders aren’t forced into taking out long term loans from the government (or other parties) to keep themselves solvent while they write down the losses
.Why can’t Lenders spread out their loss for years and that way the taxpayers get paid interest for bailing them out ?
Why don’t the banks just give low fixed interest rates incentives to first time, or qualified buyers, that are willing to take foreclosures off the books,(at the lenders expense ).
The problem is that many people didn’t really want the houses they were purchasing for real use . I have never seen so many people have such short term goals with real estate, while expecting big returns .It took me five years to start coming out ahead on the last house I bought and I never dreamed of selling before that .This is a big joke bailing out people who held property for such a short time ,or pulled out money to buy crap .
I remember during ownership of my last house the market tanked for a while and I just ignored it because I could afford my payment .What gives the government the right to bail out people who were fraudulent on their loan applications, or it was lender fraud ,who were in la la land thinking would cover their fraud by appreciation ?
I sure hope helicopter ben nor the gubbermint interfers with the free market and attempts to prop those insanely high prices up for decades like what happened in Japan. 20 years later, prices are still going down and theres no rust belt for affordable housing like we have in America and where the smart people are relocating to(self employed so it don’t matter)
If we keep letting those FB’s refinance, they are going to stay in their house as long as their mortgage is equal or cheaper than rent then walk away anyway when they can’t or won’t pay any longer.
I am thankful for the rust belt that gives us first time buyers a chance to own a house(much cheaper than renting anywhere) I would rather pay $300 a month mortgage to own in NW pennsylvania than rent at $1200 a month in a “desirable” location thats a ripoff anyway. If I pay high rent, ill never have money to save for a downpayment. I would rather buy a mobile home at this point for a fraction the cost of rent. I can get a nice 2/1 trailor for $5000-10000 and either pay low $200-300 monthly lot fees or own cheap land up north.
I have been suggesting others to live on the cheap so they can save up a large downpayment or buy a house in cash. While renting is cheaper than owning in some locations, rent can be high enough to leave you with little savings left.
I know that mobile homes depreciate, but houses are depreciating for the next several years and would you rather lose 50% of $10,000 or $250,000? Or pay $1200 a month in rent instead of $300 a month for a cheap mobile home ? Or why not just relocate like so many others are doing?
Sorry for the long rant but those insane prices make me mad. I hope no one catches the falling knife and I hope the free market is allowed to let prices return to pre bubble fast.
Bye Fl,
I kind of think that a $5,000 mobile will not depreciate very much.
Hey Blue, I checked Zillow again(Pittsburgh) and it’s weird. Some of the houses aren’t overpriced, others are more than 100% overpriced! For Plum Boro, prices are all over the map and range from $50 to $100+ a square foot. Sold prices range from under $50k to over $200k and some of those $200k homes aren’t that fancy, around 2000-2500 square feet.
It’s hard to make heads or tails of this whole mess with such a huge disparity. 1998 prices are anywhere from 20% to more than 50% off 2008 prices depending on the house. Could I assume the cheaper houses are fixer uppers?
Anyone who live(d) in Pittsburgh, could you shed some insight? How were prices back in 1998 or before the bubble?
I do not want to catch a falling knife and what seems “cheap” compared to those $250k+ south Florida houses could still be overpriced(to a lesser extent than Florida?)
I could save the $1000+ itll cost to make an extra trip and visit Pittsburgh if there is no sense buying there now. Ill just go straight to Oil City/Franklin and spend up to $25k on a starter house. It’s as much as 3x cheaper than renting so even if that $25k house drops to $10k, ill be ahead over renting within 3 years.
I understand it’s smart to rent if it’s cheaper than owning but when it’s as much as 3x cheaper to own than rent in NW PA, there simply is no sense renting. I just want to minimize my losses by buying the cheapest half decent livable house and sit tight for a few years at least. I will then be able to relocate anywhere and save a fortune.
At this point, would I be wasting my time to consider any temporary location besides NW PA? I don’t have this “entitlement” sense and I am willing to live on the cheap and ride out this stupid bubble.
Bye Fl,
You’re barking up the wrong tree. I don’t see buying a house as “living on the cheap” just now. I don’t see borrowing $ for anything as “living on the cheap”.
If you want to wait out the storm and be flexible in two or three years, find a cheap rental in or near a little village away from the developments and work and save and keep your head down. The rent on one of those $10K mobiles is very low and you can move whenever you like. The redneck neighbors will tell you all you need to know about the community and help you “get along”.
The vast disparity in housing prices in a region is due to red hot development in some areas and cold grey decay in others. Never buy a mail order bride.
The 25K houses you are seeing are probably 40’s and 50’s builds. Don’t forget to tack on all of the repairs you are going to need to do in order to make one of these places comfortable.
Mobile homes are built better than the houses in the last decade.
“Thank goodness I have a lot of math, cause thru the clever use of differential equations, I can calculate that the Fed has only four more Shock and Awe 75 bps cuts, plus a Shock (but no Awe) 50 bp left.”
Barry Ritholtz
Excellent — anyone who is smarter than a fifth grader can figure out just how much powder (other than the verbal variety) remains in the Fed’s keg.
You are assuming they won’t cut rates below 0%…
How would that work? (That is, how could nominal rates go subzero?)
Easy. All institutions holding savings accounts, brokerage accounts, etc, has to report the average daily balance for the year to the IRS. You get to enter this amount on a tax form, and they apply a 1% tax on your savings.
Of course, interest rates are already well below 0%, because of inflation, ah yes, the old hidden tax. The war on savers continues…
Inflation for household goods and food is really picking up ( do the shopping and cooking for a household of 7). I am still a saver, but just doing it in canadian dollars and euros.
You can’t take nominal rates below zero because everybody will pull their money out of the accounts.
“everybody will pull their money out of the accounts” — that possibility is also subject to change
Bernanke’s SPECIALTY is how to stimulate an economy even when interest rates are already at zero. Here’s a speech he gave on it in 2002:
http://www.federalreserve.gov/boardDocs/speeches/2002/20021121/default.htm
Indeed, under a fiat (that is, paper) money system, a government (in practice, the central bank in cooperation with other agencies) should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest rate is at zero.
What I don’t think people realize is that the Fed/gov’t can together essentially print as much money as they want. Gov borrows, Fed buys the debt, ad infinitum. Deflation in the short term is definitely possible, but long term, there’s just no way we get a Mad Max environment like some are worried about. There will be pain, but the economy won’t grind to a halt; not even close.
I hear ya, people will wait years to sell there homes now, it wont be unitl days on the market equal two years that prices will fall like a rock.
When I buy a home it wont be for a investment purposes.
It’s interesting that after one rally of the market, the media has forgotten about the housing wreck- all is well again! I was happy to just see on CNBC comments about massive mortgage fraud and the fact that banks will only get back 30% of the loan value on average.
The fed can lower rates, announce temp bailouts, etc. but teh elephant is still going to be in the room: a lot of mortgage fraud, tapped out consumers, and Lord knows what kind of crap financial entities are still hiding in the books
“I was happy to just see on CNBC comments about massive mortgage fraud and the fact that banks will only get back 30% of the loan value on average.”
Wouldn’t that mean house values will have to come down 70% (more or less)? I’m oversimplifying perhaps.
There are a lot of costs involved in foreclosure. Back interest, back taxes, repairs to get the house ready to sell, Realtor fees if they have to use one to move the house, etc.
Usually, in a foreclosure they figure these fees are $20K or so. BUT, usually they just sell the house to someone else at the auction. So, the bank doesn’t pay most of these costs. But now, THEY are having to eat these costs.
SO, no. It doesn’t take a 70% drop. It takes 20% fraud cash-back at closing, a 30-40% drop in market, with 10% in closing costs, 5% in back taxes/HOA fees, 10% in legal fees, months in carrying costs, repair costs…. on and on….
http://tinyurl.com/22wwgv
It’s spreading. Some of the “it’s different here” markets have seen large increases in inventory:
Charlotte: 19%
Raleigh: 24%
Portland: 36%
Seattle: 50%
A good quote from Phoenix:
“For now, people trying to sell homes “don’t seem to have a prayer” in competing with lenders offering foreclosed homes and builders dumping excess inventory, says Don Schriver, owner of Assist-2-Sell Good Sense Realty in Buckeye, Ariz., a suburb of Phoenix. He points to a four-bedroom house in Buckeye that was built in 2005 and sold in August 2006 for $775,000. After a lender acquired the home through foreclosure last year, it sold again in December for $380,000.”
From the Deep South — it’s not different here. I just returned from two weeks driving through Alabama and Georgia. Not as much panic as here in Florida, but panic is palpable nonetheless. I really, really hate the “New Price!” sign riders. Prices are coming down in the way many of us predicted — newly-listed properties are at a noticeably lower wishing price than older listings. the ones for which the owners hopelessly cling to their perceived entitlements.
Saw one small neighborhood of very large $700K - $1M houses on 3-acre lots in the far exurbs of Atlanta - of the four spec houses, all built by the developer, one has an “under contract” rider and I’ll be surprised if it closes. This is a treeless small subdivision out in the sticks. There is an abundance of unbuilt land in Georgia and most of it has nice trees in place. These houses have been on the market for about a year. I follow the builder’s inventory and he has one other spec house in a $500-$700K neighborhood that has been on the market for 18 months or more and I believe it doesn’t sell because the floor plan sucks.
While the PTB may wish for a long, gradual decline in housing prices, I don’t see it that way. The last time we had such a decline, we didn’t have the Internet telling us the comps and tax records — buyers did not have all of the information they need to make the best decisions. Now that such information is widely available, buyers and lenders will see trends in comps and the march downward in prices should be on in earnest.
It was an odd feeling to see a house at a price that “felt fair,” only to consider that it probably will go noticeably lower and that it therefore makes no sense to buy now. Renting doesn’t cost me any sleep at all.
Was laying in bed wishing I could sleep more, thinking.
In Atlas Shrugged, Ayn Rand uses the metaphore of an old oak as symbolism for a mixed socialist-capitalist economy. Her heros are climbing on an oak tree. The go out onto a large limb, and crash, snap, crash, the limb breaks off and they fall. They look at the trunk where the brach was, and it is a hallow shell. The bark and and thin layer of wood under that makes it appear that the tree is healthy, but really the core has been eaten by insects and rotted away to nothing.
Is there not a better metaphor for our economy?
It looked healthy as can be with ever rising productivity, but most of that was wages not keeping up with inflation, which was really just consumers getting over their heads in debt.
We had insects known as equity managers eating the core out of the economy, and paying low tax rates for the great service they were doing for the country.
We had rot in the form of outsourcing and insourcing as the real industrial base was shipped overseas and the few “making stuff” jobs that couldn’t be shipped over seas were given to illegals.
Now… moving on to the stimulus package.
IMO, it will do more harm than good. WHY?
I see 3 groups of people:
1) People without debt. They will save this money, not spend it.
2) People with managable debt. They will use the money to pay down debt.
3) People over their heads. They will spend the money since they probably plan walk from the bad debt.
Well, right now, it is the 2) group that is paying interest which is being by the banks to cover losses from defaults generated by group 3).
Give me the money, I pay down my debt, and the banks make less revenue needed to cover the losses from the defaults.
Am I going to go spend this money at the beginning of a recession???? HECK NO!!!!
And, as I typed that, new proposal on the stimulus came out. $300 per working adult and per child. Only for individuals with $75K or less incomce and couples under $150K. And must have more than $3K of earned income….
Let’s see… that gets me $1200. Sweet! That is 1/3rd of my BoA credit card balance!
Am I the only one that plans to spend the $1200 on trees for my yard?
$1200 free money!!!! Maybe I’ll buy my husband a beater so he has something to drive on the weekends. (He has a pretty nice company vehicle on weekdays–upgraded every 2 years)
Or is this just a loan on our 2007 taxes?
Hey where’s Al Gore these days? (yeah I know, Davos)
How come he isn’t taking credit for discovering the housing bubble and credit crisis? After inventing the internet and discovering warming, he should be in line for his next Nobel - this time in Economics.
Yensoy, Excellent point !!
There goes gold over $900.
Housing Slump
Starts to Hit
Stronger Cities
Supply Grows, Prices Weaken
In Northwest, North Carolina;
Manhattan Looks Vulnerable
By JAMES R. HAGERTY
January 24, 2008
“…For now, people trying to sell homes “don’t seem to have a prayer” in competing with lenders offering foreclosed homes and builders dumping excess inventory, says Don Schriver, owner of Assist-2-Sell Good Sense Realty in Buckeye, Ariz., a suburb of Phoenix. He points to a four-bedroom house in Buckeye that was built in 2005 and sold in August 2006 for $775,000. After a lender acquired the home through foreclosure last year, it sold again in December for $380,000….”
wsj
http://tinyurl.com/22sljb
“Let’s see… that gets me $1200.”
That gives me nada, zip, nil. But that’s ok because I’ll make up the difference through investments in a tax deferred account and cut back to zero on discretionary spending. Last year I spent on things because the price was right (like Bose wave II) but this year I got my fishing license and will spend time in the Sierra’s fishing and camping out.
PERSONAL FINANCE
Homeowners deluge mortgage brokers
The Fed’s big rate cut translates into cheaper mortgages and triggers a bonanza of new business for lenders.
By E. Scott Reckard and Kathy M. Kristof, Los Angeles Times Staff Writers
January 24, 2008
Homeowners deluged mortgage brokers with calls Wednesday, hoping to take advantage of sharply lower interest rates to refinance into cheaper loans.
Countrywide Financial Corp., the nation’s biggest mortgage lender, said call volume jumped by at least 50% over last week. Independent brokers such as John West of Orange County also said their phones didn’t stop ringing.
“In 20 years in the business, I have never seen rates fall this far this fast,” West said. “I think lenders are really going to have to gear up. None of us were ready for this.”
http://www.latimes.com/business/la-fi-refi24jan24,0,2796080.story
R.O.I.
By BRETT ARENDS
Now Is the Time to Refinance
January 24, 2008
If you haven’t refinanced your mortgage recently, do it now.
http://online.wsj.com/article/SB120113218983711667.html?mod=googlenews_wsj
“These will only turn out to be reasonable investments if we actually see deflation — an era of falling prices. That is possible, but very unlikely.”
what goes up must come down. oil is the trigger.
What’s Next for the Banks?
By ANDY KESSLER
January 24, 2008;
(Kessler ran a hedge fund)
“…My view is that firms that successfully combine banking and investment banking will walk away with the prize, by being able to offer a full range of services to clients — short-term loans against assets or receivables as well as bonds and equity for long-term projects, the kind of underwriting and trading that requires large amounts of capital. The inevitable consolidation that should have occurred after Glass-Steagall (the 1933 law that separated banks and investment banks) was repealed in 1999 had been on hold while everyone chased easy profits. But now the shakeout is here.
Goldman Sachs will own a bank, maybe even Citigroup (Goldman’s $85 billion market capitalization might be able to swallow Citi’s $125 billion value) and strip it down to what it needs. JP Morgan should reunite the House of Morgan by merging with Morgan Stanley, and become a full-service powerhouse. But JP Morgan could buy Merrill or Lehman or Bear Stearns instead. Bank of America will merge with who’s left. …
…Expect consolidation to start now. The real winners on Wall Street will be the ones with huge stockpiles of capital who listen to the market, and who are fleet of foot enough to smell out and deploy their capital creating instruments that global growth companies need, rather than false profits from eating their own sausage.”
http://tinyurl.com/yrgcah
Andy Kessler made me more money than anyone I can remember. I bought fiberoptic and bandwidth stocks in 1997 and 1998 after reading his recommendations on that. You know the rest of the story.
Must be talking about gold bulls here…
January 24, 2008 9:34 A.M.EST
BULLETIN
Bulls maintain their footing
http://www.marketwatch.com/tools/marketsummary/
dumped my ES from yesterday. No need to be greedy, still have many index calls.
You hold ES overnight? Too dangerous for me.
I can trade all night.
Damn that sounds like fun.
“Bull on a hot tin roof…”
We’re mear 1350 which was support for about 15 minutes on the way down.
48 points on BIDU in less than one day? Buh bye.
Isn’t it great to see how effective the Fed’s intervention has been in calming the financial markets?
It’s been a trader’s fantasy this month.
well, you know that Goldman Sucks thrives on volatility lately; always nice to have that special relation with the government.
The market is behaving “as if” a hard floor is in place at the opening bell levels. Even the gloomy news on existing home sales was not enough to penetrate the floor.
I am thinking maybe this floor will stay in place through some time after next Monday. It looks bad if the stock market is tanking while the CIC is giving a speech. Thoughts?
WIRED MAGAZINE: ISSUE 16.02
Culture : Culture Reviews RSS
Why Things Suck: Credit Cards
Good for my kids and G’kids to see this article.
http://tinyurl.com/372sqh
http://hud1.towerauction.net/cgi-bin/e10_select_property.cgi?id=372294283&office=e10&state=NY
In the neighborhood we lived when I was little, off Bailey in Buffalo. $3,500. Goes to show “you can never go home”! My dad sold his for $6K back in 1960.
I feel really sad about Buffalo and I hope the city begins to come up with some ideas about how to turn things around.
I wish I could say my hometown, Portsmouth, NH, was seeing reductions. My parents bought in in 1974 for $24,500. When I pull up Portsmouth listings I see most of what’s available is condos, I suppose because no one can afford SFHs anymore. Most SFHs I pulled up appeared to list between $500 - $700k. (Trulia has Portsmouth avg listing price at $552,500) To boot, the condo’s property taxes were not that much lower than CNY.
I guess I won’t be going home either.
We screwed the pooch royally…
Buffalo, Cleveland and other spots along the Great Lakes were vibrant, happening cities, until the St. Lawrence Seaway was opened.
Their reason for being was no longer, once there was access to The Atlantic Ocean.
In the late 1980’s Quagga and Zebra mussels from a Russian ship invaded, and now every last bit of the Great Lakes are full of em’.
The Colorado River and 7 California reservoirs are more recent victims.
It’s best not to fool with Mother Nature…
Economic Slowdown Could Widen U.S. Budget Deficit
By Michael M. Phillips
Word Count: 615
http://online.wsj.com/article/SB120109522024409773.html?mod=hpp_us_whats_news
10:00U.S. Dec. single-family home resales fall to 10-year low
10:00U.S. Dec. existing-home median price down 6% in past year
10:00U.S. Dec. existing-home inventories fall 7% to 3.90M
10:00 Median single-family price falls for 1st time in 40 years
10:00U.S. Dec. existing-home sales weaker than. 4.98M expected
marketwatch.com
I read that 4.95M was the expected number.
Nice shot of Dubya w/ SD mayor Sanders here…
Deal Near on Economic Rescue Package
from The Associated Press
http://www.npr.org/templates/story/story.php?storyId=18015172
P.S. This appears to be the story from which TxChick extracted info on the plan to raise the GSE conforming loan limit to $700K.
I am wondering if this might not be a perfect opportunity for deep pocket infesters from foreign lands to swoop in and snap up some bargains in the U.S. residential housing market before reflation gets into high gear?
Is there some reason you think foreign investors are dummies?
First, why would they want to buy anything in the US when it will be cheaper in the future. And why would they want to tie themselves to a sinking economic ship.
They’ll stand back and wait for the dust to clear. The example of Japan and the long years of that nation’s re deflation should be clear in their minds.
You forget that as opposed to the US Federal Reserve, Japan has a “no bubble” mentality and aggressively raised rates in the early ’90s.
As inflation accelerates in the US (an evil to minimize damage to the financial system), perhaps foreign mopes will buy.
Or to put it another way, today I can short the US T and use the dollar for a nice “carry trade”. Whee. Sharpe ratio 1.27
Next week when the Federal Reserve lowers by 50 basis points, if prices are the same, the Sharpe Ratio goes to 1.29
That is real moneys. I can make over 12%/yr sitting back and doing nothing. More Leinie’s bartender.
Explain zackly how you do that for those of us who are just rug merchants like myself. I’d like to put some of my 401k folks into that strategy so I don’t have to baby sit them anymore.
Tx, If you collect interest on short positions then it is worth doing. When I short a stock or Treasury bond I can buy Treasuries, T bills, foreign currencies, foreign bonds and equities etc. If you cannot collect interest on a short position it is not worth it.
I don’t think all foreign investors are dummies, just the ones who would think now is a good time to buy in the U.S. (And I assume this is not an ignorable number…)
Deal reached on the stimulus package. $300-1,200 in rebates. So that couple that already went out and spent the $1,600 that was first reported will now only get $600…maybe $1,200 if they have at least 2 kids.
Gotta wonder how many people actually spent the rebate money they didn’t even have yet.
I did (8800GT / P35 / Lian Li/ Vista Home Premium from newegg)! But as a single guy renter in Silicon Valley I can afford it at least. Also it was a capital expense for my hobby game dev.
hahah. My hobby is flying around the world with that Microsoft flight sim software. Talk about a time waster but I love it.
My hobby is sitting in “The Dew Drop Inn” with a few pints of Leinie
Big Butt, a cue stick and an inebriated opponent in a game of snooker.
Alas the youth of today, can drink alright but lack the skill to shoot anything but 8-ball.
I just received parts for my new build from Newegg. E6700 I had lying around (”loaner” from ex-employer), plus $687 incl taxes. MS Flight Simulator is awesome and is part of the plan for this XP/Ubuntu/Leopard triple boot.
Have to try Xplane though.
are you on one of those virtual airlines? I could spend 24 hours a day doing that.
No, didn’t dare try that - I’d end up spending too much time on it. Gotta say flight simulator is one of the rare video games that is actually realistic fun and not fantasy fun.
My wife works with a doctor that has his own (really nice) plane. It’s fly by wire. He can’t find people to fly with (his wife is afraid to fly in a small plane) so he is more than happy to let me take short flights with him.
Flying over Zion and the Grand Canyon/Lake Powell area is pretty spectacular. We once flew to Sedona for lunch.
He was amazed the first time I took over the controls with how relaxed I was and how easily I controlled the aircraft. The reason. It was no different than the flight simulator PC program my father had when I was younger. The joy “stick” is the same and the front gauge panel is computer simulated.
No offense to any “real” pilots out there. I’ll bet any of you who are good with the computer simulaters could fly the real deal, with supervision of course, too.
I do that with Google Earth but the photography is kinda patchy.
I kill time by using REALFLIGHT remote control simulator. I fly real aircraft for a living so the challenge isn’t there and it is more like being at work than I care for. Flying a remote control aircraft is much more challenging and fun for me.
TxChick, I have seen you have Gymnast in your e-mail, How long ago or are you still involved.
Mine is going to go toward travel, beer and maybe food for when txchick puts on her TA seminar this year.
Two More Major Apartment Building Owners Face Pressure from Creditors
“Just one month after the impending collapse of MBS Cos.’ Texas apartment empire came to light, comes news of two more major multifamily owner/managers trying to steer away from loan defaults and foreclosures.
Atherton-Newport Investments LLC, a real estate investment and development company in Irvine, CA, controlling about 5,000 units, filed for protection under Chapter 11 of the Federal Bankruptcy Code in the Central District of California, Santa Ana Division.
And in Florida, student housing apartment owner Booth Companies in Tallahassee has defaulted on numerous loans backing at least 18 complexes near Florida State University in Tallahassee. The portfolio includes about 2,400 units…
http://tinyurl.com/2u3q4z
Costar
took off the bidu, rimm, goog, aapl beta trade ndx 1820ish. too much, too soon.
still stand by the 980 gold target (with a shot at 1150), intermediate term. gold up $50-55 from lows. silver holding strong too. silver should go over $20 intermediate term.
i am thinking gold going to 1000.00 then a blow off to 1100.00 followed by a correction to the high 800’s.
I am thinking whiplash.
Historically, the situation with Gold is very similar to the early 1970’s, when it quadrupled in a very short time from $35 to $150.
BULLETIN
U.S. FIXED MORTGAGE RATES AT FOUR-YEAR LOWS: FREDDIE MAC
Lennar’s fourth-quarter loss widens
By MarketWatch
Last update: 7:51 a.m. EST Jan. 24, 2008
http://www.marketwatch.com/news/story/lennars-fourth-quarter-loss-widens/story.aspx?guid=%7B6F09D033%2DFA56%2D4ED5%2D8484%2D9C5D72C2365A%7D
Comments
There are 2 comments
by Nigel 40 minutes ago
OK, 4th quarter loss was $7.92 a share, whereas analysts polled by Thomson Financial expected, on average, a loss of $1.65 a share. WHAT?? With such unwarranted optimism, it’s insane to expect homebuilder shares to rebound.
by cekim 28 minutes ago
“it’s insane to expect homebuilder shares to rebound.” -NIGEL
Insanity might explain the rise in home builders over the past 3 days…
Like the legendary Clayton Williams said, “if it’s inevitable, why not lay back and enjoy it.”
lol
You realize he was referring to rape, right?
Yes, after 30 years, I can see the humor.
Bobby Knight said that too…about being raped.
I can’t wait for Big V to chime in
More stimulating maths:
$800 X 114 m U.S. hhs = $91.2 bn
$145 bn - 91.2 bn = $53.8 bn extra for what?
Tell Congress how you would spend $800 tax rebate
By Jennifer Waters, MarketWatch
Last update: 8:46 p.m. EST Jan. 23, 2008
CHICAGO (MarketWatch) — As President Bush and congressional leaders move closer to carving out an economic stimulus package, the debate grows louder over how much of a help it will be to consumers. MarketWatch wants to know what you think.
The president has proposed a $145 billion package that would consist of tax rebates and breaks as well as extended unemployment benefits, food-stamp benefits and business-tax relief for investments in new equipment.
http://www.marketwatch.com/news/story/tell-congress-how-you-would/story.aspx?guid=%7B54A18608%2DA62D%2D4A7B%2D9405%2D8AF81FE0B85D%7D
That story is out of date and incorrect. Rebate now only $300-$1,200 and big tax cuts for businesses. No extended unemployment benefits or food stamps.
I can’t believe the Democrats caved in on that. Michael Moore will have plenty to say.
$800 Gift Card
http://www.stockmania.com/index.php?showimage=140
That is a weird-looking helicopter!
That is the Mothership. She controls all.
Unidentified Financial Objectives?
touche
DCB or bottom for l-t T-bond yields?
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=TNX&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=18&freq=7&startdate=&enddate=&hiddenTrue=&comp=tyx&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013
I’m going into that Rydex fund Hoz mentioned.
Which Rydex fund?
http://finance.yahoo.com/q?s=RYJUX
This one? Rydex Inverse Gov Long Bond Strategy Inv (RYJUX)
What no faith in the government throwing money out of helicopters? I think alot of cash has fled to treasuries for safety but will find a better place in time. This fund might do very well. Same general Idea is why I keep Gold miners. Good luck.
Shhh!!!
Looks to me like the DJIA is a far better bet. The trend is your friend.
http://finance.yahoo.com/q/bc?t=my&s=RYJUX&l=on&z=m&q=l&c=&c=%5EDJI
Freddie Mac’s unpaid principal balance rises
By John Spence
Last update: 8:50 a.m. EST Jan. 24, 2008
http://www.marketwatch.com/news/story/freddie-macs-unpaid-principal-balance/story.aspx?guid=%7B5DFFEABF%2D9E89%2D41FE%2DB0E5%2DC696CCB6518C%7D
BULLETIN
TENTATIVE DEAL REACHED ON TAX-REBATE STIMULUS: REPORT
CURRENCIES
Dollar down after home-sales data disappoint
By Lisa Twaronite, MarketWatch
Last update: 10:46 a.m. EST Jan. 24, 2008
SAN FRANCISCO (MarketWatch) — The dollar was down against most major counterparts Thursday, pressured by weaker-than-expected U.S. existing-home sales data.
http://www.marketwatch.com/news/story/currencies-dollar-dips-vs-most/story.aspx?guid=%7B1E400A5F%2DB888%2D46F5%2D8298%2DD62218719BE8%7D&dist=hplatest
I don’t get it.
“weaker-than-expected U.S. existing-home sales data.”
How is ANY strength in this market expected?
Bob Pasani making a fool of himself…
Months’ supply of housing coning down slightly…
YEAH moron… That happens EVERY WINTER!!!!! In fact, the drop this year is much less than usual. Let’s see what happens in March-April????
Yep, he was pretty excited about it, too.
ECONOMIC REPORT
Existing-home sales fall 2.2% to 4.89 million
Median 2007 sales price of single-family homes falls for 1st time in 40 years
By Rex Nutting, MarketWatch
Last update: 10:15 a.m. EST Jan. 24, 2008
WASHINGTON (MarketWatch) — Resales of U.S. homes fell 2.2% in December to a seasonally adjusted annual rate of 4.89 million, the lowest in nine years, the National Association of Realtors reported Thursday.
Resales are down 22% compared to the previous December and are down 32% from their peak two years ago.
http://www.marketwatch.com/news/story/existing-home-sales-fall-22-489/story.aspx?guid=%7B5A97DE86%2DD04F%2D4822%2D9D0C%2D84F98D35C29C%7D
Instead of an $800 tax rebate I had been advocating an $800,000 tax rebate, because then everyone would be rich and nobody would be upside down on their mortgages anymore.
I am shocked to find out that the tax rebate is only going to be $300. With gold going up and the rebate going down; instead of an ounce of gold I’m only going to be able to buy a 1/4 ounce of gold.
By the time this deal is done maybe this tax rebate will buy me a dozen eggs.
ain’t that the truth. I’m going to put an ad on Craigslist to give mine away to the person who emails me the best verifiable sob story.
“Instead of an $800 tax rebate I had been advocating an $800,000 tax rebate”
I agree except let’s make it an even million. Then everyone will be millionares and we will all live happily everafter.
Looks like an increase to the conforming loan limit might be a done deal:
http://biz.yahoo.com/ap/080124/economy_stimulus.html
“Both sides agreed to allow Fannie Mae and Freddie Mac — government-sponsored companies that are the two biggest U.S. financers and guarantors of home loans — to buy loans much larger than the current $417,000 limit, aides and lobbyists said. Frank said that lending cap might reach as high as $700,000 in areas with the highest home prices.”
This makes me sick, not one of these jackass’s in congress other then ron paul had the sack to fight this, BS, the GSE are’nt solvant as it is…
i remember in ‘87, there was that huge drop on black monday. we stabilized for 3 or 4 days and the next monday, we got whacked again. maybe the re-tests happen faster these days. but this recent drop isnt even on my list of top 10 drops. let’s see a 2500 poiint drop and you have my attention. fwiw, i think this market is very different than ‘87 or ‘73 or ‘98 for that matter. FAR FAR more leverage in the markets for one…
it isn’t on anyone’s list but it’s the largest drop since the spring of 2003 and you have a whole crop of bull market geniuses who were not prepared nor have any experience with support failing. Some of these manage OPM in case you hadn’t noticed.
and it is only the 30th largest bounce back….but it was still fun..
(percent bounce back; 2nd in nominal terms).
“…The Fed was on a tightening mode prior to the equity market correction of October 1987. The federal funds rate (Historical Changes of the Target Federal Funds and Discount Rates - Federal Reserve Bank of New York) had been raised to 7-1/4% from 6-3/4% during April-September 1987. Following, the sharp drop in equity prices on October 19, 1987, the federal funds rate was lowered to 6-3/4% during the next few weeks and by early-February 1988 the federal funds rate was at 6-1/2%. The peak to trough decline of the S&P 500 was 33.5% and the Fed had lowered the federal funds rate 75 bps before resuming tightening in late-March 1988.
Chart 1 Standard & Poor’s 500 Stock Price IndexDown 33.5%: Aug. 25, 1987 (Peak) - Dec. 3, 1987 (Trough) Source: New York Times /Haver Analytics
The S&P 500 peak in 2000 was on March 25. The peak to trough decline was 49.1%. The Fed had raised the federal funds rate to 6.50% by May 2000. In January 2001, the Fed implemented a surprise 50 bps cut of the federal funds rate, which was followed by aggressive cuts such that the federal funds target rate was 1.75% in December 2001. The next move was in November 2002 when the federal funds rate was lowered to 1.25%. The trough of the S&P 500 was in October 2002. The federal funds rate was down 525 bps by November 2002 when equity prices started advancing again….”
Northern Trust Bank
Jan 23, 2008
I agree we have far, far more leverage and we are WAY overdue for a correction. I think that 4Qtr earnings are going to suck. We are about 1 major bad earnings report away from being whacked again.
ah….you forget curbs my friend. and back then the markets were less automated. a relative close to the scene told me back office spent days processing sell orders.
“The Realtors group’s affordability index in November and October was at the highest level in more than two years.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=abeWJq6XfCdU&refer=home
So it is only as unaffordable as it was in 2005? And how did their convenient shift of assumptions in how much people should have to pay for housing affect this?
Let’s say the bubble began after 2000. Wake me up when affordability returns to the average level of the previous 50 years, not to the level of 2005.
anyone here want to take this womans advise????
Whether you’re looking for an investment property or a place to live, here’s a look at the cities you should seek out and avoid in 2008.
http://finance.yahoo.com/real-estate/article/104278/Best-and-Worst-Places-to-Buy-a-House;_ylt=As5g_I7KIZYISCvscIjvzLK7YWsA
Danielle Babb is an experienced real estate investor and specialist on the use of technology and real estate.
She grew up in Riverside and is probably in her 20’s! doh!!
Palm Beach? Or Tampa as an alternative? If she doesn’t have real estate she’s trying to unload here (and if she isn’t trying to reinflate the bubble), then she’s absolutely insane. The name Yahoo is definitely appropriate.
Just returned from a whirlwind trip to the high Sierras (Sonora area) to pick up a rescue dog and visit long-lost friends. Their house is very nice, on 3 acres, well-built, 15 years old, and they paid 450k cash 4 years ago. They sold a small 60s house in Palo Alto (they owned for 25 years) and banked the other 500k for retirement. They felt they’d got a real steal at 450k, and my knowledge of Calif. prices isn’t enough to know one way ot the other, but knowing that was the height of the bubble, I suspect they paid too much.
My question - anyone here know what’s going on housing price-wise around Sonora? Am curious to know, as I liked it there, though it’s too crowded for me. Any comments welcome. Too much snow - dumping like crazy when I left 2 days ago. Thanks.
My wife calls hwy 49 “California’s Appalachia”
I wonder how people make a living there?
My friend is a veterinarian and she says there are some real hard people there as far as pets are concerned. It’s a beautiful area, though.
One of my favorite roadtrips…
It’s quite beautiful indeed and hot as hades in the good old summertime.
You know, you read stuff like this piece about the fraud at this French bank, and you wonder if if the counter-parties to a lot of the recent trading are simply lunatics. It’s hard to make an argument for rational markets against evidence like this.
Societe Generale Uncovers Massive Fraud
no worries, opm crowd will reflexively buy into month’s end. eventually buying the dip wont work and then we’ll have a very nasty dislocation. i have no idea when that will be but am on red alert. at least a lot of these guys have a 6 mo. to 12 mo. redemption window. fortunately, i never had my fund in that desperate position but most of these guys dont care about their investors and will gun it without any regard for risk.
we can call ourselves zimbabwae:
Jan. 24 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke and U.S. Treasury Secretary Henry Paulson are guilty of “Zimbabwe economics” by failing to step in to support the dollar, said Forbes Inc.’s Chief Executive Officer Steve Forbes.
http://www.bloomberg.com/apps/news?pid=20601083&sid=a1d6vDJU7gOg&refer=currency
Uncle Buck flat on his back:
http://quotes.ino.com/chart/?s=NYBOT_DX&v=w
At least the stock market is holding up well today…
Zimbabwe or aren’t we?
It is not possible to deflate the currency to prosperity. Mr. Forbes is correct. I just do not like being compared to Zimbabwe.
What do people think about the rebound in financial stocks? I just bought a put on DSL this morning, thinking they had quite the jump that can’t possibly last. WFC and WM have had good rebounds, too. Is it time to re-establish positions? Or will the rally extend?
The rally could extend but the fundamentals are not there long-term. Long-term puts on financials might be good, depending on premiums. I am reloading homebuilder shorts now, and buying oils.
little late to short. i’d love to see C go into the teens but that’s being greedy. the early 90s set up a great buying opp in the single digits. i think the financials will consolidate and give some back and then go higher for the next 3 months. be careful. shorting is not easy.
I prefer technology as a short. This is rolling from sector to sector.
FOMC March 20, 2001
Mr Alan Greenspan
“It is important that the Federal Reserve not follow a flawed strategy. I fear that with a reduction of 75 basis points or even 100 basis points today, which as you know a number of people are suggesting, stock prices could still fall, leading too many observers to conclude that monetary policy is ineffective. This is a potentially dangerous view in my mind especially among the broad array of those who do not participate in the equity markets. If we do 50 basis points and stock prices fall further, as they well might today, it is the central bankers who may be perceived as intellectually inadequate, not policy itself. This is far less dangerous to the economy!”
So the Fed Funds were dropped 50 bps and the stock market tanked.
Thank god this is all contained and the Federal Reserve knows what to do.
“…stock prices could still fall, leading too many observers to conclude that monetary policy is ineffective.”
This is pretty much what happened in Japan in the early 1990s, isn’t it? The BOJ cut to zero and the stock market kept falling for fifteen or so years? Is it different here?
I follow the CD rates of a few comparitively high-interest paying thrifts. They all uniformly lowered their rate offered on 60-month CDs today, cutting exactly 0.25% off their rate. To a man- er, to an S&L.
The surge of the War on Savers is advancing onward toward Berlin (soon).
I have my growth business for 2008! I already registered the domain “WarOnSavings.com”. Now all I have to do is put up a blog and watch the $$$ roll in!
Reuven,
Keep us posted. I would be happy to throw in whatever cranky remarks I can muster.
Apparently, the overexposed Mark Zandi came to Norfolk yesterday to talk about our rosy housing outlook. I wish I had know he was coming, as I would like to have gone to see how strongly he believes what he says. In any event, he basically said that Hampton Roads is special.
—————————————————
“Hampton Roads has seen fewer subprime problems than the nation and relatively stable housing prices, making the local horizon slightly less cloudy, Zandi said after his talk. “It’s insulated from the financial storm that’s affecting the rest of the country,” he said of the region. “You’re going to weather very well.”
Link here.
—————————————-
Anyone giving this guy any money is an idiot.
I’m so mad i can scream! In fact I did scream at the radio just a minute ago. Nancy Pelosi is so proud of her plan to give $1200 to every deadbeat in America. And *I* won’t get a PENNY. Me, a small businessman who has no mortgage issues, and has created jobs in 2007, and pays more than his fair share of taxes won’t see any money from this bailout.
Screw You, Congress!
We’re seeing strange phenomena already because of this massive influx of printed money: The stock market is up AND gold is up $22 over yesterday’s NY close (which simply means the dollar is dropping.) To all those who are trying to save money, we’ve just got reamed up our A$$es so that J6P can have a Wal*Mart spending spree.
thats not all, if it fails she is promising more to come.
“I can’t say that I’m totally pleased with the package, but I do know that it will help stimulate the economy. But if it does not, then there will be more to come,” Pelosi said.
http://news.yahoo.com/s/ap/20080124/ap_on_go_co/economy_stimulus_411
From an economic view, Ms. Pelosi is correct. The stimulus package to have any effect must be done quarterly.
At this time it is “a feel good” action. A non event in a still expanding economy about to explode with inflation.
Platinum broke 1600 today, and we just had a record gold close on the COMEX. Booya!
I wish I can see this as a “silver lining” (pun intended), but realistically the money I have in metal is really just a hedge against falling dollars and not an investment.
Fahrenheit $911, currently.
Well the investment results for hedges can exceed investments. Gold over 30% last year, not shabby.
But just wait until all the ETF’s that supposedly have your metal stored for you, don’t.
http://www.financialsense.com/fsu/editorials/greene/2008/0122.html
And when will the financial majordominos be able to pay back the government for all that gold, they “leased”?
Sparks will fly.
Sounds like scaremongering. Streettracks GLD ETF is audited, they have a vault, etc. They have the bullion.
I agree with you on the issue of leased gold; gold leasing has been a means to suppress the price. It’s not working.
Trust nobody but yourself.
Post-Partum Depression = Foreclosure
“In 2001, very aggressive monetary and fiscal expansion reduced the severity and length of the recession. It is true that this time as well the Fed has been busy cutting interest rates and the government is working on a fiscal stimulus. But this time, before long, our policy makers will run into constraints. The government can’t keep cutting taxes, because the national debt is too high, the path of future deficits too steep, and the costs of the baby boomers’ retirement too imminent. The federal government needs to retain the confidence of the bond markets.
“This is different from 2001, which we entered with a record budget surplus, allowing room for stimulus. Similarly, the Fed can’t keep cutting interest rates because the dollar has been falling steeply, and America needs to retain confidence of foreign investors who are financing our deficits. This is different from 2001, when the dollar was strong, inflation was all but dead, and the Fed could cut interest rates by [5.5 percentage points].”
James W. Harpel Professor of Capital Formation and Growth
NBER
Real rates are currently negative. Every cut from here hurts much more than it helps, in terms of inflation versus reflating the system. CPI inflation last year was 4.1%, and rates are 3.5%! We are past the point of diminishing returns.
I see this is being revisited and it should be. This would do a lot more to get money into the hands of those who would spend it than checks which nobody will see before midsummer:
The agreement left some lawmakers in both parties with a bitter taste, and they complained that their leaders had sacrificed too much in the interest of striking a deal. Many senior Democrats were particularly upset that the package omitted the unemployment extension.
“I do not understand, and cannot accept, the resistance of President Bush and Republican leaders to including an extension of unemployment benefits for those who are without work through no fault of their own,” Rep. Charles B. Rangel, D-N.Y., the Ways and Means Committee chairman, said in a statement.
Sen. Max Baucus, D-Mont., the Finance Committee Chairman, said leaving out the unemployment extension was “a mistake,” as he announced plans to craft a separate stimulus package in the Senate starting next week.
Majority Leader Harry Reid said the goal is to send the package to the White House by Feb. 15 for Bush’s signature, but he noted the Senate would likely try to add more spending to the package.
“I expect that the (Finance) Committee and other senators will work to improve the House package by adding funds for other initiatives that can boost the economy immediately, such as unemployment benefits, nutrition assistance, state relief and infrastructure investment,” Reid said in a statement.
Unemployment numbers are a fabrication.
If the US calculated unemployment as it is calculated in much of Europe, current unemployment would be 13.8%. If calculated as they do in Sweden, unemployment is 15.7%. Extending benefits for unemployment would force a harsh reality upon an over extended government.
As regards adding funds for other programs. A joke that if it occurs will be to late to have any meaningful assistance. Ergo, the chance of it occurring is slim under the current administration.
How long do you figure it will be before we see the first sleazy tax preparation firm offering “loans” against these rebates at usurious interest rates?
1 week
and I wish I had thought of it first.
Oh Ms. Tx the government is giving moneys away to the people that will use it for such silly things as food and gas instead of new Ipods.
bogus unemployment numbers: same situation in my country. We have record low unemployment at around 350.000 ( workforce maybe 10 million) and record numbers of vacant jobs (often unskilled work that now gets done by workers from Poland etc.). But we also have more than 1 million people on social security or disability benefits (that can pay a lot more than average wage) that are ‘unable to work’, so they are not counted in the unemployment numbers. More than 10% of the workforce is ‘unable’ to work, while the Dutch sometimes claim to have the best healthcare system in the world (which is BS of course)! For sure most of these people are voluntarily unemployed; I’m sure most of them would take a normal job if they didn’t get at least an average income for free from the government
Hoz,
Some sources please. Thanks.
possible repost
CEPR link
http://tinyurl.com/yw46mz
Caution 7 pg pdf
The denominator is susceptible to redefinition as needed to get the rate just right.
I will not get a rebate because I earn too much. So that means that, even though I can’t afford to buy my own house, my excessive taxes will be used to help pay for someone else’s house (which they bought out of sheer irresponsibility). Why should anybody go to college and learn how to do something useful if they already know that all their hard-earned money will be taken from them and handed to someone who never bothered?
How about that $300/child rebate? If you can’t afford to have kids, don’t have ‘em. Why do I have to pay for them? Encouraging irresponsible behavior is so dumb, why do our politicians not see the folly in this?
Fear at the World Economic Forum in Davos
“We’re entering a perfect storm, a period of financial turbulence and very limited capital,” said one executive, whose company needs to borrow money to grow.
“What’s driving everyone crazy,” said another executive, “is, you don’t know who you can trust.” Both are well-known executives who did not want to call attention to themselves.
The new lack of trust has virtually closed down the securitization system that financed many companies and many mortgages. It has shaken other markets, where traders worry that counter parties — the people they trade with — will not be able to perform on contracts that may require large payments years later.
“It’s like walking blind in a minefield,” said Nouriel Roubini. “You have no idea if your counter party has a lot of toxic waste, or not much.”
Until this summer, it was easy to trust the banks…But what appeared to be a well-capitalized financial system has turned out to be the opposite, as big bank after big bank has had to seek huge capital infusions. Securities that banks had been able to keep off balance sheets — Mr. Roubini says regulators should never have allowed such things — have come back just in time to provide large losses.
“We did not,” said an executive of one financial institution, “fully understand the extent of the risks” in some securities. For obvious reasons, he did not want to be named.
George Soros’s proposed method of [preventing a wave of CDS defaults] seemed unlikely to win approval, but was interesting because of the extent of fear it showed. He wants bank regulators to go in and audit the big financial institutions, and then either close them down or give them clean bills of health, with explicit guarantees of their positions. Then traders would know some counter parties were safe.
That such an idea could cost the Treasury billions, or give big financial advantages to the favored banks, or even amount to practical nationalization, did not seem to bother Mr. Soros. He is worried about the possibility of “systemic collapse.”
Call me a socialist, but I think Soros is exactly right.
Time to clean house.
It’s late in the blogday, but this is an entertaining Darwin-award type questionnaire from Mike Thomas, a longtime contrarian at the Orlando Sentinel:
http://tinyurl.com/2zmfwq
Apologies if this has been posted earlier or elsewhere in the HBB.
That was great, Chip! Thank you.
The Bank must keep its nerve
By Martin Wolf
Published: January 24 2008 19:26 | Last updated: January 24 2008 19:26
In times of panic, grown-ups keep their nerve. In a financial crisis, central banks must be the grown-ups. This week, however, the board of the US Federal Reserve seemed to panic by implementing an extraordinary 0.75 percentage point cut in its interest rates prior to its next scheduled meeting. The move was apparently in response to a falling (though still more than fully valued) stock market.
So should the Bank of England follow suit? The answer is: no. Another quarter of a percentage point cut now makes good sense. Dramatic slashing of interest rates does not.
http://www.ft.com/cms/s/0/f49c67e8-caa7-11dc-a960-000077b07658.html
I thought the point of engineering a rise in inflationary expectations was to lean against the gale-force wind of a recent rise in recession fears? ME CONFUSED.
“The aim is not to eliminate the import of global inflationary pressures. It is rather to ensure that they remain transitory. What must be avoided at all cost is a permanent rise in inflationary expectations, and an associated need to generate a significant and costly recession, to reverse them again.”
http://www.ft.com/cms/s/0/f49c67e8-caa7-11dc-a960-000077b07658.html
We really have inflation now. I believe that the Fed inflation calculation does not fully appreciate nor model inflations extent or magnitude. The current actions are very short sighted.
Roidy
So let the Monetary Policy Committee stick to its mandate, make measured cuts in response to the careful analysis of prospects and leave the theatrics to others.
this to me is the best part of that article!!!!
Today’s Fed apologist could become tomorrow’s FOMC member.
January 24, 2008
Bernanke’s Fed shows that it can be nimble
By Stephen Cecchetti
http://blogs.ft.com/wolfforum/