Bits Bucket And Craigslist Finds For February 21, 2008
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Citi Group Flees…
http://www.bloomberg.com/apps/news?pid=20601087&sid=aXXucptLVGuc&refer=worldwide
While the SEC required dealers to disclose that they may use insider knowledge to place bids, they don’t have to say how frequently they bid or how much. Dealers also aren’t obligated to disclose rates on auction debt when the securities trade.
Forgive me for saying so, but that sounds like a market that NEEDS to die. Replace it with a market that is not shrouded in secrecy.
Replace Wall Street’s operation with a market that is not shrouded in secrecy and excessively-close ties to Washington, and perhaps the U.S. economy can begin to right itself.
I think what is what the markets are curently in the process of doing on their own.
That is the terrible beauty of market forces in a nut shell — in the long run, they prevail over attempts to thwart them. It is better to swim with the current than against it.
Agreed. The market is repricing risk. The tide is turning, has turned. Naked swimmers are going to drown.
In the short run this is going to be a bitch; In the long run it will save our a$$.
This is more like throwing naked swimmers off of a helicopter, into the middle of the Atlantic Ocean, just like the Argentine military did in the early 1980’s, to make people disappear…
lol : “I won’t pay 12 percent for more than one minute without refinancing.”
And another ‘victim’ gets hammered by the you-can-refinance-it-later scam!
Everyone was pushing the corporate equivalent of ARM’s.
Wait till all the adjustables hit the Manhattan co-op market. Most of the corrupt boards have loaded up their co-op’s with adjustable debt, sold their shares and fled.
There are many bombs waiting to go off in Manhattan. It’s not just the supply bomb and the bubble bomb. There are a few surprises in store.
Or what about Queens West here in Long island City…The 1st building was some ridiculously low price like $50,000 for a studio, but close to $2000 a month for maintenance I think it was 97% financing…….so yes we might actually have a building where the condos are worth LESS then zero at the bottom.
This is an old old Manhattan trick. Prices next to nothing, maintenance and variable costs close to monthly nut.
Only n00bs and retards fall for it.
This is an old old Manhattan trick. Price the sucker as low as possible, and keep maintenance and variable costs close to the monthly rental nut (via debt.)
Only n00bs and retards fall for it.
And this is an old HBB trick. How did it appear twice, and in variable form?
Interesting comment, pussycat. Do you have a link on that? How can one find data on co-op debt levels/terms?
Only anecdotal evidence I’m afraid. Most co-ops guard their financial statements and we can all see why now.
“Most of the corrupt boards have loaded up their co-op’s with adjustable debt, sold their shares and fled.”
huh??? [manhattan] co-ops must provide pretty thorough yearly financial reports to all shareholders. don’t know if this is standard practice, but my co-op has always financed with a 10-year balloon mortgage for the co-op’s debt, and refinances every 10 years. our balloon pops next year, and as interest rates are coming down sharply, the board will assumedly be able to refinance at much less than our current 6.x% rate. maybe your statement is true for condos, but i think co-ops tend to have much stricter financial oversight. as far as “corrupt boards …” is concerned, this seems like a rather wide brushstroke to me.
It is a rather wide brushstroke. That’s how brushstrokes work.
I wasn’t taking Fifth Ave. co-op boards here. There is considerable anecdotal evidence to the statement I made up there.
Incidentally, if I were you, I’d wait until the actual refinancing to see if “interest rates come down sharply”.
BTW, don’t you find the fact that your co-op has debt at all just a tad weird?
I must be terribly old school for all this new-fangled debt crap.
Manhattanite:
How much is your monthly maintenance fees? The rule of thumb used to be no more then $1 per sq foot of your apartment.
It is my understanding that the bankers encouraged issuers to amend their bond documents to increase max rates to upwards of 18% or higher a few months ago to keep the auctions going, and then let them fail recently anyways in the last few weeks. Thus, the issuers are now left paying 18%, which is higher than the original max rate and in excess of available cash flow (and not much in the way of reserves). Not to mention that switching modes to VRDO has its own set of issues. Another interesting fact is that the bankers are telling me that anything with Ambac insurance is considered toxic and they are better off going naked. Interesting times. I see no easy answer to the liquidity problems. I heard the IRS issued a notice recently that dumping the insurer is not a reissuance, and that amending the max rates was ok, at least during safe harbor periods of time. I dont see ppl in that subgroup going home much anymore.
As long as the stock market keeps going up, who cares about these obscure behind-the-scenes problems in the auction-rate-securities market (whatever that is)?
‘Subprime Contagion
Wall Street firms, reeling from $146 billion in losses on their debt holdings, became unwilling to commit their own capital to support auctions that don’t attract enough bidders.
From 1984 through 2006, only 13 auctions failed, typically because of changes in the credit of the borrower, according to Moody’s Investors Service. There were 31 failures in the second half of 2007, and 32 during a two-week period beginning in January.
“It’s ugly,” said Luis I. Alfaro-Martinez, finance director for the Government Development Bank of Puerto Rico, which saw the rate it pays on $62 million of debt rise to the maximum of 12 percent set out in documents governing the bonds from 4 percent at a Feb. 12 auction handled by Goldman. “It’s getting uglier.”’
This is a great spiral. Municipalities put projects on hold during this ugly period, construction firms see a slow down, they lay-off workers ….
All while tax receipts are down.
I have previously expressed concerns on this blog about high deficits in our country at the household, city, state and federal levels, thanks in part to a highly questionable belief that debt equals wealth. It seems this belief is presently undergoing a stress test at many levels.
Here is another case in point:
California’s budget deficit grows to $16 billion
By Aaron C. Davis
ASSOCIATED PRESS
2:59 p.m. February 20, 2008
SACRAMENTO – California’s nonpartisan fiscal watchdog on Wednesday said the state’s budget shortfall has grown to $16 billion and offered an unprecedented and competing plan to close the gap by imposing both spending cuts and tax increases.
Legislative Analyst Elizabeth Hill said Gov. Arnold Schwarzenegger’s proposal for the 2008-09 budget year is flawed because it fails to set funding priorities and correct the state’s chronic imbalance between spending and revenue.
“A decline in revenue means we have a larger shortfall than the governor projected,” she said. “Our recommendations will affect all Californians in some way. However, we think that will benefit all Californians in the long run.”
http://www.signonsandiego.com/news/state/20080220-1459-ca-statebudget.html
Time to move out of California and let house prices fall further?
… and another case in point:
More Metro news
Budget shortfall called long-term
By Jennifer Vigil
UNION-TRIBUNE STAFF WRITER
February 18, 2008
SAN DIEGO – San Diego’s annual budget deficits add up to something more significant – a long-term shortfall that “will persist well into the future” and continue to cause cuts in services, according to a report from the city’s legislative analyst.
http://www.signonsandiego.com/news/metro/20080218-9999-1m18gap.html
So that implies its time to buy a San Diego condo, right?
Out of curiosity, is San Diego’s population grew at its bubble rate, when would is fill up its surplus of housing? 2012?
Got Popcorn?
Neil
… another case in point (though I personally see the health care cost issue as a red herring relative to the fact that Americans have been conditioned to habitually spend and live beyond their means):
Caution: Retirement bankruptcy up ahead
Study: Health care costs to blame for decreased savings
February 20, 2008 6:00 AM
COLUMBUS, Ohio — A dramatic increase in the number of working Americans who likely won’t be financially prepared to retire is largely due to the escalating cost of health care, according to the most recent findings by the Center for Retirement Research at Boston College.
…
“The personal savings rate in the U.S. today is essentially zero,” he said. “And a recent survey by the Employee Benefits Research Institute shows that 44 percent of those respondents said they were “guessing” as to how much money they’ll need to save to live comfortably in retirement. They aren’t seeking professional advice; they’re not even using available tools or other resources. Fortunately there are countless resources — many of them free — that consumers can turn to for help.”
http://www.seacoastonline.com/apps/pbcs.dll/article?AID=/20080220/BIZ/802200366&sfad=1
“Out of curiosity, is San Diego’s population grew at its bubble rate, when would is fill up its surplus of housing? 2012?”
Did you want to assume that San Diego’s junior executive population grows at the rate necessary to fill up all the $1m+ newly constructed SFRs on the golf courses? That would be a pretty high rate of growth in the upper income tier, IMO. Pretty soon our economy would have all chiefs and no warriors if this played out…
The SDUSD has been preparing for massive layoffs. They had classified employees hand in their seniority dates a couple of weeks ago and last week the certificated were asked for theirs. The husband has 10 years with the district. We think he’s pretty safe still we’ll breathe easier after March 15th.
“Americans have been conditioned to habitually spend and live beyond their means” equals Consumer
I miss the antics of Tijuana-adjacent, sort of like one reminiscing about a fleet enema.
The county just north of me has $4.6 bil in outstanding debt of which 43% consists of auction-rate securities. The population is about 670,000. Assuming 3 persons to a household then each household carries $8,900 in auction-rate debt now costing 10%+. Hopefully the debt is callable; otherwise unless the market becomes liquid the county will have to raise taxes, cut services, or both. This happening as we enter a recession is not good.
Maybe it’s about time for all levels of government to cut back or put on hold a whole bunch of projects.
There are a ton of municipal and city projects out there that are true malinvestments at the greatest level that have been fed by the Great Fiat Ponzi Money and Credit binge over the past 25 years.
An example…. the small town of 12,000 i used to live in has just passed a bill for $ 19.7 million to build a hockey rink/rec center…. The small town of 1,200 i now live in has just passed a bill to build a $ 1.9 million outdoor swimming pool and is planning on building a new town hall for over $ 1 million.
The unaccountable bureaucratic ignorance and mindset that has fostered so much malinvestment simply truly amazes me and maybe the Bond Vigilantes will put and end to all of this…. I sure hope so.
A widespread misallocation of resources is a key part of the current economic debacle.
I read elsewhere that the auction rate market was an attempt to resolve the conflict of interest between the sellers, who wanted to sell bonds for long periods at low interest rates, and prospective buyers who didn’t want to tie up their investment money for such a long period. The system was a compromise and worked up to a point.
Yes, the ARM’s worked out real peachy for the FB’s too!
“Citizens Property Insurance of Tallahassee, Florida, a state-run insurer that protects homeowners against hurricane losses, is a casualty. The rate Citizens pays on a portion of the $4.75 billion in securities it has sold jumped to 15 percent from 5 percent at an auction run by UBS that failed on Feb. 13. ”
Isnt Citizens the state agency that writes home insurance when no private insurance company will step in? Its state subsidized insurance for expensive beach front houses? The rates are artificially low to keep taxpayers happy. When the next hurricne comes, they will likely have insufficient reserves and the state will have to kick in some money. Yes i want to lend them money at 15%
On CNBC an analyst is claiming that the FED is behind oil price rises.
He says that instead of the banks and hedge funds borrowing funds cheap and relending it out, they are borrowing it cheap and driving up commodity prices.
Interest rates on credit cards and home loans are rising too.
Got Conundrum?
“Got Conundrum?” An excellent wine, but terrible for the financial system and economic policies!!!
Oil has risen much more in dollars than in euros. This can only be due to the declining value of the dollar. Sorry you can’t heat your house, retirees. Wall St wants it’s rate cuts.
That makes a lot of sense to me, although I have no idea if it is true or not. The only thing is that when lent, they get to use the fractional reserve system, which is why they can make SO much money off a loan that only pays 6% (because they originate 10 of those loans on the same 100K, in effect getting 60%). But I don’t think that they can do this when buying commodities?
CC and home loans are rising not because of the cost of money, but because of the risk. Even if money is free to borrow, you still don’t want to lend it to someone and not get paid back. That’s what the the problem currently seems to be (IMHO).
See yesterdays Wall Street post. The cost of mortgage money is up.
I believe it is much different this time than the 1970s, as houses were not so overvalued at the onset of stagflation back then as they are presently. Though it may seem unthinkable, the potential exists for the housing situation to deteriorate from here.
“The cost of mortgage money is up.”
Which should mean that housing prices will decline further and hopefully, faster.
It does kind of seem like we are now getting awfully close to the start of a devastating positive feedback loop here with housing. Once one starts it’ll come fast and furious.
It’ll be interesting to see the reactions of some of the “I’m not giving it away” house sellers. You know, the ones who drop their prices in increments that chase the market down. Many probably could have sold if they’d bitten the bullet and priced realistically for the moment. But now, “realistic” pricing will be lower and lower, moment by moment. You can almost read their minds: “I shoulda sold when I got that offer…”
Why bother?
You’re assuming they have a skin in the game. A better game-theoretic description would be that they should price it “as high as possible”, hope to get lucky, and if it doesn’t work out, toss the keys to the bank.
Under that model, they are absolutely doing the “right” thing.
“…and if it doesn’t work out, toss the keys to the bank.”
Agreed — I suspect this is the standard FB game plan.
The big question for me is what happens when lenders are loaded with a glut of REO. There may be considerable moral hazard at some point for the govt to come in and “solve” the crisis, relieving banks of their REO glut by spreading the losses over the current and future U.S. federal tax base. I personally will be surprised if this does not occur at some point (to the extent it is not already occurring piecemeal through stealth policy), given the scale of the problem and the present day political-economic status quo.
I have a friend who with his siblings inherited a house. They have the “we’re not giving it away” attitude big time. So far offers are coming in about 25% under their full retail ask price.
Even though they have no skin in the game on this one, they’d even rather rent it out and wait instead of just unloading it and be done with it. He’s so adamant about it, there’s no point in even discussing it.
It don’t matter, PB, it just don’t matter.
Even assuming a bailout and that’s a big-ass assumption, the key is price/income and prices will come crashing down.
I shoulda sold when I got that offer…”
With oil prices as high as they are right now, those drowning in debt are begining to wish they had sold when they had the offer.
Blano,
I think we should re-define the “skin in the game” as “something to lose by selling at a lower price”.
Your friend hypothetically has something to lose by selling at a lower price (some theoretical profit).
Many who put nothing down, are under water, and can’t make the payment, have a disincentive to sell. Not only do they get $0 back under the entire reasonable range of sales prices, but they lose their shelter if the home is owned by someone else.
There are a whole lot of people out there who’s most rational decision will be to simply stop making payments and wait for the Sheriff to come knocking.
and in Europe it is going down, significantly (0.5-0.75% lower over the last few weeks, that is effectively a 20-25% lower interest rate compared to last month).
and due to the cost of mortgage $$ going up
applications for new mtg’s and refis fell sharply last week
and these rates are still below 6%
The cost of mortgage money is up ??
And the underwriting guidelines are excruciatingly tight…The pendulum has swung from the far left to the far right….Nobody wants to buy the paper ??
which is why they can make SO much money off a loan that only pays 6% (because they originate 10 of those loans on the same 100K, in effect getting 60%)
Er what? Banks only loan out money that someone loans to them, aka deposits. It’s true that the fractional reserve system multiplies the amount of loans, but the amount of deposits gets multiplied too. That’s where the loans come from.
Please explain how deposits get multiplied.
Fractional reserve lending means that a lender is required to hold on deposit X% of it’s outstanding loan portfolio as a reserve. The example given previously is clear and correct. There is no multiple working on the deposits, unless you count outstanding debt as an asset.
Heh - you guys are both wrong and right at the same time.
A bank does not get $x and then the authority to loan out $x *1/(reserve ratio) like many believe. However, the banking system as a whole sees this effect. What happens is this (assuming a 10% reserve ratio and no propensity to withdraw cash):
Bank A gets $10K, can loan out $9K and keep $1K as reserves.
$9K is spent and deposited at Bank B (or Bank A) by the person who receives the newly spent money. Bank B can loan out $8100 and must keep $900 in reserves.
Process repeats until a total of $90,000 ($9000 + $8100 + $7xxx + …) in new money is loaned out on $10,000 ($1000 + $900 + $810 + …) in reserves TOTAL within the banking system.
If you think a bank receives $10,000 and can immediately loan out $100,000, what happens when that $100,000 is spent and deposited elsewhere? Infinite expansion of the money supply?
Fractional Reserve banking does create money out of thin air, but it is a process, not a one shot thing.
The Fed does not drill for oil, but our oil prices are $US denominated. I would counter that the Fed is behind $US prices (not only of oil).
Inflation is everywhere and always a monetary phenomenon.
- Milton Friedman -
“He says that instead of the banks and hedge funds borrowing funds cheap and relending it out, they are borrowing it cheap and driving up commodity prices.”
I think they are trying to make money off the next bubble
“He says that instead of the banks and hedge funds borrowing funds cheap and relending it out, they are borrowing it cheap and driving up commodity prices.”
A lot of businesses are hedging against inflation by buying commodities. It’s interesting to watch the fear of inflation create inflation. The FED has lost much credibility in this area.
If this is the case then these price rises are unsubstainable. The market forces of supply and demand wll eventually assert themselves and prevail.
Yup, more speculative bubbles. The question is whether you want to play in this one or not.
Frankly, I like the pokey, slow, non-speculative investment game…
“Frankly, I like the pokey, slow, not-speculative investment game …”
So do I. The Wall Street adage of “Money is easier to make than it is to keep” is so very true, especially on today’s investment climate.
This is why I like cash.
It’s a good gig. Plus, you get to do the nyah-nyah-naa-naa-nyah-nyah. With a little interpretive dance too.
Looking good Louis. Feeling good Billy Ray.
Feb. 21 (Bloomberg) — Gold traded near a record as a rally in oil and farm commodities boosted demand for precious metals as a hedge against inflation and investors expected the U.S. to lower borrowing costs again. Silver gained to 27-year high.
“It seems gold is gathering steam and $1,000 an ounce is not far off, with inflation picking up,” Greg Canavan, analyst at Fat Prophets Management Ltd., said by phone from Sydney today. U.S. interest rates also look likely to fall again in March, he said. “Nothing is more bullish for gold.”
http://www.bloomberg.com/apps/news?pid=20601091&sid=aCUhjWP0EF2c&refer=india
Jas must be getting waterboarded; he said he sold Dec. gold at 980. Ouch!
Big deal for gold. Look at Palladium. I bought less than a month ago at $365. It is at $517 this morn. Not a bad return!!! The market, little by little, is finally seeing inflation–and believing it. At least, inflation for raw materials…not for housing.
It’s interesting though. Today, the 10-year has fallen back to 3.8%. Is this simply a flight to quality? If everyone is expecting inflation, why is the 10-year so low?
Probably a flight to quality. The paranoid & fearful only want the safest places to park their cash, this is hammering down Tbill & Tnote rates.
Not just inflation. Hyper inflation. It’s the only solution left. There is no way the government could pay back its debt or fulfill its other obligations (Social Security, Medicare,….), even at a 100% personal- and business-tax rate.
I love a good conspiracy theory as much as the next guy.
However, the inflationistas never manage to explain the process except for the generic “they’ll print money” bit. They can’t even explain why Shitti and the white shoe bankers at Mother Morgan had to borrow money at loan-shark rates. Not to mention that hyperinflation means “game over forever” for the Fed.
I’ll suggest a different solution. It starts with a D.
Regarding the Social Security problem, a solution exists in having folks work longer.
Here’s website that discusses this idea:
http://www.urban.org/url.cfm?ID=411584
I think we are seeing deflation. I would not be shocked if the treasury has M0 going negative at this point.
I’ll wander about for M3 and M0 numbers. I fully expect M3 to collapse and prices will correct sharply downward.
It will make SS easier to handle.
“I fully expect M3 to collapse and prices will correct sharply downward.”
Totally agree. M3 is where the thin-air money is located.
And back into thin air it will go, making cash (M0) king.
“Regarding the Social Security problem, a solution exists in having folks work longer.” Better yet, have folks pay into Social Security and die before they’re eligible to collect anything. Maybe that’s why the FDA allows imports of Chinese pharmaceuticals from uninspected and unapproved manufacturers.
I think it was over this last weekend that someone on this board was saying that they were short palladium. I was saying that didn’t sound like a very good plan, as was someone else. I’m just hoping that they didn’t have a huge short position because they are screwed if they do.
I figure that as long as the mines in South Africa are flooded and the country continues to have power supply problems, Russia will be taking the world on a platinum and palladium ride to the moon.
http://www.kitco.com/market/
FaceDown,
I’m with you all the way. I bought a number of palladium Canadian Maple Leafs several weeks ago, thinking that the extreme run-up in platinum was a great opportunity for palladium. The differential between the two had never been so high, so I figured either platinum would come crashing down, palladium would rally big-time, or they would both meet in the middle somewhere. I just didn’t expect it to be so quick. I still think palladium is a better deal than other PMs (although silver is still somewhat compelling), since recent history (since 2000) had the price over $1100/oz. Of course, that was due to hoarding, similar to what boosted silver to $50/oz in 1980. But, it is a great commodity play and palladium is actually useful for things–unlike gold which is a strictly monetary instrument. Palladium will eventually be in a bubble, as all PMs will be, but, like Bill in Carolina suggests–I’m probably not going to sell out until 10-year Treasuries get to 6-8% or so.
Um, you’re incorrect on gold being a ’strictly monetary instrument’. Tons of gold goes into IC chips and card-edge connectors and plating on electrical connectors of all types every year. It’s a very useful metal, and every piece of electronics that you own has a tiny amount inside of it.
Actually gold on card-edge connectors is not as useful as silver, manufacturers just add it because it has that je-ne-sais-quoi quality about it. Critical applications add some material like Stabilant-22A to all card edge & similar connectors for reliability. Gold in some parts of circuits may be essential. However, some of its use in electronics is nod to conspicuous consumption.
My dentist told me gold for crowns on teeth is the best material available. It holds up well to physical stresses and is minimally reactive chemically and biologically.
Just bought 46 ounces of PD on the 18th, already made 2k. I’m in love with Palladium. I am so glad I picked it over silver, although I am picking up silver in small amounts whenever possible. I think PD is going to double this year.
“I think it was over this last weekend that someone on this board was saying that they were short palladium.”
He sure did. I sold him my gold after profiting 100% off it. I could net 150% on PAL if I sold this minute.
Some are just always a dollar short and a day late.
>Some are just always a dollar short and a day late.
He’s now about $70/oz short at this point. Doh! I really shouldn’t make fun because it will happen to me at some point. Still, it is kind of funny.
“Still, it is kind of funny.”
Anyone long on commodities, PM’s or not will provide much more humor in the future.
Is there any demand for pd & pt aside from the automotive industry?
Do Indians, Chinese and Europeans have a history of buying it as a hedge against currencies, gone wrong?
ixnay
Silver at a 27 year high. Dosen’t this mean that if you bought silver 27 years ago and buried it in the back yard you would still be under water? Some investment! Dig it up and sell it quick before you lose any more.
So…
Would this be A.D. 27, then?
auction market evaporation:
Feb. 21 (Bloomberg) –Hundreds of auctions have failed this month, sending borrowing costs as high as 20 percent because dealers from Goldman Sachs Group Inc. to Citigroup Inc., UBS AG and Merrill Lynch & Co. stopped using their own capital to support the sales. Regulators, who allowed the manipulation of bids and lack of information to persist even after two probes in the past 15 years, are now watching a $342 billion market evaporate at the expense of taxpayers.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aXXucptLVGuc&refer=worldwide
‘at the expense of taxpayers’
Yes, we are all victims now. These poor, poor, taxpayers, who have enjoyed free money for years, now have to pony up substantial interest instead of actually paying for the projects themselves. Isn’t this a much needed repricing of risk? Shouldn’t the ‘war on savers’ crowd be rejoicing?
What about “The war on people that don’t own gold, silver, platinum and palladium”? We can’t forget that one.
Or the “War on People Who Bought Homes They Cannot Afford and Have No Savings”? This war is waged by lenders that loaned FBs the monies and are now foreclosing, and the best counter strategy for many FBs appears to be walking away and leaving the keys behind.
The max rates the issuers are paying due to the failed remarketings are much higher than one would expect looking at other rates in the system. Something is terribly wrong in this market.
I wonder how my little city is doing. They raised the sales tax rate rate from 7.25% to 8.25% this year to pay for 30M$ of rail road track that will probably never be built, and more police and fire. I was assured that the cost to locals would be $20/year.
Hope their interest rate isn’t in the process of trippling. I don;t think they are allowed to go to 10.25% on the sales tax…
Note that auction rate securities are a small but significant segment of the muniworld. Most munis are fixed or variable rate bonds swaped to fixed under an ISDA documentation (as as a result unless the particular bonds are trading at a huge deviation from SIFMA or a huge deviation from % of LIBOR their exposure is limited). I do note however that standard formulas for correlating a % of LIBOR to SIFMA are starting to show significant deviations. Anyone out there know what the market share of auction rate of securities is in comparision to the total market? The problems in the auction rate arena are much more severe than the problems with just vanilla variable rate muni debt right now. Also, as you said, many munis are capped based on mil levy increases, etc. The majority of the auction rate securities passing my desk related to student loan programs.
Tim, These are contract rates for particular securities on an event nobody expected. Most will be refinanced out in a few days at more normal muni rates–excepting those with serious budget problems who can’t find insurance coverage. Which are they? A few days (or weeks) at the higher rate should not cost anybody the city–unless they are in deep doo already.
My understanding at that very few of these refis have actually occurred and there is some question as when they will, as the best way to handle it is still being heavily negotiated. You are correct that rates will change once they are refi’ed, but I am not thinking days or weeks. There are many, many tax issues that the IRS has given little guidance on. I heard they may give some guidance Friday.
“Yes, we are all victims now. These poor, poor, taxpayers, who have enjoyed free money for years, now have to pony up substantial interest instead of actually paying for the projects themselves. Isn’t this a much needed repricing of risk? Shouldn’t the ‘war on savers’ crowd be rejoicing?”
Ben, it is all part of the tax whining mantra and that mantra only perpetuates the lie that a particular party will reduce your tax burden if you only elect them. They’ve been given the chance, year after year, time after time, to make good on their “we’ll cut taxes” lie. Nobody ever asks them to complete the thought and define what taxes. And as history has shown, they merely shift the tax burden from those who can most afford to pay on to those who can’t.
Nice racket huh?
exactly exeter, hopefully you have finally learned your lesson and vote libertarian this time… ;^)
Hahh…. Nah…. I’ll vote dem just to watch the tax whiners and moonbats screech when the dems let “tax cuts” expire and raise the top marginal rates to even up the score.
Yea breaks my heart to see interest rates going up were they belong.
Um, what? I pay my taxes and save my money. In return I get to watch crooks and deadbeats live for at least a few years in a big house while I live in a cruddy apartment because I am not a liar and a crook. Then, when TSHTF, they beg for a bailout, my taxes go up, and they get to skate since they have no money anyway. Tell me why that wouldn’t leave us taxpayers pissed?
I don’t know about you, but I haven’t been getting “free money” and just because the gubermint needs more money to support assorted pork projects doesn’t mean I voted for the waste, so why should I support paying for it?
Oops - I may have been too snarky on that one: interest rates should be higher, but for savings accounts as well as loans: I don’t like seeing the lenders jack up the lending rate while dropping the savings rate and pocketing the difference while “helping” us.
Got a CD rolling over this week at a measly 3.50% and I don’t think I can do any better than that either. A year ago the dividend rate was 5.45% and just a few months ago I got 4.70% APY
And don’t forget how low savings and CD rates is what drove money into seeking higher yields that ended up in mortgage backed securities ,that ended up fueling the easy money housing boom .
It’s enough to make me want to invest in Brazilian CD’s or something like that.
inflation on the front pages:
WASHINGTON — The Federal Reserve, for all its power, faces tough new limits on its ability to keep the economy out of a recession.
On Wednesday, the central bank, led by Ben S. Bernanke, found itself facing hints of a problem that the United States has not seen in decades: stagflation, the mix of slumping growth, sharp spikes in oil and food prices and a rising pace of overall inflation.
The Labor Department reported that consumer prices jumped 4.3 percent in January, compared with one year earlier. That was the biggest jump in more than two years.
http://www.nytimes.com/2008/02/21/business/21econ.html?_r=1&ref=business&oref=slogin
Feb. 21 (Bloomberg) — The European Commission cut its forecast for economic growth in the euro area and predicted the strongest inflation since the start of the single currency, highlighting the dilemma facing the region’s central bank.
http://www.bloomberg.com/apps/news?pid=20601068&sid=a5NZeVHTgAnk&refer=economy
ny times is all over this story:
Even as economic growth sags, oil and gasoline prices are surging to new heights. Gold is on the rise, along with the prices of such basic commodities as wheat and steel. And on Wednesday, with the latest government report on consumer prices, there are signs that overall inflation, after years of only modest increases, may be breaking out of its box.
http://www.nytimes.com/2008/02/21/business/21stagflation.html?_r=1&ref=business&oref=slogin
Dennis Kneale says inflation is low and the economy is great and that we are overreacting. He says even though the economy is in fantastic shape the FED should keep cutting rates because inflation is not a problem and will drive this economy forward.
Dennis Kneale … otherwise known as Kudlow Junior.
Nothing problem here that a few more Fed rate cuts can’t fix, is there?
Fears of Stagflation Return As Price Increases Gain Pace
By Greg Ip
Word Count: 1,801
The U.S. faces an unwelcome combination of looming recession and persistent inflation that is reviving angst about stagflation, a condition not seen since the 1970s.
http://online.wsj.com/article/SB120355396795281551.html?mod=hpp_us_whats_news
“a condition not seen since the 1970s.”
Retro is in. Cue the BeeGees, get out yer disco duds. And line up at the gas pumps. Although, instead of a fiver to fill the tank, you’ll need at least a twenny.
$20??? add a $50 to that & you just might be able to fill an empty gas tank.
it cost me $35 to fill my 4cylinder and i only do it 2x a month tops. i do not drive much thankfully
i just crack up now when i see these hummers and gigantic vehicles, wait unitl summer with the ac running in these
thirsty alligators
Same here MG, 1996 4cyl Ford Escort station Wagon…with only 52K miles…It still has along life ahead of it.
I judge the consumer’s perception of the “gas situation” here locally by looking over at the Arco off Hwy 101 in Mill Valley while traveling south back to the City.
If there are big lines (southern Marin Arco’s underprice others and take only cash/debit cards), then I know even the “better off” are becoming more price sensitive.
For a midweek evening, I can’t recall seeing a bigger line two nights ago than I’ve seen in a couple years.
Belt tightening all around!
That’s the nice part about driving a paid off somewhat sensible vehicle. You don’t add insult to injury by having payments too. And those registration fees (taxes) come way down. Its bad enough laying out $55-60 to fill it up. Can you imagine hefty payments, high registration tax, and a gas guzzler. No thanks.
Gas is $6 a gallon here for 91 octane, in New Zealand…
Diesel is cheaper @ $4.25 per gallon.
What kind of gallon does New Zealand use?
Netherlands: current gas price $ 8.70/gallon (EUR 1.55/liter), near all time high and price is expected to keep increasing in the near future. Drivers definitely are NOT cutting back on petrol, as someone said in the TV news: ”guess we have to eat a bit less”. They do shop around a bit more though, to save a few pennies.
……and don’t forget CB radio and earth shoes.
Pet rocks, THEY’RE what we need right now.
I’m all for a good stoneing.
My daughter paints pet rocks. When she runs into her old high school teachers she loves to tell them she’s selling rocks.
The #1 Songs for February 21:
1970: ‘Thank You (Falettinme Be Mice Elf Again)’ by Sly & the Family Stone.
1971: ‘One Bad Apple’ by The Osmonds.
1972: ‘Without You’ by Nilsson.
1973: ‘Crocodile Rock’ by Elton John.
1974: ‘The Way We Were’ by Barbara Streisand.
1975: ‘You’re No Good’ by Linda Ronstadt.
1976: ‘50 Ways to Leave Your Lover’ by Paul Simon.
1977: ‘Blinded By the Light’ by Manfred Mann’s Earth Band.
1978: ‘Stayin’ Alive’ by Bee Gees.
1979: ‘Da Ya Think I’m Sexy?’ by Rod Stewart.
1980: ‘Do That To Me One More Time’ by The Captain and Tennille.
1981: ‘9 to 5′ by Dolly Parton.
1982: ‘Centerfold’ by J. Geils Band.
1983: ‘Baby, Come to Me’ by Patti Austin with James Ingram.
1984: ‘Karma Chameleon’ by Culture Club.
1985: ‘Careless Whisper’ by Wham! Featuring George Michael.
1986: ‘How Will I Know’ by Whitney Houston.
1987: ‘Livin’ On A Prayer’ by Bon Jovi.
1988: ‘Seasons Change’ by Expose.
1989: ‘Straight Up’ by Paula Abdul.
http://www.super70s.com/
And the only song worth a damn is the Sly tune. I just got “Baby, Come To Me” in my head and threw up in my mouth a little.
MrBubble
RE: Super 70’s…
Unfortunately I was there…a truely worthless decade of music-save for “the Boss”.
“Unfortunately I was there…a truely worthless decade of music-save for “the Boss”.”
And the orignal Bruce always better than the Manfred Mann covers.
It’s disturbing just how many times we keep seeing phrases like: “Not seen since the 70’s” or “not since the Great Depression.”
Seems to me to lead more and more to the conclusion that the endgame of this will be some sort of ghastly mix between the runaway stagflation of the 1970’s and the crippling of the economy in the Great Depression.
RE: this will be some sort of ghastly mix between the runaway stagflation of the 1970’s
It really is deja vu…Oil price shocks, Detroit pumpin’ out big horsepower dinosaurs, collapsing inner cities, horrible music, a detested President; monster inflation ready to kick in because of an unpopular war…it’s all there!
Only dif is that there was a residual manufacturing sector left to revive.
Oh yeah, and 80 million boomers were in their peak earning years ready to be taxed to death.
All gone now.
is there anyone who still believes the central banks give a damn about inflation? it is evident from their actions that inflation is totally irrelevant to their policy. Just for those who wonder: money supply growth in Europe is very close to that in the US, both are around 15% now.
One of Roubini’s solutions to the crisis is to inflate away all this debt. Maybe they’re just testing the waters on that.
I think thats exactlly what the FED is doing and thats why commodities are rising as investors front run this stupid policy to save the banks deflating collateral. Trying to inflate home prices. Hows that working for you Bernake? Whats that? oil is above 100 a barrel and gold is 950 oz.
And home prices still falling gee thats too bad.
Hard money assets inflating vs. the Dollar while housing tanks. Expect many more months of this Monetary inflation/R.E. deflation
major/minor concerto. Much to the consternation of those who insist on believing “it is either inflation OR delation”.
Simplicio = tertium non datur
“Hard money assets inflating vs. the Dollar while housing tanks.”
Opposition in all things.
The problem will be getting this inflated money into the hands of the people to spend it. Some new mechanism is needed. Welfare for everyone?
They have no trouble getting money to people. The check is in the mail; first of many.
Yup, and the government should move forward with tossing social security into the market so Wall Street can get their piece of the action.
One of Roubini’s solutions to the crisis is to inflate away all this debt. Maybe they’re just testing the waters on that.
But if wages don’t rise as well, we’ll be even more boned. The last 3 places I have worked only gave raises to a small number of workers. The majority got zilch. And yet we made $10B in profit last year.
That’s odd, since I know some folks who get 15 to 20+% raises per year - the executives, CEO’s, etc. The rest of us get nada or next to nada!
Mostly deflation because of wages. Just some commodity inflation becasue of a weak dollar and cheap money for the Investment banks to speculate with. But I see mostly deflation so the Government and other Debtors will never be able to pay back the debt. Because of this new risk Interest rates will rise in time. Higher interest rates and crushing debt = default game over for the upsidedown homeowner. The government will just raise taxes and probably emerge bigger than ever after this crisis blows over.
Inflating away the debt only works if wages rise with inflation. Income - basics = money left to pay in debt.
If prices rise on food, gas, healthcare, etc but wages are flat, then inflation hurts not helps.
How are we going to get wage increases with globalization, illegals, and a slowing economy?
I applied for a part time teaching position at the local Community College to make a little extra money. I found out that they are swamped with applicants. I never made it to the interview stage.
I teach a class or two on the side at the local CC. Enrollment has dropped, so fewer course offered and all the part-timers are rotated around and get only one course at a time. I agree, hard to get in - especially now.
Isn’t it the Feds role to Inflate until you deflate? I think it is somewhere in their charter. I am not sure the surface tension of our current buuble can hold one more major pump of $$$ without going BOOM and we have to start all over
As long as the OECD CB-ing cartel coordinates their inflation-creation policy, where is the problem?
I would like to know how the Corporations are getting away with not raising wages in light of record profits . As I see it ,the system broke down the minute the Corporations had a global wage market to choose from . Bring back jobs to Americans !
Only union jobs aren’t experiencing wage deflation (for now). An exception is the airlines. My neighbor had a 40% cut a while ago.
As soon as wages get too high in Asia, they’ll move on to a cheaper labor market country. American workers are the big losers in “The World Is Flat”. Meanwhile inflation rages on, our lifestyle sinks, and we are feed cake. It must be nice to be a CXO right now.
Privatize the profits.
Socialize the cost and risks,
party on… globalization was the end of America.
“the system broke down the minute the Corporations had a global wage market to choose from”
Exactly, Global trade has created a global price for labor. The US pays higher thus is less competative and we are in the process of rebalancing this via no increase in wages (for the masses) and devaluation of dollar. THis points to less buying power for the masses. It appears their is still a premium for the highly educated. This premium continues due to our education system lagging in its ability to provide a highly educated workforce. Less supply then demand.
suing Fannie:
NEW YORK (Reuters) - The attorney general of Ohio said on Wednesday his office was considering bringing a shareholder lawsuit against mortgage buyer Fannie Mae over disclosures of subprime holdings.
Attorney General Marc Dann last month sued Freddie Mac, another government-sponsored housing enterprise, on behalf of the Ohio Public Employees Retirement System, contending it had engaged in securities fraud for failing to disclose risks from its investments in the subprime mortgage market.
http://www.reuters.com/article/domesticNews/idUSN2036654920080220?virtualBrandChannel=10005
Subprime Is Really SubCRIME: America’s Deeper Financial Crisis
http://www.alternet.org/workplace/77375/
It was discouraging when our government’s leading critic of these practices got so discouraged that he quit last week. David Walker, the comptroller of the currency had warned back in 2005 (as reported in my film In Debt We Trust):
Continuing on this unsustainable path will gradually erode if not suddenly damage our economy, our standard of living and ultimately our national security.
A call for justice that is likely to be lost in the MSM din of demanding more interest rate and tax cuts so the financial scammer crowd can continue their shell game.
While I dont disagree that there were various parties that should share the blame, I found the article biased in that the author fell into the trap of seeing those facing foreclosure as the true victims. I am not saying others should not also be viewed as culpable, Im saying I believe that the borrowers that borrowered more then they could afford participated in the conspiracy in the hopes to get rich quick or because they acted with reckless disregard for the consequences of their actions. The real victims were those that did not participate in the conspiracy but will be hurt by its ramifications. The author is playing his/her own version of the shell game.
Agreed. If home prices were 10% higher today and you couldn’t make your mtg payment, you wouldn’t care what mortgage you signed. You’d sell the house and take your profits. No one would care. No one did care.
You wouldn’t be a victim, you’d be a savvy investor.
I agree that the FBs should be held accountable for their actions and that the entire home building/buying/selling process is littered with deceitful crooks. My point should have been clearer that the fraud was rampant and it has not been given adequate attention.
We love you bizar and were talking more about the article than anything you said. One interesting thing to consider is that subprime had Fed approval and Greenspan said he considered the issue and thought the benefits outweighted the problems. The politics of finger pointing are complicated when the government refused to recognize and address a problem that so clearly threatened our economy until it was too late.
Tim, I agree with you . It’s so true that a victim is a person that has consequences because of another persons acts (such as a person walking down the street and getting hit by a car that went out of control because the driver didn’t fix his brakes ).
Borrowers were conned into the real estate appreciation scheme ,(to the point that many committed loan or cash back fraud ), and this ponzi-scheme crime wave is contorting the entire economic policies of the Government now . Wall Street kept feeding the easy money machine way into late 2007 ,when it was apparent that in early 2006 the gig was up .Those last 2 years of bad loans were entirely unnecessary . Think about all the people who got a false raise in property taxes because of this inflated market and were forced to move.
The fake crime wave RE market forced innocent people out of homes , it created tons of vacant houses going to waste ,it priced millions out of the market ,it took to much of a % of household income ,thus setting up the seeds of a possible depression ,it set up massive losses for investors thinking they had safe investments .
Is it really acceptable that WALL STREET got all these investors in the secondary market to buy junk paper by saying that it was good low risk stuff? All the lies kept the big money machine funding junk paper (and the yields were low enough that the investors didn’t question the ratings )?
I don’t expect that Justice will prevail in this absurd economic situation ,but I would like to at least see some attempt to protect the innocent people .
RE: from the SubCrime article…
Quoting Bank of America’s chief market strategist, Joseph Quinlan, the crisis, which has spread beyond U.S. shores to banks and other sectors worldwide, is “one of the most vicious in financial history.”
Hmmmm…I guess everything isn’t “CONTAINED”!
BB & Paulson would make Joe Gobbels proud.
Saying “it’s contained” too often may have the perverse effect of increasing the shock and awe effect upon discovering the truth.
I think Jim Grant said it best when he said (paraphrasing) that the mortgage crisis WAS contained….to planet earth.
Buy the XHB. All is good.
http://biz.yahoo.com/ap/080220/meritage_homes_mover.html?.v=3
Bet in 6 months (maybe 3) they are DOWN 50%.
Wonder how much David Goldberg was paid to upgrade the stock. I smell a sell off by the officers.
How did I become so cynical? Oh, I remember, it was watching Mozillo sell his Countrywide shares while stating that Countrywide was in fine shape.
—
February 21, 2008
Ara Hovnanian: “Prices are back to 2002-03 Levels”
He was on Bloomberg. He said that they are back to 2002 or 2003 levels depending on the area. I am sure that he is talking about the New Homes. New Home prices lead the existing home prices.
If the existing home prices go back to the year-end 2003 prices then we are talking about 20-25% decline from the current prices for all metros, San Jose, and LA, as tracked by Case-Shiller and Radar Logic. BTW, in LA Area the prices had doubled by 2003 from their late 1990s lows. So, even after a 20-25% decline from current levels the prices in LA Area would be double of 10 years ago.
A 20-25% price decline for existing homes from current levels will be devastating for the financial markets and will push the US economy into a depression led by defaults of more than 10M homes.
Jas
But what other choice is there? 50% increase in pay for everyone, but no increase in the cost of goods to go alone with it? A return to subslime, fraud loans for all?
There’s no other way this can end: either we fall into a deflationary depression because of this mess, or we try to print our way out, resulting in hyperinflation (especially in needs) leading to staggering poverty for all. The Depression option is the BETTER of the two choices!
Exurban blight - The surge in foreclosures is taking a heavy toll on formerly booming inland communities in California.
Last week, the research firm RealtyTrac released its foreclosure rate rankings for 2007.
1. DETROIT/LIVONIA/DEARBORN, MI
2. STOCKTON, CA
3. LAS VEGAS/PARADISE, NV
4. RIVERSIDE/SAN BERNARDINO, CA
5. SACRAMENTO, CA
6. CLEVELAND/LORAIN/ELYRIA/MENTOR, OH
7. BAKERSFIELD, CA
8. MIAMI, FL
9. DENVER/AURORA, CO
10. FORT LAUDERDALE, FL
22. Phoenix
http://www.latimes.com/news/opinion/editorials/la-ed-foreclosures20feb20,0,5022514.story
It blows my mind that there are 21 other metro areas worse than PHX and what inning of this ballgame are we in? 3rd?
#7 - yippee!! UGH!
“California’s inland exurbs became boomtowns because borrowers, wisely or not, chased the American dream. Now they may face an American nightmare, different but no less dismaying than the one they so recently fled.”
Some of my fave Cops episodes take place at various locales in the IE.
True palmetto
they just love their meth in the ie
In the I.E., there are a lot of Meth Odd actors, trying to break into your business.
Ok, the speculation is over. The Fed is going to inflate their way out of this mess. From Yahoo news feed:
“Overall consumer prices rose 0.4% vs. December and 4.3% vs. a year earlier. Food prices rose 0.7%, the most since May 2004.”
Yes, Ben still wants to cut rates.
BTW, the Fed is claiming that inflation will be moderated as the economy slows. This little bit of BS is from the same people who gave you “it’s contained” and ” it’s decoupled”.
Roidy
The price of eggs and milk going up is going to fix ‘this mess’?
and iron ore, and everything else.
SYDNEY, Australia — Rio Tinto, the world’s second-largest iron ore producer, has indicated that it is not satisfied with the 65 percent increase in the benchmark ore price negotiated by Companhia Vale do Rio Doce, the Brazilian mining conglomerate, with Nippon Steel of Japan and Posco of South Korea.
http://tinyurl.com/2r5wk5
The current rate being negotiated with China is 105% increase in ore. Buy what China buys.
I disagree. Demand for industrial metals is falling off a cliff. There will not be 1 billion automobiles built in china.
Dude, Nobody in the world really cares what happens in the US any more. I posted this last night (from Reuters) “…Government data showed on Thursday that exports rose 7.7 percent in January from a year earlier, beating a median forecast for a 6.4 percent increase and supporting the view that demand for Japanese goods in emerging economies cushioned soft exports to the United States….”
Get with it, this is a world wide party and we aren’t invited.
Cars use the least amount of steel. How many ships are being built in the US?
One word, rebar.
Surely you can’t believe that the worldwide building boom will continue unabated in the face of an unprecedented credit contraction?
I put my money where my mouth is on this one with Sep. 22.50 puts on RIO. Even if they can hold there pricing point (which I doubt) they face tremendous cost increases due to fuel costs.
I usually buy eggs at Trader Joe’s…2 weeks ago one dozen was $1.19…Sunday it had jumped to $1.79!!
36 eggs used to cost $2 at Sams Club. Now its over $5.
Not surprising. I’ll bet the cost of chicken feed has skyrocketed, tracking the mega price increases in grains.
We were sitting next to a pro wino, on our flight to NZ…
He informed us that $2 buck chuck @ Trader Joe’s was going away in California, to be replaced by $3 buck chuck.
(deflationistas, please drink up)
Increases in eggs and milk prices do not affect U.S. inflation, as they are highly volatile and hence excluded from “core CPI.”
I think you meant to say:
Constant increases in eggs and milk prices do not affect U.S. inflation, as they are are highly volatile and hence excluded from “core CPI.”
Kai Rysdal did a very effective job last night on American Public Media’s Marketplace with his one-line propagation of this falsehood (which he apparently accepts on faith). I have news for you, Kai: Price changes that always move in the same direction are quite useful for measuring inflation trends, if the goal is to obtain an unbiased measure of inflation.
Wednesday, February 20, 2008
Listen to the show
High prices spread throughout economy
This month’s inflation statistics show that, along with higher food and energy costs, consumer prices have risen all across the economy. John Dimsdale reports on why the price hikes are so widespread.
…
KAI RYSSDAL: Every time inflation statistics come out from the Department of Labor, and that happens once a month, we actually get two numbers. The first is a reflection of all the prices the government measures: housing, food, cars, the whole deal. The other’s what’s called the “core rate.” That’s the one economists pay the most attention to, because it leaves out food and energy. Yes, we all eat and use electricity, but those prices change so much they’re not really useful as a way to measure inflation trends.
http://marketplace.publicradio.org/display/web/2008/02/20/price_rise/
If stock prices were tracking food prices, the market would be described as “sizzling”.
Hedonic adjustments people will simply switch from eggs and milk to twigs and water.
It is a good thing that the US has been an excellent saver of fat!! They are going to need it moving forward.
My rental increases 5% this year.
I think this math is the biggest load of crap. If you want to smooth out volatility of certain items, you shouldn’t eliminate them from the basket, but take a running average going back x years. Hell, I’d even live with a 10-year running average, it would be more realistic than ignoring it altogether…
Yes.
Indirectly, and in some small way, at least. Increasing the price of eggs and milk means that egg and milk producers get paid more $$, and thus are able to take home bigger salaries and bonuses, and thus are able to pay off their debt easier.
Obviously a very small example, but it illustrates the point - inflation is one way to remove debt. If you have have massive inflation (debasing the currency), then there are more $$ available to pay down the existing debt. Simple.
The problem is - you piss off all those people who are the owners of that debt - the investors, because they get paid back in $$, which are worth a lot less than they otherwise would have been. This in turn discourages future investment in $$.
“Increasing the price of eggs and milk means that egg and milk producers get paid more $$, and thus are able to take home bigger salaries and bonuses, and thus are able to pay off their debt easier.”
Correction: Increasing the price of eggs and milk means that owners of agricultural corporations and grocery stores make more money, the CEO’s get a bigger bonus, and maybe they get to goose their stock price.
Farmers, hired hands on farms, grocery store employees, etc., get diddley/squat. And they still have to pay more when they purchase said items.
Long term, if fewer people can afford food, that results in fewer potential home buyers - not a good strategy!
But hey - I am sure the executives, Wall Street crooks, etc. don’t worry about the price of gas, milk, eggs, etc. so it’s all good! Argh!
“Long term, if fewer people can afford food, that results in fewer potential home buyers - not a good strategy!
But hey - I am sure the executives, Wall Street crooks, etc. don’t worry about the price of gas, milk, eggs, etc. so it’s all good! Argh!”
The thinking/posturing in your post has elements in it that have bothered me for a long time (ie. the relationship between buying a house and food/gas pricing). When someone buys a house at these lofty levels they have removed a hugh portion of their disposable income from the market place; likewise with the purchase of a high priced automobile. We have always had some control over house prices and car prices by refusing to buy over priced items like cars and houses but not as much over food/gas and medical costs, and yet we as a nation want food, gas, and medical at beggar pricing (things necessary for living) while continuing to waste our money on inflated housing and autos. It does remind me of T. Ernie Fords song about the coal mines ‘I owe my soul to the company store (banker)’
the Fed is claiming that inflation will be moderated as the economy slows
yeah, funny. Just a looking at the numbers shows exactly the opposite has happened. Inflation is accelerating as the economy slows, and the mechanism behind it is central bank action.
But, but, whatever happened to the talk of coming DEflation?
Sorry Virginia, there is no Santa Claus; it’s just George W. Bush.
Roidy
Arson?
http://www.insidebayarea.com/trivalleyherald/localnews/ci_8323090
I dunno if it’s arson, you’d think if it was, the residents wouldn’t have remained there to be injured.
So far in Fla, we’ve been lucky to have had winter rains that seem to be preventing things from becoming too dry. However, if the rains don’t keep on coming, cases of arson could be even uglier than usualy during the spring “dry season”.
That’s what got me. They were in the house? But the circumstances…People constantly surprise and amaze me. I might believe anything at this point.
stock futures up, bond yields lower, growth slowing, prices rising -sup with this picture? Bernanke needs to man UP!
How can stock futures not be up when you have such good news in the markets this morning:
J.C. Penney 4Q Profit Falls 10 Percent
http://tinyurl.com/35drlm
Oil Prices Slip but Stay Close to $100 a Barrel After Record Close
http://tinyurl.com/2wvnx3
A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain.
- Mark Twain -
Lending Squeeze Hits Ailing Firms
By Jeffrey McCracken
Word Count: 1,664 | Companies Featured in This Article: Landry’s Restaurants, UBS, Credit Suisse Group, Wells Fargo, Kohl’s, Gottschalks, Bon-Ton Stores, Ford Motor, General Motors
With the economy sputtering and banks pulling back on lending, the noose is starting to tighten around a host of struggling companies.
For years, companies had access to easy money for everything from expansions to acquisitions to leveraged buyouts. For many, this global credit boom forestalled painful plant closings, job cuts and asset sales.
Now, the day of reckoning is arriving for some of them, as skittish corporate lenders push them to the brink of bankruptcy and beyond.
http://online.wsj.com/article/SB120356179488682019.html?mod=todays_us_nonsub_page_one
Economic Darwinism. The weak are being culled from the herd.
Sharper Image played an important role in the economy — absorbing excess money. Now that role is no longer required.
They took a big hit when Consumer Reports magazine reported that their most-profitable item, an “ion air cleaner” didn’t do anything.
Then, when Sharper Image sued Consumer’s Union, Consumer Reports updated their report to show that the ozone produced by the thing actually can harm you.
(It used to drive me nuts when people in offices where I worked, almost always women, would have one of these things plugged in under their desks! I would have loved to sneak in and rewire it so just the power LED lit up, but the ozone generator was off.)
You can see a summary about the Sharper Image vs Consumer’s Union here http://www.quackwatch.com/14Legal/ionicbreeze.html
Hahahahaha - that is amazing!
Sharper Image: “You - you said our product doesn’t do anything! How dare you!”
CR: “Okay, we’ll update that…”
Sharper Image: “Well, that’s better - hey, wait, now you say our product produces toxic ozone?!”
CR: “Well, technically it IS doing something…”
sharper image was one of those stores i always went to when i was at the mall yet never…ever bought anything. it looked like most everyone else did the same. never understood how they made a living.
Michael,
Ditto here. It was fun to see what new gizmo was trying to extract $ from some idiots wallet. Even if the item was cool, it was always overpriced. Truly a store for more money (or credit) than brains people. The U S Patent Office will be missing some revenue. The road to riches has narrowed.
Dutch housing bubble update:
Dutch january 2008 home prices are up 4% compared to same month previous year; compared to december 2007 the view is mixed but there still seems to be a small gain. Sales numbers declined 9% compared to last year. All economists etc. are forecasting 3-5% higher prices at the end of this year; with the current plunge in mortgage rates that wouldn’t surprise me.
Oh yes, Dutch investors were relieved yesterday when financial ING told them that their losses as a result of US mortgage exposure (subprime and most of all Alt-A loans) will be only about 1% of the investment (about 200 million on 30 billion investment). They must have the most clever banksters on the planet to have less than 1% losses. I smell a rat, but we have probably have to wait another year before we know what magic is behind these numbers.
Dutch investors must be on the lookout for “rogue traders,” who always seem to come out of nowhere & require drastic restatements of the numbers reported by large financial institutions.
Funny thread related to the “resilient” Raleigh, NC housing bubble. A flat worlder said the following about Schiller’s prediction that RTP would decline but avoid an all out collapse:
“Well, I think he got that from me. I have been trying to undo the doom & gloom mentality that everyone seems to have. Obviously, this area has a lot more going for it, than other parts of the country do. I will not re-post all I have in the past, but just ask that everyone take my word for everything going forward. Thanks in advance.”
Just keep feeling good and everything will be A-OK!
So that’s what doom and gloomers are doing wrong.
I am in RDU. The market has cooled and foreclosures are up but prices aren’t down much yet. The drought is severe and we may run out of water this summer. New home builders no longer install lawns, etc. due to water restrictions. The market here has nowhere to go but down as the influx of outsiders is slowing and job growth has turned negative. Many people are delusional, asking 300k for houses that should price at 200k. Rents are very cheap; can get a two bedroom apartment in north Raleigh for $600. I am watching from the sidelines; this market is going to crack.
I do own, but over in hedingham village (established section). Cheaper house, but I am expecting a 20% drop.
I would REALLY be panicking if I owned a 600K Cary McMansion.
haven’t heard too much about all the long islanders fleeing to the carolinas lately
like an addict trying a new city- different city still an addict
Friend and his pregnant wife fled to North Carolina three weeks ago. At least they bought their house outright and sold their old one before they left.
Hi,
Why the hell are the stock market futures UP??? Why is it trying to g UP?
Stocks always go up. D’uhhhh.
They are pricing in a greater percent chance of deeper rate cuts which of course is a red herring. They dont undertand what is happening behind closed doors on wall street or the extent of the hit that our financial system is about to take. Patience. There will be many new lows in the upcoming months.
“They dont undertand what is happening behind closed doors on wall street…”
How can markets be so persistently dumb?
Because they are not efficient.
Anyone who believes that must be an academic or dumb but I repeat myself.
Ha! I think even most academics have given up their efficient market fantasy…
They should.
In effect they are arguing that people like txchick or Hoz or even little ol’ moi don’t exist.
But I assure you I exist, and I bite. Really hard too.
Computer program trading. Computers are smarter than people, you know…
Because they’re not making anymore stocks. You should buy now or be priced out forever!
It seems that most of today’s genius CEO’s, who are only good at cutting costs are not using the windfall profits to expand the business. Instead, they all seem hell bent on stock buy backs.
Its funny how Wall St. does notice some things. They constantly applaud our CEO’s cost cutting, but are concerned that he won’t be able to grow revenue in the long haul.
Of course his solution isn’t to hire more engineers and make more and better products. His solution is to hire more salesmen. Sometimes I think today’s CEOs all did their apprenticeships at GM, Ford or Chrysler. These guys just do not believe in making what the customer wants.
Why should they? They’ll get theirs either way and they’ll be set for life.
Engineers don’t seem to understand that there’s a different way of looking at the problem, and it’s far more “rational” than the “decent” way they look at things.
It’s like talking to my dad. It gets boring after a while when they can’t see the obvious.
Does anybody know of a site that tracks the amount of 401(k) money that gets invested each week or month or something? That money has to go somewhere. I think the stock market slowly ratchets downward as more and more people wake up and say “I can’t invest money into my 401(k), I need that money to buy gas and groceries”. If I’m right about this, it will gain a very nasty momentum as time passes, but right now I think most people are still investing in their 401(k)s.
Actually, I believe that the percentage of 401(k) eligible participants who actually save is disappointingly low. IIRC its less than 50%.
I think the question is when will the “less than 50%” become “less than 20%”, and how can we watch this?
I suspect we’ll see it by virtue of a falling market.
I’ve been watching the adoption of some new ETFs based on some real FTSE indices. The amount of money invested in these new ETFs appear to be stagnating. I don’t think it’s because they are poorly conceived ETFs, I think it’s because people are avoiding putting more money into public markets today…
I guess she missed Money and Banking class the day her professor discussed the topic of “inflation risk premium.” And she is clearly clueless about the juxtaposition of higher long-term interest rates with massively-overpriced housing.
“Hooray for rising long rates! If the Fed cut short rates and long rates fell even more, that would be reason to worry. It would imply the demand for credit, as reflected in market rates, is falling faster than the Fed can increase the supply.
An inverted yield curve, with short rates above long rates, is contractionary. A positively sloped yield curve is stimulative. It’s the one bright spot amid all the gloom. Eventually it will help the banking system heal.”
http://www.bloomberg.com/apps/news?pid=20601039&sid=a0J8InWkFYkA&refer=home
She also states the following:
“[Argument] With credit standards tightening, lowering the funds rate doesn’t matter. Banks aren’t willing to lend.
[Response] Homeowners who are delinquent on their mortgage payments, have lost their homes to foreclosure or have followed the advice of Website youwalkaway.com aren’t in a position to take advantage of lower interest rates. Others can, including renters with a good credit history.”
So in summary, renters with good credit histories that avoided the housing bubble like the plague are now going to jump in to buy housing using ARMs. Although she doesnt state this expressly, she states elsewhere that long term rates are increasing. Thus to “take advantage of lower rates” they have go the ARM route, and preferably one tied to LIBOR or some other index which takes full advantage of lower short term rates.
“So in summary, renters with good credit histories that avoided the housing bubble like the plague are now going to jump in to buy housing using ARMs.”
This is quite a joke. Why would anyone smart enough to avoid drinking the ARM koolaide to this point want to financially hang themselves just as inflation is heating up?
That was my dry sarcasm. Of course they wont.
Credit crisis turmoil claims new victims
By Stephen Foley in New York and Sean Farrell
Thursday, 21 February 2008
Losses resulting from the credit market turmoil – until now largely limited to the world’s biggest investment banks – are starting to be felt much more widely, by wealthy individuals, local government and even sports teams, presaging a new and potentially litigious phase in the crisis.
http://www.independent.co.uk/news/business/news/credit-crisis-turmoil-claims-new-victims-784970.html
Gee, KKR is wallowing also. Luckily, big K can always go live on his huge sailing yacht, even if he has to sell the submarine…
No end in sight for credit crisis
Published: February 20 2008 14:41 | Last updated: February 21 2008 00:00
KKR Financial Holdings (KFN), the specialty finance company with $17bn of assets under management, has been here before. The listed KKR affiliate is in another round of talks with noteholders about restructuring some debt as the deep freeze in the mortgage markets refuses to thaw. KFN is now focused on other assets, such as corporate loans and debt securities, having managed to flog $5bn of residential mortgage loans and mortgage-backed securities last year. But it still has a rump of mortgage assets to deal with, estimated at under $5bn. The noteholders, who are funding these assets, have agreed to extend the date at which some of the debt matures, until early March. What happens next and does it matter?
http://www.ft.com/cms/s/1/d52b1948-dfc1-11dc-8073-0000779fd2ac,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html
I wondered when people would start being told they are screwed. And this is all in the pre-screwed phase really, with financial instruments falling in value in anticipation of losses that are going to occur. Are those mortgate securitizations still paying the lower tranches? That’s a theft that someone needs to stop.
Dresdner in $19bn bail-out of SIV
By Chris Hughes, Investment Banking Correspondent
Published: February 21 2008 12:24 | Last updated: February 21 2008 12:24
Dresdner Bank on Thursday said it would underwrite its $19bn K2 structured investment vehicle, as it revealed plans to cut back its investment banking activities in a move that has already cost 450 jobs.
The German bank is the latest major lender to bail out its SIV, and the rescue is the third largest after similar moves by Citigroup and HSBC.
EDITOR’S CHOICE
StanChart gives up on Whistlejacket SIV - Feb-20
AIG to bail out troubled SIV - Jan-23
Moody’s to call for SIV rethink - Jan-16
Banks and investors seek SIV exit routes - Dec-11
Fitch refuses to pull ratings on Sigma Finance - Jan-09
Fitch may set limits for debt product ratings - Dec-19
http://www.ft.com/cms/s/2100fc7e-e068-11dc-b0d7-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F2100fc7e-e068-11dc-b0d7-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Moody’s to call for SIV rethink
By Stacy-Marie Ishmael in London
Published: January 16 2008 00:23 | Last updated: January 16 2008 00:23
Managers of structured investment vehicles need to fundamentally rethink their business model if the sector is to survive, Moody’s will say on Wednesday.
The vehicles, commonly known as SIVs, have been among the biggest casualties of the credit crisis, and have contributed to money market volatility, spread widening and illiquidity in both the US and Europe.
http://www.ft.com/cms/s/53f44276-c3ad-11dc-b083-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F53f44276-c3ad-11dc-b083-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
More Americans Giving Up Golf
Surveys sponsored by the National Golf Foundation have asked players what keeps them away. “The answer is usually economic,” Mr. Kass said. “No time. Two jobs. Real wages not going up. Pensions going away. Corporate cutbacks in country club memberships — all that doom and gloom stuff.”
In many parts of the country, high expectations for a golf bonanza paralleling baby boomer retirements led to what is now considered a vast overbuilding of golf courses.
Ha - that makes sense. A triple whammy - not only can boomers not afford to play golf, but they don’t have time anyhow since they can’t retire. And not only that but prices for homes in the big retiree golf areas (Arizona and Florida) are too high for them to move there!
What’s a good golf short? Unfortunately it looks like Nevada Bob’s isn’t really available (NVBBF.PK).
There are already starting to be golf courses that go BK. There are WAY to many golf courses. I think we’ll find that people still golf, but green fees fall.
What’s a good golf short? Unfortunately it looks like Nevada Bob’s isn’t really available
Not sure how diversified this company is so you’ll have to do your research, but NYSE:FO, Fortune Brands owns Acushnet Company, which includes the brands Titleist, Cobra, and Footjoy. Might want to check them out… though from my last discussion with management there they were experiencing strong growth internationally, and not expecting domestic growth to pick up anytime soon. Caveat Emptor
I thought about shorting FO sometime back - but they’re extremely diversified, including into staples that will do OK during a downturn, so decided not to.
Yeah, and there’s another element added to that mix- some neighborhoods marketed years ago as being golf course communities around here, have seen their courses closed completely. This happened before the present mess around here. Newer courses, in the meantime, have sprung up in diferent parts of town and are doing well. It’s as though the courses have a lifespan equivalent to the “newness” of the homes that surround them.
they can always build more homes on these unused golf courses
oh i forgot we have too many homes as well
Or maybe convert them into city parks, maybe with a few baseball and soccer fields for the kids. My son plays competitive soccer. We are fortunate to have a very nice sports complex in Loveland, but some of the fields on our away games are simply horrible. One field had a big hole in it marked with traffic cones.
So expensive and water-intensive to keep all that prime bluegrass and all the non-native trees going. It’s a shame but most the courses are designed and landscaped all wrong.
We were in Santa Barbara at a conference at a spa this weekend (comped, natch) and my husband stood on our balcony, which overlooked pools, jacuzzis, cabanas and, in the distance, a golf course, and of course the Pacific Ocean, and said “In the future, anthropologists are going to excavate this site and say, ‘This is the way people lived, before the fall of the American Empire.’”
20 things we will see less of after peak oil.
During the next five years, the middle class will be spending a greater portion of their income on food and energy and have a lot less money available for the luxuries in life, especially luxuries that are energy and resource intensive. For the last five years many people have been financing their lifestyles with debt, but the easy credit cycle is winding down, so this option will be less available. At the same time there will be a smaller upper class that is super wealthy. These will include owners of energy companies, foreigners, smart investors, and government insiders. This wealthy elite will continue to drive a smaller demand for energy intensive recreation. We may see trends like less total visits to ski resorts with marginal resorts catering to families and the middle class shutting down, but an increased demand for the most extreme skiing experiences such as helicopter skiing in the far reaches of Alaska.
Practical items on this list such as large trucks and private jets are used both for business purposes and by the wealthy. Businesses will be cutting back on everything that uses energy to stay profitable. The middle class will be forced to cut back due to reduced credit and less money available, but the wealthy elite will continue to drive some demand at the very high end.
1. McMansions: lots of energy for heat and AC
2. Exurbs: Long commutes, lack of mass transit, long drive to the store
3. Cows: Consume lots of corn that could be used for methanol or feeding people. Plus cows are damaging to the land and emit lots of methane.
4. Migration Pheonix and Las Vegas: $500 per month air conditioning, water supplies are constrained.
5. International Vacations: 40% of your air ticket goes straight to fuel, this will only be going up. Flying 8000 miles is similar amount of energy per passenger to driving 4000 miles. People will decide to visit a beach or exotic city close to home rather than on the other side of the world.
6. Vacation Homes: Its hard enough to heat and maintain 1 house. Who wants to pay two sets of bills, plus the weekly transportation between the houses.
7. Las Vegas Vacations: flying 3000 miles to a place with no water and air conditioning required everywhere. Just to see flashing lights and spinning wheels. People who cant say no to gambling will stay home and go to the local Indian casino.
8. Golf Courses: lots of land and lots of water. Lots of energy used to maintain the lawns, not to mention the transport energy used in 3000 mile golf vacations. Golf Courses in Phoenix and Las Vegas, need I say more?
9. Power Boats: lots of energy use. More energy if the boat must be taken on a trailer to the lake. Plus the energy of driving yourself to the boat.
10. Off Road Vehicles: see #9
11. Giant SUVs: most people don’t need the space of a Expedition, Tahoe, or Sierra. It uses lots of energy, and will increasingly have a social stigma.
12. Giant Pickups: not needed except for construction workers. Even tradespeople will find they can use a smaller truck.
13. Snow Mobiles: energy for the snowmobile, and LOTS of energy to haul it up to the mountians
14. Skiing: energy for the lifts, for getting to the mountain, for heating the lodge. Less snow available due to global warming. Thus more energy for artificial snow making.
15. RVs: driving your house back and forth across the country?
16. Bottled Water: why make a plastic bottle and ship it 1000s of miles for something that comes out of the tap. If water quality is an issue, a filter on the faucet does the same thing.,
17. Live Sports: The home theater gives a better view, without the parking, traffic, high prices, and long lines.
18. Cruises: Fly 1000s of miles to get to the port, lots of energy for the boat itself, all the food must be carried and refrigerated. And lots of cruise ship employees along for the ride too.
19. Private Jets: lots of jet fuel, there will likely be less use for business and the upper middle class, but some increase by the wealthiest elite.
20. recreational driving: less weekend drives. Shorter drives. Resorts 4 hours from the city will lose out to resorts 1 hour away.
Just a note on vacation homes. With over 1800 vacation ( lake ) homes for sale here in Vilas County Wisconsin…selling at the rate of 4 per week ( 300k plus properties ) we have a major problem. Running 13 foreclosures a month. Lets see, we have about 70 real estate brokers just in the Eagle River area..guess they will be soon fliping burgers or moving out of the area…tooo bad! Why aren’t the Illinois people buying??
McMansions to become two family homes. (Adding more inventory)
McMansions to become boarding houses. Landlords/ladies qualified by experience with the Marines or US Rangers needed to maintain order & decorum among the residents.
More likely just to be torn down than systematically converted into multi-family homes. Just finished a weekend study of grand old Victorian houses that no one could afford after about 50 years. True mansions… one would think their lifespan would have outlasted a mere human being.
21. The return of the passenger train
Skiing is next.
$79 lift tickets this year at Mammoth Mountain. They have been going up 10% y-o-y. I love skiing, but it has become a $500/day sport (food/lodging/rentals/lifts). I have gone from 7+ days a year down to an average of 3.
What ever happened to the rich Baby Boomers that were going to buy all this overpriced stuff ? Guess the golf courses might have to lower the costs .
Medical costs going up every year like clockwork take a lot of “funds for fun” out of the hands of retired people ,yet the service goes downhill ,in my opinion .
The thing that drives me to drink is if I make a appointment with the doctor at a certain time ,why do I have to wait so long in the waiting room ,especially when it takes so long to get the appointment to begin with ? I’m getting sick of doctor overbooking in which they don’t even have time to look your chart over .(I’m not down on Doctors or medical science ,but I want some value and service for the dollar ).
I suspect doctors who spend time getting to know their patients & make the attempt to treat them as they would have their loved ones treated probably can’t bring in sufficient income to stay in business, pay their employees, malpractice & other necessary expenses. The overbooking and rush-rush-rush is a way to maintain “productivity.”
Can someone please fill me in on what the Fed did yesterday to inspire stock market gains? I was under the impression that computer program trading was responsible for the gains. Regardless, I note that the stock market (still) always goes up.
February 21, 2008 9:33 A.M.EST
BULLETIN
Targeting broad-based gains
Wednesday’s Fed-inspired advance shows legs. In the tech sector, Cisco wins buy rating. Crude futures retreat as gold pushes higher.
http://www.marketwatch.com/
PB …I can never understand what makes the stock market go up . As I see it, there is nothing but bad new daily in one way or another ,yet the rallies keep coming .Cheerleaders are convincing people that the stimulus package or the government will always ride in on a white horse to save the day I guess.
Rallies? The S&P can’t even get back to 1375 which was the huge support last year and the breakdown point this year.
True
OK OK ,but no reason for any kind of a over all rally up these days . I am thinking that the truth of the dire financial problems have not been totally priced into the market . What do I know however since I’m not a stock player and I just get these gut feelings .
I’ve fallen and I can’t get up.
http://origin.www.spike.com/video/2746222
Please people, stop whining. You are not expected to know what makes the stock market move, you are just a tiny speck on a big whale’s body, just accept this fact. Or lose your shirts if you try to outsmart it.
This spec increased it’s value by 58% last year. Markets are efficient only in the whole. A person who has a good BS detector will beat the market more often than not.
A person who has a good BS detector will beat the market more often than not.
The problem with this argument is that there are A LOT of people with good BS detectors and far more money than you. There is good statistical chance they’ve already exploited most arbitrage opportunities. I don’t say it’s impossible to play it smart, just saying the chances of consistently winning are very slim.
“Index funds are for people to lazy to do their homework.”
Mr. Warren Buffett
or read some books by Mr. Peter Lynch
Additionally, we have seen example after example during the past couple of years with regard to the disastrous decisions that have been made by “the smartest guys in the room”.
I fully well know that I’m collecting crumbs with a whisk broom. It’s the knowledge of my position vs. the big boys that gives me my arbitrage.
All,
I found this online book yesterday and thought it was a most fascinating read. It was published in the 1980’s but when you read the section on real estate it predicted the price/rent ratio’s we see today and the resulting crash. This book is a real eye-opener and should be recommended reading for anyone trying to survive the coming inflation/deflation and government price fixing / shortages etc.
http://www.biorationalinstitute.com/zcontent/alpha_strategy.pdf
How about this from the book?
It’s fascinating - the book has a copyright of 1980 and the author, in this section, is essentially pointing out what a housing bubble looks like:
“Alan Greenspan, formerly Chairman of the President’s Council of Economic Advisers, pinpointed the expansion of mortgage credit as a dominant factor in the U.S. during the last few years. He noted that up until about 1973, mortgage credit rarely grew by more than $15 billion per year. In the past two years, the rate of increase has approached $100 billion annually. Is it any wonder real estate prices have soared?”
Somehow, the Maestro ignored similar statistics in the 2000’s when he primed the pump to no end!
I noticed that section too…
A young Economist named Darth Maestro, who was a pupil of mine until he turned to evil, helped the Empire hunt down and destroy the Austrian economists. He betrayed and murdered your father. Now the Austrians are all but extinct. Maestro was seduced by the dark side of the Economy.”
Your father was seduced by the dark side of the Economy. He ceased to be Alan Greespan and became Darth Maestro. When that happened, the good man who was your father was destroyed.
Thank goodness I’m already married. My wife is too used to geekiness to look at what I’m ROFL’ing about anymore. If I was still engaged, I’d be toast.
Dead cat drop (but luckily, the stock market is going up today!)…
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=TYX&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=1&freq=9&startdate=&enddate=&hiddenTrue=&comp=tnx&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013
There is a flight-to-quality move underway into gold and l-t T-bonds at the same time the stock market has taken wing. I predict the flight-to-quality move will prevail over the stock market rally by a few months from now, as unresolved credit market issues ultimately overwhelm irrational exuberance. Any thoughts?
http://www.marketwatch.com/tools/marketsummary/
“Any thoughts?”
I am mostly out of the stock market into cash. long term bonds no, metal stocks yes. Will buy back in RE at the bottom.
I saw something in print a day or so back that suggested the U.S. headline indexes lost 50 pct of their value in the early 1970s stagflation episode, over a period of a couple of years or so. Is it going to be different this time?
I’m looking for a repeat of Autumn 1974, when P/Es fell to well under 10.
Until then I will remain in cash.
(FWIW.)
But wait, both of you.
You must remember there was no PPT back then!
MARSHALL LOEB
Lessons learned from Clinton’s mistakes
Commentary: Don’t be haughty, reward insiders or cede ‘change’ platform
By Marshall Loeb, MarketWatch
Last update: 7:35 p.m. EST Feb. 20, 2008
NEW YORK (MarketWatch) — She could still, of course, pull off a lot of last-minute miracles, walk on a little water and carry the day — but don’t bet on it. Hillary Rodham Clinton’s startling performance in the election campaign of 2008 almost certainly will be remembered for grabbing defeat from the jaws of victory.
http://www.marketwatch.com/news/story/lessons-business-leaders-can-learn/story.aspx?guid=%7B80D5F3B2%2D2C04%2D426D%2DBB0C%2D03BDA2BD8402%7D
The fall of the Hildebeast will be the one bright point going forward, if she does lose. I shudder to think of the socialist nightmare she force upon us if she won.
I really don’t care for the attacks upon Hilary, but i have to give you credit for “Hildebeast”, that’s a good one…
Obama - Hillary - what’s the diff?
Either would be better than the current destruction of America.
Ah, yes, I’d hate to end up a “socialist” hellhole like Canada or Sweden.
What a horrible lifestyle to have to endure.
I found this blog a few weeks ago while searching for Reo information.I am interested in property in Bullhead City ,AZ for retirement.
When I was there in December and drove around I noticed all the abandonded homes and housing tracts left by builders.
As of today,realtytrac shows 15 preforclosures,117 auctions, 96 bank owned properties in just the 86442 zip alone.
Prices had followed LA, Phoenix and Vegas to what would be considetred a resort area.However as markets decline there has been no price drops in Bullhead City.A handfull of shacks or lower end houses have gone down 20% or so but the main bulk of inventory remains sky high.Even auction homes not selling at $80k are going back to listing at $200K !
All sources I have found show little to ZERO sales in the area for the past 2 months.
I contacted a realtor thru emails to ask about an REO and she seemed absolutely clueless as to the market there.I guess its just the old “denial ” mindset.
Why do the banks refuse to lower the Reo’s????
There are alot of bank owned properties listed but all are very high.
I am in no hurry but it seems like the bottom is going to crash there real hard someday soon.The question is how low and when?
Sdguy,
1. Keep visiting this blog, there is a wealth of information about a lot of things.
2. Bullhead City has no price drops? I don’t know about Bullhead (a resort town?) properties, but Lake Havasu City has a tremendous inventory of homes and very little demand.
3. Banks don’t lower the prices for a couple of reasons
(a) ignorance
(b) hoping for an RE turnaround
(c) Employees are overloaded with repos and they don’t know what they’re doing
If you’re not in a hurry take it easy, look at a few homes, make a few outrageous offers, and generally have a good time. Most people here think we’re years away from the bottom of this market so just relaxed and enjoy the train wreck.
sdguy,look up kingman az. i moved here 3 years ago after selling in running springs ca. i bought new 3/2/3 on large lot for 192,500. my builder has new ones right now for 165,000 3/2/2. the weather is about 15 degrees cooler here than bulhead city. its about a 45 min drive to bullhead from here.if you want more info about homes here call me. 520-921-0570
I am reading this blog daily and will continue to do so.I have learned alot in the past few weeks.
I am just amazed that so many homes are just sitting and the banks dont move them.I know its happening everywhere.San Diego is also on the decline but I own nothing right now.
Azrenter…….I have been thru the whole area.The wife loves the river so its Bullhead /Laughlin area for us.
Thanks…….
I love desert living but decided against moving there in my retirement. There will be water shortages in the southwest within the next 20 years, some areas may be uninhabitable. IMHO.
I have read the recent reports about the water situation with Lake Mead,Mohave and Havasu.We still like the river area and it hasnt changed our minds.Land with a well may become a problem but I think the cities with water systems along the river will be okay.
Areas as far south as San Diego get water from the Colorado.It could get interesting in the future.
Inflation Trap Looms For Fed
Paul Maidment, 02.20.08, 10:14 PM ET
Those who feared the Federal Reserve was showing a reckless disregard of the risk of inflation in cutting interest rates to stave off a potential recession had their I-told-you-so moment Wednesday.
http://www.forbes.com/home/opinions/2008/02/20/fed-inflation-notn-oped-cx_pm_0220fed.html
Special Report
Beyond The Balance Sheet: Recession Stocks
Jack Gage 02.20.08, 6:00 PM ET
Is the economy falling apart or not? The mixed signals include a crisis in home finance, a weak jobs report, strong productivity numbers and an expectation (from analysts) of a 15% gain in corporate profits for 2008.
http://www.forbes.com/home/business/2008/02/20/recession-stocks-investing-biz-cx_jg_0220bbs_land.html
BULLETIN PHILADELPHIA-REGION MANUFACTURING COOLS FURTHER IN FEBRUARY
Philly manufacturing activity slows further in Feb
By Greg Robb
Last update: 10:08 a.m. EST Feb. 21, 2008
WASHINGTON (MarketWatch) - Manufacturing in the Philadelphia region weakened further in February, the Federal Reserve Bank of Philadelphia reported Thursday. The Philly Fed diffusion index fell to -24 in February. The index had plunged to -20.9 in January from -1.6 in December. Readings below zero indicate contraction. The decline was unexpected. Economists were expecting the index to improve to -10. The new orders index rose to -10.9 from -15.2, while the shipments index fell to -12.2 from -2.3. Inflationary pressures eased a bit. The prices paid index dropped to 46.6 from 49.8.
http://www.marketwatch.com/news/story/philadelphia-region-manufacturing-cools-further-february/story.aspx?guid=%7B8948CCAC%2D89E8%2D4F0B%2DA30B%2D78F824C4D136%7D&dist=
Any thoughts??
I heard Bobby Seale (co-founder of the Black Panthers) speak last night at Phoenix College.
Paraphrasing, he said the coming economic maelstrom will aid radical organizing and activity; radical, not left/liberal.
He stated he realizes the failures of communism and he *sounded* like he’s embraced classical Anarchism, ala Bakunin.
I think he may be correct.
To be honest individuals need to protect their wealth from being stolen by the masses. It makes no difference whether a thief robs you or the government robs you on behalf of the real thief (your neighbor). Once people wake up to the theft they will be forced to take measures to defend themselves, and that will probably include the formation of new “radical” movements that are only radical in the sense that they are defending themselves yet wish no harm to anyone who isn’t trying to steal from them.
To protect against mass theft will require mass organization to provide mutual self defense.
When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.
This is the kind of “radical” movement that I hope we see.
Woaaahh, Dan, what’s with that sorta oldstyle writing and all?? What book that from, anyway, Dude??? The Bible or somethun’???
Maybe I am miss-reading your sarcasm, but that is the Declaration of Independence of the United States of America. The document we celebrate every 4th of July. You have just lost my respect.
Dan, that post was in total sarcasm, al la many of today’s Americans. Sorry, should’ve said “sarcasm off” at the end.
My point was that many Americans wouldn’t know a quote from the Constitution from a hole in their head…
You have regained my respect.
LOL!! Thanks, and BTW, good post.
Be careful.
You may wind up with a file in some FBI office somewhere.
Yeah, It is a sad day when an individual who wishes no harm on others and only wishes to be free has to worry about secret government agencies putting their name on a list.
The german people, out of fear of government, kept quite during the rise of Hitler. Evil prevails when good men do nothing. The truth is that any revolution has to be a revolution of ideas and the masses have to be persuaded. It is hard to teach and persuade others if you lack the courage to speak out. Many peaceful revolutionaries have been imprisoned and killed.
Violence is only the last resort when they come for our guns or gold. (If slaves had guns, would they be slaves?)
We all die in the end. Lets leave our children a better world than we were given! If you don’t have a cause worth dyeing for you are not really living.
“The spirit of resistance to government is so valuable on certain occasions that I wish it to be always kept alive. It will often be exercised when wrong, but better so than not to be exercised at all. I like a little rebellion now and then. It is like a storm in the atmosphere.” - Thomas Jefferson
When our country is facing poverty as a result of this crash all of the rules we have grown up with will be challenged. People have been taught that it is OK to steal from others when you *need* it because that is what everyone votes for (SS, welfare, universal healthcare, education, and on). When people get desperate and the government isn’t doing enough fast enough they will just cut out the middle man.
An observation in my area (outside of Philly, bordering Montgomery and Bucks Counties). I’m helping a friend look for a new rental since her rent’s going up and what I’m finding are rents higher than I expected.
On the plus side, I’m also starting to see house prices budge - a little.
Why would rents be significantly higher, though?
Assinine accidental landlords trying to cover their resetting ARM nuts?
Carrying costs are higher… insurance, taxes, utilities. If vacancies are low, it behooves landlords to pass these increases on. If vacancies are high, landlords absorb the costs as replacing a tenant often costs more than the cost increases being absorbed by the landlord… not that difficult a concept really.
Over on Yahoo! Finance the latest market update reports the plunge in the PHL Fed mfg survey. It concludes with this qualifying statement:
“This is not a good number, but it is important to keep in mind this is just a survey.”
Would that statement have been included if the reading was +24.0 instead of -24.0?
Sit and Spin!
Yeah except it’s “Sit on the JT and spin” now. LOL.
Co-wokers from central FL are telling me they’re having a lot of trouble with wells. Water leverls are dropping and people are pumping up salt- and brackish- water (in addition to drinking Whale Piss http://www.cfnews13.com/News/Local/2008/1/12/seaworld39s_saltwater_tanks_leaking.html )
With all the housing stock in central florida, those folks in areas without “city water” may not ever be able to sell their houses, once word gets out about this problem….
Of course, the fact that people are leaving Florida and new development has stopped may delay the problem for a year or so, but why would anyone choose a house with a residential well source instead of from a municipal / treated source (still ultimately a well, but with more resources, etc.), all other things being equal.
And they certainly don’t have the resources to expand municpal water systems to individual developments throughout Central florida.
i am beginning to think that peak water may pre-empt peak oil as the most looming (and ultimately population delimiting) catastrophe on the horizon.
Maybe the business of the future will be installing artificial turf lawns! Pricey, but they don’t drink and never need mowing! They do have that funny rubbery smell though.
“…peak water may pre-empt peak oil as the most looming (and ultimately population delimiting) catastrophe on the horizon.”
Limiting population is not a catastrophe. Just like rates and prices, there is a peak. And we’re close to the limits.
There will be no “catastrophe”. Malthus has never been right and he never will be, and the reason is that the economy has a feedback loop in it.
(Hint: it works via prices. That’s why the markets f*ck up when the price mechanism goes awry.)
One of these days my dad is going to understand this. It’s an upward battle. Sigh.
It’s truly amazing how little water people acutally need.
I know of a guy who lives in a remote section of the CA desert who has to haul in all his water. This chore causes him to think of his water as a precious commodity, one to be radically conserved. Visitors find discomfort at some of his rules, such as his rule that the toilet is to be flushed only once each day regardless of its usage.
During my early morning walks each day I get to notice how may lawns are watered by automatic sprinkling systems; There’s one frivious use of the wet stuff right there.
Allow the market forces to work and it will be discovered there is plenty of water to meet people’s needs (as opposed to wants).
The water problem will be ignored until a good-sized city runs out. If the southeast does not get hurricane induced rains this season then Charlotte, Winston-Salem, Greensboro, Raleigh, Durham, and Atlanta are candidates for running out of water at the end of this year. The biggest problem with lack of water will be human waste disposal: the sanitary sewers will quickly become clogged.
Nothing wrong with composting toilets, used very successfully by many.
Deploying a few hundred thousand composting toilets on short notice is most likely in the event of a crisis.
…UNlikely…
The Federal Reserve Bank of Philadelphia’s general economic index declined to a minus 24 from minus 20.9 in January, the bank said today. Readings less than zero signal contraction. The Philadelphia Fed’s general economic index averaged 5.1 in 2007.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPhJfVbfZkV0&refer=home
Maybe it is just because I am a bear, but to my eye, the headline stock market indexes are trying hard to sell off…
February 21, 2008 10:30 A.M.EST
BULLETIN U.S. BENCHMARK HOME-LOAN RATES MOVE HIGHER
Bright start to stocks’ day
http://www.marketwatch.com/
Something is going on, the market should be down sharply on this news.
What happened to the bids? lol
I’m not feeling it right now. Staying out until this sucker breaks one way or the other. Made enough in January to take the rest of the year off.
Vix is trading at the lower bband, not much fear out there.
This news should make the stock market go up, as it increases the likelihood of future rate cuts.
ECONOMIC REPORT
U.S. economic indicators off 0.1% in January
Conference Board sees ‘weak growth’ ahead
By Robert Schroeder, MarketWatch
Last update: 10:15 a.m. EST Feb. 21, 2008
WASHINGTON (MarketWatch) — The index of leading U.S. economic indicators dipped by 0.1% in January, as weaker stock prices and housing data drove the gauge to a fourth consecutive monthly decline, the Conference Board reported Thursday.
http://www.marketwatch.com/news/story/leading-us-economic-indicators-off/story.aspx?guid=%7BDB3D6A83%2D902A%2D4A48%2DAB8A%2DD01D9596FB2B%7D
There’s an article in the LA Times about school budget cuts - closing and teacher layoffs. Some of it is being attributed to foreclosures and the resulting declining enrollment. One school district had 400 foreclosures in their school district.
On the college-loan hunt
Tips for parents, students as credit crunch squeezes the market
By Andrea Coombes, MarketWatch
Last update: 8:53 p.m. EST Feb. 20, 2008
SAN FRANCISCO (MarketWatch) — Students in need of college loans may want to start taking pointers from home buyers who are finding it harder to qualify for mortgage loans.
The same credit crunch that’s squeezing the mortgage market is crimping student loans as well, so parents and students seeking loans to pay for college this fall will find fewer companies offering loans and may find interest rates and fees higher than expected.
http://www.marketwatch.com/news/story/tips-finding-funding-credit-crunch/story.aspx?guid=%7BCF83F8E4%2DF6EB%2D4BC2%2D8551%2D3B136CB7F6D4%7D
It will be interesting to see what the lower GPA crowd does now. In the past 2nd and 3rd tier private schools were the ticket for these people. These people will have a hard time getting into State U, since as demand increases so will admission requirements at most public colleges.
I think you will have the opposite problem. Demand will fall for all colleges due to lack of loans. This will bias the student body toward the richer families and lower academic standards as schools struggle to keep the student body and profits they have enjoyed. I expect both falling standards and falling prices.
Demand will fall for pricey, no-name private schools. How many kids will apply to the University of Denver at 20K or Regis at 26K per year when they can go to CU for 6K or CSU for 5K (all numbers are tuition only)? If loans become tight CU and CSU will be swamped with applicants and will have the luxury of becoming pickier when admitting students.
I’m not sure that DU or Regis could lower their tuition to be competitive with CU or CSU.
A 32 bps increase in fixed-rate mortgages over one week sounds like a big move. Good thing the long-bond T-bond yields are plummeting today, or this might be a worrisome development.
Freddie Mac: Fixed-rate mortgages rise again
By Michelle Donley
Last update: 10:27 a.m. EST Feb. 21, 2008
NEW YORK (MarketWatch) — U.S. fixed-rate mortgages rose in the latest week, according to Freddie Mac’s survey released Thursday. The national average interest rate on the benchmark 30-year, fixed-rate loan averaged 6.04% in the week ending Thursday, up from 5.72% a week ago, but lower than the year-ago 6.22%.
http://www.marketwatch.com/news/story/freddie-mac-fixed-rate-mortgages-rise/story.aspx?guid=%7B90CBBDF7%2DB69C%2D4BFD%2D9B07%2D419A5903E818%7D
Wall Street Bank Run
Mr. David Ignatius
Washington Post
“…Frightened financiers are pulling back from credit markets — going on strike, if you will — to escape the unraveling daisy chain of securitized assets and promissory notes that binds the global financial system. As each financier tries to protect against the next one’s mistakes, the whole system begins to sag. That’s what we’re seeing now, as credit market troubles spread from bundles of subprime residential mortgages to bundles of other kinds of debt — from student loans to retailers’ receivables to municipal bonds.
Investors are nervous because they aren’t sure how to value these bundles of securitized assets. So buyers stay away, prices fall further, and the damage spreads.
The public, fortunately, doesn’t understand how bad the situation is. If it did, we might have a real panic on our hands. And there would be more pressure for bad policies — ones that try to freeze the damage, rather than letting prices fall to levels where buyers will return and the markets will clear. Hillary Clinton’s proposed moratorium on home foreclosures, in that respect, is one of the truly bad ideas of our time. It would make the situation worse by increasing even more the illiquidity and inflexibility of the housing market….”
http://tinyurl.com/2u37sl
“The public, fortunately, doesn’t understand how bad the situation is. If it did, we might have a real panic on our hands.”
This is why the sheeple must have the wool pulled over their eyes by all means necessary. I expect the stock market to do just fine over the next few months, no matter how many shoes drop on the credit markets.
IMO, If you’re broadly diversified and years out from having to take required disbursements, ignore the noise and the short-term market swings.
My focus is which administrations policies are next up to lord havoc over us. Wall Street’s already got the havoc thing down pat.
It is possible that this is not a short term market swing, but a 20 year correction.
Forget about the administration! The problem is that Congress is getting involved in the US markets. This is not a good thing. Congress will restrict foreign investment in the US, a stupid protectionist measure. It is not possible to devalue your way to prosperity.
Thank God I’ve got 20+ years to wait it out. Assuming of course I don’t die before then; but that’s what life insurance is for.
In the meantime I’m trying to learn as much as I can now from you and txchick and folks like you so that I take the best advantage of both ends of the situation. My long-view and hopefully my upcoming better than average knowledge.
I have more than 20 years to wait this out, but I’m still in cash today. I don’t know when the bottom will be, but as long as there are massive ARM resets on the horizon (Option ARMs are just starting to hit), things are going to get worse.
I think that means I’ll be in cash at least through 2008, perhaps 2009.
In the meantime however, if I find some distressed commercial real estate, my cash holdings may become real property holdings.
I agree!! Protectionism only will make things worse. Protectionism and Pupulism are 2 things to keep an eye on moving forward. Both “sound great” to the sheeple but will have long term consequences in our financial prosperity
This type of thinking is common, and the person that thinks this way will fund their retirement with nearly worthless dollars.
Most people don’t factor in losses due to real inflation rates. If they did they would realize that there are really very few 20 year spans where the market has made much money at all.
Take a look at the S&P 500 since WWII. There were several, long stretches of time where money market fund investments did better than the S&P 500 (even with dividends). Dividends are much lower now so the return going forward can be worse.
If you’re confident that 10 years from now the S&P will be at least 2200 (5% annual appreciation ignoring dividends) then go ahead and ignore the “noise.”
I personnally think the market is heading for a secular consolidation period. (10-15 year period of little growth aka a sidewards period.) I am normally a buy and hold person. I am learning the intricacies of the daily markets in order to better capture gains aka make money off the “noise”.
This site has an interesting but long, 35 minute video interview with economist Martin Feldstein by Charlie Rose.
Pittsburgh area home sales are down 18.4%
http://www.pittsburghlive.com/x/pittsburghtrib/news/breaking/s_553558.html
Average and median prices in the area are both up.
Hoz or any other currency maven:
I want to buy a piece of jewelry from a German firm. The price is 10K euros. I hate to be a buyer with the dollar as bad as it is but I want the item. What’s your outlook on the dollar in the next say, 3-6 months. I have American and Canadian $$. Is there any way to do this without top ticking the euro?
Buy it now. With money supply growing between 10% and 15% worldwide, all currencies are sinking.
Dollar strength? Take your pick, which trend is the strongest?: Unwinding of carry trade ($ down), flight to safety ($ up), helicopter-Ben printing money ($ down), I’m sure there are more.
We have about 25% of our money in foreign currency CDs (Euro, NKR, SFR, AU$), so far it’s been pretty good. I think we’re going to bail out of AU$ though…
Tx, I am massively short the Euro. The Euro is IMHO the most overvalued currency in the world. Wait 3 months.
thanks Hoz! That’s what I wanted to hear
I concur, The Euro was the flight to safety from the dollar. Now the world is seeing it is no safe haven either
Well, what IS it, tx? Jeeze, why you being so coy? Is is an emerald ring? A ruby brooch? A diamond dog collar? Is it a tiara with glittering sapphires? I assume you already have one of those. I approve of tiaras. I have a couple. They go with anything, even a life-vest.
I feel like such an idiot. Buying a heavy platinum piece in Euros at this moment in time. It’s a platinum and diamond ring in a style you just can’t get here in the U.S. Very Bauhaus looking.
The company is called Henrich + Denzel. Check it out.
I am most impressed that you can buy “Schmuck” there. Thought that meant something else entirely.
lol, don’t think that thought didn’t cross my mind
What about them rhinestone cowgirl boots???
Both currencies will drop in real terms. USD has dropped faster the last couple years. Your question is a kobayashi maru; there is no correct answer.
I’m wearing a tiara and ReMax blazer right now, both excellent thrift store bargains. Tx, are you now or have you ever been involved with McCain? Come clean now and we will go easier on you.
I like my sugar daddies much younger
Me get big smile. Tiara and ReMax blazer!!!
Respectfully speaking, the Kobayashi Maru was the “no-win scenario,” as opposed to “no correct answer,” IIRC.
Which I don’t believe in either, for what it’s worth.
If anyone can win in a financial scenario, IMHO txchick, Hoz and Co. can.
Your question is a kobayashi maru; there is no correct answer.
Thanks Spock…
Humans…
Washington Post is having a “chat” at 2:00 PM today about renovating your house for resale. Anyone have any embarrassing questions to ask? No guarantee they will be answered, but you can always try. Go ahead…ask Shane Tallant (host of HGTV’s Designed to Sell) why they never recommend the sellers renovate their asking price first?
Oops. Here is the link. You can submit questions whenever…
http://www.washingtonpost.com/wp-dyn/content/discussion/2008/02/14/DI2008021402497.html
Im think im one of the few ppl that prefer to see homes decorated badly and smell like hell, with little or no renovations. I can see through all that nonsense and get a discount and renovate it how I want to. When these shows try to attempt to show how much sellers can make with a few cheap changes, shouldnt it put buyers on notice to not fall for it anymore?
I’m with you on looking like hell, but I’m not so sure I agree on the smell. I once looked at a place in Jersey City that smelled terribly of dog and bird waste. There was almost no furniture or carpeting, so the smell was most likely in the wood floors. Absolutely no way to tell how much it would have taken to get rid of the smell.
However, falling for the “it smells like cookies” (or apple pie or gingerbread, etc.) ploy is about as stupid as you can get.
Yes, no carpeting and bad smell is a bad sign. One home I brought in ‘95 had carpet over the hardwoods. It had old dog feces in every room (dont ask me why the listing agent didnt suggest it be removed). I think because of that I got it for $35k less than fmv at the time. I removed the carpet, aired the place out and refinished the hardwoods. No smell after that, and only cost a few grand.
I love it when the realtor acts like they don’t smell anything. I looked at several places with deep urine smell in hardwood floors. Why do so many idiots rush out and get two big dogs when they rent, and/or fancy themselves to be dog breeders?
Smells are hard to remove. I have spent countless hours spraying woodfloors to remove pet urine etc on several rental properties. I now only hold properties with slab foundations and I generally put ceramic tile in most of the living spaces (never all since it leaves the place cold). It reduces the cost of replacement. Tile also doesn’t absorb smells.
Upon further consideration, based on the evidence submitted, I withdraw my smell comment.
You have to use HGTV math:
1. New coat of paint in the kitchen adds $13,000 in value to you home, but only costs $60 and 6 hours.
2. Plant 4 shrubs outside, cost to you $135, adds $24,000 to the value of your home.
3. Travertine tile, adds appr. $200k to the value of your home, costs $4.39 a sqft.
Polly,
“why they never recommend the sellers renovate their asking price first?”
That’s another show called “Secrets That Sell”. Ssssh don’t tell anyone I told you this
Homes went up 11% a year in Calgary for the last decade. Most of that happened in the last few years. But there isn’t a bubble there.
http://www.canada.com/calgaryherald/news/story.html?id=63e06f6b-0338-4488-9605-f50767bb1415&k=84277
Nope. No bubble for our neighbors.
“On a national level, the average residential price rose from $154,606 in 1997 to $307,265 in 2007 - a 98.7 per cent gain or 7.1 per cent compounded annually.”
Hmm… how have incomes done in Canada over this time period?
Am I getting conspiratorial, or what.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aIYk0W9vfTh0&refer=home
Federal Reserve “Policy makers cut their 2008 growth forecasts and said that rates should be held down ‘for a time,” minutes of their Jan. 29-30 meeting showed yesterday.’”
For at time — until the election.
“They also called inflation ‘disappointing,” and some foresaw raising rates, possibly at a ‘rapid’ pace once the economy recovers.”
Or after the election. Blame Obama — money was cheap under Bush.
“rates should be held down ‘for a time’…some foresaw raising rates, possibly at a ‘rapid’ pace.”
You know that all they will really do is whipsaw the economy into a tangled mess with a policy like this.
“Well, we’re going to keep The Titanic on course, full speed ahead until just before we hit that iceberg. Then, we’re going to reverse the engines and turn the rudder REALLY FAST. That should about do it.”
Opps here’s the url
http://bigpicture.typepad.com/
Now is a great time to buy using a safe, fixed rate mortgate! Fixed rates are at an all-time low, and…errr…wait a minute…
http://tinyurl.com/322blz
Now is a terrible time to buy with fixed rate mortgages! Not that anyone could afford fully amortizing fixed rate mortgages in California anyway…
I just about blew a nut when I saw the following craiglist ad for a house here in my area. At first I thought it was a cute joke, but then I realized these dreamers are for real. I love that bit about the “Mediterranean elevation” (that’s a new one on me), and better yet, the picture of the red rocks of Sedona (which btw is nowhere near the depressing, lower middle-class neighborhood that this house is situated in). I have an acquaintance in this same development with a larger model who is trying to off load it for 185K with really no expectations of doing so in this market. I really wish this was a joke, because the pathetic sadness of it makes a little tear go dribble down my cheek. Well, maybe not.
http://flagstaff.craigslist.org/rfs/581703215.html
that must be that Cornville area? Do they even have water there?
Camp Verde, wahoo!!
“Many calls already” - yeah, I bet.
We are in Kerikeri, NZ and it’s pissing down rain, which is not unusual in a rainforest…
Strolling down the main drag last night, we looked at about 100 houses for sale, in 7 different realtors windows, and each window had exactly 1 SOLD sign. 7 out of 700, equals a sparkling 1% sales rate.
Paul in Jax asked about anti-Americanism here, and honestly, we haven’t run into many Americans in our week here. Did some laundry @ a laundromat yesterday and had a nice talk with the proprietor, who told us that Germans outnumbered yanks by a 5 to 1 ratio, as far as his clientelle was concerned.
NZ opted out of the ANZUS treaty almost 25 years ago, as they didn’t want U.S. ships powered by nukes in their harbor.
In 2000, they decided they didn’t need to replace aged fighter jets in their air force, despite us offering up F 18’s @ attractive terms.
In every town in NZ there is a World War 1 memorial, as the percentage of men lost in a small country like this, was phenominal.
The losses from WW2 were almost as devastating.
Hopefully our lust for war will go away, as it has here.
I have spent perhaps 1 1/2 years of my life here, the past 30 years, and have never been the subject of ire, because of where i’m from.
I can’t say the same about Europe, where in the early 1980’s, they really hated us, and were quite vocal about it.
Please feel free to add commentary on your time spent there. NZ has always fascinated me and is high on my list of retirement destinations.
The best way to describe the country is thusly…
Ireland runs into Costa Rica runs into Switzerland
The people are the most outdoorsy of any country i’ve been to…
sure, NZ is an extremely pleasant country. Too bad they have a serious housing bubble now too, but that could be expected despite their very remote location. Just wonder what will happen to this tiny economy when the global credit bubble goes poof.
P.S. regarding Europe: I don’t think Americans are hated in most of Europe, but the US government sure is extremely unpopular over here. As long as Americans behave like tourists and don’t start to defend their own governments actions, they will be welcomed.
“…The National Bureau of Economic Research (NBER), the Cambridge, Mass., nonpartisan economic research organization that, among other things, calls the beginning and end to recession, named James Poterba as its next president and chief executive officer, succeeding Martin Feldstein, who announced his retirement earlier….”
WSJ
IMHO this gentleman is good.
Avant que Je parte:
IMHO the bailout of the monolines will be announced tomorrow. The bailout out will be allowing a partial split into separate margined entities. Entity A will insure the Munis and margin requirement will be effectively dropped. Entity B will be the junk and the transfer of $10B from the former Muni side will be transferred to Entity B. This will maintain the AAA credit ratings.
A failed business model being kept afloat by a change in margin requirements.
I’m sorry to hear that. This will stave off the inevitable for at least another month or two.
txchick57:
“that must be that Cornville area?”
Actually Camp Verde, but I’m always going between there and Clarkdale. Both areas are in the dumps.
http://flagstaff.craigslist.org/rfs/581703215.html
Did you catch the “many calls already” bit toward the end of their ad?
I’m thinking this really should read: help! we have too many calls from collectors and we’re upside down.
Question for US equities market mavens.
Should I wait for the S&P 500 to close below 1325 before I go into an inverse S&P 500 fund or should I do it tomorrow? I’m looking to hold it for at least one year.
I’m confused. If you thinking about an inverse fund, wouldn’t it be better to get in high and sell low to get the inverse effect?
Maybe you should wait for it to close above 1375? Just a thought and whatever you do, don’t listen to me.
I would say that if you plan on holding for a year that your buy in point doesn’t much matter. I understand, I think, your rationale for waiting until it breaks through some downside resistance but doesn’t the overriding reason for choosing this fund in the first place take precedence over chartist type planning?
If Hoz is right about the monoline bailout then you may want to look for a new near term top on the SPY because there will be a heck of a pop when it’s announced.
Creating something out of nothing. From Bloomberg:
The Office of Thrift Supervision is developing a program to prevent borrowers from abandoning homes worth less than the amount of the loan. Homeowners would be able to refinance their mortgage at the current market values, with the lender getting a “negative-equity certificate” to be redeemed once the home is sold, OTS Director John Reich said yesterday.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aLYeeJerD2R0&refer=home
Have cake and eat it. More from Bloomie:
Negative-equity certificates could help servicers limit loan losses and avoid an “avalanche of borrowers who choose to walk away from the mortgage,” Scott Polakoff, the agency’s senior deputy director, said yesterday. The Federal Housing Administration could help homeowners refinance, he said.
The next great government-sponsored program will be “negative-money,” now being tested in some Cleveland and Detroit neighborhoods.
MarketWatch’s chief Economist Irwin Kellner urges government backed real estate price support program. Of all the ways the government wastes my tax dollars, I think this way would be one of my very least favorite:
“Home prices are falling because there are at least 5 million unsold homes overhanging the market — a 10-month supply at current selling rates, and twice the usual number. Their median price is $208,000. That’s 10% below the peak, but still a high 3.2 times median family income.
Housing would be more affordable if the median home cost 2.8 times median family incomes, as it did in the 1980s when housing sold at a brisk pace. In today’s dollars, this means a drop to $184,000. See Dec. 3 column.
Simple arithmetic tells us that this is a difference of $24,000, or about 12%.
If the government were to give sellers half of this, they would be able to lower their asking prices without losing any more money. And giving buyers the other half would enable them to pay more without having to come up with additional funds…. ”
http://tinyurl.com/yvujbv
simple historic experience tells me that if the government subsidizes $24,000 on every home sale, prices will go up by at least $24,000 (as long as lending requirements are not tightened) and make homes less affordable for the average buyer. But I guess that is exactly what this guy is looking for.
Works like a charm in the Netherlands: home prices up more than 1000% in many areas, prices have been climbing for 20 years now without a glitch. At the same time, home ownership is among the lowest in the EEC, the median home costs 8.5x median income and housing subsidies (for owners and rentes) are a big chunck of the state budget, bigger than education and healthcare. There is no housing bubble in Netherlands, it is all strictly based on the fundamentals of government policy
The death of the auction-rate market?
Everybody from wealthy individuals to big corporations has stopped believing in auction-rate securities as a secure type of short-term bond investing. Now, bond issuers and banks are also trying to get out of the market. Bob Moon reports.
http://marketplace.publicradio.org/display/web/2008/02/21/auction_rate_q/
When I first learned about the auction-rate market, 3 things occurred to me in rapid succession:
1) They did WHAT?
2) For HOW LONG?
3) WHAT WERE THEY THINKING OF?
Thursday, February 21, 2008
Did Soc Gen know about illicit trading?
Societe Generale reported that Jerome Kerviel, the rogue trader, cost the company around $5 billion. Though the company claims he did the trading on his own, an internal report revealed he had received big bonuses. Stephen Beard reports.
http://marketplace.publicradio.org/display/web/2008/02/21/soc_gen/
The concept of “rogue trader” needs its own acronym, RT, to go along with SIV, ARM, NINJA, etc. in the financial news, and JT here on the HBB.
Thursday, February 21, 2008
Crisis allows affordable housing
Angela Glover Blackwell
The threat of foreclosure has hit millions of Americans. But commentator Angela Glover Blackwell says the housing bust may finally put affordable homes within reach, allowing communities to rebuild.
http://marketplace.publicradio.org/display/web/2008/02/21/foreclosure/
Thursday, February 21, 2008
Commercial real estate also suffering
With a 90% dip in sales in the last year, commercial real estate was hit hard by the subprime crisis. And now that developers are having to pay higher borrowing costs, it could mean higher rents and less tax revenue. Lisa Napoli reports.
http://marketplace.publicradio.org/display/web/2008/02/21/commercial_real_estate/
Twelve-step program…
February 20, 2008
by Martin Wolf
America’s economy risks mother of all meltdowns
“I would tell audiences that we were facing not a bubble but a froth – lots of small, local bubbles that never grew to a scale that could threaten the health of the overall economy.”
Alan Greenspan, The Age of Turbulence.
That used to be Mr Greenspan’s view of the US housing bubble. He was wrong, alas.
http://blogs.ft.com/wolfforum/2008/02/americas-economy-risks-mother-of-all-meltdowns/#more-110
The Long Johns (John Bird and John Fortune) on turbulence in the financial markets
http://www.deeshaa.org/2008/01/25/the-stock-market/
Shrinkage hurts; ABCP decline since last July:
(784.3/1200-1)*100 = -34.6 pct
Investors exit asset-backed commercial paper
By Anuj Gangahar in New York
Published: February 21 2008 18:33 | Last updated: February 21 2008 18:33
The US asset-backed commercial paper market shrank for a fourth straight week, with another $11.7bn worth of the short-term debt disappearing from the market in what appears to be an accelerating trend once more.
The decline, the worst in four months, takes the total amount of ABCP outstanding down to $784.3bn, according to the latest data from the US Federal Reserve, which is within a whisker of the low point reached at the end of last year after the market’s spectacular collapse.
Investors have exited ABCP in droves since the credit crunch struck last summer, causing immense pain for the mainly bank-run, off-balance-sheet investment vehicles that relied on it for funding.
The market, which has tumbled from a peak of almost $1,200bn outstanding in July last year, had shown tentative signs of recovery in January, expanding by about $32bn from its post-summer low point of $780bn at the end of December.
http://www.ft.com/cms/s/0/e27502a0-e0aa-11dc-b0d7-0000779fd2ac.html