Bits Bucket And Craigslist Finds For February 23, 2008
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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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Presidents Can’t Manage The Economy…
http://www.townhall.com/columnists/JohnStossel/2008/02/20/presidents_cant_manage_the_economy
Nevertheless, the average J6P American voter traditionally blames all his economic woes on the WH incumbant. This unfortunate myth requires the CIC to pretend that he pulls the economy’s puppet strings.
Suprised ?… Nah.. The mirror is the last place people look to answer the “who’s responsible for my lot in life ?”..
If you are unwilling to look in the mirror, there are far more plausible actors on whom to cast blame than the CIC…
http://www.jibjab.com/originals/2-0-5
CIC? I’m not familiar with that acronym and I imagine a few others do as well.
Prof Bear… can you give us a refresher on your frequently used acronyms?
Thanks.
J6P = Joe Sixpack
WH = White House
PTB = Powers that be
CIC = Command in Chief?
Yes.
Ah, the Tom Clancy acronym (CIC).
Right. Stuff like NAFTA and the Iraq Debacle have no effect whatsoever on J6P.
And the housing bubble was caused by the fall of the Berlin Wall or OBL, of course
Nothing to do with Greenspan. Or people from Wall Street who end up in W’s cabinet.
Exactly. The amateurish excuse making makes kindergarteners look wise and wordly.
Really ? Think what could have been in $750B of spending in Iraq had been spent domestically on infrastructure and technology. Of course they can’t manage the economy but they can affect where money gets spent.
RIght. 5/20/03 - we not only have been there much longer than we were engaged in WWII, isn’t the 5th anniversary of “Mission Accomplished!” coming up on May 1? Lots of bumper sticker potential there.
5/1/03 - 5/1/08 - Mission Still Accomplished!
Celebrate 5 Years of Mission Accomplished!
etc.
That $750B would have done much better by being right back in the American taxpayers’ pockets. In fact, that is where the missing consumer spending would have been from. Instead, it was wasted on war.
Please, however, don’t say it should have been distributed as entitlements (health care, housing for the poor). it is best for those who worked their A$$es off to keep their wealth and be rewarded for that work.
That 750B is in our pockets - it’s the hole in our pocket that will be sucking down our hard earned money for decades to come!
btw, 40% of GDP (the broadest measure of economic activity) is based government spending.
and our economy survives in spite of government spending, not because of it.
so far
“…Manufacturing jobs are no better for America than other jobs.”
Mr Stossel, your next article should be about the growth of the American Porn Industry, all jobs being equal.
John Stossel is a corporate hack posing as a journalist. And Townhall is a rightwing blog with credibility issues.
It’s important to know the source for such drivel.
Unlike the New York Times, I bet. Yeah, riiigghhhttt.
attacking where someone comes from instead of the ideas they present is a good sign you can’t debate the actual merit in them.
Years ago this fool stuck a mic in a Pro Wrestler’s face and asked if wrestling is fake. The wrestler got pissed and smacked him on the side of the head and said “that’s a open hand slap is that fake” one of the best bitch slaps I’ve ever saw he just about started to cry. After that he started to cry about his hearing was damaged in his ear on another 20/20 show.
“one of the best bitch slaps I’ve ever saw”
Rich, u r a maroon. Another fine result of our public school system? BTW, he head clapped him and ruptured his ear drum.
“Rich, u r a maroon. Another fine result of our public school system? ”
u r a…? Public school system? Pot..Kettle..Black?
lol
They might not be able to manage the economy but they can sure set it up for failure.
Rolling back regulation and lac of enforcement.
Tax incentives to offshore jobs.
No energy policy
Driving up the deficit
Tax policies that harm the middle and upper middle class.
We should have a housing bubble blog convention and ask the presidential candidates to come speak at our convention
I would gladly fly across the country to attend!
It would definitely be raucous.. Pinkos vs. Libertarians..
The Kansas City Experiment. (Earlier in the week there was a short exchange about the efficacy of cost-per-pupil in education policy.) In this example a federal judge orders a school district to spend $2 billion dollars. Link:
http://tinyurl.com/d2nka
These startling examples of the failure of social engineering by courts never seem to surface in any main stream media. Quick, stick our heads back in the PC sand!
There’s always plenty of room at The Ostrich Farm for more ostriches.
They’re only making so much land, and the big birds need someplace to stick their heads.
There was a bird here called the “Moa” that was like an ostrich, but 10-12 feet high…
Died out like 1,000 years ago, as the Maoris found them really good eating~
No moe moa, eh?
Sounds like you’re having fun down there in Kiwiland, lad!
Now that we are in the South Island, we feel like we are home.
We’re headed towards Mount Cook tommorow.
It’s only 12,500 feet high, but plays like a Himalayan peak.
The last 3 or 4 thousand feet is all snow and ice.
Until white man showed up, there were only 2 mammals in the country (a couple of different bats) and birds ruled supreme for 18 million years.
They are pretty docile still. I have been within 25 feet of a New Zealand Falcon many times.
Imagine that?
I was talking to someone I work with and he stated “I haven’t look at my stocks since the DOW dropped below 12,600″ I was like Yea that is a good was to manage your money. When things do not go my way or the way I think they should, I research the hell out of what caused the divergence. Sticking ones head in the sand is not going to help anything.
I suspect if you were to audit the books you would find most of the additional money was spent hiring administrators.
The goal of many large school districts is to get as many of your friends and family in on the administrator staff as possible. Some school districts have as many as a 1:1 ratio between teaching and administrative staff (Irvine, CA … Cough). In San Juan Capistrano, the board of education had a $52 Million administrative building nicknamed the Taj Mahal by the locals. Despite the massive corruption and fraud involved, not one was sent to jail or lost their jobs. Welcome to America folks, and how about a new school bond?
Here in San Diego, the corruption in our public schools is very serious too, but another conversation.
Bottom line :If you want to really improve schools and education, we need to provide realistic alternatives to public education, which is currently on my radar as the greatest national security threat we face, because while school administrators and board members enrich themselves, we are rapidly losing our base of well educated Americans and no one seems to care!
“we are rapidly losing our base of well educated Americans and no one seems to care!”
This is a pet topic of Lou Dobbs’, and I think he’s right.
I wish Lou Dobbs would run for president. The current gang are all the same & I’m not enthused by any of them.
At least Dobbs has been on top of many issues which threaten this country, and he’s not a PC apologist. Seems to be one of the few with integrity. Probably why he won’t run.
I think we also need to ramp up big-time what we used to call “Vo-Tech” - the vocational-technical schools that were alternatives to college and to some extent high school for those who had skills or potential not likely to be developed well in more traditional institutions. A kid succeeding in a plumbing class, learning a trade and earning some money on the weekends might be a lot less likely to get into trouble than if that kid were in high school, failing algebra.
“A kid succeeding in a plumbing class, learning a trade and earning some money on the weekends might be a lot less likely to get into trouble than if that kid were in high school, failing algebra. ”
Agreed, but alas, so many troublesome variables here…lots of “intelligent” kids with total crap home lives drop out or do very poorly n school. Then there’s the “low-average” I.Q. kids that struggle and drop out too. There used to be plentiful unskilled/semi-skilled jobs for folks w/out H/S Diplomas. Now even unskilled and semi-skilled employers want H/S diplomas or GED’s. Trade schools aren’t a cake walk for some of these low avg. I.Q.’ers either.
We need to figure out what to do with the lower range I.Q. kids that aren’t mentally delayed, but on the other hand, can’t tackle Algebra either. Currently, I believe there’s diplomas for the general population (avg. to above avg. aptitude kids) and the “spec. ed. diploma” for the DD and learning disabled. Maybe they need a “mid-range” diploma for the low-average I.Q. kids so they can at least provide a “Diploma” to qualify for entry-level jobs. Of course this opens up Pandora’s box of testing expenses to see where kid’s I.Q.’s are at.
I get a ton of adults that test at the low-average range and dropped out of H/S. No Diploma, no jobs…what do we do to help these folks? There’s a rapidly shrinking pool of jobs they qualify for these days.
DOC
We need to figure out what to do with the lower range I.Q. kids that aren’t mentally delayed, but on the other hand, can’t tackle Algebra either.
Ahem. That why they invented the military service and city politics.
Or those who use ADHD as an excuse. I have a 32 year old relative who worked one year in his life. He’s lazy. I’ll be Doggoned if I have to support lazy people such as him. This is why I hate progressive taxation.
ADHD and he’s lazy!? Well–he doesn’t have ADHD. As a true ’sufferer’ of ADHD I get more done than anyone I know. Partly because I don’t have to do that one thing, you know, where you lie down and shut your eyes and hold still for a long time? Oh, yes–sleep. Waste of time, in my opinion. And another thing is, I can eat about 4,000 calories a day and not get fat. ADHD is GREAT.
Go smack your stupid relative, I urge you. It’ll be a helpful smack, not a mean one, and that makes it okay.
Half of the population is mentally below average.
I support vo-tech for the computer programming trade. I just wrote a long discussion about this, but it’s so long and off-topic that I decided not to post it here. Maybe I’ll post it on my on my own blog some day, if anyone is interested.
Waste of money - 4k/year buys you a programmer in Bangladesh.
I’d like to see it on your blog.
sm,
are u or have u ever been a computer programmer? while there are some successful computer programmers that are undereducted….anyone worth a damn is pretty intelligent….
aside from the obvious requirements of understanding boolean logic, often even the easier programming tasks come down to automating manual processes or mimicking real-world behaviour of systems…..
….while some programmers may lack social skills i don’t know any that can’t hack undergrad math (?)
I think we also need to ramp up big-time what we used to call “Vo-Tech”
——————
Yes, yes, yes!!!
The idea that everyone needs to get a college degree — many of which hardly qualify one to manage a retail store — doesn’t take into account the fact that we need skilled craftsmen & women who can build something that will last — and not be full of toxins, hopefully.
I’m a former apprentice committee member who interviewed and evaluated potential candidates, & we DO NOT want the low achiever students (dropouts) - we want the ambitious intelligent overachievers! Our problem is the counselors and parents, who push every student worth approaching, into signing up for theoretical college classes, instead of useful practical subjects.
Years later, they return to vocational studies when they realize their insurance or retailing jobs aren’t fulfilling, either financially or spiritually. The service industry should only include those that know how to extend the live of our infrastructure - power, facilities and how to support our living in our chosen climates, not paper pushers.
The government was promoting homeownership and there was a stated goal, by the administration, to increase the number of homeowners. If increasing homeownership is the goal, then allowing the market to correct accomplishes this. As prices drop afford ability goes up. Greater afford ability increases homeownership. Efforts to prop up the market only serve to hinder afford ability. In he long run, allowing the housing market to correct, is positive for increasing homeownership. Allowing the malinvestments, of the last few years, to get cleaned out is the best long term way to increase homeownership. If you want to put a chicken in every pot, you don’t do things that will increase the cost of chickens.
There is another huge economic fact that the press refuses to see, even though I have tried to point it out every chance I get. A big problem is overbuilding, right? As long as prices are artificially high, builders can still make a profit and will continue to build. Like the Oregon new-house auction story I posted yesterday, the company said they wanted to sell so they could become a buyer again!
If you believe in the laws of supply and demand, just be patient and let these fools find out the hard way.
‘Large U.S. homebuilders are circling like vultures waiting for their distressed colleagues to go bankrupt before snapping up the choicer properties, two chief executives said earlier this week.’ ‘I hate to feel like a vulture, but in every cycle we have typically bought land from other builders that have gone in bankruptcy,’ Ara Hovnanian, CEO of Hovnanian Enterprises. ‘We have already looked at parcels of several other builders in bankruptcy.’
‘Tom Eggleston, head of C.P. Morgan Communities, expected half of the National Association of Home Builders’ 75,000 members to be in financial distress within three years. ‘Prices are depressed and the opportunity is there to buy land at unheard of prices,’ Eggleston said.’
From Elaine Chao, Dept of Labor, 2006:
“The average American will have had 10 jobs between the ages of 18 and 38. Every year, about one-third of our workforce changes jobs, largely to take advantage of better opportunities.”
How many times will the average worker have to move to do this? Prices have to stay low to allow these changes. Or we become a nation of renters?
Better opportunity — you are fired and the McJob is better than homelessness.
“The average American will have had 10 jobs between the ages of 18 and 38. Every year, about one-third of our workforce changes jobs, largely to take advantage of better opportunities.”
Laughable arithmetic. Say the population is X
If X/3 changes their job every year, then in 20 years, there have been 20X/3 job changes.
Therefore the average job changes per american is 20/3 which is about 6.7 not 10 as she claims.
I don’t know what the real numbers are, but her statement is so obviously incorrect by inspection so I put no faith in her ability to use statistics. I truly hope the next administration is better at elementary arithmetic.
geez the laugh is maybe on me. It says that 18-38 year olds change once every two years and that 38-68 year olds change once in 15 years.
Screw it, it’s saturday and I need to go out and enjoy the crappy dc weather.
This is anecdotal, but a lot of people don’t understand just how much the economy has changed in the past 10-15 years.
Example: I graduated from law school in 1996. I’ve had five different jobs since then. Every single one of my classmates has changed jobs a like number of times. My old roommate is now looking for his sixth job.
It’s not that we are marginal types, drifting from job to job because we lack the character or ability to stick with one employer; we are graduates of a top five law school. Everyone is bright, hardworking, and ambitious — no slackers here.
Nor do we change jobs because employers are constantly throwing money at us, getting into bidding wars in order to entice us to come work for them. I wish! People change jobs because they have to — because they are fired, downsized, or because there simply isn’t any future for them at a given firm.
Things are totally different for lawyers born 10 years earlier. At my last firm, there were a bunch of guys in their mid-40’s. Every single one of them had changed jobs exactly twice during the course of their careers.
Obviously, none of us have anything to complain about, even if our jobs aren’t secure, we make a good living and are a lot better off than someone working in construction, in a factory, or doing temp clerical work for $9.00 an hour. But I believe that employee mobility (a polite way of saying “career instability”) really is much, much greater than it used to be. All of my lawyer friends have Ivy League educations, have worked at the best Wall Street firms, etc., etc., and yet we all have had 5-6 jobs during the past ten years.
That’s just the way things are for everyone these days. The tech guys out there will know what I am talking about. A lot of my clients are tech guys, and they seem to change jobs every SIX MONTHS. It makes things kind of interesting, one of my clients works in the financial sector writing trading software and not too long ago changed jobs three times in one year! His whole industry seems to work that way. My client always seems to be hiring someone he worked with three jobs ago or trying to recruit someone who left his second-to-last employer, etc. It’s pretty amazing.
Anyway, it seems like that’s just the way the economy works these days.
I think she is mixing apples and oranges. On the one hand, she is only talking about the average american in the age group (18-38) changing jobs every two years (10 jobs in 20 years). Then she makes the statement that the average person (all ages)in the workforce turnover jobs.
All I get out of her statements, “is that their is a lot of turn over in jobs, with no conclusion other than the two statements together tell me nothing”
Am I misunderstanding this heavy math?
Joe Schmoe,
Agreed. We’ve had the internet bubble and now the housing bubble. IMO, these two events are worth millions of job changes just by themselves. Add in the cut-throat tech world and the next bubbles (green technology) and this is life as we know it.
I’m in tech and haven’t changed jobs since 1999. The salaries in my field still don’t match those of the boom era so many people simply won’t leave their job because they know it means taking a pay cut.
Hey Joe Schmoe:
My brother just got hired on the spot at US Surgical, because the hiring guy was his boss at another company 11 years ago.
—————————————-
My client always seems to be hiring someone he worked with three jobs ago or trying to recruit someone who left his second-to-last employer, etc. It’s pretty amazing.
Ditto. 13 years for me with a stable, growing biotech company. I could leave for more money but how long would that last, and how many times would my kids need to change schools?
I graduated as an engineer from a prestigious school. Mt fiancé graduated with an MBA from the same school. She graduated in1995. Since her graduation she is on her 6th job. She was a director of HR in most positions. In each and every position she had to downsize the company and in the end fire herself. These were high tech manufacturing companies’ names most people would recognize. For the past decade we did not buy a house because her job insecurity. I was in the same position in the 1990. So I took the matter in my own hands and started a business. What I have discovered is it is easier to count on yourself rather than a corporation. It is easy to make money but much harder to make a living. What I can not comprehend is why so many smart successful people such as the ones on this blog don’t take the matter in their own hands and work for themselves. When I see people working for many different employers in a relative short time span, it confirms my belief that in the future most of us will be working temporary jobs. I call this employee on demand. When the project is over, so is the employment.
Sorry about the rant.
This may be another symptom of the Hollywood-ization of America. Businesses organized like movie making project teams. Well, more likely becoming Hollywood without the guilds.
This is why urbanization is likely to continue apace. The only shot one has to put down any kind of meaningful roots is to move to an large urban area that has both the largest amount and the largest variety of jobs.
Alas, that is also reason #1 why the REIC in my city thinks there will be no meaningful decline in prices here - because we’re drawing more and more people looking for work.
On the street at least, they may be partially correct. The number of out of state plates I am spotting in my travels about town is soaring. Aside from large increases from the usual suspects - IN, WI, MI, and OH - there been more and more from the south and mid-Atlantic - particularly VA, MS, and AL. CO plates are popping up a lot too.
Now, can these people afford the current prices? That’s the detail the local REIC leaves out. People usually don’t uproot themselves for the chance to spent $350k on a 1 bdrm.
“meaningful roots”
IMHO, that’s a pretty powerful factor. People will be willing to spend for that.
Assuming you are in Chicago, your sources are incorrect edgewaterjohn. Or mine are.
I am in Chicago as well. Population statistics from 2000 to 2006 (World Almanac) reveal a population LOSS for Chicago totaling nearly 100,000.
This does not bode well for REIC’s claim re: urbanization. And, empty nesters buying second homes in major cities does not help the situation. In fact, it makes things worse. Properties that part-time residents purchase essentially are tombs for a good portion of the year. How does the REIC propose attracting retailers into residential areas that have low population densities?
So the supply of workers goes up in your area but the salaries will eventually go down. This may explain why wages have been relatively stagnant since 2001 compared to previous cycles.
Yes, Eudemon, it’s Chicago. If offical population figures for the city proper are declining, it is not showing on the streets. Figures from 2000 are based on estimates - and there are the wildcards of undocumented migrants and transplants - many of whom double up to save money. For example, one trick is not to transfer license plates - so as to avoid buying a Chicago city vehicle sticker. So, in whose population estimate do these folks show up - Chicago’s or their home town’s? The 2010 census will be enlightening in any regard because so much has changed just since 2000.
Small town America has been in decline and time and time again we read how the young are forced to move to the cities for work. That said, I absolutely do not believe that that migration will automatically support current real estate prices. Rents are now falling in Chicago, despite this influx.
If rents are falling, and wages might soon follow - then what are we left with? A whole bunch of people looking for work and cheap housing - so it may be possible for population to increase without a corresponding increase in the demand for real estate. In other words, a big mess.
I’m in Massacchusetts where there has been a net population loss as well. I think the real trend is younger people moving south and west because of the warmer climate. I’m guessing the same is true of Chicago. You rarely hear of anyone coming back to Boston. I have a good friend in Chicago and he says the same.
Population loss is going to happen anywhere you don’t have a big increase in family-sized housing units. Why? Family of four replaced in a housing unit by a single, or a couple. Even in places that remain attractive to parents, that is the trend, because there are many becomming empty nesters. Depart for collect a 18, live to 78, and have a couple of kids who do the same, and only 1/3 of households will have children.
Check the number of households for a better measure.
Edgewaterjohn, Chicago is definitely losing population but a greater loss is offset by young college grads moving here. That it explains all the plates you see on the northside. However, this demographic either returns home or moves to the suburbs. Very few stay to raise a family because, quite frankly, any neighborhood where I want to raise children is too expensive or a first or second time homebuyer. Some of the nicer neighborhoods, like Lincoln Park, are insanely priced for a home. The areas on the far north and northwest side, like Edgebrook or Sagunash, are also expensive and buying a decent home will still you in the 400’s. we’re no where near as crazy priced as the average neighborhood in San Francisco, but its still very expensive for your average new family. So the transplants all leave the City after a certain number of years and return home, or, buy something in a suburb.
On a different note about Chicago, I was looking at real estate on Craigslist this morning, and it appears alot of the new condos and condo conversion on the northwest side are for rent. Rents appear to be pretty high though, such as a timber loft at Addison and Elston for $1,550 a month for a two bedroom. That’s a lot of money to rent in a neighborhood that is essentially an immigrant working class neighborhood.
Meaningful roots.
Think outside the box. Roots are traps. There is no reason to make yourself permanent in a location. Families can be moved. Children can be homeschooled anywhere. Incomes are highest among transient high paid professionals. You have to study your field and understand where the concentration of opportunities are, whether large cities or small towns.
Roots are the things that get individuals in trouble. The biggest example is this housing bubble. Bushie boy pushed for a home ownership society and the effect was a big pool of debt slaves was created. LOL. Lots of people felt stuck to a community and now must work 14 hour days to make a mortgage payment on a loan that is much higher than what their house is worth.
Slavery!
O.K. Stop. You are talking about the veracity of a statement from a Bush Cabinet Officer. It’s like talking about Pat Robertson statements on evolution.
They are meant to be misleading and ideologically biased.
Ed hits a homerun again.
Your partisan attacks are tiresome. You are a prime example of what is wrong with America, if you don’t agree with someone they become your enemy. Relax, listen to the other side they might just have a point. Reason and thought will get you ahead in life, hatred and vile contempt will not.
Wrong again, honey. Ed’s full of shit on this one.
I love the leftist celebration of diversity and tolerance on this blog.
Where was EdHopper attacking anyone? His comments are founded on historic and prevailing events. If anything is tiresome, it is those willing to commit character suicide in their shameless effort to defend those that Ed speaks truthfully about.
“I love the leftist celebration of diversity and tolerance on this blog.”
These fine fellows, with diversity and tolerance, make me feel proud to be an American!(sarcasim on) Rush Limbaugh, Sean Hannity, Fox news with Billo, Pat Robertson, Ann Coulter, Dick Morris
“Wrong again, honey. Ed’s full of shit on this one.”
Blano,
couldn’t you find a way to disagree without all the nastiness?
I like your posts, though I’m sure we disagree politically, but why jump on Ed with both feet, instead of posting something intelligent?
“I love the leftist celebration of diversity and tolerance on this blog.”
Blano, you are referring those that are Intellectual Bigots, a term I invented (no joke) and have been promoting since this past September. It sums up the mindsets of many of those on the Left and some of those on the Right.
The intellectual bigotry of many of those in wildly leftist Chicago convinced me a while ago that it’s time to move away. I’m working on that now.
Blano, you are obviously on this forum because you think that the Bush Administration has done a spectacluar job running this country. We continue to go in a positive direction and you would just like to see more of what we’ve had for the last 7 years. Have I got that right?
I’m just glad that 75% of our fellow citizens disagree with that.
YES BUSH IS THE GREATEST PRESIDENT FOR CREATING UNDERGROUND JOBS….everybody i know has some type of cash jobs
But a real job, some type of security or longevity or overtime to pay off the back bills and save for the future, that is being destroyed in America.
—————————————————–
Blano, you are obviously on this forum because you think that the Bush Administration has done a spectacluar job running this country
I guess i’m above average, i’ve had 10 in the past 3 years. Haven’t had to move once.
RE: How many times will the average worker have to move to do this? Prices have to stay low to allow these changes. Or we become a nation of renters?
It’s been mentioned before here.
With globalism and the offshoring of jobs there has emerged a new US living paradigm-the need for instant mobility to maintain financial stability.
We can call the participating job transients -the Nomad Generation.
The American Dream concept of “Home Sweet Home” is dead.
Large U.S. homebuilders are circling like vultures waiting …
Excuse ME! From the mouth of Ara Hovnanian? His company is in poor financial straits itself! HOV EPS is -$10.11, had to get dept waivers on 2/4/08, S&P slashed the rating deeper into the JUNK territory in mid Feb, … I’d be minding my own store if I was Ara. WHAT A HYPOCRITE!
Vultures themselves eventually die. In the long run, we are all dead.
Not having actually experienced that firsthand, I can’t accurately vouch for the veracity of that statement…
I haven’t personally experienced death, either, IIRC. I still have notions & opinions on the subject.
It reminds me of Dave W, former CEO of CMGi who came to our startup during the internet bubble saying that he would be able to pick up some nice company with cheap price. Well. CMGi just did a reverse split (10 to 1) so it can go back trading at low teen. I kid you not….
“As long as prices are artificially high, builders can still make a profit and will continue to build. ”
Whether they make a net profit depends on how much they paid for the land as land values seem to be falling the fastest. Net losses eat into their capital reserves. That coupled with the falling mark-to-mark on the collateral pledged to their lenders can result in the shut down of their credit lines.
IMO, the fact that one layer of builders will lose credit and fail will only speed the drop in land prices. Plus, many bought using credit, so they are paying interest. We’re talking $billions in debt. This has played out in so many cycles that there isn’t much we can’t guess, only the time frame. But this bubble was huge, and the number of impractical properties (mcmansions, useless condos) is probably unprecedented.
True. Thanks for pointing out that one thing I need to consider is whether the fact that land values seeming fall faster than home values is indicative that land values correct faster than home values. If this is true, it would in fact indicate that those buying land could theoretically build profitably even though housing is still falling in value and that the low for land values may precede the low for home values. I never considered that before.
Land values correct faster because they represent a form of futures market. The builder’s return is based on the market price of the finished house a year or whatever from now.
One should distinguish between marginal profit and “net profit.” Land purchases are a sunk cost at this stage of the game.
YEP. Lower prices are the best “affordability product,” there is. How can people NOT see this? Even greed and self interest shouldn’t be able to erase this simple truth from people’s minds.
If increasing homeownership is the goal, then allowing the market to correct accomplishes this. As prices drop afford ability goes up. Greater afford ability increases homeownership.
I agree with you that the correction increases affordability. It is questionable, however, that it increases homeownership, at least in the short term. Those that got kicked out of homes they cant sell and cant afford may not qualify for years to get into the game again. Also, even long term, those that could afford to buy may see renting as a more attractive option once expectations of appreciation in excess of inflation are gone for good. I dont think any of this is a bad thing. Only fiscally sound homeownership should be encouraged.
“It is questionable, however, that it increases homeownership,”
Perhaps it would better to say, it increase the option of homeownership.
Yes. Especially for the first time homeowner.
Bruce Norris makes this point in his presentations: When affordability (in So. Cal.) is at 40% nobody wants to buy (at least there are no waiting lists.) When affordability starts falling (prices go up) people start buying. By the time affordability is at 15% the mania is in full force (”buy now or be priced out forever”) and this indicates a tipping point. As affordability increases (prices drop) less people are buying. By the time it reaches 40% people are back to “real estate is the WORST investment ever.” His motto - buy when affordability is high and sell when it is low. That’s what I plan to do and we have a long way to go to get back to 40%.
But but but, … the people who already have fallen into houses are demonstrably more worthy of houses than those ewww “Renter People”, so we have to protect them!
A ‘Moral Hazard’ for a Housing Bailout: Sorting the Victims From Those Who Volunteered
http://tinyurl.com/yqq5yc
Mr. Taylor estimated the government might end up buying $80 billion to $100 billion in mortgages. But he said the government could recoup its money if it was able to buy the mortgages at a proper discount, repackage them and sell them on the open market.
Bailout schemes are everywhere and gaining momentum.
Well, you are certainly doing your best to promote that concept aren’t you? Why do some of you guys want a bailout so badly?
It’s an interesting article btw. Much of the article is talking about the obstacles to a bailout.
In practice, taxpayers would almost certainly view such a move as a bailout. If lawmakers and the Bush administration agreed to this step, it could be on a scale similar to the government’s $200 billion bailout of the savings and loan industry in the 1990s. The arguments against a bailout are powerful. It would mostly benefit banks and Wall Street firms that earned huge fees by packaging trillions of dollars in risky mortgages, often without documenting the incomes of borrowers and often turning a blind eye to clear fraud by borrowers or mortgage brokers.
You’ll not hear bailout support from this poster. I say let the chips fall where they may. I have already emailed my esteemed RIP(me off)resentatives with my objections. I am wondering what happened to that early polling on this topic, I think it was by CNN or Money magazine, that indicated that the majority of the voting public did not support any form of bailout? It’s a war of perceptions. Notice how the MSM echoes the impact in terms of how many people or families will “lose their homes”. The fact is that they will only lose the financial millstone they and the greedy REIC put around their own neck. Considering that rent costs are a fraction of the inflated and dangerously structured adjusting and neg am notes these folks chose to saddle themselves with renting may be a relief. And movement of a block of cash strapped households out of that distress may add to consumer spending in some small way.
This latest bailout proposal by BofA is a much more dangerous one for the taxpayer IMO because it is a Bank and Mortgage bailout primarily with the side effect of “helping” FBs. My perception of our leaders is that for the most part they are bought and paid for by the money cult and as such this one has a higher chance of sucking more out of my wallet.
Helping FBs is a myth perpetuated by the REIC. Even the few that think they want to keep the debt will change their mind when prices drop another year or five.
As far as sucking more out of your wallet, that can’t happen either, IMO. Taxes are like rent, you can really only pay so much or the economics of your household collapses. We are paying just about the maximum. So what does government do? Borrow. You nor I will ever pay that off because we can’t. Who has $54 trillion dollars? In fact, as the economy slumps, we may see tax cuts.
Good points Ben. As far as my wallet is concerned I agree with your point that taxes are like rent and coupled to my income and budget, but I have to say that the more I perceive the gov as doing a poor job, the more motivated I am to reduce what I pay in taxes. Also, how does this balance out in countries with higher income tax rates like England and Canada? Do the socialized programs reduce the costs per household to offset the tax hit to each household budget?
So, Ben, are you ready to join my crusade to disavow the national debt? The portion earmarked for our Social Security has already been deemed mythical, which it is, so how about the rest.
Do you think Pres Obama is going to go for tax cuts? I wish that were the case, but he seems pretty far left for that to be a possibility.
“So what does government do? Borrow.”
Which brings me back to my recurring question about macroeconomic budget constraints. Various govt reps occasionally behave as though they believe current and future monies are infinitely fungible (buy now, pay later), almost as though any sort of macroeconomic budget constraint was nonexistent.
But it seems as though recent contagion events in the debt markets are beginning to reveal the mistake in this belief. Floating new plans for a large scale, debt-funded bailout at the point when debt markets for student loans and public works are starting to crumble seems quite reckless to me. I personally believe the existence of a macroeconomic budget constraint and the tradeoffs it entails become far more obvious in a tight money environment. Go right ahead and fund that massive housing bailout if you don’t care about America’s roads and higher education system.
‘crusade to disavow the national debt’
I wish it wasn’t so, because of what it means for our currency. But it’s just too large.
It is possible for one to reduce their tax burden, perhaps the most effective way to do this is not to fixate solely on income taxes. Instead, turn an eye to sales, property, and transfer taxes, etc. Taxes that are dependent on increased consumption.
The less one buys and the longer one extracts use value out of what they do buy - automatically reduces one’s tax profile. Yeah income taxes get the headlines - but J6P willingly pays these other taxes with nary a whimper.
Um, we may indeed be paying taxes at the OPTIMUM rate, but the MAXIMUM? Under Truman and Eisenhower, the richest Americans paid federal income taxes at a 91% marginal rate (capped at 87% of total income) I’m not sure that did alot less work, but they certainly got PAID alot less.
Do the socialized programs reduce the costs per household to offset the tax hit to each household budget?
Government spending on health care per capita (not per government insured population, but per total population) is higher in the US than in Canada. And the entire population of Canada is government insured.
Yes, you read that right.
“Government spending on health care per capita (not per government insured population, but per total population) is higher in the US than in Canada.”
The healthcare companies are ‘central planners’ in a sense. They have strong lobbyists and lawyers to protect their interest.
What does ’socialized program’ mean? Many corporations are socialists disguised as capitalists.
Q: Why can’t I get a dental hygienist to clean my teeth instead of a dentist? Why can’t I see a nurse with an advanced degree when I have the flu instead of a doctor?
What I need to see a doctor to get a prescription for glasses?
A: Lobbyists and lawyers
If true, then this data would indicate that this function performed by the US government is done poorly and inefficiently, even when compared to another country rather than to free enterprise. With that conclusion, do we want MORE government functions?
“In fact, as the economy slumps, we may see tax cuts.”
Ben, with all due respect, you’re dreaming. If a responsible person is elected to the WH and congress is of the same ideological proclivity, we will see tax increases on the wealthiest as a means to restore our credit rating and more importantly, to reverse the past 27 years of destructive tax policies. Face it….. Those who can afford to pay haven’t been and we, who cannot afford to pay anymore have been burdened with the interest payments associated with the borrowing. The tax cheats need to pay up and do so now.
‘If a responsible person is elected to the WH and congress is of the same ideological proclivity, we will see tax increases on the wealthiest as a means to restore our credit rating and more importantly, to reverse the past 27 years of destructive tax policies.’
Who’s dreaming?
LMAO….. Well one can only hope.
this data would indicate that this function performed by the US government is done poorly and inefficiently, even when compared to another country rather than to free enterprise
What it indicates is that a very high amount of government health care spending in the US goes toward private profits, not actual health services. No better example than the recent Medicare prescription drug plan.
Corporate welfare.
Yes, of course. We need to go back to the glory days of the Carter years.
Now, who’s pandering today???
Ok Blano. We should tax the poor wealthy elite less because we all know how oppressed they are and we’re all sure they would trade places with you./lmao
Don’t tax an anybody. We can all carry shovels in our cars to fix the roads when we come upon potholes. (/sarcasm off, kind of)
lmao… I always thought the asphalt gods magically build roads and repair potholes while we all slept. You know what I mean…. kinda like how the water gods supply clean disinfected water to 300 million people…. 24 hours a day.
Just don’t push us over the edge of the moral cliff where more than 50 percent of the population pays no taxes. We are perilously close already.
Think about your statement. You’re saying 50% pay the taxes. Do you think that might have anything to do with the fact that the top 50% earn most of the income? I often hear how the wealthy are “burdened” with income taxes but the fact remains that the wealthy elite have never paid less income taxes than they do now.
Everybody on this blog should know better than to trust government numbers when making economic arguments.
For another perspective on income inequality, check out this analysis.
The debts the US has run up, public & private, are so large they cannot be repaid, regardless of which way taxes go or who is in charge.
The 50% not paying “limit” is the point beyond which (in a “majority” voting democratic society), the non-payers can thereafter raise spending to any level desired without further direct cost to themselves.
In the housing bubble, no down payment meant no risk, thus no concern about price - only payment and loan “qualification”, and prices shot toward the moon with this basic restraint removed.
When you don’t pay taxes, your incentive is to vote for more and more services, ad infinitum… until the host dies.
…and the Heritage Foundation is a source we’re supposed to consider unbiased?
Ben in 10 years you will need 54 trillion to buy a loaf of bread. At that point paying off the debt will be easy as pie.
U.S. Rep. Rick Renzi has been indicted on charges he promised to support legislation in exchange for a land deal that netted the Arizona Republican more than $700,000, the Justice Department said Friday.
http://tinyurl.com/3a3q2r
And we should be thankful that fine, honest, upstanding representatives like Mr. Renzi will be writing and implementing the FB bailout proposals. (sarcasm off)
Give the politicians the JT treatment for even THINKING of doing it. I stayed 100% out of this mess by buying a place well under 3* income, no cashout refi’s, no HELOCs, accepted the fact that housing I could afford in ‘93 would be 40 miles out from the city. Gee, it would have been real nice to have a 750K+ place in San Diego, 10 minutes from the job, low temperatures of 60 degrees in Feb, bought with no money down, ARM with a teaser rate, & a few years later claiming VICTIM, where’s my bailout!
repackage them and sell them on the open market
even with AAA+ ratings from S&P on this repackaged crap, it will get more difficult to find enough even greater fools. Mr. Taylor clearly has not learned his lesson from the CDO fallout (or he is pretending not to understand the problem?).
“sell them on the open market.”
What open market? I didn’t know there was an open market for American mortgages anymore.
Hey, I’d be willing to buy 1 billion “worth” of SIV’s for 1 dollar. Surely, at least one person is still paying their mortgage on time.
I wonder what the bank would charge you to “manage” your $1 fund?
Bailout talk is everywhere and gaining momentum. But I am starting to side with some others here who have often suggested that these schemes will not go very far beyond the talk stage, especially now that we see contagion into other parts of the credit market. Tight money conditions have put an endogeneity noose around the lending market. Pols cannot throw more money down the residential real estate rat hole without paying the price in terms of other socially beneficial projects like college education and road repair. Money talks, bullsh!t walks.
I’ve posted this suggestion over on the Marin Blog, where, don’t ya know, “there is no bubble here, because, well, hell, we’re Marin”..
“Bailouts”.. heck with that.. if anything, lets have the US taxpayers loan the Wall Street thugs money in lieu of buying their toxic garbage and set some low teaser rates with resets at prime plus a few in a few years… that’ll keep their bonuses in check for a while… what goes around..
“Bailout talk is everywhere and gaining momentum. But I am starting to side with some others here who have often suggested that these schemes will not go very far beyond the talk stage,”
I’m guessing the bailout talk will end once re-election season in over;-)
“…an endogeneity noose…”
OK, you’ve got me on that one, even after coffee. Whazzat?
Proposed bailout analyzed in today’s NY times
http://tinyurl.com/2rx6kg
A confidential proposal that Bank of America circulated to members of Congress this month provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government — now that it is in trouble.
The proposal warns that up to $739 billion in mortgages are at “moderate to high risk” of defaulting over the next five years and that millions of families could lose their homes.
To prevent that, Bank of America suggested creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates.
“We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market,” the financial institution noted.
“creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates.”
This doesn’t require a federally sponsored entity to do this. Lenders can forgive the debt and refinance the loans. This is just another example of financial institutions trying to dump their problem on the taxpayer. Asking the government to do what they can do themselves IS A BAILOUT. I think it’s time for another email and phone campaign to our elected officials.
vmaxer…Boy do I agree with you about the lenders re-writing their own junk paper, or just selling at the new lower prices . The lenders are going to have to come to terms with the fact that so many of their loans were investors that will walk no matter what you do if they can’t make a profit .
I saw a sign at a local bank advertising the fact that they will give lower financing to borrowers that buy a REO ,with no loan costs,and I agree with this. Anything that will stimulate affordable housing for a new purchaser is what the powers should be doing . A bad loan is a bad loan anyway you look at it and any attempts to hold up this bad paper is a foolish waste of money .
If the government attempts to buy up bad loan paper ,than why don’t they buy up bad car loans and bad school loans and bad loans from every business that has some bad loans on the books?
If the banks or Wall Street Investment firms are going to go insolvent ,than they can apply for a loan from the tax-payers of America, in my view .Isn’t this the only fair way to solve the problem ,not to say that some of these Firms shouldn’t just go BK and shouldn’t be in business anymore .
These Lenders and investment firms made record profits during the boom ,so if they have lean periods (profit wise ) for the next 10 to 15 years paying back their debt for the loans they will need ,than why not ? In other words, why should the government buy this bad loan paper when they can just give a loan to the Firms that hold the bad paper to keep them solvent if that is what the intent is anyway ? The Lenders will have a certain % of loans they can save ,and they should at their own cost in light of what happened .
“The lenders are going to have to come to terms with the fact that so many of their loans were investors that will walk no matter what you do if they can’t make a profit .”
I think using the label “investors” is wrong. Using “investors” makes one think the multitudes of these buying sheeple actually had a somewhat thought-out plan.
IMO, they just bought because they could, with no more forethought or caution than we on this blog would use in buying a video.
Shit, I’ll pore over tons of info. and reviews just contemplating a purchase of a household appliance.
Banks trying to offload their crappy loans on us through the Government doesn’t surprise me one bit…as nauseating as it is.
DOC
Corporations aren’t evil; corporations that seek special favor with Congress are evil, which is probably most of them.
These same clowns that lobbied for the Gramm-Leach-Bliley Act, an act that introduced greater risks allowing commercial and investment banks to consolidate, now want help from Congress.
“Many of the largest banks, brokerages, and insurance companies desired the Act at the time. The justification was that individuals usually put more money in investments when economy is good, but they put their money into savings accounts when it turns bad. With the new Act, they would do both with the same company, so it would be doing well in all economic times.”
http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act
bastards
““We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market,” the financial institution noted.”
We don’t want to piss off China
‘“We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market,” the financial institution noted.’
If they don’t want to create that perception, perhaps they could start by finding an appropriate euphemism to replace ‘bailout’ as a description of their policy measure. I suggest ‘intervention by the federal government.’
The homeownerhship preservation ACT.
I think we already have a “Euphemism Bubble” in this country.
ROFL
A more likely scenario is just covering it up as something else.
If our government is going to consider this proposal, it should also consider nationalizing the insolvent banks shopping the proposal.
It should also consider giving my household $1m dollars to buy a home of our choice. I promise to give back $200K of that money to the campaign to reelect the Congressman in my district.
Good idea P.B. Instead of bailing out the banks, give those of us who have saved and could afford a home if they were priced at normal levels the money.
Find the price based on median income and rent to own ratios. Us savers will then pay that price and the Gov. will give the FB the rest that he owes to pay off his mortgage. He walks away from a home he can’t afford without debt, we get an affordable home and it cost less than the bank bailout. The banks should have put most of the extra money they get back into the fund for these sales.
(tongue squarely in cheek)
“Bank of America suggested creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates.”
So, let me get this straight. I get outbid in 2003 for a house that some high-rolling scum-bag is willing to PAY $100,000 more than I am willing to pay because it is unaffordable to me, due to rampant speculation.
That “buyer” takes out a NEG-AM loan and doesn’t pay down the mortgage, as I would have done, so the house is “affordable” to him. The prices rise and they buy lots of junk with the money saved being upside-down on the house payment.
Now, to save BofA from all the defaults of buyers like this, the “buyer” gets to keep his house when the mortgage re-sets, re-valued at the price I would have paid in 2003, and gets a new affordable mortgage on the new price.
That is BofA’s proposal for helping greedy pigs who bought things they could not afford?? I get to help make their payments through a government subsidy??
Screw you Bank of America. Based on your policies, you should change your name to Bank Banana Republic.
Diogenes - very well put. I hope you’ll put this into every newspaper comments section that you possibly can. How do you want the attribution to read if I quote you here in the Orlando area?
When people start talking in billions of dollars it is hard to get a grasp. 800 billion dollars represents a MILLION families with 800K mortgages or 2 million families with 400K mortgages. This represents 3 to 6 million individuals or more than the entire population of Virginia.
100% of nothing:
The death knell for the 100 per cent plus mortgage was sounded on Friday as Birmingham Midshires became the last of the six UK lenders that offered loans exceeding a property’s value to withdraw the product.
The move came at the end of a week that had seen five other banks, including Alliance & Leicester, Abbey and Northern Rock, exit that market amid jitters over falling house prices.
http://news.yahoo.com/s/ft/20080223/bs_ft/fto022220082046229782
still no problem getting 110-120% loans in the Netherlands; lenders just charge a slightly higher rate (about 0.3-0.4% extra I am told) and sometimes they require a downpayment (wow!).
Me confused. Isn’t a 120% loan just a polite description of a 100% loan with a -20% downpayment?
I don’t know why they sometimes mention this ‘downpayment’, usually it comes down to a few % ot the amount; It might be a tax issue (the mortgage etc. is fully tax deductible, but a few issues relating to buying a home are not).
Home equity lines being shut down:
http://tinyurl.com/2zo3m2
DelGallo, a real estate broker, has used some of her credit line over the years. Had she known the freeze was coming, “I would have drained it,” she said. “I would have taken every dime and possibly placed it in a money-market vehicle.”
DelGallo said she does not think she is in dire straits. “It’s more like a huge disappointment,” she said. “I have this line of credit attached to my home that’s useless.”
Does anyone have any idea what percentage of homeowners have HELOCs?
Right, the NY Times article didn’t talk about the HELOCs, just the flippers. Why should those who have lived modestly pay taxes just for the national debt in the future to subsidize the past consumption of those who lived large, so they don’t have to move?
“I would have drained it,” she said. “I would have taken every dime and possibly placed it in a money-market vehicle.”
Is this lady an idiot? Why on earth would you “drain” a HELOC (that likely carries a 6-8% interest rate, assuming she has good credit) to invest in a money market account (which, right now, is paying a MAX of about 4%)? That’s a terrible idea, you’re just throwing 2-4% right out the window.. Oh, and also, the interest on your MM account is taxable (but the interest on the loan is deductible, so, I guess it balances out).
What a stupid thing to do, glad she didn’t get the chance. And, what I think she really meant to say is that “I would have drained it gone shopping”. That, although also irresponsible and stupid, at least makes some sense.
I thought the same thing when I read that. The economic ignorance is staggering, but unfortunately it is all to common. About 12 years ago I worked in the back office of a bank. I some how got on to the subject of credit card debt with one of my co-workers, she explained to me that she was slowly paying down about $10k in cc debt and that she was keeping another $25k or so in a savings account for “emergencies”. When I tried to explained the difference in the rate she was paying on her debt (15%) and what she was earning in her savings account (3%) I got a blank stare.
I read it to mean that she would have borrowed the maximum and put it into a money market account, and let the house go back to the bank, and kept the money.
I agree. Multiply this thinking by 100s of thousands; here comes the train!
Um, but you can’t do that. All HELOC’s are recourse loans, meaning they can go after all your assets to get their money back.
I think the real problem is that people seem to think that “extracting equity” means selling part of your house to the bank, instead of what it really is, taking out a loan with your house as collateral. Those are two entirely different things.
That’s the stare you get from people commonly suffering from “Head Up the A$$ Syndrome”. It appears to be an epidemic sweeping the nation.
It can actually make sense if one really needs the money and have no where else to turn, which seems to be the case here. Let’s say you need a lot of money to do whatever and the only place to get it is HELOC. If I knew that was going to be taken away from me soon, even if don’t need the money right at this minute (for example my daughter’s private school tuition isn’t due until summer), I would max out the HELOC, park it in a 6 months CD, pay a couple % of interest in the meantime. If you don’t do this, in 6 months you still need the money but you don’t have HELOC any more and no where else to go.
It’s not as *dumb* as it seems.
Yeah, I got this sense too. Of course, it’s still retarded from the long-term financial prudence point of view but that’s in short supply anyway.
That idea is a sub-prime mentality, “Let’s say you need a lot of money to do whatever and the only place to get it is HELOC”.
What about pre planning, and having a 6 month emergency savings in the bank?
Sub prime mentality always looks to credit to bail them out of financial responsibility.
In the end it always works out the same they end up saying.
“I can’t pay it back because I ain’t got NO money, and you can’t get blood out of a turnip”.
“If you don’t do this, in 6 months you still need the money but you don’t have HELOC any more and no where else to go. It’s not as *dumb* as it seems.”
Not dumb, maybe not–but IMO, terribly f**king LAZY.
If this “whatever” people need money for IS really important, like Daughter’s tuition as stated–then you SAVE for it. I suspect Heloc’s have been used for much more frivolous things that the “important whatever’s” referred to above.
If one is unable to save ahead of time for “important” things, then maybe Helocing themselves isn’t “smart” after all.
DOC
Wonder if she planned to drain it and then get in line for a bailout.
The terms she uses is very telling of the mindset of the average consumer in this country … “drained it”.. yes, we’ve got millions of little banks out there with people living in them…
The New York Times reported in the past two weeks that 34 million U.S. households heloc-ed during the boom, and spent the pseudoequity extracted. This is in addition to all the bogus subprime stuff going on. Most of these “equity” extractions were enormous, in the multiple hundreds of thousands of dollars, so we’re talking trillions of borrowed dollars spent to keep up with the Jones family, which was also borrowing madly to keep up with its admirers.
Kennedy and Greenspan (yeah, that same Greenspan!) calculated the MEW (mortgage equity withdrawal) for households.
Here’s a chart if you’re curious.
USAA Federal Savings Bank - that’s my bank. Way to go, USAA. I love the bank and the company. Pulling HELOCs is smart and fiscally prudent in this market. And her reaction is classic - “poor me”. The entitlement attitude is sickening but expected as the days go by.
I hope that all of these banks have enough sense to limit HELOCs to a combined (with the mortgages) 80% LTV ceiling in the future. If the taxpayer has enough voice to keep the politicians from voting in a taxpayer bailout, it might happen. With a bailout, wouldn’t happen IMO - no penalty to the lenders for screwing up.
” She and her husband took out the credit line in October because they thought her job was in jeopardy.”
Brilliant move…….
Notice her job was a loan-processing manager.She then says” “I didn’t know they could do that. I thought I was too smart to have something like this happen to me.”
These people desreve everything they have coming to them.Let it all crash down…………..
This woman epitomizes an attitude that I’m beginning to think the majority of this blog simply can’t comprehend (and that’s a good thing, IMO). It’s difficult for financially astute and responsible people to understand the mentality that many Americans have. It’s an attitude of prosperity by any means. Many Americans grow up seeing the dreams promised to them by the TV not coming true for them and they get to a point where they feel it’s just not fair. Ask them, that’s their favorite phrase, “It’s not fair.”
Schools and our culture teach us that if you work hard enough, you can do anything you want, and there’s a heavy emphasis on boosting people’s self-imge. Yet there’s some evidence that boosting self-esteem isn’t always healthy (http://tinyurl.com/ysqtns).
These people live in a very different world from many of us here, and it’s not just based on education levels or intelligence. Joe6Pack works in white-collar professions, and not all of the uneducated poor are Joe6packs, for that matter. It’s a world-view.
But then, all this is somewhat self-evident, I’m just pointing out the obvious here.
I think it’s the result of stilted intellectual development. Seriously, I do. About 80% of all people everywhere in the world have brains that do not develop physically or cognitively beyond that achieved by age 18.
It’s part of the human condition - a DNA construct.
Interesting, link?
I read somewhere that the human brain doesn’t even totally mature till age 40 (sorry, forgot where, I must be in that 80%
)
I refuse to stop learning, as I grow up…
Me and about 11,386 other Americans, that is.
“It’s just not fair” a childish retort.
We live amongst a nation of children.
Six foot tall todlers,
who are about to have a collective temper tamtrum.
“It’s just not fair”
They’re absolutely right. It’s not fair, and not going to change any time soon. They need to quit crying about it and find a way to get where you want to go despite it.
Adapt and overcome..
What about the woman in that WaPo article who was borrowing money from her house to pay for preschool tuition, while she contemplated becoming a substitute teacher? The mind, it boggles.
Cartoon, The Fed Chasing the Recession, into the mouth of Moby Dick
http://caglecartoons.com/viewimage.asp?ID={F3CB3932-D69D-428F-A283-C3561E02C30B}
This is a great visual.
I have a colleague who’s husband is a mortgage broker in Bel Air MD. She said they just refinanced and got a HELOC.
I have a friend in Cobb County Atlanta who is currently paying him self through his HELOC!! He is a Dentist and all his receivables from the practice are eaten up through over head and the HELOC is how he draws a salary.
When I expressed horror and concern, he said values will never go down where he lives because of the school district
So he’s losing a little on each patient, but making it up in volume?
Volume.
SNL skit for First Citywide Change Bank
http://www.youtube.com/watch?v=m8nU-q5YPRQ
I would not want someone that stupid working on my teeth!
California to Retrain Laid-off Mortgage Workers
The various initiatives will use a variety of state and federal funds including a $5.6 million federal grant to retrain mortgage and banking industry workers laid off as a result of the subprime crisis.
http://www.mortgagenewsdaily.com/2222008_Mortgage_Training_California.asp
How much training does it take to learn the phrase
“Do you want that order SuperSized” ???
Or, “this vehicle also comes with an automatic transmission, heated leather seats and 0% financing for 10 years.”
$5.6 million to retrain is probably about a $1 per laid off mortgage and banking industry worker.
Retraining efforts ought to target workers whose skills have become obsolete. Many of those workers know how to scam people - that skill will never be obsolete and is always in demand - not just in real estate so much - for the time being.
further STAGflation pressure coming as the war winds down
how is a 532 million embassy in Iraq shown on the books ?
export ? goods sold ?
Collateral damage. Expense it under Cost of Empire.
(”Non-Performing Asset” might draw too much attention over at GAO)
petty cash??
I saw this on Craigslist in Charlotte. It’s an ad for 1 year old kitchen appliances, and states the seller needs to be out by March 8 to move into an apartment. I wonder if it’s a FB looking to get every thing of value out of the place before the foreclosure.
http://charlotte.craigslist.org/hsh/583607936.html
Citigroup rescuing Ambac
http://www.bloomberg.com/apps/news?pid=20601087&sid=aHkTNYiHGd2Y&refer=home
Shell game.
Wow! That list of eight “rescuing” banks reads like a midnight jailhouse lineup on full moon night.
” Feb. 15 (Bloomberg) — The world’s biggest banks may have to book as much as $203 billion of writedowns, in addition to the $152 billion reported so far, if bond insurers the lenders rely on become insolvent, UBS AG said.
“Risks are still rising on many fronts; the problem is broadening from just subprime,” London-based UBS analyst Philip Finch said in a note to investors today. “We expect more writedowns.”
MBIA Inc. and Ambac Financial Group Inc., the No. 1 and No. 2 bond insurers, are struggling to maintain their AAA credit ratings following losses on residential mortgages. Banks may be forced to write down the value of securities protected by contracts with the so-called monoline insurers if their financial condition deteriorates, Finch said. The New York-based companies guarantee the repayment of bond principal and interest in the event of defaults. …”
So $3b to protect $203B seems fair to me! Keep that AAA rating.
The equivalent of a drowning man throwing a life preserver to another drowning man.
Aren’t the banks reserve requirements something like 3%? So they are getting half off by sliding the shells.
This proposed bailout scheme concocted by Bank of Amer. exposes flaws in the notion that markets should be 100% free and unregulated. The US authorities should have enforced strict regulations requiring these banks to have reserves set aside for a rainy day.
Haven’t you heard that deregulation is good for markets?
P.S. Adam Smith (father of capitalism) included a “rule of law” (aka “regulations”) as one of the necessary conditions for capitalism to function well. I quote here from a speech about Adam Smith made by a well-known economist:
What we now know as the rule of law–namely protection of the rights of individuals and their property–widened, encouraging people to increase their efforts to produce, trade, and innovate. A whole new system of enterprise began to develop, which, though it seemed bewildering in its complexity and consequences, appeared nonetheless to possess a degree of stability as if guided by an “invisible hand.”
http://www.federalreserve.gov/boarddocs/Speeches/2005/20050206/default.htm
“…exposes flaws in the notion that markets should be 100% free and unregulated.”
That’s false logic. It ignores the existence of the Federal Reserve, which has the power to interfere completely on behalf of the banks. If there had been no Federal Reserve, the current banking problem could not exist in its present scale simply because the Fed could not have printed the money to make the Ponzi work. That eventually gets back to the much-dissed notion that a gold standard wouldn’t work. It sure would have prevented this, IMO.
Had the Federal Reserve never come into existence, this country & world would be in an entirely different situation. I have no confidence that the situation would be one bit better than the one we are in now, however. Panics & bubbles have been a regular part of the US economy since its inception.
“We don’t need a world full of corporate attorneys and hedge-fund managers,” she told a crowd in a Baptist church in Cheraw, S.C., last month. “But see, that’s the only way you can pay back your educational debt!”
Mrs. Michelle Obama
A few fund managers and lawyers are ok. IMHO she is right.
Heard a story on NPR yesterday about the shortage of U.S. engineering talent. One comment was that Wall Street has sucked away a good share of the U.S. engineering talent pool.
My personal take: Oh what a hash the financial engineers have made of things!
Come on Michigan!
That state is full of very smart people designing better cup holders. Send in some venture capital and leadership; put those talents to work. GM and Ford, stop 50% of your car manufacturing and start pumping out low cost windturbines and solar panels.
Nice idea, but one little problem. Current manufacturers of solar and wind power products probably pay their workers $15 to $25 per hour. Ford and GM couldn’t compete when they have to pay most of their workers $40 or more per hour.
GM new hires will be earning half pay. Yes, that’s HALF of what their co-workers earn.
I think the alternative was not unchanged or higher pay for GM workers & new hires but no GM workers or new hires whatsoever.
There is a shortage of engineers because engineering is a lousy career choice. Most corporations treat engineers like blue collar workers. It’s hardly worth the time and effort to earn an engineering degree.
There is just a massive oversupply that’s all. It’s easy enough to replace a crop of engineers for their freshly graduated siblings at a lower pay.
Most well-educated engineers have great skills. Unfortunately, there’s very little for them to do.
“Unfortunately, there’s very little for them to do.”
Bingo! You nailed it. The fact is, there are very, very few positions that require that “helluva harder curriculum.” Most engineers are “systems engineers” which are nothing more than glorified book-keepers.
The best and the brightest have demonstrated their true talents by steering clear of engineering.
Oh crap! That means I obviously am not part of the “best and brightest”. I am so disappointed!
It would be instructional for you to watch how one of our process control automation engineers “keep books”.
Good amusing thread, but I have to go.
Hope we can do it again sometime.
My very bright engineer ex makes more than the average doctor.
Software engineer here. $223k in 2005, $204k in 2006, and $223k in 2007. Hope to be over $200k this year. But I work my a$$ off to do what I’m doing and travel a lot. Total of 6 weeks of down time since I started working in my field in 1985.
Neat thing is a lot of head hunters are calling me again. One guy last week tried to get me interested in work in California at where I had a direct job for 11 years long ago. He complimented me by calling me a hot commodity! LOL. I thanked him.
sounds like you’re working for companies involved in selling things to the govt, bill.
what kind of s/w are you “engineering”?
Let us not forget it is also a helluva lot harder curriculum!
The business world doesn’t give a flyin’ f*ck about how hard the curriculum was. We know; everybody knows.
All it cares about is how much value you add to the business aka how much money do you make it?
If only more engineers understood this basic point!
I am an engineer; I am president and 1/2 owner of an 80 person engineering and construction firm so I think my opinion has validity. I would go so far as to say my insight here may exceed yours but alas I am just an “engineer” so who knows.
I simply was pointing out that the tougher cirriculum tends to push good engineering candidates in to other majors.
Who cares? There’s a massive oversupply anyway. Not to mention that China and India is churning them out as fast as they can.
Massive oversupply; limited if any demand. Guess what happens to wages.
Who cares whether you can do surface integrals and PDE’s in your sleep? I can too; but there’s no market for it.
My son computer engr. Electrical/Computer worked for Boeing Space two years now going to dental school
I don’t know, I am a seasoned software engineer and I am treated pretty darn well overall.
me too!
This is not a sarcastic question. Do software engineers study in the college of engineering at their university, or in a different college. The point of the question is, how much similarity is there between software engineering and civil/mechanical/ electrical etc.? I would have guessed that they are in the Computer Sciences area.
Chip, you are correct. No similarity at all, unless things have changed since I was in school (Engineering, Univ of Colo.).
Depends.
All of the engineerings overlap at various edges. It’s hard to draw hard lines between them. Theoretical CS overlaps with Math; CS overlaps with EE at the hardware end; EE overlaps with Materials Science at the materials end which overlaps with Applied Physics, etc. etc.
Good engineers know how to know enough to peek over the proverbial edge of their knowledge. At least enough to follow a research paper adequately (even though they may be no experts in that field.)
And each university is structured just differently enough (based on history, endowments, etc.)
Your personal take is a bunch of balloon-juice.
Not all engineers on Wall St. are engaged in the shenanigans. The collapsing spreads in equities are a direct result of the automation of many if not all of the systems. Same is happening in the other asset classes now.
This reduces the “frictional costs” aka the “vig” that the Street used to command. If you don’t think this is a good thing, I have a bridge in New York I want to sell you.
Once again, you’re showing your complete ignorance of all matters financial.
My brother has a dual degree in mechanical engineering and aerospace engineering. He could only find jobs working for the MTA, pay was around 35K. This was early 90’s. He went to Columbia got an MBA and then a Masers in Computational finance. Now he is on Wall Street raking in the big bucks. I am a chemical engineer. No jobs Mr. So I had to start my own manufacturing company.
So she proposes what to replace corporate attorneys? The federal government?
Why doesn’t propose something else…like temporarily suspending the law licenses of anyone service public office?
Conversely, why doesn’t she support tort reform or support measures designed to hack away at our countrymen’s love of suing the crap out of others?
Answer: Because she’s not interested in the freedom of individuals.
That rag makes me begin to feel warmer toward Hillary.
Try reading Ms. Megan McArdle’s view in her blog on TheAtlantic
‘Regrets . . . I have a few . . . but then again . . . too few to mention’
“…In the general? I might not vote for Obama; I will not vote for McCain. There are some things more important than the economy, and free speech is among them. Yes, I don’t like Obama’s stance on the Second Amendment, but the difference is, the president has little wiggle room right now on the second, while McCain might do serious further damage to the first, or the fourth. I dislike the steps Obama is willing to take in order to achieve his goals of economic equality. But these are as nothing to the notion that citizens have to be protected from information because Big Daddy John thinks we’ll get bad ideas in our heads…”
http://tinyurl.com/329zw7
TheAtlantic.com
Young ladies not all men are base.
“(CBS) Nancy McGrath considers Colt Haugen “an angel” and a life-saver.
Haugen, 22, a student at the University of Colorado at Colorado Springs, was in his third week as a waiter at a local Ruby Tuesday restaurant last month when, he says, he spotted a customer slipping a pill into the drink of the woman he was with.
Haugen told his manager, and they called police. Haugen also whisked the drink away and replaced it.
The customer, Robert Psaty, 56, was arrested on suspicion of inducing someone to consume a controlled substance. He is free on bail.
Police say they tested the drink, and it contained anxiety-relieving Valium.
McGrath was on a blind date with Psaty, whom she met through a dating service. …”
http://tinyurl.com/yrxt3b
CBS news
Just say no to prescription drug addicts…
Here in NZ, the laws regarding Marijuana are pretty severe.
Just the act of passing a lit joint to a stranger, constitutes trafficing in drugs…
Are there any “strangers” in NZ?
A part of the next bubble:
The Energy Challenge
Move Over, Oil, There’s Money in Texas Wind
“…Texans are even turning tapped-out oil fields into wind farms, and no less an oilman than Boone Pickens is getting into alternative energy.
“I have the same feelings about wind,” Mr. Pickens said in an interview, “as I had about the best oil field I ever found.” He is planning to build the biggest wind farm in the world, a $10 billion behemoth that could power a small city by itself.
Wind turbines were once a marginal form of electrical generation. But amid rising concern about greenhouse gases from coal-burning power plants, wind power is booming. Installed wind capacity in the United States grew 45 percent last year, albeit from a small base, and a comparable increase is expected this year….”
NYT
http://tinyurl.com/2jtucb
my newspaper today reports that the Dutch government is doing everything they can to slow the building of new wind farms (mostly in the North Sea), using all kinds of silly arguments. Technicians say it is far easier to get permission for a new oil drilling platform than for a big windmill.
Some years ago our Bush-inspired government cut all subsidies and most research for alternative energy, while coal power plants and nuclear research still get huge funding. Now - because of public pressure - the subsidies for windmills are back, so they switched to other tactics to prevent the inevitable from happening. Netherlands owes much of its land and the start of its economy to wind power. Dutch companies played a major role in the development of new windmills, but in the Netherlands the role of windpower is seriously lagging compared to neighbour countries. Maybe our kleptocrats should look again at the USA for direction …
I frequently go to Google’s finance page to see the technology stocks that have risen the most on any given day and I’ve noticed a ton of money is pouring into Chinese solar stocks. These companies are making solar panels powered by photovoltaic cells based on silicon and the new ‘thin-film’ technology. And they already appear to be making a nice profit.
watch the general solar energy stock charts over the last year or two and you see a classic bubble
P.S.: I think the technology is very promising, just doubt if investing in solar through the stock market is profitable.
In lieu of investing in companies that make solar panels, just buy some for yourself…
Uh ungowa, let the Sun make your power~
Uh ungowa
Thought you were in Kiwiland, but maybe it’s New Guinea instead??
Perhaps we need a “how are we screwed” thread. Inflation? Deflation? Seems like a policy choice to me, perhaps the only one left. And it seems to me that debtors and billionaries with money in Switzerland are a mighty potent political combination.
let’s hope for the billionaires then that their money is legal. The papers in Europe are full of stories about the (only German, up to now) tax office going after rich businessmen, and maybe even some politicians, with secret bank accounts in Liechtenstein and other places. Seems the tax office in other countries has received some black money info as well, and there is more to come - maybe also regarding banks in Monaco and Switzerland. Looks like the ball got rolling on this subject. Probably it helps that Germany needs a lot of money to cover its current budget deficit, and the coming bailouts of the state banking sector.
Perhaps it will raise salaries in the banking industry to preclude accepting the spy services bounties.
the news out of germany was pretty disturbing (to me). switzerland hasn’t been a haven for a while. they’ve been withholding taxes for EU depositors for some time. but liechtenstein was thought of as the “new switzerland”….there was another story about a week back about some dirtbag former employee extorting a bank out of liechtenstein for years and being jailed for his trouble. ironic thing was that he didn’t do anything different than the german intel service did…stole customer account info….i guess he should have tried to sell it to the greedy govt instead of the bank itself huh?
Insolvency
Are hedge fund analysts the new “smartest guys in the room”? (HFA — feel free to jump in with comments from the front lines!)
PAGE ONE
Hedge Funds Feel New Heat
By GREGORY ZUCKERMAN
February 23, 2008; Page A1
The past decade has been the era of the hedge fund, as investors snapped them up for their track record of beating the market with often highly complex trades.
But now, as the credit crunch upends financial markets, that very complexity is coming back to bite some of them.
In the past year, shares of Fortress Investment Group LLC — which became the symbol of hedge-fund success when it went public last February — are down 50% as investors wring their hands about the value of its real-estate, debt and other holdings. A Fortress official declined to comment.
http://online.wsj.com/article/SB120373510155387833.html?mod=todays_us_nonsub_page_one
Many books such as a Random Walk Down Wallstreet By Malkiel and others have proven that investors in general are better off investing in index funds than actively managed funds. I’m curious to know if anyone has done any research comparing the returns of index funds with hedge funds over a 10 to 15 year period.
Most of these books never take into account that you can only go off the Gold Standard once, and that you can only reduce rates from 18% to 1% once.
Neither is likely to repeat. Just because you stick it in a regression doesn’t mean you can just safely ignore it.
That should read: Just because you can’t stick it in a regression doesn’t mean you can just safely ignore it.
I guess the problem with that is that the last 10-15 years have seen far from ‘normal’ market action (e.g. Greenspan/Bernanke put), so any comparison is useless - at least for predictive purposes.
You know… I don’t know about that. I used to think the Random Walk book was gospel. But there are funds that, since their inception in the 50’s, 60’s or 70’s, that have consistently done better than the S&P 500 index for example.
Malkiel even allows that there are some people - he specifically names Warren Buffet - as having an uncanny ability to beat the market. I think it’s more than Buffet that can do that.
60 Minutes
A Glimpse of Secret Rove
Dan Froomkin
“…Here’s a preview from CBS News: “‘Karl Rove asked you to take pictures of Siegelman?’ asks [reporter Scott] Pelley.
“‘Yes,’ replies Simpson.
“‘In a compromising, sexual position with one of his aides,’ clarifies Pelley.
“‘Yes, if I could,’ says Simpson. …”
Washington Post
http://tinyurl.com/2zcach
Mortgage Chief Picked by BofA Sparks Worries
By James R. Hagerty
Word Count: 832 | Companies Featured in This Article: Countrywide Financial, Bank of America
Bank of America Corp. avoided many of the easy-credit excesses that other lenders embraced during the housing boom. That seemed even smarter when mortgage lender Countrywide Financial Corp. sank deep into the red last year and then agreed last month to sell itself to Bank of America for about $4 billion.
But the largest U.S. bank in stock-market value is raising some eyebrows with its decision to put David Sambol, Countrywide’s president and chief operating officer, in charge of the combined mortgage business.
http://online.wsj.com/article/SB120372901409887427.html?mod=todays_us_nonsub_money_and_investing
So that is why is BofA trying to get the government to take over its mortgage portfolio as well as other ‘at risk’ lenders.
Maybe they think the new CFO will enrich BoA execs the same way he enriched Godzilla?
CFOCOOSeems I am not the only Wall Street observer who was mystified by yesterday’s meteoric late-day runup in the DJIA.
February 22, 2008, 4:43 pm
Four at Four: All Is Well!
Posted by David Gaffen
It doesn’t seem to take much to get the market in a chipper mood. The Dow industrials reversed course in a late-day surprise after reports on a potential deal to bail out Ambac Financial Group, one of two monoline insurers that have been steadily dropping shoes for the past few months. “That’s been one of the last strongholds in terms of financial worries – and if there is a bailout and they don’t get downgraded, then I think that this market could begin to respond to the rate cuts,” says Peter Cardillo, chief market analyst at Avalon Partners. But again, it’s hard to see how this report becomes the elixir that solves everything. Credit spreads are continuing to widen, and investors remain worried about defaults across a number of sectors. Lending has dried up. The major averages were closing in on recent lows, so that may have run up against resistance, and an Ambac report was enough to inspire a rally. “For the last year, the credit markets have been leading the equity markets,” noted James Bianco of Bianco Research, this morning. “The basic problem for the credit markets still exists. One has to ask if bullish equity managers ‘get it.’”
http://blogs.wsj.com/marketbeat/2008/02/22/four-at-four-all-is-well/?mod=googlenews_wsj
Keep your eyes fixed on that eleventh hour DJIA rally, and ignore the dollar…
Dollar Falls to Three-Week Low on Concern U.S. Economy Stalled
By Ye Xie and Bo Nielsen
Feb. 22 (Bloomberg) — The dollar fell to a three-week low against the euro on speculation the Federal Reserve will cut borrowing costs to avert a recession while European policy makers keep rates on hold.
The U.S. currency declined against 15 of its 16 most-active counterparts and fell to within a cent of a record low versus the euro as traders bet the Fed will lower rates a half-point next month. The yen trimmed most of an earlier advance as U.S. stocks rebounded, encouraging investors to buy higher-yielding assets funded with cheap loans in Japan.
“The U.S. is in a material slowdown and it feels like a recession,” said Camilla Sutton, co-head of currency strategy at Scotia Capital Inc. in Toronto. “Dollar weakness has gained momentum this week.”
http://www.bloomberg.com/apps/news?pid=20601101&sid=a2kS5taiqL9A&refer=japan
URL: http://www.frontlinethoughts.com/printarticle.asp?id=mwo022208
The Muddle Through Fed
Feburary 22, 2008
By John Mauldin
The Muddle Through Fed
Risks to the Downside
Consumers Gone Wild
This is indicative of something I have been writing about for some time: the collapse of the housing market and a recession is going to be a wake up call for consumers, and especially those approaching retirement. The thought that “You better be careful what you wish for, you might just get it good and hard” comes to mind when people bemoan the low savings rate in the US.
There are several points we can take away from this research. Even when the current credit crisis gets resolved (and let’s hope the rumors which made the stock market go to the moon in 15 minutes today about Ambac getting financial backing are true), we are not going to see a return to the days of loose credit. It is going to be harder and more expensive to get a loan for all sorts of consumer credit.
Those who have used their homes as piggy banks to spend more than they make are going to have considerably more difficulty in the future. With housing values likely to drop another 15%, there is going to be less equity to borrow. It is just that simple.
Further, just as there was a positive wealth effect from rising home prices, there is going to be a negative wealth effect from falling home prices. Homes are the largest portion by far of the US consumer’s net worth. Consumers, and especially those who are close to retiring, are going to realize that the home value they thought they had is drifting away. They will realize they are going to need to save more.
On an individual basis, saving more is a good thing. But when an entire economy goes back to saving a mere 3-5%, that is going to have to come directly out of consumer spending. And since consumer spending is 70% of the economy that will put a serious 1-2% annualized head wind to GDP growth for several years, until businesses adjust. Muddle Through, indeed.
IIRC, He seemed to fall off the “containment” bandwagon somewhere early last year.
“…something I have been writing about for some time…”
Is that on a different blog? Or screen name change?
The OP was quoting John Mauldin’s writings, see website URL above.
This piece provides an indirect hint that there will be no housing market bottom until 2011.
Fannie Mae, Freddie Fall After Merrill Says `Sell’ (Update2)
By Adam Haigh and Jody Shenn
Feb. 22 (Bloomberg) — Fannie Mae and Freddie Mac fell in New York trading after Merrill Lynch & Co. analysts said the housing and debt market slumps will stifle earnings at the mortgage-finance companies through 2011.
http://www.bloomberg.com/apps/news?pid=20601009&sid=aC_IqQFS5Qiw&refer=bond
Debt market walking. IMO, these problems are easily fixed: Just let the debt markets price in default risk and inflation risk premiums, and volume will pick up substantially. I will not venture to speculate why those risk premiums remain conundrumishly low.
Deere, Ryder Lead U.S. Bond Sales of $2.1 Billion (Update1)
By Gabrielle Coppola
Feb. 22 (Bloomberg) — Deere & Co., the world’s largest maker of tractors and combines, and Ryder System Inc., the largest U.S. truck leasing company, were among corporations selling $2.1 billion of debt in the slowest week since Jan. 4.
Sales fell from $11 billion a week ago, according to data compiled by Bloomberg, as the cost of protecting corporate bonds rose to record highs. Deere of Moline, Illinois, sold $500 million of two-year floating-rate notes. Miami-based Ryder sold $250 million of five-year notes, paying a yield over benchmark rates almost triple what it offered on similar debt a year ago.
http://www.bloomberg.com/apps/news?pid=20601009&sid=awyGmr.zr1Nc&refer=bond
“Debt market walking.”
LOL.
Dehydrated Banks
http://www.itulip.com/forums/showthread.php?p=28241#post28241
I don’t see how the ambac plan is going to help the banks, the u.s. is following the path of Japan.
Banks are holding paper that they hedged via insurance from Ambac. If Ambac is downgraded, banks fail. So banks take cash and invest into Ambac boosting its balance sheet and at least temporarily blocking the downgrade, giving banks a little bit more time.
Banks bet - by the time Ambac eats through the new cash someone will help banks to unwind positions.
Do they really think ratings matter at this point? Seems like debt investors have already voted with their feet. Another losing bet by the banks.
“History is the distillation of evidence surviving the past”
Oscar Handlin
Truth in History
1979 (4th edition)
I am curious about whether pushing $50 bn of TAF “yarn” at banks could have had the unintended consequence of further shutting down debt market liquidity? My thought is that in tight credit conditions, creditors want to be paid higher risk premiums to cover the risks of default. Now that the Fed has revealed a preference for leaning against a slowdown and shoring up bank solvency over fighting inflation, add an inflation risk premium to the list of creditors’ requirements to make loans. But it appears from my untutored perspective that bailing banks out with $50 bn of TAF monies against shaky collateral would have the effect of crowding out private sources of loanable funds, as the interest rate on these TAF loans are inherently below market.
My apologies if this is a bit incoherent — I am not a macroeconomist and don’t pretend to understand the “discipline.”
Seems like the bond market agrees, long yields are back to dec levels.
A friend of mine interviewed recently for an investment bank and one of the interview questions was ‘is high inflation good for banks?’. It seems the banks are behind the inflation right?
He go the job and his answer was ‘in the long term inflation is bad for banks’.
If a bank can lend out at 6% or less and inflation is 7% or more, they lose.
“It seems the banks are behind the inflation right?”
Inflation is always and everywhere a monetary phenomenon.
–Milton Friedman–
Last time I checked, the Fed had a monopoly position in the U.S. monetary policy business.
Yea and that’s the conundrum for me. Why would they inflate the dollar, causing inflation of 7%+, eroding their own purchasing power, in an economy that allows them to earn a return of 6% or less on their loans?
I know they are causing the inflation, but I don’t understand why.
Because the commission they make on the “vig” that they make on the transaction is large enough. They’re not investing their own money. They don’t care.
Think micro not macro. Each player is acting in their own self-interest. It’s a bit like the “tragedy of the commons”.
Your posts are wonderful, Faster Pussycat. While I don’t always agree with you (tho I usually do), yours typically are a good read.
Thanks.
“Last time I checked, the Fed had a monopoly position in the U.S. monetary policy business.”
You don’t think China’s voice is growing louder? What happens when they stop or just slow down the funding of our borrow and spend Congress? Debt is money in our system.
“What happens when they stop or just slow down the funding of our borrow and spend Congress?”
For your answer, witness the status quo in the credit markets.
Recently someone mentioned difficulty with large withdrawls. Went into BoA yesterday, took out most of my life savings ($500k), moved it to wachovia for 2x the interest rate. The BoA manager almost had a stroke, took 5 of them and multiple phonecalls over 45 minutes to execute. Tried to get me to talk to their investment guy, but I shot that down real fast - been down that fruitless road before…
“Recently someone mentioned difficulty with large withdrawls. Went into BoA yesterday, took out most of my life savings ($500k), moved it to wachovia for 2x the interest rate. The BoA manager almost had a stroke, took 5 of them and multiple phonecalls over 45 minutes to execute. Tried to get me to talk to their investment guy, but I shot that down real fast - been down that fruitless road before…”
Did you get all that in cash in a duffel bag?
From today’s NY Times:
“A man carrying a bag filled with nearly $150,000 in cash that he had just withdrawn from a bank in Midtown Manhattan was assaulted and robbed by an armed man on Friday afternoon, officials said.
The victim, whose name was not released, had left a Chase branch at 1370 Avenue of the Americas and was walking west on West 56th Street when a man ambushed him from behind outside a Starbucks at 2 p.m., witnesses and the police said.
One witness said the attacker repeatedly struck the man, and then dragged him several feet along the sidewalk in an apparent struggle over a black duffel bag that the police said was filled with cash. Others reported hearing a gunshot, but the police said there was no evidence of gunfire.”
i’d bet the teller called or text a waiting accomplice….
I thought banks had rules against large cash withdrawals?
Well, they do but everything can be negotiated.
For example, the wholesale diamond industry operates on a lot of cash. If the banks want their business, they will bend the rules.
I would never have more than the FDIC insured in any one bank. Also, I would not take out huge sums of cash when a simple cashier’s check should do the trick.
Your cash must be legal then. That’s not how the diamond industry operates.
These operators are not Americans, and FDIC doesn’t mean a whole lot to them. Nor do they care.
Why on earth would you have more than the FDIC limit in any one bank?
You’re either pulling our leg, or you’re being foolish! Talk to an accountant and learn about this issue.
Banks can and do go under.
Reuven, you are right, but we structured things so we have $400k covered by FDIC. The rest will likely work their way into some low-cost index funds over time, and some into a 529 plan for the kids. I asked about buying AU govt bonds as someone here recommended, but the wachovia guys were clueless about it. I’m frankly not quite sure what to do with the cash, which I know is a nice problem to have, but still no obviously good investments out there, meanwhile inflation is notching up as expected…
Are you not aware that Federal law enforcement can, at will, seize any cash dollar amounts of $10K and over whenever they want with no explanation?
And they don’t have to return it to you either.
IF said story is true, the teller should be fired immediately and the bank branch put on probation.
Never heard that. What law are you talking about & why would that be legal?
geekden,
You may have seen, some folks here have suggested Everbank for some international MoneyMarkets and CDs. I haven’t taken the plunge myself, but it does look interesting.
Be careful with Bank of America cashier’s check. I withdrew $27,000 from them via cashier’s check in 2005 and the check bounced!
Apparently, they had closed that particular account from which the funds were drawn. When I presented the check for payment at another institution, they initially credited my account but two days later reversed it. Since I no longer had the check in possession, BofA treated it as if I had lost the check (not initially believing that their check had bounced). So, they made me wait 90 days to re-credit my account.
Bank of America has always been shady. Their schemes with illegals and credit cards, acquisition of Countrywide so they can use their losses to write off their profits, and now this cashier’s check bouncing was enough to swear I would never use anything. I hope they go bankrupt…but that is wishful thinking. They are the Goldman Sachs of the banking business–the chosen.
That’s funny. I moved an amount in that neighborhood from WAMU to Goldchain with a couple of phone calls and no hassle. They didn’t seem to even care.
just to clarify, I got a cashiers check, not a bag of money!
Oh, now you say it! My mental image of you involved gunny sacks labeled “$”. Got everybody riled up over nuthin’.
From Wapo:
“Mortgage Broker loses Heloc, Cries”
http://tinyurl.com/2zo3m2
“I got off the phone and I was shaking,” said Corazzi, who was using the money to pay preschool tuition for her twins .”I was near tears. We needed this credit line to get us through some tough times.”
Crying because you lost the opportunity to *borrow* money? What’s wrong with these people!
Here’s my advice to her if she needs $$$ to get through some “tough times”: “Hey B*TCH! Get off your ass and get a second job! And cut your expenses!”
From the way she regards this loan, it’s almost as if she had no intention of ever repaying it. If I were in “tough times”, I wouldn’t take on debt.
From TFA:
“I got off the phone and I was shaking,” said Corazzi, who was using the money to pay preschool tuition for her twins .”I was near tears. We needed this credit line to get us through some tough times.”
I have the solution! Don’t send your kids to pre-school! Stay at home with them! Problem solved!
Five months ago, the Ellicott City house was appraised at $560,000; the lender says it is now worth $469,100.
“I told them, ‘You guys are wrong,’ ” Nancy Corazzi said. “They said, ‘Sorry, this is what we’re doing in the entire area.’ ”
If they are so wrong why don’t ya try and sell it? If you could you would be able to rent and have the extra money necessary to get through your “tough time” as mentioned in the article. I am guessing it is because they are not wrong.
Mortgage Broker and Copier salesman to Homebuildrers, aparently with a frig filled with Kool-Aid. This aint gonna end well.
Looking at the picture on that WaPo article, maybe Nancy shouldn’t have spent all that HELOC money on the upgraded kitchen that I think I see behind her……
Whoa! I slept in and bits is already at 140. Holy moly, Ben! Congrats!
rent to own a 1.09 million dollar townhome in Long Beach Hahahahaha
http://losangeles.craigslist.org/lgb/apa/583918708.html
Wow that ad drips of desperation. The JT is getting deeper and deeper. How does one go Long Proctologists?
Shouldn’t one go long surgeons? Who’s gonna sew them back together?
You mean tree surgeons, of course.
We’ll just get fake plastic JT’s from China, and put them on the national credit card.
No real trees were harmed during this maneuver. LOL
http://tinyurl.com/2cmrfd
An interesting article on how the housing bubble could affect future living arrangements. I don’t buy the premise that we will see a large re-migration to the cities, but I do think some of these “exurbs” may end up being abandoned or much less populated than they are now.
I’m curious as to what others think we will see in the next 10-15 years in suburban and urban development.
http://www.kunstler.com
He has lots to say about this. Whether wrong or right, couldn’t say.
The boondocks will be ghost towns, as high oil prices will make urban areas much more cheaper places to live. Those “wise” survivalists who think that the socialist dark ages during the next 8 years will make rural life superior, better think again. Jobs, Jobs, and more jobs are in the big cities. Incomes in rural areas will go down. The only useful skills in rural places are primitive and never pay well. However I suppose internet ponzi schemes probably pay handsomely, but do not really add to the economy.
If you need to work, you’ll need to be near a big city…
But if not, get away as far as you can from them.
Vallejo, Ca. is on the verge of bankruptcy, and the criminal mind is quite savvy to little things like the police department not being there all of the sudden.
San Francisco has a storied history of vigilantism, that mostly occured in the 1850’s.
You’ll see something similar soon, but the vigilantees will have weapons with just a wee bit more firepower…
You’ll see something similar soon, but the vigilantees will have weapons with just a wee bit more firepower…
————————–
We can hope. Never understood the antagonistic attitude many have about vigilantee groups (like the Guardian Angels, etc.).
Personally, I’d gladly welcome vigilantee groups on every corner of our ‘hood. Rather have them watching over us than Big Brother with the cameras.
http://www.nytimes.com/2008/02/23/business/23wind.html?_r=1&hp=&oref=slogin&pagewanted=print
The next bubble?
“Wind has invigorated our business like you wouldn’t believe,” said Marty Foust, Dandy’s owner, who recently put in new carpeting and air-conditioning. “When you watch the news you can get depressed about the economy, but we don’t get depressed. We’re now in our own bubble.”
Here’s something for NYC Boy
http://www.huffingtonpost.com/peggy-drexler/the-incredible-shrinking-_b_88013.html
Congress is going after scumbag credit card companies. Payback for decades of shameless greed, deception and ripping off card holders.
http://www.msnbc.msn.com/id/23259179/
On Cavuto (FNC) this morning, my hero Ben Stein was supporting the taxing of the wealthy. Ah, another rich liberal joining the likes of Warren Buffet and Bill Gates who want to kill the American Dream! The bastadge!
This is why I hoard precious metals. I’m earning a high income now, but I will be willing to go on strike in the way of John Galt of Atlas Shrugged so that the sweat of my labor does not go to the lazy a$$es and commies. Warren Buffet, Bill Gates, and Ben Stein have a lot of wealth. What the gullible American public do not understand is that these clowns can simply stop taking an income and just sit on their growth stocks and not take any capital gain. And (LOL) they will not be taxed! Surprise!
But the stupid doofuses like myself who earn $200,000 or more by working overtime will be taxed to their eyeballs. Thanks Limousine Libs!
But actually, I’m going to use my loopholes to the hilt. I know legal ways to cut a $250,000 income down to $165,000 (and that does not include mortgage interest deductions).
That’s far easier than persuading the American Public to make Ron Paul President.
Most millionaires (The Millionaire Next Door) have small incomes and high net worth and do not cash in their capital gains anyway. So the commies’ approach to raise taxes on the rich will be fruitless.
I use a spreadsheet to calculate my taxes, expenses and bottom line when I consider a new contract engineering gig. I also compare direct hire jobs, cost of living, and so forth. I go for where I can get more profit for me after taxes and expenses. If that means taking an income cut, so be it. I know a lot of other high paid professionals who do this, and I tell younger engineers about this method too. This “tax the most productive” plan will destroy American productivity, as well as investment in American stocks.
I’m looking into VWIGX, which is an international growth fund. It has no yield. I also have VEIEX and invest in that regularly. I’m going to just sit on those for several years and not take a capital gain.
We will throw out the commies in 8 years.
“I use a spreadsheet to calculate my taxes, expenses and bottom line when I consider a new contract engineering gig.”
In pursuit of the tax geekiness prize, I’ll raise your spreadsheet with a script to read the spreadsheet data and push it into the IRS PDF fill in forms
That would be cool. But you know there are hundreds of IRS forms and publications at their site. You could make lots of $ selling that script to overtaxed and overworked engineers.
The difference between Ben Stein and the other two is that Ben only supports taxation to bail out his friends in the banking industry, and when he says wealthy he means those who work for a living and make money. He does not mean taxing the top 0.1% they will still have their tax breaks and tax havens. Buffett supports taxation of the elite as a matter of fareness. He points out that he gets taxed at a lower rate than his secretary. I suspect that he also takes the long term view that he is more likely to be wealthy if there is a large consuming middle class and not just a handfull of politically connected elites skimming off the poor and the few remaining middle class.
VMMXX went below 4% this week and I cut loose. My check is taking a little too long to arrive. I wonder how many redemptions VG had this week.
It’s cyclic. T-bill yields are going down commensurately too.
Greetings from Amesbury, MA. House up the street from me, similar to mine, went on the market last year for 299K, same as mine. It’s now at 249K, short-sale price. Auction notice was in the paper yesterday. Owner is RE broker, sucked all the equity out and blew it on who knows what. So, thank you very much, “Ms. Real Estate always goes up” for knocking 50K off the market value of my house.
Hilarious!
Homeowners Losing Equity Lines
In one brief phone call, Nancy Corazzi’s lender yanked away what was left of the $95,000 home equity line of credit that she and her husband took out five months ago.
The lender informed her that her Howard County home had plummeted in value and the company did not want the risk that she would owe more than the house was worth.
“I got off the phone and I was shaking,” said Corazzi, who was using the money to pay preschool tuition for her twins .”I was near tears. We needed this credit line to get us through some tough times.”
ben, i went to lake havasu today shopping. walmart was fairly busy, but lowes was dead. i seen about 20 custermers in the whole store at 330pm on sat afternoon. the cashier in the garden shop said i was the 3rd custumer since he came to work at 1200pm. so much for fixing up the homestead. no illegals looking for work i the parking lot eather. when i lived in san bernardino ca you couldnt get past the illegals looking for work.
http://tinyurl.com/2yysp
An article about the increase in the conforming loan limit. The “He” in the quote is Daniel Mudd, CEO of Fannie Mae.
“He said if you are worried about a 50 basis-point difference in your interest rate (that’s half a percentage point), you might be living in the wrong place. Let’s say a jumbo rate of 7 percent for 30 years comes down half a percentage point as a result of the new loan limit. On a $500,000 mortgage, that’s a savings of about $166 a month. In other words, you shouldn’t be buying a home or refinancing into a mortgage that leaves you with little cash cushion. That’s what led so many to be in trouble now.
If you have a jumbo mortgage and a half-percentage-point difference is going to mean a great deal to you financially — that is, it will free up money you need to pay for essentials — you’re in too much house. It means you are living above your means. Cornering mortgage professionals or other real estate experts at parties to press them for the best time to refinance your huge mortgage is nonsensical. You need to be asking when you should sell.”
Now they tell us.
Got furlough?
http://www.dailybusinessreview.com/news.html?news_id=47247
“Miami-Dade court employees got chilling news this week when they discovered they may be forced to take as many as 11 weeks off without pay by July.”
“Farina’s office issued a statement Wednesday saying the furloughs would cause child-custody and child-abuse cases to be postponed, delay banks getting foreclosed homes back on the market, and effectively stop traffic court, divorce court and commercial litigation. It would also put criminal courts in danger of running afoul of speedy trial requirements.”
“Reached late Wednesday, Chief Broward Circuit Judge Victor Tobin said the same furlough scenario could play out in all circuits across the state, and it would take years to recover from the “catastrophic” consequences.”
“There would be no evictions, no child support hearings, no civil cases, no foreclosures. It would ripple through the entire economy with a devastating effect,” Tobin said. “What we do for the public and the service we perform far outweighs the cut that we’re going to take.”
Or, what happens if no one really notices.
Gang mayhem cripples big area
A drive-by attack followed by a wild shootout between gang members and police shut down dozens of blocks of Northeast Los Angeles for nearly six hours Thursday afternoon, stranding thousands of residents, keeping students locked in their classrooms and leaving two people dead.
Veteran L.A. Police Department officials described the bizarre midday shootings — and the widespread disruption they caused — as highly unusual even in an area known for gang activity. It left the neighborhood littered with shell casings and its residents fearful…As the search [for suspects] dragged on, Washington Irving Middle School students kept on lockdown were fed lunch, allowed bathroom breaks and kept in touch with parents by cellphone. Also locked down were Fletcher and Aragon elementary schools and Cal Charter.
An automated phone service notified parents of the lockdown status, which was not lifted until about 6:15 p.m.