Bits Bucket And Craigslist Finds For February 27, 2008
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Greenspan Tells Gulf To Dump Dollar…. Between Bernanke & Greenspan holders of dollars must really love these guys! On behalf of us PM holders I’d like to say thanks guys. Rumor has it that Ol Greaspan has requested payment for some speaking engagements in Gold. Probably not true, but who knows he may have gone back to his roots.
http://mwcnews.net/content/view/20524/54/
Roger that:
Feb. 27 (Bloomberg) — The dollar weakened below $1.50 per euro for the first time on speculation Federal Reserve Chairman Ben S. Bernanke will indicate the U.S. central bank is ready to cut interest rates from a three-year low.
http://tinyurl.com/2fs3cb
Feb. 27 (Bloomberg) — Gold rose to a record in London and silver gained to a 27-year high as the dollar’s all-time low spurred investor demand for precious metals as a hedge against inflation. Palladium rose to the highest since 2001.
http://tinyurl.com/26bedp
“With a weaker dollar, imports become more expensive and that can import inflation into a country,” said Ben Davies, chief executive officer of Hinde Capital Ltd. in London who helps manage the Hinde Gold Fund.
US inflation isn’t imported, it’s home-grown. Countries that try to hold their currencies constant against the USD (China, Gulf) are importing US inflation. But countries which don’t try to follow the USD down won’t.
“The Fed wants to inflate their way out of the problems of a huge deficit and a banking system that’s at the point of imploding.”
Spot on with that one.
But countries which don’t try to follow the USD down won’t.
can you name an example? Inflation in Europe and the rest of the world is just as big as in the US and China. Looking at Europe, only in the Netherlands official inflation is very low and GDP is booming, if you believe the statisticians and economists. All this despite a very open economy (I would rather believe that the Dutch Ministry of Truth, probably directed by the kleptocrats, uses the most blatant manipulation of all EU statistics offices). All currencies are falling rapidly in real terms, but most economists and the herd are still convinced that inflation is low (or just a temporary blip).
can you name an example?
Canada. The CAD has gone from USD .63 in 2001 to 1.02 today. Since 80% of Canada’s trade is with the US, this obviously has resulted in a smaller increase in nominal prices than in the US, and even nominal price declines for many items.
wmbz,
He’s not asking them to dump the dollar. He’s asking them to dump the “dollar peg”. Which is correct.
Their inflation problems result from the peg. Remove it, and the problem is gone.
Dumping the dollar peg is the same as dumping dollars, since the peg is achieved by accumulating the extra dollars in the reserves, given a net inflow of dollars.
No, it means dumping future dollars. You can keep the ones you already have.
Once again, it does not mean dumping dollars. You just won’t accumulate any more.
yogurt: just look at the CAD Gold price (or almost any other commodity priced in CAD) and you can see that even the CAD is plunging lately (of course, what else can it do with money supply growing MUCH faster than GDP).
Has anyone called a bottom yet — on the $US?
T boone pickens sold oil a week ago, waiting to buy it back cheaper hahahaha I hope hes not holding his breath?
Or maybe hes lying and trying to get weak hands to sell?
Yes, remember how Goldman Sachs said shorting gold was the top trade of 2008?
Slim Pickens has always been my investment inspiration.
I do not trade gold, but GS may very well be correct. The price of the PMs has not kept up with the currency fluctuation so far this year. In the past this has meant a top. I do not trade gold because it is such a small market that it can be easily manipulated by a large client.
The better method instead of buying gold would be to short gold and buy the gold mining stocks. The ratio on this spread is the highest it has ever been. Either gold is going down or the gold mining stocks are going up.
I disagree Hoz. Mining stocks will not keep up due to high input prices, primarily energy, which erode their profitability. Juniors have been absolutely killed even as PMs rocket. This time the miners will lag the metals.
If the mining stocks are not going up, then gold will have to go down. It is an either/or trade. If I were a trader in gold, I would bet on a drop in gold based on its failure against currency fluctuations.
There may be a fundamental reason this time for that ratio spread.
I sold all my remaining paper gold shares well over a year ago, but have been buying and adding to the physical precious metals for years.
Last night i spent quite some time looking at these paper gold share bargains (and from an historical perspective there may well be some great ones), but in the final analysis i couldn’t stomach the thought of buying any of them as since they are just paper, they are all still tied to the Fiat Ponzi Scheme and the Lord’s of Wall Street get to wash, rinse and repeat you at their discretion.
There are also so many political and economic risks to owning any shares right now as well.
Perhaps the fact that there is such a great spread right now is that the “Public” is really not in gold (or if they are they are using the GLD & SLV etf’s as proxies) and when and if they do get in, then these things might have a big run up, but don’t think i could participate any more.
It is an either/or trade.”
No, the metals can lead the miners up. For example look at the south african miners, currently out of business.
I would bet on a drop in gold based on its failure against currency fluctuations.”
Which currency is gaining against gold?
lol
It is that Gold has stopped gaining. Once it stops rising, it can either stay unchanged or go down. I am not a technical analyst, maybe Tx would give a tech opinion. But from a fundamental point of view, the gold miners are selling - hedging. In most commodities that is bearish. The gold miners bought their hedges back 18 months ago and now they have put them back on. A nice gain of 300 pts. When hedgers lock in profits so do I.
Hey Hoz, What intel do you have on hedges being put back on? Any specific names? I watch the miners and haven’t seen this so I’m curious.
Me too, particularly as Doug Casey and company adamantly state that the hedges have been bought back…clearing the decks, so to speak
Bernanke really needs to put an end to any talk of further easing today. In so doing, he could put a (temporary) floor under the dollar. I am still hopeful that he will, and perhaps the markets (commodities, the dollar, and even a couple decent days in eaquities) will force his hand in that direction.
Even though I know in the long run there will be more whining and moaning that will either force Bernanke’s hand or force him out of office, at least he can step up to the plate now and give us a signal that inflation concerns are on equal footing with recession fears.
Consumers are not his clients.
Dollar bag holders are not his clients.
His clients are bleeding to death.
Nothing has, or will change, in the immediate future regarding the dollar.
It is going to go down unless the US Govt stops issuing debt, the Fed stops monetizing the debt (by buying all the slimy sub-prime CDO’s, MBS’s, etc), the US consumer starts living within their means, and the SSI and Medicare funding problem is solved. Good luck on any of that. God help us all if the US dollar is suddenly devalued, like a currency run on the dollar. The currency traders are the last, most drastic means of correcting a currency imbalance - they can humble even the US dollar, in short order, like hours or days time frame.
We have been extremely lucky the dollar has been devalued only 50%, or whatever, in the last 5 years, gradual like. The pols want to keep it that way, suck all your money away, slow and easy. They have sure done a good job of it, I must admit.
Don’t worry, folks: the Fed has an official inflation target of 1.5 to 2% per year! We’re saved! I think they meant 1.5 to 2% per month, or maybe 15 to 20% per year! Of course, more rate cuts are on the way because low rates = strong fiat currency!
Gah - can we please just cut to the chase already: ZIRP, and a tax-payer funded, eternal Housing Bubble with liar loans for all (provided you aren’t a saver or some strange, honest person who believes in not lying and actually paying back debt!)
Don’t be surprised if a year from now, top Fed policymakers are expressing shock that inflation turned out to be “worse than expected.”
Dollar slides to new lows after Fed warning
By Neil Dennis in London and Krishna Guha in Washington
Published: February 27 2008 10:11 | Last updated: February 27 2008 11:39
The euro broke new records above $1.50 against the dollar on Wednesday, pushing oil and precious metals to fresh peaks, while weighing on equity markets.
The dramatic moves followed weak US data and comments from the Federal Reserve which reinforced expectations of further aggressive US rate cuts.
Dollar weakness was widespread. There were records for the euro, which climbed as high as $1.5087, and the Swiss franc, which hit SFr1.0668. By midday in London, the euro was up 0.4 per cent at $1.5035 and the Swissie was 0.5 per cent higher at SFr1.0693.
The dollar index, a measure of the US unit’s strength against a basket of currencies, fell to a record low of 74.264.
Tumbling US house prices and weak consumer confidence overshadowed rising producer price inflation on Tuesday. Later, the Federal Reserve’s Don Kohn said slowing growth was a greater risk than rising inflation.
Mr Kohn said aggressive rate cuts by the Fed in recent weeks would not forestall a period of economic weakness in the near term.
He indicated that price pressures were moving up the Fed’s list of concerns but added: “I expect the run-up in headline inflation to be reversed and core inflation to edge lower over the next few years.”
Alan Ruskin, currency strategist at RBS Greenwich Capital, said: ”Ugly US data has kept up momentum for the Federal Reserve to ease rates, while the Fed shows it is still willing to oblige, regardless of the state of inflation.”
http://www.ft.com/cms/s/0/fa616ac0-e519-11dc-9334-0000779fd2ac.html
OT, but here is an update on the progress of the North American Union. Seems we are on track for having the Canadian military come on over to help out in the event of a “civil emergency”.
http://www.canada.com/topics/news/story.html?id=403d90d6-7a61-41ac-8cef-902a1d14879d&k=14984
Here is the overall plan, you can google “north american union” for further elaboration.
http://www.eagleforum.org/column/2005/july05/05-07-13.html
Of course Bush & Co should be comfortably ensconsed at their ranch in Paraguay.
http://fromtheleft.wordpress.com/2006/11/29/bush-family-purchases-100000-acres-in-paraguay/
From the Canada.com article,
“On right-wing blogs in the U.S. it is being used as evidence of a plan for a “North American union” where foreign troops, not bound by U.S. laws, could be used by the American federal government to override local authorities.”
That’s pretty funny. Canadian soldiers operating in the US would be under US tactical control and thus wouldn’t receive any orders that a US soldier couldn’t.
But whose control is the US under?
But whose control is the US under?
Cheyenne
No disrespect to Canadian soldiers, but would Canadians really want to send their troops to ‘hoods in Baltimore, Detroit, Chicago and LA? They’d probably be safer in Afghanistan.
Aren’t there some orders that a U.S. soldier would not be able to follow b/c of the constitution? Would a Canadian soldier be held to the same standard? (I’m guessing “no”)
bluprint,
As I mentioned above, the orders would come from US soldiers that have to follow the Constitution. Canadian soldiers also have a duty to refuse unlawful orders, so an order to burn down a church, shoot innocents or the like should be refused. We also have a Charter of Rights and Freedoms; check legal rights section 7-14.
http://tinyurl.com/2qfeyd
bluprint,
As I mentioned earlier, the Canadian soldiers would take orders from U.S. soldiers who do have to follow the Constitution. Also, Canadian soldiers have a duty to disobey unlawful orders, so orders to burn a church or harm an innocent shouldn’t be followed. Canada has the Charter of Rights and Freedoms, similar I believe to the U.S. Constitution. Check out legal rights.
http://tinyurl.com/2qfeyd
Fer christ’s sakes Al, soldiers following the constitution? You ever been in the military? Soldiers follow orders, they don’t look up the definition of Posse Comitatus and take a vote when they are pressed into a “civil emergency”.
Do you believe everything you read in the MSM or do you know for a fact that these troops will only take orders from US commanders (outside reading this is the case in the MSM, which we all know NEVER prints lies)?
auger,
I am currently a soldier, and receive training on following the Geneva Conventions on a regular basis. I’m not claiming that no soldier will do wrong because everyone is an individual who is prone to failure.
My point is that if Canadian soldiers respond to an emergency in the US, they will not be employed in any fashion that US soldiers wouldn’t. (response to bluprint’s question)
Besides, you should always be well behaved when visiting your neighbour
Well, if you ever get orders to police a civil disobedience in the US, please feel free to pass around the idea that it is against the constitution, at least it used to be.
BTW, I read where a study was done with the Marines a few years back asking their thoughts concerning firing on US civilians in a civil disobedience crisis. I think about 20% or so (if I recall correctly) thought that’d be OK with them. I always wondered about the genesis of that study.
I think the goal is to be able to help each other in case of natural disaster. For instance, if there was an emergency in northern North Dakota or Maine, troops from Winnipeg may be able to get there faster. And of course the various US Forces have a lot of resources to draw upon which could be helpful to us. The problem is that it can take a long time to clear the red tape before soldiers can cross the border for any reason. If there is an agreement in advance, then it gets alot easier.
RE: the Canadian military come on over to help out in the event of a “civil emergency”.
LMAO…define civil emergency? Like Katrina when all the NO local law enforcement threw their badges away because they were all being sniped by inner city thugs?
Or in the case of a more serious civil insurrection… occurance…
Like the Canadians are gonna want to deal with all the rural
heavily armed militia’s which are rapidly gaining members at this moment.
Good luck to the urban sophisticate anti-gunners.
Didn’t the creators of South Park make a movie about a Canadian invasion??
So what if the Canadian military comes here, it’s like 50 guys, tops.
This also begs the question; Why the hell do we need help anyway….Is it because we are deployed throughtout the world and don’t have the ability to protect ourselves at home ?? Bring em home….
I don’t mean to be paranoid, but I thought the US has the most powerful military in the world based on budgets and fire-power!
Seriously, what is the size of the Canadian military. I do suspect, that in the event of an economic crisis, upheaval, this is just laying the groundwork for saying to Congress that they need to do something to quell the disorder and the military/WH will say we just happen to have a joint plan. I wonder what planning the US has with the Mexican government/military?
From what I remember of my history of Germany in the 1920s-30s, this looks alot like the groundwork laid by the government to move away from democracy to social nationalism.
Just an observation.
It’s laying the ground work for synching/integrating the U.S and Canada together. Anyone notice that our holidays have been more or less synched lately? I only noticed because our “presidents” day also happens to be a new holiday of a different name (or so I read) for the Canadians now (perhaps a canadian can confirm?). Not that this is definitive or anything, just another curious coincidence.
(begin sarcasm)
We should all welcome the North American Union! It’ll be great when we use Ameros - basically pesos, but with more interesting colors and pictures on them - to buy things like bread, which we won’t be able to afford, and gas, when the gas stations are open (which will be 2 days a week, tops). Fortunately, there will be plenty of distractions to these problems, such as one would find in any gang-ridden slum, in the future Amerika! When one can’t leave the house because of a high chance of being shot, the price of gas and food don’t matter!
Hey! That sounds like the kind of “freedom” we’ve given the Iraqis!
Kohn: I expect the run-up in headline inflation to be reversed and core inflation to edge lower over the next few years
just wondering: for how long have they been predicting inflation to reverse course soon? If they keep repeating the mantra, sooner or later they will be right - just like a stopped clock. We are already close to the record inflation numbers of the seventies, when using the old CPI calculations …
Subprime was also contained, this according to them about a year ago.
Stopped-clock U.S. economic predictions du juor:
1) Inflation will soon reverse its course.
2) Housing will soon reach a bottom.
3) The stock market will always go up.
4) The economy will slow but not recess.
Hail the fed chief.
“Strong dollar policy”
Oil Spikes Above $102 a Barrel As Weakening Dollar Draws Investors to Commodities
Ahh the next bubble
Heard this guy speak last night at a Real Estate Forum - very enlightening. Here are a couple of his sound bites:
Former Wichitan Mark Dotzour, chief economist for the Real Estate Center at Texas A&M University, was the bearer of bad news. He said markedly higher investment taxes are on the way from the next administration, curtailing an era of prosperity for commercial real estate investors.
But there’s good news there, Dotzour said: As capital gains and other taxes soar under the next administration to pay for out-of-control federal spending, real estate will look like a financial refuge compared to the stock market.
“It’s kind of like a big frat party that hasn’t been doing anything but eating jumbo shrimp and drinking gin for, like, 48 hours straight,” he said, grimacing.
“Sooner or later, you’ve got to throw up and take a nap.”
Dotzour was disdainful of the $168 billion economic stimulus package pushed by President Bush and Congress.
“It’s just your government walking in with another barrel of shrimp and more gin… and as a result, the value of your savings is going to suffer.”
Dotzour wrapped up his speech with some predictions: the Federal Reserve will continue to cut interest rates through the mid-summer, with 0 percent possible “if they have to” to heal the nation’s banks.
As a result, the price of oil and other valuable commodities will continue to rise, further shrinking disposable income and handicapping an already struggling retail service sector.
Mr. D;….Do you have any transcript of the presentation ?? I would love to read it….
Sorry, no I don’t. This just came from a kansas dot com article. Try googling him, he gives tons of speeches in TX and said he is headed to DC next.
“Sooner or later, you’ve got to throw up and take a nap.”
This is pretty much my life motto. I’m even thinking of embroidering it on a pretty sampler for my kitchen door. Oh, and the rest of his words were pretty good, too.
Did Greenspan intentionally destroy the dollar? Maybe he’s been a closet hard money advocate all along, and he figured the only way to return the US dollar to a solid foundation was to destroy it from the inside? Maybe he is the “maestro” after all.
Brilliant! Why didn’t I think of that?
(Hey mjh, I just saw your response to my post yesterday re: law school - I’m going to respond to it on that string now)
housing in freefall:
NEW YORK: House prices may still have a long way to fall.
Across much of the nation, home values are dropping — even those backed by solid mortgages — and banks are repossessing more every day. Most experts say the dive won’t hit bottom for another year and only after excess inventory is sharply reduced and credit markets improve.
http://www.iht.com/articles/ap/2008/02/26/america/Home-Prices.php
Most experts say the dive won’t hit bottom for another year and only after excess inventory is sharply reduced and credit markets improve.
———————————-
And HBB’ers say it won’t hit bottom until prices are aligned with incomes.
Why, oh why, don’t the “experts” understand that the increased inventories and credit contractions are **because people can’t afford houses at their current prices**.
Inventories and credit markets will magically normalize once prices drop to normal levels.
It’s not rocket science…
I’d say a return to affordability in, say, 18 months, and a recovery of sales in 3Q 2009, is a pretty optimistic scenario for the majority of the American people.
The pessimistic scenario is that the market overshoots because the bust takes out the financial system and makes it impossible to buy at reasonable prices.
Our optimistic scenario is their pessemistic scenario.
Each house only has a finite pot of money each month. Take away food costs (which are increasing), and you have less left behind for shelter.
This bust is gonna be epic!
Oh but wait, it’s not just food costs. Add in fuel costs - we havve to get to that job somehow. Then add in clothing - if you work a middle class job in corporate america you have to wear the dockers/rockport/polo uniform at all times(except friday. Friday is hawaiian shirt day…..).
The there’s health insurance, although this is rapidly being pushed towards luxury status as well.
BTW Pussycat, I agree with you completely - I just thought I’d elaborate a bit for you.
Thanks, SR, I completely agree.
It was early in the morning when I wrote that pre-coffee.
Ya I figured you meant “food” to essentially represent everything that truly falls in the “need” category. It was a damn good point though so I wanted to add to it until the coffee kicked in
And sorry my typing was so atrocious on that post!
Thanks.
As I say, always think micro when you’re betting on macro.
That’s right, it will take bubble buyers years upon years to save up a downpayment - which will again be required. That’s assuming of course, that they 1. hold on to their income streams and 2. their income streams keep pace with the cost of necessities.
If all these mythical “pent-up” demand buyers couldn’t even save up a downpayment between 1995-2005 - how will they ever do so in the economic climate that’s upon us?
And would they even want to? Reading this blog has largely killed any desire to EVER be tied down to a house. With the economy gone haywire, the planets would have to align pretty perfectly to even consider it. Being mobile and having no debt or responsibilities is looking pretty sweet at present.
You are right Diddley. There may indeed be a fundamental shift going on here with regards to housing. Going forward, it probably will not even come close to being the “deal” it was over the past six decades.
who knows he may have gone back to his root
That was uncalled for. Don’t smear a great religion and culture by associating it with Greenspan — an atheist, a dime-store Nietzschean, and a shallow intellectual who is consistently a lapdog to power.
I could not care less about his religion, your religion or anybody elses! I was referring to his ‘roots’ in Gold.
LOL
Um, I thought the OP was talking about Objectivism, founded by Ayn Rand, who was a fierce opponent of fiat money and advocate of gold currency.
Xenos,
How does the word “root” refer to religion?
Seriously, I don’t know.
Sorry I mis-read. I think he is way to old to go back to his ‘root’!
Look, I resent you associating Easy Al with atheists. What did atheists ever do to you?
Roidy
“”What did atheists ever do to you?”
Each one uses up a sh1tload of wood…
I hear the sound of CIA files updating.
new worries on inflation and homes:
Houses are getting cheaper by the month. Everything else is becoming more expensive.
Several economic reports released on Tuesday provided fresh evidence that the economic pain of a prolonged slump in housing is being compounded by the rising cost of oil, food, clothes and other goods. Not surprisingly, a measure of consumer confidence fell to its lowest level in nearly five years.
http://tinyurl.com/2akpc2
Problem is, if everything else is becoming more expensive (relative to incomes), there is less money left over at the household level to pay for housing. The simple conclusion is that inflationary pressures in consumer staples like food and energy are helping to kill off housing demand, thereby feeding into housing price deflation.
Yes, exactly… another way of saying it is, my “pie” can only feed so many mouths… taxes, food, energy, transportation, education etc.. many of those mouths will eat at my pie regardless of my discretionary spending decisions, so I best get a handle on what’s really left of my pie for shelter etc..
uhhhh… huh huh….he said ” eat at my pie “
It’s a disaster. As Jim Rogers said Bernanke is a madman! The FRB never had and could never control the housing downturn. We’ve been saying it for some time. Now, they’ve lost ALL credibility on the inflation front. The commodities are breaking out to the upside. They’ve lost control of inflation expectations and contributed to the mother of all negative loops — deflating home prices and rising consumer prices.
Get ready. The economy is going into the toilet. Prices are going to increase OR margins will get crushed. Either way, consumer demand and profits will fall. Unemployment will spike, further reducing demand. Has Bernanke ever owned a business?
“Houses are getting cheaper by the month. Everything else is becoming more expensive.”
The answer to our fitness dilemma! Quit eating-save on food, walk everywhere-save on gas, quit shopping- buy a dream home for cash. Can you imagine? A nation of solvent, fit homeowners??
Oh dear, haven’t you heard? According to a leading *ahem* environmentalist walking does more to cause global warming than driving your car. And trees because they produce methane gas are also “bad” for the environment.
Just in case you weren’t being sarcastic, both those ascertains are total BS. Cars cause way more global warming than walking. And trees do not produce methane gas. If they did, we could harvest them and use it for natural gas.
The problem is that instead of eating less food, people are eating the same amoutn of less expensive food. And what is food is less expensive? You guessed it — high calorie low nutrition food which is cheap because it’s (1)government subsidized, and (2) easy to stockpile and ship because it’s processed to be no longer perishable.
Strange days- Soylent Green^^^^^^^
Well as my younger associate at work says ” good I don’t need all thoses boomers retiring and me paying for it” RE speculators can’t afford their homes and now won’t be able to afford to eat or drive their cars. A perfect storm
Toll blames the HBB:
LONDON (MarketWatch) — Luxury home builder Toll Brothers on Wednesday swung to a fiscal first-quarter loss and said “ceaseless talk” about a recession is dampening the mood of consumers.
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TOL 23.12, +1.20, +5.5%) said it posted a loss in the fiscal first-quarter to Jan. 31 of $96 million, or 61 cents a share, after $153.3 million in write-downs. It earned $54.3 million, or 33 cents a share, in the year-ago quarter.
http://tinyurl.com/ytwauy
‘Luxury home builder Toll Brothers on Wednesday swung to a fiscal first-quarter loss and said “ceaseless talk” about a recession is dampening the mood of consumers’.
Yeah that’s what did all right. So why don’t you guys just ‘talk’ it back up?
The sheer audacity! To just assume everyone wants to become a wage slave to get in on a Tyvek wrapped crap shack.
His sentiment is just another reason to avoid buying anything that is not a necessity until all the non-necessities can be had for pennies on the dollar.
So why don’t you guys just ‘talk’ it back up
I thought that was CNBC’s job. The constant “are interest rates going to drop again” talk certainly worked to bully Bernanke into making the US $ about as valuable as Weimar firewood.
wmbz Excellent!!
Poor Bob Toll.. He’s been reading that nice fairtale to the U.S. consumer for so long that he’s all in a ruffle now that a new reader has the floor..
fairtale = fairy tale
Regardless of our economic outlook, inflation, the sinking dollar, jobs, etc, if “Harry Howmuchamonth” and “Sally Specuvestor” *could* buy a house, they would!
If it were possible today to walk into a bank and buy a million-dollar home with no income and pay only $1200/month for the first three months, houses would still be selling! That’s the only reason they sold in the first place.
It doesn’t matter what people are saying, it’s that the lenders finally stopped the spigot because it was no longer sustainable.
That’s okay - once we get tax-payed backed “liar loans,” demand will be infinite. Of course, gas will be $10 a gallon, or some number of Amero-pesos, but you get the idea. No, wages won’t go up - assuming anyone still has a job, of course.
Bob Toll is always looking to blame somebody.
When they were making money hand over fist he was touting the companies sound execution. He wasn’t blaming the media or low interest rates for his massive profits.
From the field-I recently did an appraisal on a T home. The contract was written recently but the buyer was paying over $750K for a house that I appraised for under $500K. Closing is Friday at lower number. One more FB coming up.
Nothing like a 33% haircut. That trumps the 9.1% price drop that we just had.
RE: The contract was written recently but the buyer was paying over $750K for a house that I appraised for under $500K.
Well DD…you just saved some ignorant moron a cool $$$ quarter mil.
Are the purchaser’s gonna send you on an expense paid trip to Tahiti? Because they should…
The people who instigated the buyer’s to sign a contract to purchase a property for a quarter million over appraised value should be in prison.
foreclosures and daydreams:
The number of foreclosures in Idaho has increased dramatically over the last year, according to statistics released Tuesday.
The monthly RealtyTrac.com survey of foreclosure activity nationwide showed that filings in Idaho jumped from 382 in January 2007 to 735 last month, an increase of 92 percent.
The total represented just a 6 percent increase over December, raising hopes that the rate of foreclosure growth in the state has begun to slow.
http://www.idahostatesman.com/newsupdates/story/306676.html
http://www.msnbc.msn.com/id/23359218/
Most famous foreclosure in the US????
well, yes, it probably is if you don’t count our capital in DC..
Let housing find its bottom…
http://online.wsj.com/article/SB120407264971695087.html?mod=todays_us_opinion
From the above:
Notice that today’s bailout will be the opposite of the misnamed S&L bailout of the ’80s. Then, only depositors, whose money was guaranteed under federal law, were bailed out. The federal government closed down thrifts, wiped out their shareholders, seized loan collateral and dumped it back on the market, even at firesale prices.
That was done right.
‘That was done right’.
Exactly. The circus in D.C. won’t keep their nose out though, and that will increase the duration of the much needed correction.
The end of the original citation: “there is little resistance to contracting vast new liabilities whenever large numbers of voters are in distress, even if (as now) their own choices played a role. A more honest use of taxpayer money at least would be to buy up houses at foreclosure auctions and demolish them, especially in neighborhoods likely never to recover. The true fillip to “social stability” right now would be to nip in the bud the blighted, suburban slums of the future.”
[Sigh] Sad, but true article. After the November elections the whole country can go to hell as far as Washington is concerned. Leave it for the next guy…
Can anyone comment on what banks are willing to take for their bank owned real estate in high foreclosure markets such as Phoenix? How much off of their listed price is a reasonable offer?
Make an offer where the mortgage is ballparked close to monthly rent amount and nothing more.
rob
I agree with most of what he said about the right course of action, except for this:
“A more honest use of taxpayer money at least would be to buy up houses at foreclosure auctions and demolish them, especially in neighborhoods likely never to recover. The true fillip to “social stability” right now would be to nip in the bud the blighted, suburban slums of the future.”
Actually, buying up suburban houses, to the extent that these are newer and in better condition than urban houses in some markets, is not the best policy. Selling them or renting them to slum dwellers to break up the slums would be better.
In places like Cleveland and Buffalo, neighborhoods where the houses were not built to high standards could then be cleared, and replaced with denser, less energy intensive, more walkable neighborhoods in the next upturn.
“In places like Cleveland and Buffalo, neighborhoods where the houses were not built to high standards could then be cleared”
Those houses in Buffalo that specuvestors bought for peanuts are often old wooden frame stock…houses built in the 1910s and 20’s
that have been used by multiple generations, and often rented out, and the residents and the neighborhood is poor and rundown.
They are densely placed, and everything is walkable, but there is no city money for even demolition, there are no manufacturing jobs to support the folks in those neighborhoods, and there will be even less city or state money in the future.
RE: there are no manufacturing jobs to support the folks
The crux of the dilemma everybody seems to be forgetting.
BK Attorney believes Congress is doing the right thing
1. Is allowing judges to adjust mortgages an entirely new concept ? No. Under current Chapter 13 bankruptcy law, if the value of the home falls under one of several mortgages on the home, the junior mortgage can be “stripped” and made unsecured and then treated like other unsecured creditors like credit cards. For example, if you have a 1st mortgage ($300,000) and a 2nd mortgage ($100,000) and you convince the judge (via competing testimony from appraisers) that the value is under $300,000, then the entire $100,000 can be made unsecured. If your budget only allows for paying your unsecured creditors 5 cents on the dollar, then you have essentially wiped out the entire second mortgage at the end of your 3 -5 year bankruptcy plan. The idea that bankruptcy judges will be re-writing loans is not entirely new and the proposed laws are merely an extension of those current rules.
2. How do we know people who file bankruptcy will honor the new terms ? If these were indeed “weak financial households” that purchased homes only because of disastrous underwriting, then perhaps banks should not have lent them the money in the first place. Any time you lend to people with poor credit, you run the risk of not getting paid. Let’s face it, banks closed their eyes during the real estate boom and are now just waking up. Besides, if you don’t pay the mortgage under the new terms, the banks can always foreclose.
3. How does a judge decide what the house is worth ? As in the example in #1 above, the judge will consider competing appraisals.
4. What is the likely (and desired) effect of these legislative changes to future lending practices ? Banks will probably be more careful when lending in the future. People with excellent credit should still get excellent terms and should not be penalized for sub-prime borrower’s mistakes. Sub-prime loans are inherently risky. Banks should adjust their practices to charge appropriately for these types of loans only.
5. What is the alternative ? If you let everyone lose their homes in foreclosure, where does that leave the investors behind the mortgage backed securities ? The lenders are stuck with these homes which they will have a difficult time unloading and in the meantime will not be receiving interest payments on the loan. Will people with excellent credit magically appear out of the woodwork to buy up these foreclosed homes ? Lower interest payments are better than no interest payments.
The reality is that banks had no business lending to “weak financial households” and “weak financial households” had no business obtaining these loans. Both sides need to bear some of the loss and the proposed legislation seems to accomplish this objective.
oil:
LONDON (Reuters) - Oil powered to a new record above $102 a barrel on Wednesday, closing in on its inflation-adjusted peak, as a slumping dollar on lacklustre U.S. economic data triggered a surge across commodities markets.
http://www.reuters.com/article/hotStocksNews/idUSSYD3274320080227
gas:
Gasoline prices, which for months lagged behind the big run-up in the price of oil, are suddenly rising quickly, with some experts saying they could approach $4 a gallon by spring.
http://tinyurl.com/2w4cto
Nortel cutting 2100 jobs this morning.
States cutting tens of thousands of jobs due to budget shortfalls.
Cities even more.
Financial companies cut hundreds of thousands of jobs.
Manufacturing and Construction have cut millions of jobs.
With all these job cuts, how many people can work at WalMart and McDonalds before they stop hiring? As more and more job cuts are announced, what kind of additional pressure will that put on housing?
BMW to Cut 5,600 Jobs by End of 2008
Another announcement today:
Luxury car maker BMW says it will cut 5,600 jobs by the end of this year as it moves to trim costs and make itself more profitable.
I was at the dealership my mechanic Father works at talking to the sales guys about buying a new Saturn Astra. During the course of conversation it comes up that the BMW dealership next door (owned by same company) can’t move product and sales are down 50% from same time last year.
rob
BMW dealership next door can’t move product and sales are down 50% from same time last year.
Aside from the usual economic factors at play in terms of less HELOC money to buy with, de facto recession in many previously high-paying industries, etc., the European car makers are getting hit hard by the Eur/US exchange rate. While they have shifted more manufacturing to the US, they are not completely hedged.
Also, their value proposition is declining. I bought an ‘07 Infiniti G35x with Nav and 307hp for less than a 230hp BMW 328xi. To get comparable performance, it would have cost me almost $10K more for the BMW 335xi. Granted, BMW has no-charge maintenance and they are a little more refined than the Japanese, but the difference is not worth $10K. Another factor for me is reliability… which is awful in German cars of late, while the Japanese (and Koreans) are way ahead of the curve… just my 2 cents
The Beamers probably handle better, but will that really matter in rush hour traffic? Then again, why have a 300 hp car? Sure, they’re fun when the light turns green and you floor it, but other than that I think 200 hp is more than adequate for most cars.
, they’re fun when the light turns green and you floor it
That pretty much explains it… my wife was against spending this much money on something that depreciates, but now that she drives it a couple times a week, I think the “fun” factor has won her over.
For me, from the time I push the start button and hear the engine growl to life, I can’t stop smiling. Now I actually look forward to hitting every red light on my way to work.
The reliability thing is probably true but the average idiot american only seems to keep a car about 5 years / 75k miles so it is never an issue. I’m amazed how many people buy cars for the assumed “reliability” and then sell them after 5 years. Obviously that wasn’t the true reason these vehicles were purchased. Also all those magazines that rate vehicle reliability only do so for the first 3 years, that is an awful way to rate long-term reliability. I see a heck of a lot more 30 year old chevies and volvos than I do toyotos or hondas.
Meanwhile, my millionaire in-laws roll a ‘77 c-1500 with 250k, and an ‘86 astro van with 295k. I think the best way to get rich is to buy as few depreciating assets as possible (heck the pickup is now increasing in value every year since its a classic)
Buy that Astra now before it costs $40k because its an Opel/Vauxhall built in Belgium and there is no way the General is making any money on it as a Saturn sold in USD. A similar Vauxhall Astra costs about 15k pounds sterling - 30k US!
Where I live nursing jobs are plentiful, including home health workers, and that’s mainly it.
Yes, illness and dying are not inflation-dependent industries.
RE: Where I live nursing jobs are plentiful, including home health workers, and that’s mainly it.
Keep the living dead alive- a lot of production value there.
One thing it will do is put pressure on Walmart, fast food, convenience store workers, etc., to lose weight, not call in sick as often, speak proper English, not socialize with other employees during work hours, maintain a professional decorum, learn to subtract 2-digit numbers from 100, etc.
At least 5% of employment in this country is being performed by people who don’t have the skills or attitude necessary to hold any job. Especially with minimum wages set to rise, they will eventually be forced out.
Interestingly, I have experienced better (as in more informed or involved) service from veiled barely-English-speaking new immigrants at Walmart than I have at unionized middle American folks at Costco.
I have always found CostCo employees to be superior to those at lower paying Sams Club.
well said. There is nothing like a recession that will readjust people’s work attitude and make them ‘humble’.
You know what ur so right no fatties. You should boycott Walmart until they get rid of those hideous prediabetic checkout gals. No sense putting yourself through that kind of eye agony just to get a few cents off on your string cheese and car mags or whatever it is you’re buying at the WalMarts of Jacksonville. Our nation’s future hinges on you social Darwinists. Suck it up and get your righteous asses to Whole Foods and Target so you can pay the premium prices–only if you do your part will all the fat dumbasses get fired and starve to death. Only then will America get the thinner, healthier, smarter citizenry she needs to continue as the sole superpower. If you buy cheap, you subsidize substandard employees and that means you love welfare and that means you hate America.
Oops, someone’s chain got yanked.
Damn skraight it did, ’cause somebody has PRIORITIES ever heard of them. You’d be mad, too, if you were a big fan of reasonably priced family size boxes of Fiddle Faddle and getting a nice greeting every time you go in to buy batteries or relaxed fit jeans made by hard working Bangladeshi five year olds with the skills and the attitude to do the job right.
“In addition, the document said lawmakers are working on a separate $20 billion in grants and loans to state and local governments to help to buy up foreclosed and abandoned homes. This would be designed to help stabilize neighborhoods wracked by foreclosures. Lawmakers are also proposing to spend $200 million more per year in grants for housing counseling.”
These bailout proposal’s going thru Congress are sickening.
The time to fix the housing mess was (preemptively) back in 1997, not before home prices went parabolic for eight years straight, then started dropping at record rates of decline. Whatever happens at this point will turn out about as effective as constructing a seawall after a tsunami warning has already been issued.
According to Kudlow, it’s not a bailout. It’s a recapitalization. It’s a recapitalization of state and local governments. It’s a recapitalization of consumers, banks, and the monolines.
Mr. Bernanke goes to Washington today. More specifically, to Congress. With the stock market on edge and the dollar on life support there seems no way out for Heliben. Calm inflation fears and crash the stock market? Telegraph more rate cuts and start the gas and food riots? Ben, Ben, you should have stayed an academic. You are nothing but an errand boy, sent by grocery clerks to collect a bill.
The horror
I love the smell of rate cuts in the morning…
Ben has made his choice: hyperinflation.
If they can pull it off without the riots and such, it will be… interesting… until it all comes crashing down.
Such a fool… I love the hubris of announcing a “target inflation rate” less than 2 days after the inflation numbers produce a yearly result 10 times his target rate! ARGH!
They’ll just print more food stamps.
“We’d cut ‘em in half with a machine gun and give ‘em a band-aid.”
Bail-out package?
Watched him for a while on Bloomberg. This Mr. Bernannkay does not strike me as having a great intelligence, his comes across as a rather dull mind, or dulled mind. I wonder what his qualifications are. I wonder if he even knows the price for his facial hair care.
Watched RPauls comments to him. BB seemed to wake up a tad, but only slightly. His answer was priceless, that his mandate is to watch over prices.
New bonus for us Canadian Savers. Sorry I don’t know how to use tinyurl.
http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20080226/budget_taxes_080226/20080226?hub=TopStories.
http://tinyurl.com/
This is there webpage. It may help.
thanks
Thank you for answering the question I was always afraid to ask.
This is what the US needs to do to get people to save. Once people have an established pool of savings to draw upon they will all realize the power of savings and the prosperity it brings.
The prosperity of debt is fleeting and illusory and we are now learning this. Time and again I have voiced my frustration that savers are being punished and spend thrifts are being rewarded by FED policies.
We need to borrow this concept from our Canadian brothers up north and cure the ills of our nation by becoming savers and not spenders.
It’s a small step in the right direction.
Saving is the WORST thing consumers can do as long as we have fractional reserve banking. Remember, the banks have the ability to use the money multiplier effect to create inflation through their low reserve ratio. As long as banks can take our savings and create debt, savings will be the anti-thesis of what is needed to save the economy.
M1 demand deposits and money factors show that cash reserves are being reduced, not increased.
I am a firm believer that saving in any bank instrument is one of the causes of price increases, due to banks creating new liquidity via debt created through savings reserves. The only good form of savings today is hoarding.
Deposit into savings account = money multiplier-induced inflation.
Deposit into CD, checking account = money multiplier-induced inflation.
Deposit into money market = money loaned to others who deposit it into savings or checking accounts = money multiplier induced inflation
Invest in stock market = money given to others who will deposit it into savings or checking accounts = money multiplier induced inflation
Money hoarded in the mattress = money removed from M1 supplies = NO money multiplier induced inflation due to M0 deposits into M1 supplies.
At this point, the banking industry needs a whipping from real savers. Using banks, even via the stock market, means you’re losing value on your money. Taking the money away from banks means that you can be part of the deflationary force that actually makes your mattressed money worth MORE over the long term, as banks can not create liquidity from your generous reserves. Even better, it puts a TON of pressure on the Federal Reserve to make a decision. If they start printing REAL dollars, they’ll be in trouble with foreigners. If they attempt to accept non-dollars as reserves, they’ll get into trouble in the near future with depreciating asset values.
“Saving is the WORST thing consumers can do as long as we have fractional reserve banking.”
I think you mean saving is bad if done with the help of financial institutions, making hoarding still acceptable.
Two concerns:
1) How does enough capital get raised to do anything big if everyone hoards?
2) If I stuff my money in a mattress and everyone else puts money in a bank, I lose. Everyone would have to follow suit AKA savers strike.
Al:
I agree. I just added a new article called “Power in Numbers” to my site that discusses this need to join together in a saver strike. Remember, the money multiplier effect allows banks to reap huge profits on the backs of savers earning 1% annually on their saving investment schemes. Savers who remove their cash capital from the banks put huge pressures on banks to acquire additional reserves, either by borrowing reserves from the Fed (open market and transparent calls for help), or by raising interest rates to entice depositors to de-hoard.
Capital gets raised through previously free market processes: borrowers PROVE to individuals that they are loan-worthy. We have prosper dot com, as well as local lending groups, to entice those with positive cash capital to lend. I don’t touch the stock market, because it is fraudulent in my opinion. Instead, I invest in my own businesses (reaping 20-40% dividends annually), or in the businesses that I can actually monitor and have shareholder power in (usually local businesses). I also entice other savers near me to invest in local businesses to aid the economy, and we get together regularly to monitor the businesses P&L sheets, and utilize shareholder power as needed.
Remember though, even if you as an individual “lose” because everyhone else puts money in the bank, you still “win” by removing the banking industry’s money-multiplied-profits by 8X your hoarding. That, to me, is worth it.
One note: I know many wealthy people in the Chicago area, and many of them are actively hoarding as of 2007, some as far back as 2006. The wealthiest people I know who aren’t wealthy through debt have a strong belief in “paper is power” over “debt is power.”
Note, I am a gold bug, but I am putting more money into hoarding than into PMs.
If it got around that hoarding was the latest thing, with lots of well to do and middle class people participating, it’s an invitation to much more frequent robbery & burglary attempts, no?
Only one problem. Economics is a relative game not an absolute one.
If I get paid interest, and you don’t, I win relative to you. Which is all that matters when it comes to competing for finite resources.
Go right ahead then.
Money withdrawn from the banking system doesn’t exist in the eyes of the Fed. Just print some more to replace those lost dollars.
The Post Office loves stamp collectors as well.
You call our banking system a “Fractional Reserve” system. Are you sure it is?
“The only good form of savings today is hoarding.”
I’ve seen this type of attitude cropping up at various sites I visit lately. Interesting.
Savers’ Anarchism
1. Pay off all debts. Pay no interest.
2. Withdraw all savings, close CD’s etc. Withdraw all money not in the category of demand deposits. This would include checking accounts that pay interest (swaps accounts). Complain about monthly fees and charges at every opportunity.
3. Buy gold, silver and hoard cash and other tangibles that have inherent value.
4. Close all credit cards and credit lines, except maybe one credit card that is required for such things as plane reservations, rental cars, hotel rooms and other purchases. Pay balance in full every month.
5. Close all IRA/401k accounts, pay taxes and penalties (except maybe rollover to Roth IRA). After doing so, see steps 1, 2 and 3.
6. Somewhat off topic, but fight the coming USGov requirements for uniform driver’s licenses (national I.D. cards).
Jim Sinclair ( see http://www.jsmineset.com) has been pounding the table to close all internet brokerage accounts and obtain stock certificates for all securities you own.
“Individualist anarchism is supportive of property being held privately, unlike the social - socialist - collectivist - communitarian wing which advocates common ownership.”
http://en.wikipedia.org/wiki/Anarchism#Individualist_anarchism
Webcast on foreclosures today.
http://www.creditslips.org/creditslips/2008/02/webcast-on-fore.html
Here is a fascinating look from a few days back at the monoline insurance crisis through a fly-on-the-wall perspective. I like the poker game analogy, but the insurance business is not really supposed to operate like a poker game. Individual gamblers (or insureds) play poker, but the house is supposed to always win.
Are the monoline problems all resolved now?
The monoline clock is ticking
By Francesco Guerrera, Aline van Duyn and Ben White
Published: February 21 2008 18:10 | Last updated: February 21 2008 18:10
The poker game whose outcome could break the $2,400bn bond insurance industry and saddle Wall Street with billions of dollars in losses began in a drab, windowless room in downtown New York at 11 am on January 23.
Gathered around the large brown wooden table, under the watchful gaze of past insurance watchdogs, whose austere pictures hang in a neat row along each of its the walls, were representatives of some of the world’s largest banks.
Their host was Eric Dinallo, the fast-talking New York insurance superintendent, who had called the emergency meeting after growing increasingly concerned at the deteriorating health of bond insurers like Ambac and MBIA.
LTCM bail-out leaves bitter taste
Wall Street is often accused of having a short memory but few bankers have forgotten the evening of September 23, 1998, write Francesco Guerrera and Aline Van Duyn.
On that day, senior executives from 16 commercial and investment banks convened in a wood-panelled room at the New York Federal Reserve and agreed to put up more than $3.5bn to rescue Long Term Capital Management, failing hedge fund Long-Term Capital Management.
That extraordinary meeting – was called by the then president of the New York Fed William McDonough William McDonough, then president of the New York Fed, amid rising concerns that an LTCM collapse would endanger the entire financial system - is.
The meeting is still etched on Wall Street’s collective imagination.
Since then, bankers look at emergency gatherings in times of crisis with suspicion, fearing that being herded in a room with regulators may result in the pain, and expense, of an LTCM-style bail-out.
That is why, when Eric Dinallo, New York’s insurance regulator, called in Wall Street banks to discuss the mounting problems of monoline insurers last month, many of the participants looked at the move as both momentous and troubling.
Mr Dinallo says he did not call for a bail-out of the insurers.
But to the executives sitting around the table, the parallels with that pivotal meeting a decade ago were all too apparent.
Even the mooted white knight for the monolines – Warren Buffett – was the same as during the LTCM crisis.
Wall Street has been so scarred by those events that other regulators have been careful not to arrange collective gatherings of bankers.
In August, when the Fed wanted to encourage banks to borrow from a newly expanded “liquidity window” aimed at easing the credit crunch, it deliberately set up a conference call to avoid any comparisons with that fateful September evening.
http://www.ft.com/cms/s/0/43fce1dc-e0a6-11dc-b0d7-0000779fd2ac.html
The Bernanke Goat Rodeo
http://www.itulip.com/forums/showthread.php?p=28623#post28623
“I’d hold rates where they are and allow the recession to take its course. I’d take only the best credits at the discount window. Insolvent banks will fail and solvent banks will pick up the good assets. I’d write off the FIRE Economy. The real estate industry will revert to being the ancillary industry it is in other countries. The insurance and finance industries will revert to their pre-1980s role of supporting industrial development versus replacing it. I’d focus all of our monetary policy firepower on those sectors of the economy that can allow the US to develop into sustainable economic growth at a 1:1 ratio of debt to GDP growth versus a multiple; industries like biotech, health care, agriculture, energy, technology, and public infrastructure will lead the way. ”
Amen brother…. thanks for posting TX
The real estate industry will revert to being the ancillary industry it is in other countries.
which other countries? somewhere in Africa, maybe?
“The U.S. will offer its creditors a workout deal composed of: one, inflating away of debt; two the sale of capital and assets via sovereign wealth funds, treasury purchases via appropriations, and central bank funds; and three participation in the re-industrialization of the U.S. via investment in for-profit P3s and start-ups developing next generation national transportation, energy, and communications projects and technologies. In this way, China, Japan, and oil producers can invest their dollar denominated reserve assets, such as treasury bonds, that they cannot spend at home. This will also have the effect of reducing dollar depreciation, thus reducing losses to inflation. ”
inflating away of debt just like a FB dream back in 2005 when they borrowed way too much
In other words, the US will be turned into a colony.
Who was supposed to have won WWII and the Cold War again?
Crow makes a delicious breakfast — yum!
Insight: Decoupling gives way to recoupling
By Jim O’Neill
Published: February 25 2008 17:01 | Last updated: February 25 2008 17:01
We have completed seven full weeks of 2008. At the close of business on Friday, many stock markets around the world, including some of the best performers of 2006 and 2007, had dropped much more than the US, whether developed or developing.
For example, the previously high-flying DAX was down 15.6 per cent, virtually double the year-to-date decline in the S&P 500. So are both the high-flyers of the previous two years, China and India.
Brazil, the cheapest valued BRIC (Brazil, Russia, India, China) with the best improving economy of them cyclically, is up slightly, as are some of the N11 markets, such as Egypt, Nigeria and even Pakistan. N11 is our definition of the “next eleven largest emerging economies in terms of potential” as defined by their population size.
Yet 90 per cent of the clients I engage with are spellbound by the US recession risk and the endless saga of the “next shoe to drop” in the credit crisis.
As we have argued since December, it is time to consider “recoupling” as opposed to “decoupling”.
We were major advocates of the decoupling notion in 2006 and 2007, linked to our optimism about the rise of our beloved BRICs and the structural opportunities that would arise.
:-) 
http://www.ft.com/cms/s/0/623d1eae-e3c2-11dc-8799-0000779fd2ac.html
Now that China is 30% off its highs, versus about 12% for the U.S., the author (from Goldman Sachs) says that China may outperform on the downside. Even if it fell another 40% from here, the dollar loss of someone who bought at the top four months ago would exceed the dollar loss that person would sustain by continuing to hold through another 40% drop. These guys are all geniuses at calling tops and bottoms that happened billions of lost dollars ago.
Any idjiot could have figured out the decoupling theory was no more nor less than greater fools’ bait.
Monolines surge as top ratings secured
By Aline van Duyn and Saskia Scholtes in New York
Published: February 25 2008 20:50 | Last updated: February 26 2008 01:23
US share prices staged a late rally on Monday after Standard & Poor’s affirmed the top-notch credit ratings of beleaguered bond insurers MBIA and Ambac and said MBIA was no longer at risk of a downgrade.
However, S&P indicated that it could still downgrade Ambac, depending on the outcome of behind-the-scenes talks now being conducted between banks and rating agencies on a $3bn rescue plan for the bond insurer.
http://www.ft.com/cms/s/01766e4c-e3d4-11dc-8799-0000779fd2ac,dwp_uuid=b6abe56e-d0c2-11dc-953a-0000779fd2ac.html
mortgage apps drop:
WASHINGTON (AP) — Mortgage application volume tumbled 19.2 percent during the week ending Feb. 22, according to the Mortgage Bankers Association’s weekly application survey.
The MBA’s application index fell to 665.1 from 822.8 the previous week. It was the third straight week application volume fell. During that time, volume has dropped 39 percent as interest rates have risen steadily
http://biz.yahoo.com/ap/080227/mortgage_applications.html?.v=1
“During that time, volume has dropped 39 percent as interest rates have risen steadily.”
Am I reading correctly that mortgage application volume is off by 39 pct in three weeks’ time? And in the period leading up to the red-hot spring sales season, no less? Uh oh…
Rates are only back to oct levels, it has to be more like the fall in prices that are making buyers hesitant.
1929 redux?
BASEL, Switzerland (AP) — UBS AG Chairman Marcel Ospel urged shareholders Wednesday to approve a recapitalization deal that would raise billions from sovereign wealth funds.
Switzerland’s largest bank, which has been one of the hardest-hit by the subprime home lending crisis, wrote down 15.6 billion Swiss francs ($13.7 billion) last year and posted its first full-year net loss in a decade.
“We believe that this measure is absolutely necessary,” Ospel said, calling the current financial crisis possibly the most difficult since the stock market crash of 1929.
http://biz.yahoo.com/ap/080227/switzerland_ubs.html?.v=4
Why Washington’s rescue cannot end crisis story
By Martin Wolf
Published: February 26 2008 17:34 | Last updated: February 26 2008 17:34
Last week’s column on the views of New York University’s Nouriel Roubini (February 20) evoked sharply contrasting responses: optimists argued he was ludicrously pessimistic; pessimists insisted he was ridiculously optimistic. I am closer to the optimists: the analysis suggested a highly plausible worst case scenario, not the single most likely outcome.
Those who believe even Prof Roubini’s scenario too optimistic ignore an inconvenient truth: the financial system is a subsidiary of the state. A creditworthy government can and will mount a rescue. That is both the advantage – and the drawback – of contemporary financial capitalism.
http://www.ft.com/cms/s/0/1aa2daea-e48d-11dc-a495-0000779fd2ac.html
The optimists ignore an inconvenient truth: Investment bankers and hedge fund managers are mammals, and mammals habituate. The LTCM lesson of 1998 was that firms that grow too big to fail automatically qualify for bailouts, as a failure of a too-big-to-fail financial institution could jeapordize the entire global financial system.
The clear policy implication was that firms which achieved too-big-to-fail status could play the “privatize profits, socialize risk” strategy: Heads, and our top managers take home record year-end bonuses; tails, and we become beneficiaries of a govt-sponsored bailout to mitigate gambling losses.
Now we have so many too-big-to-fail financial entities that the whole situation may prove too-big-to-bail.
They should not let banks or other companies merge into entities that are too big too fail. Break them up a ‘ la AT&T.
The current policy regime pretty much favors the formation of too-big-to-fail megatrusts, but making them a protected class.
butbyBecause that breakup worked out so very, very well.
This is the VERY reason why we will see hyperinflation. The government working with the banks will print as much money as needed to cover the insolvency. If you want to know where this will end ask yourself these questions:
How much real wealth-creating economic productivity goes on in our country? (Farming, manufacturing, mining?) How many people can be supported on that real productivity?
The reality of the situation is that our country is broke and that the dollar is worthless. The dollar is in a bubble because of *expected* future value, not because of any real fundamentals. The result will be a reversion to an economy capable of producing real wealth (not claims on wealth). This means that 98% of our country (and 99% of the world) will be living at subsistence levels until our populations adjusts.
On a side note: please remember that crashes ALWAYS over shoot. This means that what little real economic production we have today will first collapse until things reorganize. Factories producing cars that no one can afford will go out of business. This is the result if misallocation of economic productive resources. So take some time to consider where we should be spending our economic resources? Water, Food, and Fuel. These prices will go through the roof in REAL terms because everything else will be worthless junk in an economy where people are barely productive enough feed themselves.
PAGE ONE
Decline in Home Prices Accelerates
Fed’s Efforts Have
Only Muted Effect
On Mortgage Rates
By KELLY EVANS, SERENA NG and RUTH SIMON
February 27, 2008; Page A1
The decline in U.S. home prices accelerated in the fourth quarter, according to two leading barometers, compounding two of the biggest threats facing the nation’s economy: faltering consumer spending and tight credit markets.
The S&P/Case-Shiller national home-price index for the fourth quarter fell 8.9% from a year earlier, the largest drop in its 20 years of data. And the Office of Federal Housing Enterprise Oversight’s index — which tracks only homes purchased with mortgages guaranteed by home-loan giants Fannie Mae or Freddie Mac — was down 0.3%, the first year-to-year decline in the measure’s 16 years.
http://online.wsj.com/article/SB120403496764693703.html?mod=hpp_us_whats_news
Don’t forget to bury a statue of St. Joseph in the yard, or to promise you will return to feed the squirrels.
GETTING GOING
By JONATHAN CLEMENTS
Price Fixing: In This Market, Selling a Home Requires Savvy
February 27, 2008; Page D1
If you’re selling a car or a house in today’s sluggish economy, make sure the price is right.
Americans are constantly buying stuff. But most of us don’t do a whole lot of selling — which means we don’t have much experience at setting prices.
Want to improve your odds of finding a buyer? As you try to unload your car or your home, consider these four pricing tricks.
http://online.wsj.com/article/SB120407749294595441.html?mod=todays_us_nonsub_pj
Now that’s the kind of in-depth financial analysis I expect from the Wall Street Journal. Wow! I bet the journalist had quite the feeling of accomplishment when he handed that piece in to his editor!
At least he didn’t recommend a granite dash for the car.
A poisonous mix for the economy
Data show prices shooting up while growth is slowing down
By Dean Calbreath
STAFF WRITER
February 27, 2008
It’s been three decades since the nation suffered its last bout of stagflation: a combination of stagnant economic growth, rampant inflation and rising unemployment.
But with consumer prices shooting up and the threat of recession looming, many economists warn that another round of stagflation may be on the horizon. Even if stagflation can be avoided, it seems likely that the economy will worsen over the near future, they say.
“Each day, inflation is getting to be more of a nasty problem,” said Dan Seiver, a finance professor at San Diego State University. “And economic growth, which slowed to nearly zero in the fourth quarter of last year, could easily dip below zero this quarter. So we’re getting the ’stag’ part of stagflation, too.”
http://www.signonsandiego.com/uniontrib/20080227/news_1n27econ.html
9th ward activist to be sentenced in mortgage scam
http://tinyurl.com/37nxsa
Green was charged in connection with a scheme in which businessman Calvin Davis recruited “straw buyers” who agreed to buy his minimally repaired blighted houses at inflated prices and submit fraudulent applications to Citywide Mortgage for federally-insured loans to buy the properties.
Because the straw buyers generally couldn’t afford a monthly note, loans were applied for with falsified employment and credit documents and tax returns. Davis paid Green $8,000 to supply false tax documents that the straw buyers used to apply for the loans.
After Citywide sold the mortgages to other lenders, the straw buyers defaulted on the loans, leaving it to taxpayers to pay them off, and the buyers got a share of profits Davis made by selling them the real estate, according to prosecutors.
And it only took about three years for this to make headlines. I can only imagine the housing market fraud that willbe headlines in the next couple of years.
Txchick,
Sorry I didn’t do this sooner, but I want to thank you for recommending the Jeff Cooper DVD.
Haven’t made it all the way through it yet, and I’m having a little trouble digesting some of what he says, but still it’s great stuff to learn about. Trading is something I’ve discovered I never get tired of learning about.
Thanks again!!
I have a couple of CDs for you from a good trading seminar targeted mostly to beginners and intermediates. Email me offline with an address and I’ll send them to you.
I have to confess I wrote it down one day when you and Hoz were talking, but it’s at home. Can I get it again, or here’s mine: blano8102@yahoo.com
Thanks!!
Google fails me. “Jeff Cooper DVD” turns up nothing about trading that I can find.
Do these “Fed Funds” have to ever be repaid?
BUSINESS BRIEFING
Fed auctions $30 billion more in funds
February 27, 2008
The Federal Reserve, seeking to combat effects of the credit crisis, said it had auctioned $30 billion more in funds to commercial banks, at an interest rate of 3.080 percent. It was the sixth in a series of auctions that so far have pumped $160 billion into the nation’s banking system in an effort to provide cash-strapped banks with extra reserves.
http://www.signonsandiego.com/uniontrib/20080227/news_1b27bizbrfs.html
the FED is way behind the curve; the ECB already has handed out more than 500 billion in funds, large chunks of it backed by the most crappy US CDO stuff, Spanish mortgages and other high quality collateral.
Are these funds in the form of loans or grants?
They are putatively loans. Nobody seems to be looking very closely at the quality of the collateral though.
exactly. officially they are loans, but in reality the EU taxpayer is on the hook for the full amount; but it will take a few months before the sheeple realize what game Tricky Trichet and his banksters are playing.
They’re in the form of groans and rants
” pumped $160 billion”
This is entirely incorrect. Whoever wrote this (AP?) needs to do their homework. The cumulative total is 60 billion, as the auctions are for 30 day loans.
http://www.federalreserve.gov/releases/h3/Current/
Economic slowing hits upscale chains harder
Macy’s, Target look stronger despite consumer confidence drop
By Joshua Freed
ASSOCIATED PRESS
February 27, 2008
MINNEAPOLIS – In a slowing economy, the more upscale the retailer, it seems, the more they’re struggling.
Department-store operator Macy’s needed a one-time tax benefit to rescue the fourth-quarter results it released yesterday. But cheap-chic Target did better, with an 8 percent drop in quarterly earnings that was still a little higher than analysts expected, and Wal-Mart, with its strong emphasis on low prices, reported a solid fourth quarter last week.
http://www.signonsandiego.com/uniontrib/20080227/news_1b27retail.html
I seriously scanned by this post quickly and thought the author was identified as Joshua Treed
When did Macy’s become upscale?
I think chains like Nordstrom’s are going to get taken out behind the mall and shot.
Nordy will survive by cutting prices to fit the market, and they will still be a profitable top-end store. With the society polarizing, the truly rich will continue to thrive and shop as usual.
Sorry, if it were truly an upscale store in a boutique sense this might be true.
But Nordy’s and Coach and Tiffany’s, etc. long ago gave up that mantle and went mass-market. Their performance now is completely dependent on the HELOC crowd.
They are all gonna get taken behind and shot.
Macy’s Michigan Ave. - Kenneth Cole Reaction pants, black $59.99
Feline’s Basement (across the street) - same exact product/SKU - $19.99
Viola, upscale!
People are smart.
This is a great time to shop for apparel. The clearance racks are jammed with stuff people didn’t buy over the holidays. I have two small children, buying things at the end of the season for next year is a good strategy for us. Of course hand-me-downs and second-hand stuff also works too.
I disagree. There will be better times ahead.
Of course, if you need them go ahead but I would critically distinguish between needs and wants at this point in time.
Every sign I’m seeing in non-discretionary purchases is deflationary. Even companies that have never offered discounts in the past are offering them. They are cutting their margins to survive. Or else they are gonna get taken behind the woodshed and shot.
The price of anything I would like (but don’t “need”) is falling fast.
“Feline’s Basement”
Cats are smart! Hee hee
Aspirational brands are getting hammered.
Dutch homeprices are still rising (slowly) but apparently the banks are getting more worried that the biggest pyramid game in history is faltering, as home sales numbers keep declining (despite lower mortgage rates).
ING (of ING Direct fame, the company that refuses to admit their US mortgage losses) is launching a new initiative to kickstart the Dutch housing market. No, they are not suggesting current prices are too sky-high and that less idiotic asking prices might move more homes. Their brilliant analysis is that people are not moving because the right homes are simply not on the market. So from now on, if you see an interesting home that is NOT on the market you can call your ING agent and if you make a realistic offer (now what would that be?) they will pass your request to the local RE shill and get the ball going. Lets see how much traffic they can stir up …
Good sense from the New York Times.
http://www.nytimes.com/2008/02/27/opinion/27wed1.html?_r=1&ref=opinion&oref=slogin
The Senate proposal to allow judges to allow mortgage modifications in bankruptcy is supported as an alternative to taxpayer bailouts. The proposal could be limited to “the junk mortgages of the past few years” to prevent any effect on the rates paid for future non-junk mortgages.
“By advocating bailouts, the lending industry is trying to head off a possible change in the law that would let troubled borrowers modify their mortgages in bankruptcy court — where lenders, not taxpayers, would be stuck with the losses…In the end, taxpayer-funded bailout proposals may make sense, but only if other prudent measures have been exhausted. That has not happened yet.”
‘The proposal could be limited to “the junk mortgages of the past few years” to prevent any effect on the rates paid for future non-junk mortgages.’
This is bogus. Retroactive contract modification will naturally tend to drive up the rates on all debt, by introducing legal risk to lenders that the terms of their private contracts might later be modified to their detriment.
Let lenders who made bad loans go under (at least those which have not already) and investers who put up the funds for these loans eat their losses. That is the best way to make sure this mess never happens again. Measures to shore up bad gambling debt with taxpayer dollars will plant seeds for another bubble within a few years, and also will impose higher borrowing costs on those who had nothing to do with this mess.
PB, I agree with you on this view. However, I would point out that interest rates are going up for the rest of us who would not bite on the funny money. The RMBS capital markets are in lockdown, as are the commercial MBS markets. Rates are going up, because the investors are realizing the true risk and are no longer pricing mortgage backed securities at the same prices they did T-bills!
Rates will probably bounce higher than the mean for a while, but they were lower, so it is to be expected. Not much can change that now, since it is market driven, not Fed controlled.
Preach it brotha, lessons need to be learned across the board. Not only will retroactive contract modification drive up rates and fees, it will reduce willingness to lend. Why would investors buy into this in the future?
As far as simplifying mortgage documents and disclosures in the future - HA! If we go in this direction, they will become even more lawyerized and impossible for J6P to understand.
I have some questions about this:
1. Will people who refinanced and took out hundreds of thousands of dollars in equity be able to do this?
2. Will a homeowner who had his mortgage reduced from, say, $500k to $350k still claim his house is worth $500k when trying to sell?
They should set up a provision that any revenue from a future sale up to the original loan amount (+ interest?) should be paid back to the original lender. At least within a few years…
There was a wheat thread yesterday where a farmer stated that wheat can grow anywhere, so prices will fall. But farming is intensive; you need energy, water, arable land. Those inputs are getting expensive, and so you get stories like this:
water fears lead saudis to end grain output:
Saudi Arabia plans to halt wheat production by 2016 because of concerns about the desert kingdom’s scarce water resources, according to a US government agency.
The Saudi Arabian government has not publicly given details of the move, which comes as global cereal prices surge, driven by strong demand and lagging supply. Top-quality wheat prices for baking bread hit a high this week of $25 a bushel and have more than doubled since January.
http://tinyurl.com/yoxqjy
“…a farmer stated that wheat can grow anywhere….”
LOL
The caveat if there is enough water (see Australia’s wheat production for the last 5yrs), if there are enough seed grains and if there are enough Gleaners. Since there is likely not enough seed grains and Gleaners available then kiss the expansion of wheat good bye.
But he is right with fertilizer and water you can grow wheat on a bowling ball.
At least “w” is getting this right.
http://www.cnbc.com/id/23356482
I’d agree with that.
So, why is this bill a bad thing? In a chapter 13, the debtors would have to write a very tight budget and stick to it for 3 years. Many people over the last few years were approved for mortgages without any real consideration of their ability to pay the monthly payment. To me, it seems as thought this bill would retroactively do the job of the original mortgage broker.
In the end, the banks (or bond holders) have two choices. Accept a lesser payment or take possession of an empty house. Many of these houses in places like Las Vegas where real estate is simply not moving even with a heavy discount. If the debtor declared Chapter 13, at least they get some money.
It shoots future bond sales in the foot. Would you buy an mbs if this goes through?
Why would anyone buy an MBS right now? Are you buying?
I’m not buying anything, including stocks.
Yeah, I’m curious where the smart money is going. All the remaining investment options are looking like a bad idea. Dollars in mattress = killed by inflation. Where to look? I’m curious - is there a HBB concensus beyond “we are screwed”?
Wednesday, February 27, 2008
Bernanke talks Fed’s ‘conundrum’
…
Jeremy Hobson: Don’t be surprised if you hear the word “conundrum” today.
In Alan Greenspan’s last year on the job, he used that word to describe this problem: The Fed was raising interest rates, but rates for long-term bonds and mortgages were staying low. Now, Ben Bernanke has the opposite problem. The Fed is cutting, but long-term mortgage rates are going up.
http://marketplace.publicradio.org/display/web/2008/02/27/bernanke_to_congress/
Remember when Greenspan was cutting rates but mortgage rates took a while to drop?
Wednesday, February 27, 2008
Foreign investments are just bailouts
As the U.S. banking system continues to get into more trouble, the government has responded by buying up stakes in the failing companies. But Robert Reich reports the governments doing the owning are overseas.
http://marketplace.publicradio.org/display/web/2008/02/27/reich_govt_bailouts/
Wednesday, February 27, 2008
Hard times for Latino construction
Construction went from being a leading contributor to employment growth to a leading source of unemployment. Dan Grech reports from a community near Miami that the Latino population has suffers a particular loss.
http://marketplace.publicradio.org/display/web/2008/02/27/latino_construction/
The problem with Mexico is the utter lack of education policies, which limits its population to nothing more than an endless supply of cheap low-skill labor. In the US, Hispanics have the lowest level of education. For many decades now, farming, traditionally labor-intensive, is becoming a high-productivity sector, with less reliance on manual labor. Construction business is cyclical, some years you work, some years you don’t.
And how much can you make cleaning? The world is passing Mexico by. BTW, the lack of a good educational policy will inflict a lot of pain on the USA too. I work in hi-tech, and all the outsourcing to India, Eastern Europe, etc is no joke. We are not talking about outsourcing coders or repetitive tasks - we are talking about outsourcing the whole designs, from the ground up. Electrical engineering, programming, material science, you name it.
Fannie Mae reports a 3.6 billion loss and everyone wants them to buy toxic mortgages from other banks and increase the conforming loan amount? How is this going to do anything except bail out Wall Street for their excesses while leaving the GSE’s and taxpayer ultimately to clean up the mess?
http://biz.yahoo.com/ap/080227/earns_fannie_mae.html
Fannie Mae is just an established conduit for the bailout.
Pardon me if someone posted on this yesterday, but did anybody see Bill Gross’s latest call for socialism (that would benefit him greatly, of course)? This guy is such a slime ball. He espouses “capitalism” in the sentence before he calls for a bailout from Washington. These types of people are just as, if not more, socialist than the real socialists in this country.
I would consider myself an uber-free-market guy. As such, these giant corporations and money managers need to be destroyed. They are more reliant on government handouts than the dimwits in N Mpls waiting for their monthly check.
Every day, the dystopian novels/movies are looking more and more like our future.
“dystopian novels/movies”
I always felt “Running Man” was underrated in this regard.
Polarized society - rich in towers/poor in the streets - check
Government & justice a comical reality show - check
Little distinction between the corporation & the state - check
Food riots in Bakersfield - pending
For a B movie they got it spot on - even the police riot gear looks exactly like it does today.
The short story (by Stephen King) the movie is based on is much better :).
Must not be fun to be BB going to visit Capitol Hill today, with the flames of inflation and dollar decline licking at his heels
February 27, 2008 9:14 A.M.EST
BULLETIN
Futures show bulls turn tail
Wall Street to key on Fed chairman’s testimony and Q&A on economy
Stock futures pressured. Lofty commodity prices, as well as renewed dollar weakness, confront Fed’s Bernanke as he heads to Capitol Hill.
• Stocks to watch | European stocks extend losses | Asia advances
MORE RECORDS FALL
• Gold breaches $960 mark | Dollar plumbs new depths against euro
http://www.marketwatch.com/?dist=ctmw
This just in! Jim Cramer has been named the winner of the inaugural Basher Busters Dastardly Babbler Award. This dubious distinction is reserved for the market analyst with the most misfires and manipulative behaviors in a given year. It was a tight race, but in the end, Jim Cramer of CNBC edged out his buddy, Dennis Kneale, to win the award.
Cramer won primarily on style points and sheer determination. Not only did he amass a number of notable miscalculations, he did it with his usual panache and exuberance. This self- promoting, so- called market genius whiffed on his Dow Jones prediction when he declared it would hit 14, 500 by year’s end. He swung and missed again when he dubbed Sears a buy at two hundred dollars per share. Sears stock stands at ninety dollars today. Depending on how you look at it, that Sears call was a terrible miss or a sucker punch to the abdomen of the individual investor.
Add to his bad market calls the fact that he targeted America’s youth in a whirlwind tour of Universities, selling them his Cramerica Kool- Aid, which is spiked at best and poisonous at worst, and you can see how Cramer set himself apart from his competition. Throw in his now- famous rant declaring that “the Fed knows nothing,” add a dash of his pill-popping mockery on the Conan O’Brien show, and he distinguishes himself even more.
But the coup de grace, the final straw, the cherry atop the whipped cream was his confession to having fun with stock manipulations. He pulled the wool over America’s eyes and laughed in our face at the same time.
And there you have it! The 2007 champion Dastardly Babbler. Congratulations, Jim!
I see Dennis Kneale is Lying Larry Kudlow’s new boyfriend. Such pandering stupidity is sickening.
Can’t anyone recall the last time Kudlow spoke truthfully?
Kudlow speaking truthfully yesterday, imho,
Is the Fed in Denial About Inflation?
And where was he 6 months ago? A year ago? And 2 years ago when he insisted there was no inflation and criticizing the Fed for raising rates? It’s a little late to be ringing the inflation siren and far too many lies told by Kudlow for anyone to come to his rescue…(hint)
The cramer faed-o-matic is a well-known and very successful way to trade. Cramer gets whipsawed almost daily.
They forgot Mr. Cramer’s “best pick” of 2007, he said the money center banks would be the best investment of 2007. Not bad only down 30% for the year. Think of the mopes that bought Bank of America or Citigroup or Wells Fargo or Wachovia on his recommendation. How does he sleep at night?
Very well, thank you, as do his hedge fund buddies whose books he talks.
You can’t be this naive, Hoz!
I am incredibly naive.
I think more on moral responsibility. I like to sleep at night.
So do I.
However, as the old saying goes: Just because you are vegetarian, don’t expect the bull not to attack.
Probably with one eye open.
Chicago (Lisle): another FB with a penchant for fire?
$725,000 House For Sale Destroyed By Fire
It was built in 2005. Lot purchased for $185,000. Two loans from Wells Fargo in 2005 totaling just over $700K. Listed for sale 2/12/07 for $849,900 and reduced down to $725K.
Was the fire good luck or bad luck?
I see no problem here the PPT cannot fix with a late-day rally.
February 27, 2008 9:36 A.M.EST
BULLETIN NASDAQ PACES EARLY RETREAT AS DOW INDUSTRIALS DROP 70 POINTS IN FIRST MINUTES OF TRADING
Sellers hold the upper hand
Jittery investors to key on Fed chief’s testimony, Q&A on economy
http://www.marketwatch.com/tools/marketsummary/
Someone has spiked the bulls’ punchbowl with testosterone early in the day today…
Door Could Open To Class Actions
WHEN BORROWERS FIGHT BACK: Banks watch closely to see if a couple’s legal struggle with their lender will launch a new front in the battle over troubled mortgages.
“…The case is alarming Wall Street’s biggest banks, which could bear the hefty cost of reimbursing all mortgage interest, closing costs and broker fees to groups of homeowners who uncover even minor mistakes in their loan documents.
After a federal judge in Milwaukee ruled last year that the Wisconsin couple had been deceived and other borrowers could join their suit, Chevy Chase Bank appealed to the circuit court in Chicago. Kevin Demet, the lawyer for the plaintiffs, said a decision by the appeals court is imminent, though others involved in the case said it could be a matter of weeks.
“It’s one of the most important cases for the mortgage industry right now,” said Louis Pizante, chief executive of Mavent, which provides consumer protection law services to major lenders. “The case was somewhat interesting a couple years ago when it started, but its ramifications and impact have completely changed given the current environment.” …
The law states that even a minuscule violation by a lender can lead to a mortgage cancellation, or rescission. …’
Washington Post
http://tinyurl.com/2zf29p
No Bailout needed! lol
Apologies if this has already been posted.
“Joe Lents hasn’t made a payment on his $1.5 million mortgage since 2002.
“That’s when Washington Mutual Inc. first tried to foreclose on his home in Boca Raton. The Seattle-based lender failed to prove that it owned Lents’ mortgage note and dropped attempts to take his house. Subsequent efforts to foreclose have stalled because no one has produced the paperwork.”
Nice! A bit too light on the details to really tell one way or the other, but I definitely support class-actions against shady banks. If we take care of all the people that got scammed, then there’s hardly any justification left for bailing out the remaining speculators.
My wife was not happy to have to initial her wrongly spelled name in 50 places in our loan documents after we had brought the error to their intention several times during the process.
Fannie Mae swings to losses for quarter and year
Mortgage defaults, falling home prices and credit woes lead to losses
By Robert Schroeder, MarketWatch
Last update: 9:07 a.m. EST Feb. 27, 2008
WASHINGTON (MarketWatch) — Mortgage-finance giant Fannie Mae on Wednesday posted losses for the fourth quarter and for all of 2007, citing the continuing drag in the housing and mortgage markets and disruptions in the credit markets.
For the quarter, Fannie swung to a loss of $3.80 a share from profit of 49 cents in the year-earlier period.
The loss was worse than expected: Analysts surveyed by FactSet were expecting Fannie Mae (FNM 25.35, -1.62, -6.0%) to report a loss of $1.21.
For the year, the company swung to a loss of $2.63 a share from profit of $3.65 a share a year earlier.
Chief Executive Daniel Mudd said the company is pleased that demand for its mortgage guaranty business has surged in response to the market’s need for liquidity.
http://www.marketwatch.com/news/story/fannie-mae-posts-loss-quarter/story.aspx?guid=%7B90452788%2D5151%2D4950%2D9F18%2D8297B442C324%7D
ECONOMIC REPORT
Business investment weakens in January
Even excluding aircraft, new orders fall across the board
By Rex Nutting, MarketWatch
Last update: 8:57 a.m. EST Feb. 27, 2008
WASHINGTON (MarketWatch) — Demand for durable goods fell back in January after a burst of orders in December, the Commerce Department reported Wednesday, another sign that the economy is slowing.
New orders for durable goods fell 5.3% in January, close to the 5.1% drop anticipated by economists surveyed by MarketWatch.
http://www.marketwatch.com/news/story/business-investment-weakens-january/story.aspx?guid=%7B955B2A09%2D4A1A%2D4458%2DAA65%2DCB4EA4A4189B%7D
http://www.pittsburghlive.com/x/pittsburghtrib/news/s_554438.html
“The Pennsylvania Higher Education Assistance Agency will suspend all new student loans on March 7 as a result of the national credit crunch.”
The article says loans to out of state students were suspended two weeks ago.
‘It doesn’t make sense to borrow money and then give it away.” Indeed.
Will the leap day, especially falling on a business day, alter the comparative YOY numbers for February? I’m guessing that the month being ~3% longer than last year could bump up some economic stats (and some folks may not want to correct for this).
Just want to know what size grain of salt I should take when February numbers start coming out.
Good point!
Where’s the Wheat?
Used to make the meat.
Remember, it takes the grain that would feed a lot of people to make the meat to feed a few. Ethanol didn’t help, but a big factor here is rising meat consumption in increasingly affluent nations such as Chindia. And that isn’t going away.
People may go hungry in economic basketcases like Africa and Bangladesh.
Meanwhile, expect meat prices to soar far more than bread prices. Got beans?
Got beans?
I hate all beans except Cuban beans.
Yesterday I bought 8 bags of brown rice.
I filled my bankers boxes full of crackers, cereal, dried fruits and some chips.
My freezer has 10 bags of crumpets, frozen onion soups, coffee, and some frozen angus burgers.
My fridge is packed with all types of nuts.
My cupboard is full of chocolate by Lindor.
My safe deposit box is full of 5’s 10’s and 20’s.
My Birthday is tomorrow, middle boomer, and I am in a ghastly mood.
Ok, i’ll post this, good for just another day or so
http://www.amazon.com/gp/product/B000FNJOUO
Over 7 pounds of very high quality whole grain Pilaf. Use the 30% coupon code mentioned on the page and it will be under $12.
I just got my shipment and it has a shelf date of December 2009 and I’m sure good well beyond that.
Meat isn’t leaving the US in any quantity. We don’t meet Asian purity standards. In the past when we have been allowed to try the export market in meats, we have screwed up. Meat exporters are South America, Australia, New Zealand and Europe (except France).
Some of the difficulties that the US has are 1) antibiotics in animal feed, 2) GMO feed, 3) using animal parts as feed, 4) bone fragments in processed meat. These are severe impediments to export.
There are several ways the world can end. The Asian nations regard the most likely scenario as a pandemic. Since there are few antibiotics, the risk of a antibiotic resistant strain of deadly bacteria developing increases when meat is saturated with antibiotics.
True enough for beef. US beef exports collasped after mad cow.
The US is a net pork exporter with Asia as the primary market:
http://www.ers.usda.gov/Briefing/Hogs/Trade.htm
Poultry exports were over $4 billion last year, a record.
http://www.wattpoultry.com/PoultryUSA/News.aspx?id=21852
how are the kool-aid exports doing?
Our pork exports are a drop in the bucket for what Asia imports. we got lucky last year because China’s pork exports were down.
And the very real threat of a bird flu epidemic has kept the frozen chicken market moving.
An interesting website for daily news is Asian agribusiness
http://tinyurl.com/2l5smp
“Among other key markets for US beef exports:
* The ASEAN region increased 246 percent to 14,882 metric tons (32.8 million pounds) valued at more than $43 million. The leading market in the region was Vietnam with a 462 percent increase to 11,012 metric tons (24.3 million pounds) followed by the Philippines (72 percent increase to 2,725 metric tons or 6 million pounds) and Singapore.”
$43MM in Beef exports in 2007 to Asia countries
I suspect our meat exports are only going to increase given the collapse of the dollar, I’ve bought some producers over the last couple of months. If we get to the point where everyone is eating beans, there won’t be a safe investment except in nose plugs and GAS-X.
Please, you haven’t a freakin’ clue of what you are talking about. I probably have more than 20 different kinds of beans in my cellar.
If you don’t know how to cook them, you will f@rt all night for sure. However, you forget another rather important fact that your body is adaptive. People who eat beans regularly do not do a stinkeroo.
I also heard that it had to do with the US meat industry’s inability to track individual animals.
The problem is the ability to track individual animals.
If we find out that this disease is common in our cattle, the meat industry could loose a lot of money.
Remember, testing of cattle is currently prohibited. I think its called “plausible deniability”.
Yep! We can easily (if price-ily) test, but we don’t because we don’t really so much want to know the test results. Want a thrill? Try reading _The Family That Couldn’t Sleep_. (about the coming CJD tsunami) (Okay, not really–it’s a pretty hard disease to get, but it sure sucks if you do get it!)
Not sure it’s any better, but I use strictly buffalo for my ground meat. It’s cheaper and leaner.
Food is a nonproblem. The order rodentia is thriving and will continue to thrive. Rats, bats, squirrels, moles and voles can supply our protein needs for decades.
Yep, dried beans are a far superior form of protein if you are going to argue either economics or eco-friendliness.
Works for me. I haven’t eaten meat in over 30 years. My food costs are basically unchanged in the past 5 years.
The problem is that if the “many” people eat *only* the wheat they’ll get sick and malnourished. No B12, no fat-soluble vitamins (A,D, K, E) protein deficiency and no essential fatty acids. Just carbs and incomplete protein.
Eating *only* the cow ( organs and all ) people would be fine and healthy though “fewer” in number…until the wheat eaters all die off that is.
This is like saying if people only eat carrots, they will die. Like DUH!!! You can get “water poisoning” too if you drink an excess of water.
Firstly, you have vegetables. Then you have dried beans, mushrooms, spices, etc. And there are entire cultures that have evolved complex vegetarian diets. They manage just fine. In fact, they seem to be breeding like rabbits. LOL.
Ignorance is not a solution.
Dollar at new lows. Was it durable goods or Big B deflating us to prosperity?
I think it was me, buying krugerrands.
Uncle Buck hit by a speeding Fed bus:
http://quotes.ino.com/chart/?s=NYBOT_DX&v=w
Got FOREX?
Bernanke Suggests More Rate Cuts Amid Multiple Economic Risks
By Tom Barkley and Brian Blackstone
Word Count: 1,391
http://online.wsj.com/article/SB120412412525296845.html?mod=hpp_us_whats_news
The YEN still looks like a good buy if you can stomach the interest rate fees while holding it. It is the last of the declining hold outs… but it will drop. Right now at 106.30 and I see a run for 102.50 within 60 days - maybe this week. Probably will break 100 easily, but I’m not counting on it.
Of course, I could be wrong, and be stuck with it for 6 to 12 months… but that’s the way I trade. I trade modest chunks and hold until i meet my price targets.
BUSINESS WORLD
By HOLMAN W. JENKINS, JR.
Bailout handwringing has spilled over on to the WSJ Op-Ed page
Let Houses Find a Bottom
February 27, 2008; Page A16
We have nothing to fear but fear itself, a president once said, and thereupon embarked on a series of ad-libs some of which deepened and prolonged the country’s depression.
Any debate about a housing bailout can be put aside — the bailout is underway, even in advance of specific plans being shopped around Washington by Bank of America to prop up home prices with direct subsidies to homeowners whose debt exceeds the value of their houses. No, the perverse effect won’t be a replay of the ’30s, or even Japan’s decade of stagnation in the ’90s, but the latter is your model, with a little inflation thrown in. The goal: avoid foreclosures and slow the fall of home prices to market-clearing levels.
http://online.wsj.com/article/SB120407264971695087.html?mod=opinion_main_commentaries
Ben — Are you still in the “no bailout is forthcoming” camp? Just curious…
February 27, 2008, 9:29 am
Roubini: FHLB Lending “Reckless”
Nouriel Roubini, a New York University economist better known now through his research service, Roubini Global Economics, cast an unflattering light on a little-discussed risk to the financial system in testimony to the House Financial Services Committee yesterday: The Federal Home Loan Banks, 12 federally banks (like Fannie Mae and Freddie Mac) that are privately owned and primarily lend to their owner-banks against illiquid collateral such as mortgages.
Mr. Roubini said:
“The widespread use of the FHLB system to provide liquidity — but more clearly bail out insolvent mortgage lenders — has been outright reckless. Countrywide alone — the poster child of the last decade of reckless and predatory lending practices — received a $51 billion loan from this semi-public system; in the absence of this public bailout Countrywide would have ended up where it should, i.e. into outright bankruptcy. And the largesse of the FHLB system does not stop at Countrywide. A system that usually provides a lending stock of about $150 billion has forked out loans amounting to over $750 billion in the last year with very little oversight of such staggering lending. The risk that this stealth bailout of many insolvent mortgage lenders will end up costing massive amounts of public money is now rising.” –Greg Ip
http://blogs.wsj.com/economics/2008/02/27/roubini-fhlb-lending-reckless/
It is proven more every day that a housing collapse is already occurring, much less can be prevented. So down goes your credibility all the more.
These goofs in Washington are in the bargaining stage of denial. You are with them and the trolls. Enjoy.
Do you think the PTB will just give up without a fight?
I don’t think anyone can keep the housing bubble from collapsing.
Wow, they lifted the caps on fnm and fre, now they have an opportunity to lose even more money.
They are going to try, I agree, they will fail, but…dollars will flow their way. I might take a few years to find out, but the PTB have a lot of influence and with a Republican-pro business admin and a GS Sec of Treasury I see $$$ coming their way.
Maybe I am just some dummie from Bakersfield…
Ben - I don’t think anyone’s been questioning whether or not a bailout will actually work or not - most or all on this board would say that it wouldn’t.
At question is whether or not a bailout will be attempted or not, and what are the financial ramifications - i.e. how much will it cost the taxpayers.
A lose/lose scenario would be tons of taxpayer $$$ being spent on a bailout, and the bailout still failing.
(Well - lose/lose from a homeowner, and general economic perspective; from a current-renter perspective a failed bailout would be a win/lose situation, with the “win” being home prices that still crash.)
Exactly, packman.
A “bailout” won’t keep home prices aloft unless it permanently increases wages by 50% or so. Not gonna happen = any bailout will fail it’s goal of keeping prices high.
However…I am more concerned about the economy and the socio-economic fallout of any bailout attempts. IMHO, any bailout attempts (outside of forcing lenders to take all the losses & no tax money being used…though the FDIC, SIPC and PBGC will have to be propped up) will likely have the opposite effects. It will prolong the recession, making a depression even more likely as the economy will NOT pick up as long as house prices are falling. The sooner we get it over with, the sooner the economy can recover.
The government will be insolvent or we will experience hyperinflation if there is any taxpayer-funded bailout, IMHO.
These are the things I’d like to avoid, and would gladly postpone buying a house if it means we can create a more viable economy in the process.
No bubble in history has ever been re-inflated. Capital will flow to the next bubble.
you obviously underestimate the ability of the government to print money.
And you overestimate their competence in making the money flow to exactly the right channels to preserve all nominal prices.
I had credibility? Cool! Here I had thought I was just a blogger…
Hand me some lotion, we have been on the right side of this discussion.
To the contrary, you’ve been consistently wrong for years.
‘WASHINGTON (AP) - If you are looking for a sign that the housing market has bottomed, you won’t find it in today’s report covering January new home sales.’
You are misunderstanding me.
I have been saying they will try and get bailed out and they will get some $$$.
Succeed, I doubt it?
Wrong for years. I have been coming here since the spring of 2005 and I have agreed with you on most everything except the bailout attempts - UGH!
C&C - I am starting to think this is Ben J’s sense of humor at work. He likes to stir up some of you regulars as he knows you will take him serious.
Ben,
It seems there are a couple of points of disagreement between discussants here. One is on what would or would not constitute a bailout attempt, and another is what the effect will be.
For the record, I believe there will eventually be a large-scale bailout attempt, and that it will succeed only to slow the rate of home price decline, not stop it. We will consequently end up in a similar long period of home price decline to that enjoyed by Japan from 1990-2005 or so…
Prof,
IMHO you are fascinated by ‘white noise’. EVERYTHING! the government does can only make the situation worse.
There is nothing the government can do that can prevent a bubble from bursting.
What the government can start to do is prepare to pick up the pieces.
“…The American economy — a marvelous but flawed engine of wealth — periodically goes to speculative or inflationary excesses. If most of those excesses aren’t given the time to self-correct, we may be trading modest pain today for much greater pain tomorrow. Trying to prevent a recession at all costs is a fool’s errand that could ultimately backfire on us all.”
February 27, 2008
The Specter of Stagflation
By Robert Samuelson
http://tinyurl.com/25octv
I agree: They will try everything possible to stop the return of affordable housing. That doesn’t mean that they will succeed, but they can give us a nifty “Lost Decade” rolled into some sort of super-Recession in the process.
For a while I shared this thesis; however, the evidence is starting to indicate this will be worse than Japan. At least the Japanese were able to import deflation from China as the Japanese asset bubble deflated.
With rising consumer prices and increasing borrowing costs, together with faltering confidence in housing as an alternative investment, we could see a much faster decline in home prices. The entire economy is now being driven off a cliff with Bernanke at the wheel.
“They will try everything possible to stop the return of affordable housing.”
I don’t know that they WILL try everything possible so much as TALK about trying everything possible.
“IMHO you are fascinated by ‘white noise’.”
Well, Hoz, we are all entitled to our opinions. But personally, I would argue that what fascinates me is not white noise per se, but rather a consistent pattern of stock market movements in exact opposition to current news items. Case in point: BB testifies on Capitol Hill that everything has turned out worse than expected since last summer, and inflation may end up higher than the Fed is currently forecasting, which all sounds like it should be pretty bad news for Wall Street traders, as the U.S. stock market lost maybe 50 pct of its aggregate value during the last major stagflationary episode in the early 1970s. Nonetheless, the stock market manages to climb on the news and reach a temporarily positive plateau intraday level. Fascinating indeed!
I would go so far as to conjecture that the stock market does better than average on days when the muckiest of mucks testify, which is quite the opposite of white noise.
http://www.marketwatch.com/?dist=ctmw
See you are looking at ‘white noise’. Compare the price of the stock movement to the price of the dollar index. For certain types of hedges, it is time to buy the US market against the currency basket. The return should be ~3% for the month of Mar. A fully hedged position.
They are simply flushing more crapital down the housing bubble drain. For years Berserkers chased this bubble. Now, the government gets its turn. Malinvestment begets malinvestment. Let them be. We know how it ends.
Meanwhile, keep your powder dry. As Ron White says, “you can’t fix stupid.” You sure as hell can profit from the turbulence, however. I know that sounds cold but it’s the unforgiving truth.
That’s what they said about the Titanic.
http://www.marketwatch.com/news/story/capital-position-makes-aig-unsinkable/story.aspx?guid=%7BD9E2B865%2DCA3B%2D41B8%2DACD7%2D9CD46E97AF54%7D&dist=hplatest
Chicago area:
Home sales fall in Kane and Kendall
Sorry if this is a duplicate post, but housing has hit bottom in Detroit….houses for sale at $100. Some might even pay you to take them.
http://tinyurl.com/2tmvsn
Guy in Dallas has been trying to get the city to stop calling him the owner of his deceased father’s house for years. They keep trying to add more fees for remediating it and he keeps telling them he didn’t inherit it.
The end game of unfettered capitalism is oligopoly and then monopoly.
what, no “do-overs”?
I’m here.
damn good thing all the capitalism I see is getting pretty ‘fettered.
end game postponed for better weather, like fall maybe.
Look at that stock market rally — proof that BB’s comments are working their magic!
http://www.marketwatch.com/tools/marketsummary/
All news is good news.
Let her rip!
From HousingWire
MBA’s Chief Economist Jumps to Fannie Mae
By Paul Jackson • February 27, 2008
Doug Duncan, the often-colorful chief economist that rose to industry prominence with the Mortgage Bankers Association, is moving to a similar role at Fannie Mae. The GSE on Tuesday named Duncan vice president and chief economist after 15 years at the MBA, where Duncan often served as the organization’s most visible spokesperson.
“His counsel and scholarship will be important assets for the company as we strive to bring stability, liquidity and affordability to the turbulent housing and mortgage markets,” said Fannie Mae CEO Daniel Mudd. “I also hope that, given Doug’s role at the MBA, he will provide us with critical insights so that we can better serve our partners and customers in the years ahead.”
Is he still renting these days?
Who cares about them subpoenas? Open the mortgage lending spigots! (Not that this will work unless lending standards are returned to 2005 levels of debauchery…)
My main question:
1) Can Fannie and Freddie eat toxic mortgage debt directly off the lenders’ books, or are new originations required for these higher conforming limits to be exercised?
2) How many San Diego households can actually afford a home which requires a $730,000 loan? (My guess: Precious few, unless significant numbers are living with multiple households under the same roof. This is occasionally tempting to me personally, even though I would probably never do it unless we were in desperate straights.)
Fannie Mae shares zoom higher as caps lifted
Company allowed to buy more mortgages as it posts fourth-quarter loss
By Robert Schroeder, MarketWatch
Last update: 12:10 p.m. EST Feb. 27, 2008
WASHINGTON (MarketWatch) — Shares of Fannie Mae and Freddie Mac shot higher late Wednesday morning after the companies’ regulator said it would allow the two government-sponsored mortgage-finance giants to buy more mortgages as of March 1.
Fannie’s shares zoomed 15% to $31.04, while shares of Freddie Mac shot up 15% to $29.09.
The decision by the Office of Federal Housing Enterprise Oversight came the same day Fannie Mae reported a $3.6 billion loss for the fourth quarter and a $2.05 billion loss for 2007, citing the continuing drag in the housing and mortgage markets and disruptions in the credit markets.
http://www.marketwatch.com/news/story/fannie-mae-shares-zoom-higher/story.aspx?guid=%7B90452788%2D5151%2D4950%2D9F18%2D8297B442C324%7D
…”will not work”…
Superfund needed to clean all that toxic waste.
OFHEO website had a statement by the boss last month about not being in favor of the increase in the conforming loan limits. They will spend 66 million in 2009 fiscal year watching over 2 companies?
As this is the bits portion:
This YouTube video from half time at the B’ball game is what happens to me every time I ask a girl out. I would hate to wake up the next day if I were this young man!
http://tinyurl.com/2un3ev
Omigod that’s awful…..
Show her your trading records. That’ll do it.
Meanie! (Similar to what my banker said, “Just leave your check statement at the Starbuck’s counter”.)
I just don’t think that way.
Unfortunately, it’s what THEY think that counts.
I know, I know… I have to stop thinking about myself and think about what THEY want!
“May I have a Venti carmel Macchiato with skim milk please?” I want to smack ‘em all.
“Starbucks Coffee Co. in Seattle, WA, plans to lay off approximately 600 employees. This total includes the elimination of existing positions and open headcount, as well as the reduction of its current workforce. Approximately 220 partners have separated from the company, nearly all were U.S. partners serving in non-retail support roles. ”
MA this week
Lol, I was kidding (a little!).
That’s why I don’t even bother these days. I can’t give them what they want for now, so I don’t even see the point of asking.
If you want `da bootie’, you’re going to have to put up with this. Or date smarter women.
And who knows? They might even like the spankings. Everybody wins. LOL.
…is what happens to me every time I ask a girl out
Hoz, I’m sure those girls have no idea what they are missing. Just ask a SMART girl out. That’ll do it.
Damn those canceled sales — they sure make interpreting these numbers difficult!
ECONOMIC REPORT
New-home sales fall despite record price cuts
Pace of sales is lowest in 13 years after 2.8% drop in January
By Robert Schroeder, MarketWatch
Last update: 12:46 p.m. EST Feb. 27, 2008
WASHINGTON (MarketWatch) — Despite a record drop in prices, sales of new homes nationwide fell by 2.8% in January, led by a drop of more than 10% in the Northeast, the Commerce Department reported Wednesday.
Sales of new homes slipped to a seasonally adjusted annual rate of 588,000 last month, just shy of the 590,000 that economists surveyed by MarketWatch had expected. See Economic Calendar.
The decline in January marked a 13-year low and constituted the latest sign of prolonged weakness in the U.S. housing market. January’s sales pace was down 33.9% compared with January 2007.
Sales are off 58% from the peak in mid-2005.
The figures likely overstate the level of sales, because they count canceled sales contracts, which have jumped in the past year.
Inventories of unsold homes fell for the 10th month in a row, but it wasn’t enough to prevent the months’ supply of homes on the market from hitting a fresh 27-year high at 9.9 months. Inventories are undercounted because of the canceled sales.
http://www.marketwatch.com/news/story/new-home-sales-sink-13-year-low/story.aspx?guid=%7B1145565F%2DB33C%2D46AD%2DA364%2D0F4C9632C7A4%7D
So, what do you do when your two gov sponsered mortgage buyers start posting horrific losses because of crappy mortgages?
Why, you give them the ability to buy as many more crappy mortgages as they can get their hands on!
So what happened to OFHEO? Just a few short months ago I remember them suggesting that raising the caps would be irresponsible. Now? NO CAPS AT ALL! WHEEEE!
If they’d removed the caps while slapping on a 20% downpayment limitation, MAYBE this could be seen as a good move. MAYBE.
One thing that I can’t understand is thinking that easier lending will save a market done in in part by easy lending. Anyway, I haven’t seen any indication that the GSEs are in a position to loan much more. Their execs caution that Wall Street (remember them) might not buy the loans. OFHEO says that they aren’t set up to do these loans. So we’ll see. What I’m waiting for is the look on the faces at CAR when prices continue to go down even after this passes.
“…thinking that easier lending will save a market done in in part by easy lending.”
http://en.wikipedia.org/wiki/Hair_of_the_dog
Yah, it’s crazy how realtors say “Look, they’re doing (xyz bailout plan) so home prices are sure to only go up!”
I mean… if real estate was a good deal, there would be no need for a bail out. Even if real estate was a BAD deal, and wasn’t selling much, there’d be no need for a bail out. Real estate being at mania and fraud driven highs threatening to crush many many banks…. well… then the gov looks into bail outs. Bail out talk is, in my opinion, a very BAD sign for real estate. Bail out talk means you’re screwed if you bought recently, and you ought not to buy until the mess finishes getting flushed.
The CAR trumpeted fed rate cuts/mortgage rate tick downs/tax rebates/monkey farts as proof that housing was bottomed. This will be another awesome chance for them to prove how wrong they can be.
Hoz — Here is some fascinating news. Would you consider this 30.4 pct drop in applications to refinance existing home loans to fall into the category of “white noise”? I am guessing this drop is a bit outside the normal range of inter-week variation. I admit that I don’t consider myself capable of distinguishing whether an individual datum represents a material shift in trend or mere white noise.
Refinancing applications down 30.4% last week
MBA data document further hike in interest rates charged on mortgages
By Amy Hoak, MarketWatch
Last update: 7:00 a.m. EST Feb. 27, 2008
CHICAGO (MarketWatch) — Mortgage applications filed last week dropped a seasonally adjusted 19.2% compared with the previous week, reflecting a plunge in homeowners pursuing refinancings, the Mortgage Bankers Association reported on Wednesday.
Interest rates on both fixed- and adjustable-rate mortgages increased, according to the Washington-based MBA’s weekly survey.
Applications to refinance existing home loans dropped 30.4% for the week ended Feb. 22 vs. the previous week, while filings for mortgages to purchase homes edged up a seasonally adjusted 0.2%, the survey found.
http://www.marketwatch.com/news/story/week-to-week-refinancing-applications-down-304/story.aspx?guid=%7BCB96166C%2D2012%2D4A3B%2D9DB0%2D32A56D812285%7D
http://bigpicture.typepad.com/comments/2008/02/declining-home.html
Exactly. The refinance applications are directly tied to the rates, which took a big jump the last two weeks.
(raises hand)
Me for one. I was just about ready to pull the trigger two weeks ago on refinancing to a lower rate - on the fence. When rates jumped - so did I - off the fence onto the “I’ll keep my current rate thank you” side.
So far, the Fed’s housing price crash acceleration program is working just marvelously. What could be better for price crash acceleration than (1) low wage inflation, coupled with (2) high consumer necessities (food and energy) price inflation; (3) higher mortgage interest rates, reflecting the pricing in of an inflation risk premium; and (4) a continued reluctance of lenders to make loans to buyers of homes they cannot afford, due to (still) unaffordable prices?
Don’t forget the (5) threat of having mortgage contracts rewritten by a judge to reduce principle owed by (by the time the correction is fully underway) up to possibly 50%.
Right — investors must be champing at the bit at the moment to throw more money down the mortgage securitization toilet…
Did you go short yet? I think 1150 is the next target for the spx. Heavy action in the mar 1200 on the spx yesterday and today. (i have puts on the djx, spls, cat, bni, wmt and low)
No. Waiting for 1400+ or mid-March whichever comes first. I have a straddle in place on the three indicies as of last Friday.
I see what you are looking at, i don’t think we get that high. It is interesting that someone is buying mar protection that far down.
“The Fed’s efforts so far to soften the blow of the housing slump with lower interest rates appear to be having a muted effect. Since September, the Fed has reduced its target for short-term interest rates by 2.25 percentage points to 3%. But some mortgage rates are actually rising, and those that are falling haven’t fallen that much.”
Lets see what interest rates do when they start dropping money out of helicopters? I really don’t know what other things the FED can do this RE bubble is over. Going to have a commodities bubble to fight here in a couple of years it looks like?
The fed can buy treasuries to for rates down to what ever rate they decide. Ben. B. already stated that he would do this in order to prevent deflation. Ben B. also stated that he would buy foreign treasuries to manipulate the value of the dollar and keep inflation going (as a last resort). Anyone in the deflation camp needs to read Ben. B’s 2002 speech about the dangers of deflation and how the government working with the banks can insure inflation. By using the printing press.
All you need to do is look at the common wisdom:
Lack of demand is causing the economy to crash, give money to people to spur demand.
Increase government spending to spur demand.
Lower tax rates without lowering spending to spur demand.
The will keep trying to spur demand by giving people money until the dollar is toast.
Talking is one thing; doing it is another.
It’s like the 20-year old pimply kid talking about dating Cindy Crawford. Easier said than done.
In any case, this can’t be done without being noticed. At that point in time, the smart players will just shift to hard assets.
In any case, this is like those grand conspiracies. It requires all the players to cooperate. One smart player somewhere will undoubtedly resign from the WTO, and come up with a hard currency backed by gold, and money will flow into that country.
Of course, the grand conspiristas will argue that Ben Bernanke will order that country to be invaded too.
Yeah, OK, dude, pull the other one, OK?
at least the FED is causing mortgage rates in Europe to go down, keeping the EU housing bubble alive. I’m curious if this is an unexpected or planned side effect of their policy…
Prof G.S. Bear,
White noise distracts from significant news. That mortgage applications are down can be the result of the entire US lending area waiting for the MSA numbers to be published. These numbers will change conforming loan limits. Why send an application to refi now, when in a few days the loan formerly known as jumbo may be conforming? The numbers can be calculated easily, but until published nothing can be done.
There is so much public information available on who benefits from the new loan limits, and borrowers are a small part.
Good point. I think there is a whole lot of waiting going on at the moment to see how the policy chips fall…
From the pages of CNN Money today, right now! the following article is being run:
Say good-bye to granite countertops
High-end kitchen and bath renovations just aren’t boosting a home’s value the way they used to. Sellers who succumbed to home over-improvement syndrome are feeling the pain.
With all of the granite countertop comments here on the HBB I thought you all wourl appreciate it.
Enjoy!
Good news: $US is rising against the GBP.
http://www.bloomberg.com/markets/currencies/eurafr_currencies.html
I guess the $US is rising against the Euro now. Still good news, right?
Euro is up more than 1% against the US$ today. At 1.515 (all time high) now. And no ECB intervention! are they giving up, or are they going to play the surprise rate cut game soon?
Right — sorry for the confusion. For some weird reason, Bloomberg puts XXX-US and US-XXX exchange rates on the same page…
It is the way Forex is done by the banks and brokers. I haven’t learned why - but you learn to always pay attention
Norway’s Krone Rises to 27-Year High Versus Dollar on Oil Gains
By Robin Wigglesworth
Feb. 27 (Bloomberg) — Norway’s krone climbed to a 27-year high against the dollar after oil’s surge to a record boosted the country’s revenue and stocks and as traders bet the Federal Reserve will lower its target interest rate.
http://www.bloomberg.com/apps/news?pid=20602098&sid=azq9acRtfuzA&refer=world_currencies
Feb. 27 (Bloomberg) — Jefferson County, Alabama, had the credit rating on $3.2 billion of sewer debt slashed three levels to the lowest investment grade by Moody’s Investors Service, which said officials may run out of money to pay rising interest costs, much of it involving auction-rate debt.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aEuywsvQiYMI&refer=home
Monoline Deathwatch as municipalities fail to make timely payments.
hows that “borrow short, bleed the lend long strategy workin?”
The Short View: Dollar sell-off
By John Authers, Investment Editor
Published: February 27 2008 19:14 | Last updated: February 27 2008 19:14
If the dollar is going to make a great comeback, it will have to wait a little longer. It is again victim to savage selling.
Having broken through $1.50 against the euro for the first time, it sank to $1.51. It is also at a new low against a trade-weighted basket of currencies.
…
The forex market, incredibly, may now be more worried about US inflation than the Fed is.
Meanwhile, how to reconcile the collapse of confidence in the US economy in currency markets with the positive performance of US stocks in recent days? Maybe it is down to money illusion. The S&P is up 1.5 per cent in dollars over the past two weeks: it is down 2.25 per cent in euros.
http://www.ft.com/cms/s/0/ab0b6dea-e564-11dc-9334-0000779fd2ac.html
Housing Woes Put Bush, Hill At Odds
White House Opposes Use of Tax Dollars
By David Cho and Lyndsey Layton
Washington Post Staff Writers
Wednesday, February 27, 2008; Page A01
Congressional leaders yesterday gathered support for aggressive changes to bankruptcy laws that would help troubled homeowners, even as the Bush administration threatened to veto the plan and emphasized its opposition to any program that would risk tax dollars.
http://www.washingtonpost.com/wp-dyn/content/article/2008/02/26/AR2008022603645.html?hpid=topnews
There is that mysterious $3 bn loss figure back in the news once again.
KAI RYSSDAL: Real estate came up quite a bit today in the back and forth that members of Congress like to have with the Fed Chairman. Mr. Bernanke said his best guess is that home prices will continue to fall until some time next year. Federal housing regulators really don’t want that to happen, so today they announced they’re lifting the caps on the mortgages Fannie Mae and Freddie Mac can buy. Which would be great — if the two mortgage giants had any money.
From Washington, Marketplace’s Nancy Marshall Genzer reports.
——————————————————————————–
NANCY MARSHALL GENZER: Fannie and Freddie buy loans from banks and guarantee them. That puts more money back into the banking system for new loans, but after a series of multi-billion dollar accounting scandals, the federal government decided to limit how much money Fannie Mae and Freddie Mac could invest in loans they would buy and hold. Now regulators say Fannie and Freddie are cleaning up their books, so, as of this Saturday, there are no limits on their mortgage investment portfolios, but today Fannie announced it lost more than $3 billion in the fourth quarter of last year. Oops.
http://marketplace.publicradio.org/display/web/2008/02/27/freddie_fannie/
Turns out handwringers provide a valuable, if underrated, economic service.
Wednesday, February 27, 2008
Proceed with caution in this economy
Some economists and pundits have said we should spend our way out of the current economic slowdown. But commentator and economist Susan Lee says it was that same worry-free attitude about buying that got us into the housing crisis in the first place.
—————————————————————————–
“Well, in retrospect, it looks like a little anxiety would have been a good thing, and now there’s plenty to worry about. Here’s the short list. Home prices continue to slide. The deficit is ballooning. The dollar is weak. Oil is expensive and the credit crunch is spreading, and don’t forget about retiring boomers who’ll begin to slurp down Social Security and Medicare funds before we know it.
Worse, all this is happening when Americans don’t have much of a cushion. The savings rate has been under 1 percent for the past three years. That’s way below the average savings rate of 8 percent between 1980 and 1994. We’ve had our decade of an Alfred E. Neuman economy and the results aren’t pretty, so I’m not going to blame people if they start thinking like Ben Franklin.”
KAI RYSSDAL: Economist Susan Lee lives in New York City.
http://marketplace.publicradio.org/display/web/2008/02/27/what_me_worry/
Why can’t Congress do something socially useful, like passing a law which makes it illegal for a lender to foreclose on a rental home until the end of the lease term? This would help prevent local housing markets from infestation with wannabe landlords over the balance of the next century.
Wednesday, February 27, 2008
Foreclosures hit home for renters too
Homeowners are not the only victims of the subprime mortgage crisis. Many renters are being evicted from homes and apartments going through foreclosure. Monica Brady-Myerov reports.
http://marketplace.publicradio.org/display/web/2008/02/27/foreclosure_evictions/
IPOs worth $21bn pulled from market
By Joanna Chung in London
Published: February 27 2008 22:01 | Last updated: February 27 2008 22:01
Planned initial public offerings worth more than $21bn have been pulled from the global market in the first two months of the year, a figure almost double the amount raised through successful flotations, new data will show on Thursday.
The value of cancelled or postponed deals, the highest on record for the first two months of any year according to data tracked by Thomson Financial, underlines the degree to which the credit market turmoil is hurting investor appetite in the once-buoyant equity capital markets.
Such a poor start to the year marks a sharp contrast to previous years, including 2007 when global IPO issuance reached an all-time high. Indeed, this month is set to become the first February since 1992 in which new issues were less than those of traditionally slow January.
“When there is a lot of risk aversion and volatility in markets, demand for IPOs dries up,” said John Crompton, head of equity capital markets for Europe, Middle East and Africa at Merrill Lynch. “Investors are not keen to buy into companies selling shares for the first time or will only do so at significantly lower prices.”
http://www.ft.com/cms/s/0/ff108a82-e560-11dc-9334-0000779fd2ac.html
Whatever else history has to say about the Bush administration, nobody can argue that HP is caving at this point when so many pols are succumbing to special interest pressure for special bailouts. He may emerge from this ordeal as the Paul Volcker of his day, by which I mean a leader so strong that he was not swayed by political pressure or dire circumstances to abandon his principles.
Paulson Dismisses Mortgage Rescue Plans
By Michael M. Phillips and Greg Ip
Word Count: 1,466 | Companies Featured in This Article: Credit Suisse Group, Fannie Mae, Freddie Mac
WASHINGTON — The Bush administration is hardening its opposition to the chorus of Democrats, bankers, economists and consumer advocates calling for a big-money government rescue program for struggling homeowners.
In an interview yesterday, Treasury Secretary Henry Paulson branded many of the aid proposals circulating in Washington as “bailouts” for reckless lenders, investors and speculators, rather than measures that would provide meaningful relief to deserving, but cash-strapped, mortgage borrowers.
Mr. Paulson’s comments came amid signs that the nation’s housing market is getting worse, not better.
http://online.wsj.com/article/SB120416823532298975.html?mod=hpp_us_whats_news
Who should take the lead in resolving problems of consumers struggling with mortgage debt?
Government
6 votes
(7%)
Industry
31 votes
(36%)
Neither
49 votes
(57%)
Florida Bust Spawns Vulture Culture
By JEFF D. OPDYKE
February 28, 2008; Page D1
Miami has a new vice: bottom-fishing for condo bargains.
Home buyers from around the U.S. and abroad are descending on Florida to buy condominiums that have suffered sharp price drops amid the housing glut, subprime-mortgage crisis and credit crunch. Some are searching for investment properties, confident home prices will eventually rebound. Others are hunting for vacation or retirement homes. Yet pitfalls abound, and experts warn that prices could dip even further.
http://online.wsj.com/article/SB120404642492394071.html?mod=hpp_us_inside_today
Foundations Weigh How to Allay Foreclosures
By Ruth Simon
Word Count: 1,247 | Companies Featured in This Article: Bank of America, J.P. Morgan Chase, Deutsche Bank
Some of the nation’s wealthiest philanthropies are turning their attention to the growing foreclosure crisis, which some fear could usher in the type of urban blight that devastated pockets of American cities in the 1970s and 1980s.
How to tackle it isn’t clear. “Every big funder is out there trying to figure out how to participate in systemic responses,” says George McCarthy, a senior program officer with the Ford Foundation. The problem, he says, is that “no one can figure out where the opportunity lies” and how philanthropic dollars can be spent most effectively.
http://online.wsj.com/article/SB120417041800299099.html?mod=todays_us_nonsub_marketplace
While Congress is busying itself with the question of what is the best way to pour more monies down the mortgage lending rat hole, available funds for other valuable projects are drying up. WAKE UP, CONGRESS!
New Monkey, Same Backs
By Liz Rappaport
Word Count: 809 | Companies Featured in This Article: Bear Stearns, Lehman Brothers Holdings, Morgan Stanley, Bank of America, J.P. Morgan Chase, Citigroup, State Street, Depfa Bank, Financial Guaranty Insurance
Banks and municipalities can’t catch a break these days.
A new round of higher debt costs confronts some states and cities as another usually humdrum part of the credit markets runs into trouble. This time, the culprits are variable-rate demand notes. And banks that guarantee they will act as buyers of last resort face something they never expected — having to purchase many of them at once.
Variable-rate demand notes let issuers borrow for long periods — but at short-term interest rates. Like auction-rate securities, interest payments adjust on a weekly or even daily basis.
http://online.wsj.com/article/SB120415907849298203.html?mod=todays_us_nonsub_money_and_investing
CRUNCH!!!
‘The problem: Just like many issuers of auction-rate securities whose interest costs soared after auctions for some of their debt failed, an increasing number of municipalities are being hit with sharply higher interest on their variable-rate demand notes because dealers of the debt are having trouble selling it.
Last week, rates on $300 million of California’s variable-rate demand notes rose to 8.25% from 2% the previous week. “This is an amazing confluence of problems that no one expected to happen,” California Deputy Treasurer Paul Rosenstiel said.’
“Credit crunch” has never really been adequate to capture the nature of the unfolding situation in the debt markets since last August. I suggest a new moniker: Liquidity freeze.
Variable-Rate Note Market Now Freezing-Sources
Tue Feb 26, 2008 8:02am EST
NEW YORK (Reuters) - Major banks, including UBS AG and Citigroup, are making it harder for clients to sell what was considered one of the safest alternatives to cash — so-called variable-rate demand notes — sources familiar with industry practices say.
“I heard everybody’s doing it,” one of the sources said on Monday.
http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSN2527372820080226
A one month drop of 2% in industrial output occurs at an annualized rate of ((1-2/100)^12-1)*100 = -21.5 pct. Uh oh…
Japan’s January industrial output drops 2% on month
By V. Phani Kumar
Last update: 8:01 p.m. EST Feb. 27, 2008
HONG KONG (MarketWatch) — Japan’s industrial output fell 2% in January from the previous month, led by a decline in the production of large passenger cars, memory chips and digital cameras, according to official data released Thursday. The drop was steeper than expected.
http://www.marketwatch.com/news/story/japans-january-industrial-output-drops/story.aspx?guid=%7BFD3C0F5B%2DE82A%2D4CD1%2D89B3%2D4838912D6A99%7D
Decoupling, schmoupling…
Asian stocks fall as weak Japanese data bolster fears of global slump UPDATE
February 28, 2008: 12:52 AM EST
SINGAPORE, Feb. 28, 2008 (Thomson Financial delivered by Newstex) — Asian shares were mixed in late trade Thursday with Japan slumping after weaker-than-expected industrial production data reinforced concerns about a global economic slowdown, while a stronger yen pressured big exporters.
The Hang Seng managed gains on expectations that US rate cuts will be followed by Hong Kong cuts — the Hong Kong dollar is pegged to the US dollar.
http://money.cnn.com/news/newsfeeds/articles/newstex/AFX-0013-23347363.htm
Stopped-clock bottom callers are coming out of the woodwork these days…
DAVID CALLAWAY
Time to draw a line under the financials
Commentary: Despite more writedowns, the bottom is near for shares
By David Callaway, MarketWatch
Last update: 12:01 a.m. EST Feb. 28, 2008
SAN FRANCISCO (MarketWatch) — Financial stocks, the scourge of Wall Street over the past seven months, may finally be bottoming out.
http://www.marketwatch.com/news/story/time-draw-line-under-financial/story.aspx?guid=%7BCEC27733%2DF612%2D48AF%2DB229%2DE4BE5953A941%7D
What is it about “liquidity freeze” that stopped-clock WS bulls cannot grasp?