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Good morning everyone,
I’d like to continue a discussion from a late-day thread from a week ago. A few of us were discussing opportunity costs related to various expenses. I’ll get it started:
My family has a $10k auto loan at 5.75% and $15k student loan at 2.9%. When VMMXX was around 6% it was a no-brainer, stay liquid and be ready to strike at the bottom.
Coincidentally my house fund is currently about $25k. So with 2 checks I could be out of debt FOR GOOD. It’s very tempting because I really don’t mind renting in my current situation. I also figure if I’m among the few buyers out there, and I choose to pay down debt, I can only force the market lower.
When I got my car a few months ago, Cap 1’s rate was 5.99% and I got 5.75%. They’re currently advertising 5.74%… I was thinking about calling them up and asking to re-work it for 5.25% or threaten to just pay it off. Has anyhone tried this?
Anywho, much to think about… I’d like to hear your thoughts (of course, *not investment advice*)
Reacting as a lender, my guess is Cap 1 will tell you just pay it off.
… which is a good thing to do! It is an effective return of 5.75 (or 5.25 if they say yes.) Risk free.
fwiw, I think az_lender is right. I doubt they even have a mechanism to lower the rate, they may not even own the loan anymore. So you should call them up and try just for the helluva it (who knows?) and let us know how it turns out!
a tax free return, which depending on the alternative investment you chose could be anywhere from 15% on up to your income tax rate.
LOL..That’s an awesome blogger name!
I’d say pay off the auto loan, and continue to make payments on the student loan at 2.9.
With the coming “new standards” your remaining $15k will get you into a $75,000 property at best, so continue to save what you can.
“I’d say pay off the auto loan, and continue to make payments on the student loan at 2.9.”
if there is any possibility of bankrupty in the future; pay off the student loan not the car loan. student loans are not dischargeable in bankruptcy.
Muggy, 2.9% student loan? I’m paying 6.5%. Would you please advise?
It’s actually my wife’s student loan. She consolidated in 2003 I think. It’s a direct loan from the Gubmint (Dept. of Ed). Call them and see what they can do.
http://loanconsolidation.ed.gov/borrower/bconsol.shtml
You also get a 0.25 percent discount for automatic debit from your checking.
I just checked the site and the going rate is around 8%. I guess we got lucky. I also checked her paperwork and she consolidated in December of 2003.
Thanks for the reply. Now I just gotta hope that credit is even available what with several states already stopping or curtailing student loan programs.
My wife consolidated a year or two ago (before we got married), and I believe her rate is around 2%. Soon after, congress changed something, and the loan rates shot up.
My wife and I consolidated at the right time, just before student loan rates started to march upward. We consolidated at 2.625% and this year we will have three years of on-time payments for which SLM gives a bonus… our rates will be at 1.625% unbelieveable…
I did negotiate a lower interest rate at the time of purchase. My bank advertised and posted an interest rate that was about .5 above an unadvertised competitor/credit union and I asked them if they could meet/beat it. Initially, the agents told me they could not and that their current rates were not negotiable. I requested to speak to her supervisor and eventually I reached the person who had the authority to make the change. It just goes to show you they can if they want to but they will be resistant since they would be taking money out of their own pockets. With persistence and a promise to continue business and refer I believe you can negotiate the lower rate.
My outlook would be different than most others here.
Your current loan rates are either about the same or less than current mortgage rates. I think it’s a wash.
I would keep the cash, as you have more flexibility. It also gives you more leverage if you find something you are interested in and you need to come up with cash fast.
Conversely, mortgage interest is tax deductable. So the higher amount borrowed, the greater your deduction, at least as currently structured.
I would save the money, buy the house and take out a HELOC to pay off the car loan, as part of the purchase agreement with the bank or lender.
Why do you think so many people are driving ridiculously expensive, over-sized and fuel guzzling cars?……………….it’s tax-deductable.
“I would save the money, buy the house and take out a HELOC to pay off the car loan, as part of the purchase agreement with the bank or lender.”
Wow, this is the type of crazy thinking I was hoping to get. Interesting…
If I recall correctly mortgages are tax deductible but HELOCs aren’t
Second mortgage?
Purchase money mortgage?
A cost of doing business in the transaction for the new house?
Some kind of expense added into the mortgage?
How stable is your income? do you have an emergency fund to cover all expenses for 3 to 6 months?
If your income seems secure and you have other reserves i would pay off the car loan. the 2.9% student loan is cheap money. It may be tax deductible too making it real cheap money.
Depending on the job, 3-6 months in the emergency fund isn’t enough. For people who have a job that is at risk, try for 6-12 months, closer to 12.
Both of those notes are well below the current real rate of inflation so the more important question is, where is your cash at?
CD, savings account, mutual fund, t-bills?
Gold, Silver?
Muggy - I’ll let you in on a secret. I know someone who works in a big undiscovered fund company in Nigeria. He is sitting on an amout of investment money too big to count and is looking for a big
sucker, I mean savvy investor to send money to invest for us in exchange for a 15% commission.Simply send me your bank # and ss in emails and we can set up a test wire fund of say, $25k. We will send a Brazillion dollars in return.
This can’t go wrong:-
1)They are not making any more Nigerias.
2) Nigerian email Investments can only go up.
3) Hurry up and don’t miss the boat.
4) Suzanne Mugbrnevryday researched this.
5) You can always refinance.
My family has a $10k auto loan at 5.75% and $15k student loan at 2.9%. When VMMXX was around 6% it was a no-brainer, stay liquid and be ready to strike at the bottom.
Why a no-brainer? You have to pay income tax on that 6%, so even at those rates, the debt is costing you more than you are earning.
“Why a no-brainer?”
Liquidity, flexibility, opportunity… this is the heart of this discussion. I can make my debt disappear, but then have no down payment.
First off, you aren’t really saving that much. You need to focus on increasing your income (without increasing expenses) or increasing your savings (cut back spending). Might be best for you to disclose some percentage rates. People here can give some great tips on how to save better. Maiximizing your savings is the REAL KEY. You are too debt focused… 1) you haven’t paid off your existing debt. 2) You want a down payment so you can TAKE ON MORE DEBT?!
You need to break away from debt-thinking.
An extra part time job could destroy such small debts pretty easily. Then you can have REAL POSITIVE savings.
Read this blog, a lot of people have made the case that housing prices will go down for the next 2 years (at least). So plenty of time to get debt AND save another $40K. Then only buy a $100K house and put only $20K down - and keep the other $20K for emergency (ONLY).
Second, just to comment on your direct question - If you believe there will be inflation - keep the loans. As your income/savings will grow at a faster rate than your old debt locked in at a time of lower inflation. If you think there will be DEFLATION - then not sure. I’m still learning the realities of deflation
Uh, what? I’m too debt focused but I should keep my loans?
You have some presumptions that are incorrect. I’m already lean and mean on expenses, I don’t really have a lot of debt, and I am happy with the amount I work/save.
I appreciate your response, but I’m not sure what you’re saying…
$25K in debt and $25K saved = $0. You aren’t prepared for anything serious. Available credit card limits is not savings. You at least have a large retirement fund or something?
Hi Muggy,
I called Chase and threatened to pay off my wife’s ($36k, oof) auto loan unless they refinanced her 7.5% rate (we got it at the dealer just to hurry). They said they wouldn’t or couldn’t do it, and so I just refinanced with our local credit union at 6%. A few weeks after it was paid off Chase sent me literature asking me to return with a lower interest rate. Ridiculous. My advice, pay it off and refinance it with the Bank of Muggy. Pay your normal payment to yourself above and beyond any normal savings and you just earned a return of 5.75%.
You already know my wife and I have $100k in student loans at around 2.3% combined and we are choosing to pay as slowly as possible. We are even choosing to pay the auto loan as slowly as possible. Our primary goal is to maximize the total cash on hand so we are ready to buy.
We pay about $4000 a year in interest, but we make about $3600 in interest from the cash. Because it’s a wash, we don’t feel too bad about it.
Your student loan rate is just fine. I would keep that loan as long as possible.
CCC
If you and the wife earn less than $140K you should check out the student loan interest deduction. ($2500 for under $110, phases out at $140K). But you probably already know that.
I’ve been annoyed this morning, reading part of the opinion in Home Building Assn v Blaisdell (1934), in which the Supremes held that the economic emergency of the times justified the state of Minnesota using its power to postpone foreclosures, and otherwise reshape the remedies available to stiffed creditors. I guess Hillary is taking a page from that book.
Less surprising is Norman v B&O Railroad (1935), in which the court held that “gold” clauses in contracts really meant “money,” and that despite the 40% devaluation of the dollar in gold terms, creditors in “gold-clause” contracts could collect only the dollars equivalent to the old gold amount, even though the new gold amt would be less.
Both these decisions seem to reflect Roosevelt’s threat to pack the court.
We’re not exactly in 1934 type economic times (yet). I doubt there were any 26 year olds in those days owning six houses (figuratively).
My take is that economic growth as we know it is essentially over. Forever.
Economic growth = increased energy use
If things don’t seem as bad as the 1930s, give it a few years. Unemployment and economic activity were much worse in 1938 than in 1929 or 1930.
We are on a certain path to a liquid fuels crisis that will cause enormous economic disruption. That’s the conclusion of the Hirsch report, linked below in PDF format.
Hirsch Report on Peaking of World Oil Production; Impacts, Mitigation, and Risk Management
I was bored the other night and fired off a History Channel modern marvels regarding coal mining from the network file server. In the program it said that at current consumption levels there is 250+ years of coal left. It also said that a modern technology is to convert the coal to gas, which yields much cleaner burning. Battery technology has improved, Li-Ion while violent when damaged they can store a great amount of energy. Nuclear power is nice too. I think they should build new nuclear plants that also function as desalinasation plants as well. Put them not so far from the oceans and use them to generate power and provide drinking water. There are solutions. Remember cassette tapes? Look how quickly they faded once recordable CD technology became available. The same could happen to petrol powered autos.
BV,
Interesting, and I largely agree with you (given I’ve spent the last several years thinking about commodity prices in terms of energy inputs.)
You might also want to consider information inputs too, though (”content” is almost free to replicate, and becomes increasingly important to quality of life beyond the subsistence level.)
We’re not exactly in 1934 type economic times (yet). I doubt there were any 26 year olds in those days owning six houses (figuratively).
Yha, we aren’t in those times. Maybe we are in even WORST times. Back then people had major problems without the financial leverage to buy six homes at age 26. So that financial leverage could work in reverse - driving the economy down way faster and way deeper than in 1934.
Minnesotans are just so damn dumb.
“Minnesotans are just so damn dumb.”
Awwfer krazee, doancha know!
Damnit. I can’t type in my Minnesota accent.
The foreclosure on the block I grew up in just dropped $10,000 this week. Only $50,000 to go. The price is now $169,900. The assessed tax value is $214,000. Instant equity, don’t ya know? Yaa, you betcha. It don’t make no sense to me dat dis here ting is now $45,000 below dat dare tax value dat sumbitch put on da place.
I finally can understand what you write. Keep it up NYCB
FDR rigged the court big time
father of US socialism
now we call it compassionate stupidism
now thats bright to write off the entire New Deal with all its accomplishments into a one line quip! that power station that still powers your computer was probably built during the New Deal.
Not much built during the conservative years we’ve had to endure but Star Wars weaponry (that doesn’t work) at a cost of, well lets see…The ENTIRE New Deal….and biological weapons of mass destruction.
“Not much built during the conservative years we’ve had to endure but Star Wars weaponry (that doesn’t work)…”
I guess you missed that shoot-down last month. But what the heck, you probably wouldn’t believe it happened anyway.
The satellite shoot down last month was done with conventional rocket, no? I don’t think satellites in outer space fired lasers that blew up the rocket. That was one of the big premises of Star Wars weaponry.
“I guess you missed that shoot-down last month. But what the heck, you probably wouldn’t believe it happened anyway.”
oh no i believe it and i read about it.
with 40 percent of OUR children living in poverty in America and 1 out of 100 of OUR American citizens incarcerated in the prison complex (did you read that and do you care?),i’d say shooting hardware out of the sky is like the effect of a fireworks display on July 4th. bang and its done. we’ve got more important accomplishments to achieve right here on planet earth in the good ol usa. like bringing manufacturing bak, fixing our dilapidated infrastructure and creating an economy that makes things again. whether its government sponsored or corporate partnership i don’t really care. the weaponry thing however frankly chills me to the core. its like a product with only one aim-to destroy..
Now hold on a second there, Melvin….Are the Republicans responsible for buidling that fancy $1 Billion Embassy in the Baghdad Green zone?
“The satellite shoot down last month was done with conventional rocket, no?”
Rocket convention, guidance and tracking system, STAR WARS technology. Sorry, it worked.
Obviously non of that matters if you’re on the receiving end of a hostile missile, but that can never happen if we wish it not to happen.
…it’s better to have adults running the country.
“with 40 percent of OUR children living in poverty in America and 1 out of 100 of OUR American citizens incarcerated in the prison complex (did you read that and do you care?),”
Most of those people in jail terrorize minority areas, so I guess you have no problem springing them loose…as long as its not your daughter.
Or let me put it another way…we tried your solution…make excuses and empty the jails. That was called the 1970s, and crime went through the roof. But who care about history…
“I don’t think satellites in outer space fired lasers that blew up the rocket. That was one of the big premises of Star Wars weaponry.”
I’ll admit that we didn’t build everything that Reagan wanted, but it’s difficult when you have a political party running Congress that parrots the Soviets. So, seriously, what aspects of Star Wars were built and did NOT actually work (rather than miss sometimes during testing).
The Soviets sure seemed convinced that it would work.
(don’t bother commenting Melvin, this involves national security, it’s way over your head)
“now hold on a second there,Melvin.. are the republicans responsible?”
hehehe thats pretty funny. ok i’ll hold my horses. why would I want to blame a Republican when I can also blame the Democrats and the couch potato (e)(quayle) American public.
“Rocket convention, guidance and tracking system, STAR WARS technology. Sorry, it worked.”
Don’t be sorry, a trillion dollar missile defense shooting a satellite out of the heavens, it better work! whether it can shoot down an incoming missile from the Soviet Union or a suitcase bomb is another matter(heaven help us that this should never come down).
“Most of those people in jail terrorize minority areas, so I guess you have no problem springing them loose”
who said word one about springing anyone loose?? all i said is we’ve got work to do here healing this country, with jobs and manufacturing.
I’m not too hot on having a suitcase bomb go off, but I really fear (and still fear) the 50 to 100 megaton city-busters that the Soviets/Russians have. These wipe out everything in a 25 mile radius, instantly…and pretty much give a death sentence to people out another 50 miles. That what concerned Reagan. It would sure be nice to take out a rouge missile with that warhead, should it be heading towards us at Mach 16.
If lack of jobs was the problem, we should have had anarchy during the Depression…the crime problem simply occurs when moral-less people think that they can get away with something.
take a look at this and look under utilities, or public buildings, or conservation for pictures of the New deal. putting our wealth together for the common good- benefits for generations. socialism indeed- its called cooperation and building for the future!
http://newdeal.feri.org/library/
One word Melvin: wow! For all the updates & changes FDR brought. What we all take for granted now, like electricity was unavailable in most of the rural America for example… My parents went through the depression, Mom clearly recalled the day, Dad lost his job, 70 years later, and the descriptions of being on relief, her Father sweeping the streets… Not pretty times.
I believe that FDR’s administration in the TVA electrification of the South. If it hadn’t been done, the south would still be lighting up there part of the country with oil lamps!
Another one, Ben.
Yeah, that’s right, if it wasn’t for big government showing us Southern hicks the way, why we’d have plum gone 70 more years without bothering to even figure out that you could convert power into electricity and then send it through wires and right into people’s homes! And if somebody out in the country found out about electricity and said, hey, Mr. Electric Company man, can you send me in a line and sell me some of that stuff so I can light a bulb and use a toaster, he’d surely’a said, No, sirree, you gawn haft’wait on the gubmint to take care that - this here’s the South!
Yea, thank god for the sophisticated New Yorkers, who managed to rate MBS’s as AAA and ENABLE this bubble.
They are a WONDERFUL gift to this country…THANKS.
got rocks-another one? another what? another citizen? speak up for yourself boy, you don’t need Ben to protect you.
Comment by GotRocks
2008-03-01 14:27:31
Yea, thank god for the sophisticated New Yorkers, who managed to rate MBS’s as AAA and ENABLE this bubble.
They are a WONDERFUL gift to this country…THANKS.
Say GOTROCKS,
i apoligize if I misstated my comment. In the depression era, the South was a dirt poor agr. area. The US, under FDR was attempting to pull the US out of the Depression.
All I am saying is, that our current lifestyle came into existence based on the decisions and sacrifices of the earlier generations.
Today is a different world. Most people today do not know how to cook other than place it in a microwave. This is not the South’s problem but the entire generations starting with the baby boomers.
Just my observation.
Again, I apologize, if I upset I upset individuals from the South. It wasn’t just the south, everyone outside of the big cities were land rich and cash poor. My Mother, who was born in Iowa and lived through the 30’s had an outhouse for a bathroom. They used a Sears Catalogue for TP. The only way they survived was through barter and growing their own, and she was a younger child out of 10 children.
It wasn’t just the South that was backward compared to the cities!
Don’t sweat it, you’re forgiven. We are a bit defensive when we perceive that the South is being slandered…for example, I’d take living in Huntsville, AL, over any older Northern city of its size…it’s not even close regarding which city is more modern and better to live in.
Thanks, for your acceptance of another person’s opinion. Things have changed so much since the Great Depression, I do not thing anyone as any idea how the current financial crisis will eventually play out.
I suspect that we are in unchartered waters and the past history can not provide us with a guide. It will have a material impact on the living, however we do not know the extent or the damage or in what form it will take. It will not what our parents or grandparents went through, because our lives are built upon their efforts/sacrifices. In whatever form our suffering will be, It will be different, but could be just as devastating.
Yes we do living in interesting times. Well, it will not be boring.
Just my observations.
Here’s a laugh: FDIC brings back 25 folks from retirement because they had insolvency experience from the 90s bank meltdowns. They then issue a statement to cause the following article:
FDIC doesn’t see bank failures surging
http://tinyurl.com/2kyok4
bernake sucks
i just checked my interest paymnet for my mm acct this month
$50 less this month then last month and i added a few grand to it
i was getting enough over the course of a year to pay at least 1 if not 1 and a half months rent
the more i save the less i get in interest, very nice system
You’re still paying for your own drinks.
It isn’t Bernanke’s fault that your interest rates are so low, it’s the President’s fault.
…………professor, your comments are contradictory.
If REAL interest rates are edging UP because the financial world has finally come to realize that all that financial hocus-pocus of derivitives, Asset-back paper, Swaps and Swindles (cubed) is all leading to horrendous losses, and consequently there is RISK in most of these hidden schemes, in addition to the introduction or rampant inflation, then FED RATES should be rising, not falling.
Bernanke and his boyz are setting the rates. If you are saying he is not independent as is supposed and that the Prez is pushing him to give business more free money until the election is over, maybe there is some truth in that, but Bush isn’t running.
Why would he push for lower rates?
Bernanke is an intellectual idiot, almost as bad as the idiot who last sat in his chair.
What did is comrades at Time Magazine call him…..Maestro??
Sorry — the sarcasm tags on that post did not show up…
Maybe you should purchase muni bonds? They are on special at the moment…
Hedge Funds’ Fire Sales Send Muni-Bond Yields To Historic High Levels
By Michael Aneiro, Tom Lauricella and Liz Rappaport
Word Count: 837 | Companies Featured in This Article: Allianz SE, Ambac Financial Group, MBIA
http://online.wsj.com/article/SB120429486695502997.html?mod=hpp_us_whats_news
Not to worry! It’s all contained, Muni’s are riskier today than yesterday that is why they lost 100bps.
Just a random thought: some goofball communities have posited buying up the houses in foreclosure to maintain property value using muni bonds as the funding. I wonder what those bonds would be worth.
The highest yielding Muni I was offered yesterday had a yield of 9%+ (AAA). One thing I have never bought a municipal bond in my life. It is not that Muni’s are bad, they just have never fit my investment strategy.
Everything is a good investment at the right price, and a bad one at a wrong price.
I have nothing against munis. Have owned in the past, and may do so again in the future.
Not now though. Not until the bodies are uncovered, the states’ financial situation is substantially more clear, and most importantly, definitely not until Kentucky v. Davis is resolved one way or the other.
Faster Pussycat - I’m not so sure all thing are a good investment at the right price. some things carry a liability to go along with them.
I have some gold to sell you:
http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=1451360
I never said prices couldn’t be negative.
People assume liability for cash flow all the time. It’s called insurance.
Nice catch on the gold. Gotta save that one.
West coaster here.
I was thinking about taking all my money out of 90 day US treasuries and buying all Aus treasuries.
I am no math wiz so I use a broker. Is there a danger and a lag?
This is scary.
Two things to say:
1. You are selling low (USD) and buying high (AUD is at all time high).
2. How much are middleman charging you to do such a transaction. I find it is expensive. I suggest you get a retail Forex broker like Oanda (I use for 4 years) that lets you trade as little as $1 at a time. The interest won’t be as high but the fees are way lower - and you can trade ANY TIME and take advantage of dips/ups and precise times. Be a “month trader” not a “daytrader”. Trading at the right times every month would do better than locking in for 3 months.
3. you are betting in a strong China the rest of this year. As they seem to be driving AUD. Australia isn’t a oil producer
Round Sparrow. Ty. I just heard the part about aus at all time high. damn. I also heard I could lose if dollar goes up.
What is a round sparrow?
Recent high, yes.
All time high, not even close.
The Oz dollar was over $1:40 US at one point during the 1970’s.
Ouro, I have a lot of Australian treasuries. The yield is somewhat higher than on US treas of like maturities. I have come to believe that AUD is basically a gold play. Yes, it may depend on Chinese growth, but Australia does have BHP, one of the world’s biggest gold mining outfits. If you look at the price of gold in AUD, it hardly changes. I am not selling any Aussie treasury bonds right now (but I can’t swear I’m “right”).
How are you spending your rebate?
My wife and I will be saving half and using the other half to attend 2 weddings we originally were on the fence about.
Hostess Twinkies.
Hundreds and hundreds of Twinkies…
That should provide adequate sustenance for the Dr. Who marathon.
Should we be avoiding any City Halls after you eat those Twinkies?
yes good idea - i have 3 weddings this year to attend
and i have to go to all 3
MRE’s & ammo.
shotgun and ammo
We’ll use it to pay our taxes.
They have a special down at the Taco-Mart. 100 tacos for 100 dollars.
I love it when people catch The Simpsons references.
Avoid donating it to PBS.
PBS is like an dodderin’ droolin’ old aunt in tatty moldy clothes with a faint whiff of alcohol about her. Lord knows she’s an embarassment but you can’t just have her put down like you know you want to.
I’m not not licking frogs.
Toads., not frogs. LOL
Particularly species of Genus Bufo
Our local PBS station now runs ads encouraging old people to put them in their will.
The NewsHour with Jim Lehrer still practices actual journalism. Watching Gwen Ifil conduct an interview is an exercise is the sublime. For that reason alone I send them a $ignificant annual contribution.
Some of us still enjoy a bit of having a bit of dignity and integrity in our evening news. So while we might have the faint odor of Madera about us, some “doddering old aunts,” still cut their own firewood and butcher their own meats, so you might want to think twice before attempting to “put us down…?”
(cackles)
did you say, “doddering.”
I edited this, really I did….
But this other MG work is so much more appropriate:
http://en.wikipedia.org/wiki/Three_Hundred_Big_Boys
Haroooo!!!! Tricky Dick Fun Bucks!!
NOW is the best show on television and I’ll take the history programs over anything on nbc,cbs, abc.
I remember a story about Jane Fonda. I believe in the 1970s she gave money to a veterans organization. They used the money to have a bunch of “We hate Jane!” bumper stickers printed up. That is perfect. I think I will have a bunch of t-shirts printed up that read, “You’re in debt and you’re f–ked!”.
It seems that this taxpayer does not qualify for a tax rebate, but It would’ve been a sure thing if I didn’t pay any at all.
Life’s little ironies…………….
I’m not getting much, I’m in the reduced section, so at least I get something back.
Can’t decide between a Ben Bernanke or Hank Paulson Voodoo doll.
Strip club…
Tell them you want the “stimulus package”.
The one Congress recommends.
Straight into the money market account.
Saving up for a downpayment on a home…
Two week “Green Car” Japan Rail pass. So long as 1 USD > 100 JPY at least.
50% Vacation in San Diego
20% Emergency Fund
30% Honda Pilot Savings Fund (for the fetching Mrs Lip)
Since I won’t be getting a rebate, I guess mine will be used by some FB to stimulate a blip in WalMart’s revenues.
Ours should cover the 60K maintenance on the ‘96 sedan and the 30K service on the ‘94 convertible that are about due. Cue the smiling independent mechanics we use
I’m going to buy more books, because if there is one thing I need, it’s a couple more books. I can see a bookless white space on one wall and it’s making me crazy. Or, and this could be a better idea, I’ll just buy a bunch of chocolate bars and more bullets and fill that alarming blankness that way. Chocolate, bullets, beer and books–I am set for anything.
Sounds good to me. It’s better than having ungainly piles of books on every horizontal surface.
I recently had a friend drive me to IKEA (in their truck) where I bought seven more bookcases.
They looked at me funny at the checkout counter, and I was like, “Whatchoo looking at, punk?”
4 day weekend road trip to Tennessee with my daughter.
Incandescent light bulbs. Lifetime supply while the government still permits me to buy them.
There will always be a black market.
However, I do agree with you. The crappier new ones just don’t give off that soft light that is so pleasant to read by. Mine got dumped after about a week.
And I’m the enviro-freak type!
Like low-flow (have to flush 3 times) toilets - might be a market for those in the future
Ours is going into DD’s college fund.
No rebate for us. I’ll pay extra this year, too (damn the AMT!) I suggest that everyone have a few drinks and save the rest.
Buying silver and euros.
In The UK
Property prices fall in February
House prices fell in February by 0.5%, says the latest survey from Nationwide.
The fourth consecutive monthly fall in property prices pushed the cost of the average UK home down to £179,358.
The annual rate of house price inflation fell from 4.2% in January to 2.7% in February, the lowest since November 2005.
http://news.bbc.co.uk/1/hi/business/7269894.stm
but there up
Average asking prices jump by 3.2% (£7,428)
http://www.rightmove.co.uk/pdf/p/hpi/HousePriceIndex18thFebruary2008.pdf
Thats alright then don’t look at the price you sell something for just the price your asking. I’m going to put my house up for sale for 10 Billion that should help the stats.
Buy to let is thriving
The buy-to-let property market is still thriving, according to the Council of Mortgage Lenders (CML).
http://news.bbc.co.uk/1/hi/business/7264519.stm
Apart from the firms that have gone bust
One of the biggest buy-to-let investment companies in Wales has gone into administration.
Cardiff-based A & A Property had more than 250 houses and flats on its books in different areas throughout Wales.
http://news.bbc.co.uk/1/hi/wales/7267670.stm
I’d just like to thank Ben for his web site. Looking at the US from a UK prespective it’s as if you have access to events that will happen in the UK market six to twelve months in advance. Our shills (not a word used in the UK when talking to work mates I have to substitute lieing bastards) are trotting out the old favourites it’s diffrent here, buy now or be priced out forever etc etc. I’ve also found that even trotting out the view that housing will fall only leads to abuse such as misrable bastard, Lord Grimthorpe, the Prince of Doom, however one are two are starting to ask my opinion probably because I’ve gone very quite and they are starting to get worried.
are trotting out the old favourites it’s diffrent here, buy now or be priced out forever etc etc.
I’m disappointed that our UK brethren resort to tired Americanisms and haven’t invented more lyrical lies, as the English are often wont to do.
They have tried “We are not America” which is quite sad and “there is no recession in sight” probably because it’s creeping up behind them to bite them in the arse.
This is a bit more lyrical English verse.
Polonius to his son Hamlet:
Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine own self be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.
Great quote, but hard to imagine from the mouths of used-house salesmen.
[ FYI: Polonius was the father of Ophelia and Laertes. Hamlet's dad was doing the ghost routine, which got the gig going. ]
knew that………..should have read
Polonius to his son in Hamlet, but i miss-type often.
Aren’t most of those UK loans short term arms or even variable rates (can change month to month).
That’s what it was like when I lived in Australia. Buying a house on a variable rate? Sheer madness.
Most loans in developing countries are variable rates. They even adjust “instantaneously” (month to month.)
The first reported median sales price drops is where the ball really gets rolling. It will be interesting to see how many more banks the Brits will rescue, and what this will do for the pound.
I had to take a car service earlier this week to visit a customer. It was a very interesting ride for a lot of reasons. Not least of which was the discussion we had about the current state of business. The driver told me that things were really down. He said that in the last 2 months the activity by the hedge funds has dropped off a cliff. They are hurting big time. He said, “if I am hurting then every driver is hurting”. So, we are this early in the game and the drivers are taking it in the rear but we are not in a recession. It sounds like New York City drivers, and their hedge fund patrons, are already suffering. Oh, but don’t worry, Manhattan real estate is bullet-proof. Bwahahaha. Good luck with the kevlar Manhattan.
perish the thought of a hedgie taking the subway after 9pm
oh the horror
“The driver told me that things were really down.”
Oh yeah, the never-mentioned medallion bubble…
I’ll go ahead and be the first to call Cabbie-Medallion-Defaults… I can already see NYPD prying those suckers off…
http://www.nyc.gov/html/tlc/medallion/html/auction/main.shtml
About 6 months ago a cabbie told us the medallions were going for north of $400,000.
They’re not making any more medallions.
I read “Medallion bubble” and ?
Medallion is up 36% per year for the last 19 yrs. So far this year they are up 12%. In fact, I emulate Medallion.
Yeah, they are hurting doubly. During the hedge fund boom, lots and lots of players entered that game of driving people around. Hell, you made serious dough ferrying drunken hedgies up and down I-95.
Now massive oversupply, falloff in demand.
What does that remind you of?
There’s going to be a lot of used Lincolns for sale.
If you look at towns like Stamford, CT, you quickly realize how completely dependent they were on the whole money flow from the Ibank/hedge fund bubble. Most of the consumer business models are hooked up to it — restaurants, bars, etc.
I foresee lean times ahead.
Like Hoz, Buffett made nice gains using the Brazilian real. His railroad investment is ahead. and the “insurance party”, his words, is over.
http://www.nytimes.com/2008/03/01/business/01berkshire.html?_r=1&oref=slogin
This is why i keep saying 20 year pensions are history and probably 25 years too, plus so many new employees DON’T SMOKE, which adds a lot of cost to pensions, because they live longer after retirement.
And the military will have to end the 20 year policy as well. Think of those consequences.
————————————
Promises involving very early retirement — sometimes to those in their low 40s — and generous cost-of-living adjustments are easy for these officials to make. In a world where people are living longer and inflation is certain, those promises will be anything but easy to keep.”
The promises will not be kept. Inflation will eliminate alot of the benefits, but ultimately, they will “adjust” the payout and benefits at retirement age.
If that can’t be done, then the account goes to the Pension Guarantee Retirement fund that will adjust it for them.
My relatives in Germany have already seen this. Starting to retire now, the benefits were “reduced”.
You can’t be a country receiving “refugees” from around the world as dependents and not have your standard of living decline.
America will be next with all the illegals getting free passes to tap our retirement accounts.
plus so many new employees DON’T SMOKE, which adds a lot of cost to pensions, because they live longer after retirement.
Prepare for the rise of risky-lifestyle pensions, available only to those who smoke, drink heavily, and have lots of unprotected sex.
Diabetes will be the new lung cancer. Kills you eventually, but only after draining huge med resources, unlike lung cancer, which you can treat cheaply with oxygen, morphine, and a priest.
Diabetes is seriously whacked out stuff. It pretty much f*cks up every single soft tissue organ in your body.
Speaking of the times, my wife had someone come into the bank yesterday asking if they could exchange their dollars for gold. They were tired of watching the stock market down and gold up. This person (who was in their 60’s) didn’t even realize that banks haven’t accepted dollars in return for gold in ages. Sounds like the beginning of a bubble?! When my barber mentions that she’s unloading her stocks to buy gold, I’m out.
In the 1970s I was working with an electric utility. When the rates skyrocketed because of the oil crisis, many people were having a lot of trouble paying their electric bills. One day I heard a bunch of commotion and went to see what was up. An old lady had paid her bill, something like $73, with old silver dollars. The woman behind her asked the not-very-bright cashier if she could buy the coins for paper money and the cashier gave them to her. Not much of a morality story for my kids. To this day, I feel bad for that old woman.
you assume that things always normalize to dollars. The truth is things always normalize to gold. The dollars can go to 0 for ever while gold won’t.
Hmmm… the sheeple are starting to figure it out, eh?
Where’s the DCA crowd? C’mon, c’mon, catch those knives.
Anthony,
95% of JP6 doesn’t know about gold yet. When I went to buy my gold coins last week, the dealer confirmed this.
IMO, the only way that gold can go down is if the US gets their financial house in order. If you’re selling, I’ll buy it.
Who is Frank CHODOROV…
http://www.lewrockwell.com/rothbard/rothbard172.html
Tired of watching your dollar’s value evaporate? Here’s an idea from the WSJ: Buy stock.
Big Firms Offer A Money Haven As Dollar Skids
http://online.wsj.com/article/SB120433365803004551.html
Be sure to start with a large fortune.
Buy foreign bond funds with your short term money, and dollar cost average like crazy into stocks. I hope the market stays down for a decade at least!
DCA into stocks?
BWAH-HAH-HAHAHHAHAHH!!!
oh, Muni funds are looking mighty tax free fine.
For people like me who got screwed out of a tax rebate.
Tax exempt 3+% return for short term money is fantastic.
Don’t forget to dollar cost average into your 401K every month, and put money into any tax advantage accounts like HSA accounts, and IRA, and 401K to the fullest allowed amount! Tax exempt, and untouchable by the courts. Brilliant!
Muni funds have already gotten taken out the back and shot.
The yield on the short-term has spiked almost 90 bps in less than three weeks. Where do you think that came from, precious?
Your precious fund took a hit. You are under the illusion that you didn’t lose any money because it maintains a price of $1. However, you lost money all the same (which you will see in the coupon whenever it gets paid.)
Long-term munis are one of the worst investment ideas that I can think of right now, not just because the states are facing insolvency, but there’s also Kentucky v. Davis hanging like a sword over their heads.
BiM and HFA — in case you are lurking, please feel free to jump in here and suggest that there has never been a better time to buy stocks!
They’re recommending GOOG as a safe haven?
BWAH-HAH-HAHAHHAHAHH!!!
Surely they meant GOOG put options?
With all the blowups in the markets recently, like the hedgies forced selling, AIG, freeze up of LBO’s, falling NYSE averages for 4 straight months, BB saying he wouldn’t be “surprised” by a “few” bank failures, … It’s a good time to jump back in?
These reasons make really good sense, as we will obviously remain in a rising earnings environment for the foreseeable future time horizon in the face of the mother of all liquidity freezes…
Reasons to like “large-cap growth stocks” in a weak-dollar world:
• They tend to have high and rising overseas earnings.
• Falling dollar makes those earnings more valuable.
• Falling dollar also makes shares more attractive to foreign investors.
So the argument is the world will just magically decouple from the US consumer ? Once I US consumer dies on the vine so will earnings overseas. Most of the world still relies on the US consumer to keep their $2/day jobs.
No kidding, if we’ve decoupled then why do the Asian markets plunge everytime ours do?
China can beat its chest over the Olympics all it wants, but if the poor schlubs in Peoria can’t keep shopping they’ll share the pain alright.
Testify, brothah john!
Not all Asian markets plunged.
The worst performing Asian Stock market is Japan. Japan is closely tied to the US not as much to Europe.
The others are up on average 20% in the last 52 weeks. This is not including the average currency appreciation of 9%.
I have no idea why some of the markets in Asia tank on bad news from the US and others soar. I suspect it is because of hedge funds using intermarket comp analysis. e.g. Buy Bank of America sell ICICI.
Considering the 100% appreciation in the Chinese market a 35% correction is not out of the question for a bull market. Or I would not fade Mr. Jim Rogers.
People need to stop chasing imaginary gains! Any loss in the dollar is going to devalue your companies bank account and increase their production expenses. Foreign currencies are all falling in real terms. There is NOTHING to gain by a falling dollar except larger numbers.
Lets assume inflation is ONLY 10%. This means you need to find a company/portfolio that will yield 10% annual growth AFTER TAXES just to BREAK EVEN. Your average joe following the advice of the media or trusting ANY fund manager will NEVER see those kind of returns with any kind of regularity.
Think about it this way. All most all currencies are inflating at greater than 5% and the US dollar fell by 8.5% against all of these other currencies!
Unless you take extreme risks in a very manipulated market you cannot win.
Falling dollar makes earnings worth more in nominal terms, but you will be taxed on the “non-profit” and end up with less in real terms.
How do Large Cap Growth Stock earnings do in a Recession ?
Not too good huh so why is the WSJ wanting me to buy? As a hedge against the falling dollar? Well they are better than bank stocks I guess.
Firstly, this naive adherence to the three-factor model is going to get your head handed to you.
I would leave these fairy tales to the sheeple, Univ. of Chicago economists, and the Vanguard-istas. Small value does well in recessions, etc.
In any case, this is not your average recession. And there are many things that you can’t put on the right hand side of a regression. That doesn’t mean you can just safely ignore them. You can only go from 18% rates to 1% rates once. This was the wind behind the sails. Now the wind has gone away.
I love how the pundits are quick to quote “A rising tide lifts all boats” but in a falling market they say how Large cap will do better. Better is still negaative. Look at GE. A great company IMHO. They are down 9 pts since last October (20+%). It does not matter that they are a great company cause “A lowering tide lowers all boats” I am glad I sold out at 40!! Remember this is a company that benefits from a falling dollar!! They will be a buy again in the next year IMHO
A truly disgusting article.
“We think of them as “American,” but of course the biggest and most dynamic U.S.-based companies are really international.”
I don’t think of any of these corporations as “American”. Corporations have no loyalties to anybody or anything, other than profit margins. They have become monsters that are above any sort of law. They can pretend that corporations are human but if they are really human then they are obviously the worst, most heinous sociopaths known to man. And they have taken over everything. Nice!
They have become monsters that are above any sort of law.
My experience with boards/officers is that they don’t think they are above the law. They seem to regard it as more of an inconvenience, as well as a mechanism to cause full-employment of the lawyer population.
They can pretend that corporations are human but if they are really human then they are obviously the worst, most heinous sociopaths known to man.
Hah.
The documentary “The Corporation” runs through the clinical symptoms of the psychopath and demonstrates that the typical corporation exhibits all of these behaviors. It’s actually just one small thread in a pretty compelling argument.
Corporations have loyalty to the board and top shareholders. Just not to the lower employees or small time investors.
Another in a steady stream of articles exhorting the masses not to withdraw any money from the boyz’ pot ‘o gold.
The only mystery is how many ways can they word this message and still garner readers’ interest and attention in the face of the obvious.
Why should anyone have to stay onboard for the ride down? What does that accomplish? For the same reasons they shouldn’t throw the keys on the roof and walk?
Would you help a noob by telling me where to look for mortgage information on different properties around Miami-Dade?
I’ve noticed how some are able to pull this out for their area and have wondered if it’s publicly available information in most cities. Thanks
Here’s what you need for your mortgage searches:
http://www.miami-dadeclerk.com/public-records/
http://www.miamidade.gov/pa/property_search.asp
The first link is the online record search. You have to know the name of the person who owns the property to search for the mortgage (MOR is the mortgage instrument). Then view the mortgage image to read the loan amount. Don’t forget to look for 80/20 mortgages; they would be two separate documents but usually with the same date and more often than not the same mortgagor.
The second link is the property appraiser’s office. You can find the owner’s name by searching by address. However I find the search process a little frustrating. IF you can’t find an address, then you may just not have it in the search engine correctly. And I think you need to include the street, lane, ave dropdown to search or the record won’t come up.
Happy hunting!
propertyshark.com ??
also look for records in your county.
Who is Martin Sullivan, and why does his well-coiffed mug keep showing up day after day in the WSJ print edition (today on page 1 imbedded in this article)?
Wave of Write-Offs Rattles Market
By David Reilly
Word Count: 1,175 | Companies Featured in This Article: American International Group, UBS
The massive write-downs that financial firms are posting have begun to spur a backlash among some investors and executives, who are blaming accounting rules for exaggerating the losses and are seeking new, more forgiving ways to value investments.
The rules — which last made headlines back in the Enron era — require companies to value many of the securities they hold at whatever price prevails in the market, no matter how sharply those prices swing.
Some analysts and executives argue this triggers a domino effect. The market falls, forcing banks to take write-offs, pushing the market lower, causing more write-offs.
http://online.wsj.com/article/SB120432957846104273.html?mod=todays_us_nonsub_page_one
Yeah, heaven forbid anyone should acknowledge what an asset is really worth. Might spook the investors.
My impression is that the problem is not with requiring companies to value assets at market value, but rather with excessive latitude in accounting rules which let corporations play shell games with their books. Firms hence follow opaque and deceptive accounting practices which mislead investors about the market values of their operations.
Some analysts and executives argue this triggers a domino effect. The market falls, forcing banks to take write-offs, pushing the market lower, causing more write-offs.
interesting there is no domino effect that when the market wildly swings to the upside causes these same firms to overvalue assets thereby pushing the market up causing more overvaluation causing the market to go up, and in the end cause the ceo to get a huge bonus.
very little complaining going on about this.
If it walks like a duck and quacks like a duck, maybe it’s a duck…
Jobless data raise fears of recession in California
All employment sectors in county shed workers in Jan.
By Dean Calbreath
STAFF WRITER
March 1, 2008
http://www.signonsandiego.com/uniontrib/20080301/news_1n1jobs.html
The graph which accompanies this article shows the CA employment level has a serious second derivative issue over the past 1 1/2 years (large magnitude and persistent deceleration since May 2006).
BofA Inherits Countrywide’s Baggage
By James R. Hagerty and Peg Brickley
Word Count: 413 | Companies Featured in This Article: Bank of America
Bank of America Corp. isn’t scheduled to complete its planned acquisition of Countrywide Financial Corp. until the third quarter, but it is finding that the mortgage lender is a lightning rod.
A federal watchdog Thursday asked courts to penalize Countrywide for alleged abuses of the bankruptcy system. Separately, Sen. Charles Schumer (D., N.Y.) called on Bank of America to reconsider its recent decision to appoint David Sambol, Countrywide’s president and chief operating officer, as the head of the two banks’ combined home-mortgage business.
http://online.wsj.com/article/SB120431148597903459.html?mod=hpp_us_whats_news
“but it is finding that the mortgage lender is a lightning rod.”
F—ing A, we could have told these idiots this much. They are buying the latest Enron and we all know how much love Enron conjured up. Anybody that thinks corporate America, or corporations in general, are smart is kidding themselves. The bigger they are the dumber they are. They make money due to their pull that comes with their giganticism.
“Anybody that thinks corporate America, or corporations in general, are smart is kidding themselves. The bigger they are the dumber they are.”
Right on! And this fact presents numerous opportunities for the informed little guy to profit off their stupidity.
These stumbling group-think-driven bozos are the ones that predictibly buy in at the the top and sell out at the bottom, and I just love them because of that.
Global market gloomsters have mussed up Goldilocks’ hair again.
Markets, indexes see only bad news
Ominous signals abound from around the world
By Vikas Bajaj and Michael M. Grynbaum
NEW YORK TIMES NEWS SERVICE
March 1, 2008
http://www.signonsandiego.com/uniontrib/20080301/news_1b1market.html
Man, that is one loud Burberry’s tie. They ought to issue those to traffic cops, as visibility-safety devices. Reminds me of the ’70s hippie styles.
Gotta love the obligatory photo of the disbelieving bull with his head in his hand which always accompanies these SOL stories…
He outbid AnnScott for it on ebay.
LOL
OK, this was a cheap shot but it was hilarious.
LOL.
Reminds me of the ’70s hippie styles.
Hah.
If you think that Burberry tie is hippie, it’s a good thing you can’t see what i wear to the office … my office attire is usually Flying Burrito Brothers style country psych.
Chip,
Of course the tie is loud. Trading pits require loud clothing - that’s how you identify your counterparty in a crowded room.
The exchanges try to keep things fair with dress codes, etc, and the traders constantly angle for advantages (loud suits and ties, platform shoes, etc.) Now we have all the staff dressed in blue smocks (but loud ties,) and the average floor trader being 6′ 3″. Funny world, isn’t it?
Makes sense. After posting, I wondered if that might be the reason.
Quote of the week in bold:
“There is not any one news item that I can point to,” said Douglas Peta, chief investment strategist at J.W. Seligman & Co. in New York. “We know that there is paper out there that we can’t trust. We don’t know exactly who owns it and how much. And we don’t know how they are valuing it.”
Get ready from major turbulence. It’s coming.
• DEFCONOMY FIVE
How you’ll know we’re here: The housing downturn turns into a free fall, making it the worst collapse in our country’s history. That not only triggers massive numbers of foreclosures and lost household wealth, but it also sets off another large wave of bank write-downs.
Odds we get here: Roubini told me that it’s “extremely likely, even unavoidable” that we hit this stage because “the excess supply of new homes in the market is like we’ve never seen before.” Prices, he believes, “need to fall another 10 to 20 percent before that clears.”
• DEFCONOMY FOUR
How you’ll know we’re here: Americans upside-down on their mortgages and unable to pay their home equity loans begin defaulting on other debt, like credit cards, car loans and student loans. In addition, bond insurance companies lose their perfect credit ratings, forcing already troubled banks to write down another $150 billion.
Odds we get here: High. Roubini says that 8 million households are already upside-down on their mortgages and he thinks we could see that number go to between 16 million and 24 million by the end of 2009. A lot of those people, he believes, will simply walk away from their homes and send their keys back to the bank.
• DEFCONOMY THREE
How you’ll know we’re here: Some banks begin to crack under the pressure of continuing write-downs and mounting defaults by consumers. A national or large regional bank finally collapses, triggering hedge fund failures and general chaos on Wall Street, potentially leading to a 1987-style market crash.
Odds we get here: Very good. Roubini says that we’ll likely socialize the losses, “effectively nationalizing the mortgages or the banks.” It would be, he told me, “like Northern Rock (the large bank in England that was recently taken over by the British government) times three.” He thinks the stock market will head south throughout the year as fears about a severe recession are confirmed.
http://www.cnn.com/2008/US/02/28/beck.commentary/index.html?eref=rss_topstories
D5 - Your free fall worst-case scenario is only a doubling of what has already happened. I would call that “in the market.”
D4 - Nearly Ditto.
D3 - Ditto.
In other words, this is all basically just the foreseeable bad situation, leading to a prolonged and difficult recession. And the 1987 market crash had few negative long-term effects for the economy. A similar crash today would also probably not be a long-term negative.
What I would need to see to get me really itchy is a cogent argument showing why a Y-O-Y drop of (say) 5% in real GDP is likely. I can see -1%. I can see -2%. But that ain’t depression territory. (One positive effect of the consumer retrenchment is an expected improvement in the balance of trade, raising net exports, and contributing to GDP growth.)
How many doublings does it take to up initial loss estimates by a factor of 20?
(Answer: log(20)/log(2) = 4 1/3 doublings)
Ex-Greece (NY) assessor admits to kickback plot
http://tinyurl.com/2d8vd4
Schwab pleaded guilty in U.S. District Court to four counts of conspiracy and one count of mail fraud, admitting that he accepted kickbacks from property appraisers John E. Nicolo and Richard C. Ackerman and former Kodak executive Mark S. Camarata from 1992 to 2005.
And at one point Schwab bristled when Larimer mentioned restitution of $7 million. Prosecutors have already seized all of his assets, he said.
“If they’re taking all my money, why are they applying for restitution?” he asked.
Amazing that he was surprised that he had to repay what he stole?
February 29, 2008, 11:59 am
Banks May Need to Shrink by $2 Trillion on Subprime Losses
Mortgage losses, compounded by contemporary risk management and accounting practices could prompt banks and other lenders to shrink their lending and other assets by a staggering $2 trillion, a new study concludes.
The resulting withdrawal of credit could knock one to 1.5 percentage points off economic growth, significantly compounding the impact of collapsing home construction and softer consumer spending due to lower home wealth, the study, presented at a joint academic-Wall Street forum in New York Friday.
The study is one of the most exhaustive efforts to date to pinpoint the scale and location of mortgage losses and how those losses will affect economic growth.
In the initial stages of the crisis, some optimists noted that early estimates of subprime losses of $50 billion to $100 billion were about the same as one bad day in the stock market.
http://blogs.wsj.com/economics/2008/02/29/banks-may-need-to-shrink-by-2-trillion-on-subprime-losses/
“Banks May Need to Shrink by $2 Trillion on Subprime Losses
…
In the initial stages of the crisis, some optimists noted that early estimates of subprime losses of $50 billion to $100 billion were about the same as one bad day in the stock market.”
$2 t = 20 X $100 bn
What’s a factor of 20 between friends?
The bad news: dictators, crooks and British tax dodgers secret is out.
The good news: Cows are not stoned on pot anymore.
http://tinyurl.com/36gj4n
There will rise a new Lichtenstein. There will always be a Lichtenstein.
Yet a credit contraction is likely to trump all of the positives. So enjoy the rally for a few more weeks, but be prepared for a new leg down by the time second-quarter redemption requests hit hedge funds and banks announce their next round of write-downs.
http://articles.moneycentral.msn.com/Investing/SuperModels/MarketsRallyIsReallyATrap.aspx?page=all
Rally? What rally? Is he talking about friday? To use a football analogy: personal foul, 100 yard penalty, 4th down. No “hail mary” play this time.
http://www.nfl.com/rulebook/signals/10
article was published thursday. his timing was impeccable.
Some random thoughts:
In October, 1987 there were no bids on the stock market, the CBOE was thinking about closing the OEX because over 25% of the stocks had no bids. The Merc was thinking of closing the S&P pit for the same reason. Suddenly out of the blue Goldman Sachs stepped up and said they would make bids on any stocks offered for sale (The first and only time that the Fed Reserve may have had direct actions in the market that I have seen). The stock market rallied 500 points on the news. If it was the Federal Reserve that directly channeled the funds to GS, it was a brilliant move. The stock market at that time was real small and easily manipulable. The Fed lowered the Fed Fund rates to 0%, GS made the bids. If it had not worked the Fed may have lost $2-4B, but if they had done nothing …
Where is the firm willing to do this today?
There were no bids on any of this crap yesterday. Muni’s are just one that has taken it hard, but the Muni market effects every residents life style from Potholes up North or Sink Holes in the South. Over 400 failed Muni auctions in February. The MSM is reporting some cities and towns are paying 20% for the money.
About 35 years ago, a little county in Illinois defaulted on its Muni debt. (The State of Illinois paid it off) The counties debt was $1,000.00 - the county discussed BK. Pope County - great deer and goose hunting.
I got my mean and nasty shots yesterday (so, if I insult any of you for the next 5 days, I may not mean it.)
What shots are these? Vaccinations? Going somewhere?
Interesting thoughts Hoz..
It’s coming.
REVIEW & OUTLOOK
Fannie Mae Alchemy
February 29, 2008; Page A16
Both Fannie Mae and Freddie Mac lost lots of money last quarter and last year — and we mean lots. If they continue losing money at current rates, in fact, they could find themselves below their mandatory capital requirements in another six months or so.
Fannie and Freddie think that the best way to deal with this problem is to allow them to leverage up even further by reducing those same capital requirements. Some on Capitol Hill, notably New York Democrat Chuck Schumer, agree. Like maxed-out consumers who were about to reach their credit limit, Fannie and Freddie already hit up investors for a cool $13.8 billion in additional capital last quarter. But as they continue to lose money, their capital position remains tenuous.
So now, with the help of Senator Schumer and other friends on the Hill, they’re trying to get their credit limits raised. Like political alchemists, they want to turn their losses into the gold of more profit-making opportunities.
http://online.wsj.com/article/SB120424701832201551.html?mod=opinion_main_review_and_outlooks
I was thinking the same thing…However, if they raised the limit, Won’t the new paper they are buying be of a very high quality because of the stiff underwriting guidelines ??
Only if they can be sure of the collateral value. Also, nobody’s job is immune to recession. Even those who fully qualify to buy a $700K house today, might not qualify tomorrow (after losing a job).
Interesting times…
REVIEW & OUTLOOK
The Bernanke Reflation
February 29, 2008; Page A16
For readers under age 30 who are wondering why they are suddenly paying $3.15 for gasoline and $2 for milk, the answer is that this is what an inflation looks like. Those of us of a certain age remember it well, if painfully, and judging by the noises coming from the Federal Reserve of late we had all better get used to it again.
First, Fed Vice Chairman Don Kohn declared that, while inflation was worrisome, the Fed now views recession as the more urgent danger to fight. Then on Wednesday, Fed Chairman Ben Bernanke told Congress that the Fed will do whatever it takes to stop the credit squeeze from becoming a recession. That’s about as close as a central banker will get to saying that he’s thrown price stability to the wind. If inflation rises — as it now surely will — then the Fed will worry about that later, after the economy is safely past the credit crunch.
http://online.wsj.com/article/SB120424639824701397.html?mod=opinion_main_review_and_outlooks
$2 for milk? Where? How much milk?
Instant watered down.
For readers under age 30 who are wondering why they are suddenly paying $3.15 for gasoline and $2 for milk, the answer is that this is what an inflation looks like.
Not really. And it it does a disservice to under-30s to have them think that this is what it was like in the 70s. Whether inflation is 3% or 6% (or even 8%), the majority of the price increase in these items is due to factors specific to the supply and demand of these items. (BTW, suddenly? The price of a half-gallon of milk has been over $2 for years, and gas has been generally near or above $3 for almost two years.) These are relative price changes, just like the increase in the price of gold can not be casually explained by referencing a fall in the value of the dollar.
Inflation comes about because the Fed responds to external price shocks and the concommitant negative effect on economic growth by increasing the money supply.
50% off of peak, surely you jest!!
http://phoenix.craigslist.org/rfs/591519787.html
Granted the house in the add is in Queen Creek, which is too far out for my tastes. (I lived in 85249) However, the home in the add is supposedly lender approved for $465,000. The home sold for $905,000 in Dec. 2006. I have confirmed the $905,000 sales price after looking at the county assessor page. Almost time for me to start thinking about heading back down if this home sells for anywhere near the advertised price.
I watch the home sales in the 85249 area and recently one sale had caught my eye. I sold my home in June 2006 for 705,000 after paying 440,000 for it in Nov. 2004. (Signed the contract in Feb. 2004) I saw that in Jan. 2008, an acquaintance of mine finally sold his home that had been for sale at the same time mine was. I think he was asking around $800,000 for the home. Finally sold it for $545,000. He paid $402,000 for the home 4/07/2003. He also had finished the back yard (with pool), mine was still a bunch of dirt. His home was a 5100 sq. ft home on a quarter acre or maybe slightly larger. All I can say is that sale is really going to help out the comps - for me. Price declines seem to be accelerating in the first quarter of 2008, but I don’t have any data to back it up. I am getting encouraged though.
If this trend keeps up, I will look to move back down to AZ as the homes here in washington county are not dropping as quickly (yet). West Portland areas seem to be about a year behind what is happening to Phoenix. When I arrived here in 2005, I was told things were different here and that everybody wanted to live here. I thought the same thing in Phoenix in 2004 when people were hoping to win a weekly drawing just to be able to buy a home. Funny how all those folks were nowhere to be found as soon as my home went on the market in 2005.
Very few people want to live in 4000 and 5000 sq ft houses. These were built because people saw real estate as the safest and best return on investment; therefore, the bigger the better, damned the usefulness. Needless to say, this got to be a very crowded trade, and now everybody wants out of it. Overly large houses are going to fall much, much farther on a sq ft basis than small houses.
Overly large houses are going to fall much, much farther on a sq ft basis than small houses.
Larger houses are cheaper to build on a square foot basis, than smaller houses. They should sell cheaper than small houses. But, like SUVs I think people prefer bigger houses. Even if this means that 1/3 of the space is basically unusable.
I like large houses. 5000 square feet would be ideal.
You would need special track lighting to follow you from one end of the Great (Trading) Hall to the other…
I like the bigger homes as well. I, like all else, would love to have a garage or seperate shop for all my (paid off) toys and have room to do my own repairs on my vehicles. Working from the shade of the ol maple tree gets a bit much. It doesn’t shield this liquid sunshine in Oregon very well.
RE: New income standards for low-income determination
A financial advisor appearing on a recent segment of “Boston Chronicle”, a local BeanTown TV show indicated to a middle-aged couple w/ 13&16YO kids who was featured in a “Help Us with Our Finances” situation noted that a family income of $70k was considered LOW-INCOME (!) in Mazzland and they’d better go about getting better jobs or MOVE if they’d hope to have “any sort of retirement by the age of 85″. (Their italics”)
Of course in a state where public union police and firemen earned low-six figures this is not surprising.
Anyway…
They had $51k in debt via a HELOC and cc’s.
The couple acknowledged, they worked to provide “EVERYTHING FOR THE KIDS!”
The 16YO noted to the reporter she was expecting a car for her 16th birthday, and $2100.00 to finance a class trip to Costa Rica.
Lots of re-education coming down the pike with this depression.
If that were my kid, her @ss would be so sore right now, they would call Child Services on me. Of course, she would never have gotten to that point.
$2100 to go to Costa Rica? That’s one hell of a luxurious vacation by my standards, and I wouldn’t need to borrow for that.
Somebody once made me watch some MTV show called My Sweet Sixteen (or somesuch.) I was in such a foul mood afterwards, ranting and raving like a rabid dog.
Of course, they laughed at my reaction. They said that’s precisely why they made me watch it. With friends like these…
RE: ranting and raving like a rabid dog…
At the end of the segment, the Mrs. acknowledged that “yes-MAYBE the trip to Costa Rica was an extravagence…and that the “NO” word might have to excercised.
Buy the shooting script had the 16YO scrolling the Ford website, looking at new Mustangs.
So, after this comment…I’m thinking-yeah sure right. Like you’ll deny the kid and put her in therapy for the rest of her because of the “humilation”.
But don’t misunderstand…I was rather empathetic and thought these were very decent people-but this kid spoiling is a real monster.
You’re setting up the kids for failure, IMO. The world is not so kind. At some point, they will get the cr@p beaten out of them, and if they don’t know how to deal, they will collapse. You are doing them no favors.
This isn’t about “tough love” as much as about getting them to understand that in a world of finite resources, you can’t have everything, and that some planning is essential. Of course, if her parents had any brains whatsoever, we wouldn’t be talking about this.
“$2100 to go to Costa Rica?”
Hey, it’s eco-tourism, the latest thing! They go around on field trips and learn ecology and stuff. Then the rest of the time they run around in packs, studiously avoiding the locals so they don’t have to embarrass themselves with their shitty sophomore Spanish.
“she was expecting a car for her 16th birthday”
Yeah, and I’m expecting to find out I have a trust fund. So,they buy her a car, and then where do they find the gas money? These parents are doing this child no favors. If she wants a car, let her get a job.
If she wants to go to Costa Rica, let her get a job. The school is also out to lunch.
The recession will help parents like this…the word no will be heard throughout the land.
Idiots! I can’t believe they are this stupid.
http://www.suntimes.com/news/politics/820180,strogerbudget022908.article
Who’s stupid? Politicians and other government workers raising taxes is far more rational behavior than voters approving the taxes or re-electing said politicians.
Somebody mentioned that they are thinking of raising the income tax to 5% too. They are facing the Mother-Of-All-Pension-Crises down the road.
And comming to most california towns very soon…Difference is, our sales tax is already 8.5%….
Rosy Credit Ratings, Misery Matters, Ruble Rumblings: Timshel
March 1 (Bloomberg) — The retention of AAA credit ratings for the insurance units of MBIA Inc. and Ambac Financial Group Inc. earlier this week brought the global banking system and capital markets back from the brink.
But just how deserving the world’s two biggest bond insurers are of AAA rankings is questionable. While Standard & Poor’s and Moody’s Investors Service may regard the financial guarantors as AAA entities, investors don’t.
Yesterday, credit default swaps tied to MBIA’s bonds rose 106 basis points to 705 points, according to London-based CMA Datavision. That meant it cost about $705,000 to buy a contract protecting $10 million of bonds from default for five years. The figure also implies that MBIA has a 45 percent probability of defaulting during the next five years.
By contrast, credit protection for AAA rated General Electric Co. on bonds of equivalent maturities were only 137 points.
http://tinyurl.com/2bcqjy
Even that 7.5% default protection is under priced. I’d be surprised if the actual chances of SOLVENCY sans gov. bailout in the next 5 years is 10%!
Ummm… yeah. CDS’s at 705, 45% probability of default. That’s a AAA company alright!
Pull the other one, dude, pull the other one.
For some reason people think insurance makes risk or losses go away. It only moves the risk around. I have come to think of insurance as something you buy to protect an asset you *need* and cannot afford to replace from savings. The idea of paying to insure investments that you should not make unless you are prepared to lose it all is appalling! You are guaranteed to pay more than the real risk of default if the insurer knows what they are doing.
These CDO’s are nothing more than scams for white washing bad investments with AAA ratings.
The price weakness reflected in this San Mateo, CA new construction may be attributable to initial overpricing rather than the bubble meltdown, but $100,000 (18.2%) cut in the price of the one bedrooms is rather dramatic for San Mateo, CA.
The units are very nice, but the location is on the east side of the main artery (El Camino Real), and the one bedrooms do not have a private outdoor space.
One can’t tell whether the upper end price has been cut, as the most expensive ones may have been sold.
The owner was, in addition to offering the units for individual sale, offering the entire project for $11+million when I went to look; the remaining unit(s) are now being sold by a Realtor.
http://tinyurl.com/2pyhec - Initial price range
http://tinyurl.com/2txcbh - Current listing
You think 860k with $450./Mo dues for a 1300 sq.ft. condo may have something to do with it ??
Indeed, but San Mateo (the City) isn’t like those areas in Arizona with lots of land to build speculative projects. Further, the City is close enough to Silicon Valley, and next door to Redwood Shores (location of Electronic Arts and Oracle) to attract rich techies.
Prices went, and have stayed, very high for properties, some of which are singularly undistinguished, and this new project is an easily visible indicator of change in this very wealthy (old money and new) property market.
“Julian Simon foresaw the falling natural resource prices, increased world oil supply, and decline in farmland prices. His view of population economics is unique and persuasive. Discussion covers resources, environment, population growth and his analytical methods.”
PRC video added to youtube 6 parts.
“All commodities are becoming more available rather than scarce.”
http://tinyurl.com/2xbn8r
FYI
Just saw this while replying, above. I heard that Paul Erlich (Population Bomb) tried to avoid paying what he owed from the bet he lost to Simon that 5 commodities, chosen by Erlich, would decline in price over time. I believe the amount was about $10K.
“Unless action is taken to bring program cost in line with available resources, the coming surge of entitlement spending will end in a fiscal train wreck that will have an adverse effect on the U.S. economy and on virtually every American.”
“The Federal Government’s Financial Health: A Citizens Guide to the 2007 Financial Report of the United States Government.”
GAO
the boomers will not be satisfied with a lower standard of living, so everybody goes down.
Welcome to the party.
Hey Hbber’s - Do you have any advice for someone putting their home on the market today? He has a 3/2 in Prescott Valley AZ, a recent appraisal for $226K, and a market price of $225. What do you say to this guy?
Don’t bogart my joint?
“I’ll give you 100.”
Michael Moore tact:
http://biz.yahoo.com/ap/080301/the_shark_hunters.html
Ha! Guilty as charged.
With John McCain well ahead in the race for the Republican presidential nomination, and because Texans can vote in either party’s primary, Republicans have been voting in the Democratic race, University of Houston political scientist Richard Murray said.
Most are voting for Obama because they want to keep Clinton out of the White House, he said.
“We’ve always had our quota, plus some, of Hillary haters. T hey think they can drive a stake through her presidential heart, and they are hammering away with gusto,” Murray said.
The more I see of Obama and the more I see of Hillary. . . the more dangerous I think Obama is.
Obama dangerous? Trust me, after eight years of destruction under Bush, no matter who’s in charge now it’s all down hill.
Why should I trust you? Have you been deified?
I respect your opinion Paul, but please, McCain with his hundred years in Iraq plan? A campaign top-heavy with lobbyists, including his campaign manager? And his statement…”I don’t know much about economics”. And his apparent belief that “national security” dow not involve fiscal policies?
We are probably screwed no matter who wins, but those who will not release their tax records because of recent 20mil plus payouts from investing deals in Dubai and elsewhere ( yes, you Billary) with pal Burkle, make me even more nervous.
Great bits bucket link: The Isolated Buildings Set (211 Photos)
(but should be subtitled: What Happens When Real Estate Doesn’t Go Up!)
http://flickr.com/photos/metroblossom/sets/72157594559122599/map/
A few hundred photos of isolated buildings, mostly abandoned or rundown, around Chicago with a yahoo map pinpointing the exact location and neighborhood. Absolutely great photos. Please take a look even if you’re not from Chicago.
they build some funny looking places back there
Some pretty great pictures in that set.
That guy must do a lot of driving around. Though I see some swaths of the Chicago map (around Garfield Park and in the zone between 290 and the jail at 26th and California, to name two) where he could find many more subjects.
Thanks for posting the link.
“…Along these lines, I wanted to highlight one other interesting set of comments, these from C. Larry Pope, President and C.E.O. of Smithfield Food, whose honesty and candor was quite refreshing to hear. In reference to the current market situation he stated it was “…an unsustainable condition for livestock producers,” pointing out, “input prices have never been higher.” He continued, saying, “There will be a dramatic reduction in meat production and food inflation is set to rapidly increase much higher…it has to happen.”…’
USDA Agricultural Outlook Forum: Food Inflation to Continue
http://tinyurl.com/2bv4my
SeekingAlpha
Some ag costs that have jumped through the roof this year (aside from energy):
Seed corn is up 125%
Rotenone (for GMO modified plantings) up 90%
Fertilizer is still climbing
equipment is up (when available), a lot is getting exported
Repair parts are on order
It is not inflation, we just do not have the money as a country to pay what the world is willing to pay.
http://www.safehaven.com/article-9598.htm
Would food prices go down if they raised rates? No, as rising food prices are largely a result of our idiotic foray into turning food into ethanol. So much land is being planted with corn, that it creates a shortage of land available for other grains. This pushes prices up for food for cattle, hogs, poultry, etc., which means meat costs more.
As I have written for some time, it would be a very strange recession indeed, for inflation to be persistent, particularly with two major bubbles slowly collapsing before our eyes. The housing bubble is only beginning to be felt. It is clearly going to have a negative effect on consumer spending, and that is not a climate for demand-led inflation. It is just the opposite.
Stagflation and the Fed
by John Mauldin
————————————————————
I am begining to think we are headed for Deflation. The FED seems powerless. I have to say many here have said this is what would happen in a economy of debt.
“It is not inflation, we just do not have the money as a country to pay what the world is willing to pay. ”
Yep its just a lower standard of living thrust on us and we will have to deal with it.
“We have nothing to fear except fear itself!”
Stocks slide as investors scramble for safety
By Michael Mackenzie and Saskia Scholtes in New York
Published: February 29 2008 19:08 | Last updated: February 29 2008 21:10
Stock prices and bond yields tumbled on Friday as fears about the stability of the financial system sent investors scrambling for the safety of government debt.
The yield on the two-year Treasury note dropped to its lowest level in nearly four years, while the S&P 500 stock index fell 2.7 per cent and the Dow Jones Industrial Average lost 2.5 per cent.
EDITOR’S CHOICE
Editorial Comment: The Fed tightrope - Feb-29
Inflation fears could hit Fed plans - Feb-29
Lex: US negative equity - Feb-29
Economy close to stalling in fourth quarter - Feb-28
Bernanke signals Fed rate cut - Feb-28
Regulator lifts cap on Fannie and Freddie - Feb-28
http://www.ft.com/cms/s/0f52f306-e6f8-11dc-b5c3-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F0f52f306-e6f8-11dc-b5c3-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
“We have nothing to fear except fear itself!”
haha well I’d be alot more fearful if I owned a house and a bunch of stock. Still its always a little unnerving to watch the BEAR emerge.
Latest black swan victim…
Hedge funds
Cautionary tale from the hedge fund of Soho
By James Mackintosh
Published: February 29 2008 23:12 | Last updated: February 29 2008 23:12
Ron Beller may be best known for having been a victim of super-thief secretary Joyti De-Laurey, but in the two and a half years since setting up Peloton Partners with former Goldman Sachs colleague Geoff Grant he has become a fixture on the London hedge fund scene.
Peloton shot to prominence by raising close to $1bn at its launch, helped by the impeccable background of Messrs Beller and Grant.
The two former Goldman partners set up a large operation in Soho, outside the usual hedge fund stamping ground of Mayfair.
Peloton went on to call the subprime crisis early, losing money and some investors in 2006 but scoring big in 2007.
The original multi-strategy fund returned 27.18 per cent last year, while the ABS fund, currently being liquidated, made 86.61 per cent, and new money flooded in.
http://www.ft.com/cms/s/0/13293cc6-e714-11dc-b5c3-0000779fd2ac.html
Hedge fund launches are clipped back
By James Mackintosh in London
Published: February 28 2008 03:54 | Last updated: February 28 2008 03:54
Investors cooled towards new hedge funds last year, with cash put into European launches falling for the first time since the 2001 bear market.
The number of new launches dropped to 370 from 420, according to Eurohedge magazine, the first annual fall since the survey started in 2000. The $33bn raised was 11 per cent lower than the $37bn of the year before.
New and untested hedge funds are finding it harder to persuade customers to part with cash as the industry increasingly shifts towards institutional investors who want big-name funds and proven risk control systems. The cost of implementing the risk systems now demanded by investors has also made the traditional two-traders-and-a-Bloomberg start-up unviable.
“It is definitely more difficult for a small start-up,” said Nick Evans, editor of Eurohedge.
http://www.ft.com/cms/s/0/888fad5a-e58a-11dc-9334-0000779fd2ac.html
International experts foresee collapse of U.S. economy
And you thought that I had a gloomy outlook on the economy. Now the bad news pops up everywhere.
Harry Koza in the Globe and Mail quotes Bernard Connelly, the global strategist at Banque AIG in London, who claims that the likelihood of a Great Depression is growing by the day.
Martin Wolf, celebrated columnist of the U.K.-based Financial Times, cites Dr. Nouriel Roubini of the New York University’s Stern School of Business, who, in 12 steps, outlines how the losses of the American financial system will grow to more than $1 trillion - that’s one million times $1 million. That amount is equal to all the assets of all American banks.
Every day now, thousands of people all over the U.S. and Great Britain are walking away from their homes - simply mailing their house keys to the banks - as housing bailout plans fail.
With unemployment growing, the next phase will hit commercial real estate making the financial institutions the unwilling owners not only of quickly depreciating houses, but also of empty strip malls and even larger shopping centres.
The next domino to fall will be credit card defaults, and after that… who knows? There are so many exotic funds out there, with trillions of dollars in paper - or rather computer-screen money - all carrying assorted acronyms, and all about to disintegrate into nothingness. Over the next couple of years, scores of banks that have thrived on these devices, based on quickly disappearing equities, will fail.
http://tinyurl.com/2g4bx6