Bits Bucket And Craigslist Finds For March 23, 2008
Please post off-topic ideas, links and Craigslist finds here.
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The servers have been down for several hours. Hopefully the problems are fixed now.
Happy Bunny Day!
“Happy Bunny Day!”
Storytime:
When my kids were little we annually took them to their grandparents house to search for hidden easter eggs.
One year a dozen hard boiled eggs were hidden and eleven were found.
The following year another dozen eggs were hidden and this time thirteen were found.
There is no smell on earth quite like the smell of a rotten egg.
“There is no smell on earth quite like the smell of a rotten egg.”
Try sniffing a CDO, MBS, SIV…….
Try cooking one with bacon and then serving it to friends….gaahh!
Geek alert…H2S made in the lab smells remarkably like rotten eggs, since that is the compound that smells bad in the first place.
Technically, it’s the other way around: rotten eggs smell like H2S.
Triple geek alert. H2S only smells bad at low concentrations. If you can smell it, you’re safe for a while. If there’s enough H2S that you CAN’T smell it, it’s deadly.
True, your olfactory nerves get overloaded and stop sending the signal. A newly married couple died of H2S poisoning in New Zealand while in their honeymoon bed near Rotorua hot springs. The gas filled the room and they couldn’t smell it.
For one that has been in a refinery, i can attest to this. One co-worker was walking through the sulfur unit and their was a small release, he said his whole body went numb.
oxide, your choice of name was very appropriate for a chem geek. I had wondered what that was about!
‘oxide, your choice of name was very appropriate for a chem geek. I had wondered what that was about!’
I had wondered if maybe you were an alien robot, and had gotten rusty because of wading in mud puddles whilst visiting us here on earth during your Terran dominion reconnaisance effort. In fact, I’m going to keep on believing that, so don’t try any of your deceitful alien denials, you wicked rusty robot.
Easter is canceled
picture
http://tinyurl.com/pk2a3
“Happy Bunny Day!”
I had never heard that one before. I now have a phrase that I hate nearly as much as, “Happy Turkey Day”. No offense meant but that is just awful.
I guess on Passover we are going to have to hear “Happy Unleavened Bread Day.”
no ED any self respecting member of tribe will not blog on passover (unless goldman sachs collapsed then maybe)
To use a better parallel, it would be more like “Happy אליהו(Elijah/Eliyahu ) Day”, because it’s אליהו who visits everyone’s home on Pesach. (I need to open one of those so-called “New Testaments” to see where this Bunny is mentioned. I’m not that knowledgeable about Christian theology”)
Perhaps, but those who do not celebrate Passover might refer to it as such, in exactly the same manner non-Christians take liberties with Christian holidays. Reminds me of “Xmas.” Same as “Xkuh,” right? Simple efficiency for both sides - fair for all.
Well, whenever I see “Put the Christ back in Christmas”, I think I should start a movement to put the ח back in חנוכה, because gentiles have trouble with the ח sound.
That sounds perfectly fair, to put the “N” back in חנוכה. I vote for that.
It is derived from what Charles deGaulle said when he first heard they were going to celebrate a holiday on easter: “C’est une bonne idée!” (genuine 1960s HS French class pun authored by yours truly)
Suzanne told me to post it.
I keep forgetting. Which one of the disciples was the bunny??
BAHAHAHAHA!!
—I keep forgetting. Which one of the disciples was the bunny??—
South Park addressed this. It was… Peter.
i figured the nar was mounting an attack then i realized they probably do not have the brains to do it
happy easter everyone
And Mrs. NYCityBoy just put a beautiful beef roast in the oven. Whether religious or not, there is never a better time than the present to recognize all of the nice things in our life. I hope everybody does that as frequently as possible. We will be reminded of the bad $hit often enough. I am grateful for my wife, my health, this blog and all of the little things in life (like Jack Daniels and Bob Dylan) that make me enjoy my life so much.
These times — they are — a chang–ing…
If you want to feel better about the world we currently enjoy, I recommend watching the movie The Counterfeiters.
PB that sounds like a great acting movie, and one based on fact.
“August Rush” also makes me feel good about the world. I like movies about geniuses as long as those movies have good endings for the geniuses.
The movie hits close to one of the main subjects on this blog: The effect of running money presses on the value of a nation’s currency. The story is that a bunch of Jewish concentration camp prisoners are forced to forge the British pound and the U.S. dollar. The Nazis want them to print enough monies to destroy the U.K. and U.S. currencies.
I hope she used a meat thermometer, like a Taylor or a Polder. Cannot go wrong with one of those, for any meat cooked in an oven. My sister once was seemingly intent on cremating a turkey into which, fortunately, I insisted on putting a thermometer. It was at the perfect temperature an hour and a half before she would have taken it out.
Was the site down?
Only for some.
When feds save greedy firms, economy and morality collide
Betty Beard and Catherine Reagor
The Arizona Republic
Mar. 23, 2008 12:00 AM
“However, if we let these companies go down, many others may suffer the aftereffects with losses of jobs and retirement savings. It is a lose-lose situation. These companies need to be held accountable, but I’m not sure how.”
A good start would be publicly waterboarding the executive officers of these firms until they suffer a mental breakdown, and then doing it some more.
My sister, an attorney who works near the front range, suggested that in case banking CEOs ill-gotten bonuses involved illegal behavior, perhaps reclaiming some of those monies would be a good place to start when trying to compensate investors who saw the value of their investments take a huge hit in recent months. I am not suggesting anything illegal has occurred, but it might be worth considering…
–
A better start would be never to allow any company to be so big, or engage in businesses, that would lead harm to the whole economy and others who are not employees or shareholders.
We don’t allow a neighbor to create fire hazards for other neighbors, no?
Jas
I will throw out an untested hypothesis here: Too-big-to-fail companies stifle economic growth and innovation. If you want to revitalize the U.S. economy, the first place to start would be to eliminate the unlevel playing field give the little guy a chance again.
…field “in order to” give…
I don’t think they stifle it so much as big companies are incapable of contributing to growth and innovation, even in the best of times… mature things don’t change much or have the capacity grow a lot.
That’s the job of creative, flexible risk takers, a profile much better suited to small companies and start-ups.
Large businesses will, for the most part, survive a downturn since they have deep-pocket staying power and can also shrink-to-fit circumstances. The small ones are seriously endangered.
The revitalization will come naturally at the end of this cycle, when a new crop of entrepreneurs fill the gaps left by the hordes of failed small + medium size companies. So, imo, bet on big caps now and small caps later.
What about scaling back allowed corporate political contributions (of all types) as market cap increases? Allowable contributions could continue down until a zero limit is reached on megacap status.
A megacap corporation ($200B) has an abundance of financial and political resources available for achieving their agenda; they don’t need to be able to “game” the system as well.
This assumes of course, that we can’t achieve the far better goal, IMO, of making corporate contibutions illegal in their entirety; as corporations are not citizens under the US constitution. I know, “never gonna happen.”
I think ALL political contributions should be illegal.
IMO, we should have public debates and fact-based “books” which are available to all citizens, and which are 100% paid-for by public funds.
Also think it would be nice to eliminate the electoral college and go with the popular vote — 1 person, 1 vote.
Attorneys will form a protective, impenetrable phalanx around the upper management of the firms being discussed.
All is well.
My slogan du jour is: Bring back the guillotine!
With a rusty blade.
Maria Bartiromo is on “Meet the Press” right now. What a twat. She just said, “we are all feeling it” and “we might be talking ourselves into a recession”. WTF?
I’m sure life is difficult for Maria right now. Her shillery must be making life a real hardship for her. She is on with fellow twat Erin Burnett who just made fun of Marc Faber. She is the worst of the worst and here she is on national television. Good job “Meet the Press”.
What is my point? My point is that we don’t need these big companies. Only the a$$-kissing parasites like Burnett, Bartiromo, Cramer, etc. need these sleazy multi-national debt peddlers. The whole system is broken. It needs to be destroyed and rebuilt so that major investment banks can no longer act like Soviet dictators and say, “you need us because the alternatives are so much worse”. I’m ready to see the alternatives. Bring back Glass-Steagall and let’s get rid of these jerks.
The Meet the Press producers were scraping the barrel. No one wants to do the show on Easter Sunday. Very few people are watching, but you “use up” your turn. The would have gotten someone better if they could.
There were times when I was volunteering at WNYC that we would book a stationary store owner (of an NYC “institution”) to fill a spot in the vast dead time of late August when no one published a book worth reading and the few authors on tour skipped Manahattan to do readings in the Hamptons.
Yes its a common occurrence in TV too…..Have a blockbuster movie or heavyweight fight, then put your public affairs programming against it.
Have a call-in show about education or street crime or the city hall budget up against a Mike Tyson Fight. It happened at every tv station i ever worked at.
must have been a public access commercial if i remember correctly most tyson fights were like 30 seconds-
boxing is boring these days check out mma
I wouldn’t even rebuild the system — it’s just a virtual warehouse. At least for widgets, there’s some value to having a middleman to buy “things” in bulk and slice and dice into orders for retail.
But all this financial slicing and dicing is done by computer. Why do you need a middleman? Case in point: when Enron went down, did the power go out? No, because Enron just traded energy, they didn’t directly make it or ship it. [if anything, the power went back on.]
Senator Spector is on CNN now, reluctant to admit recession. I don’t know what’s worse - Republicans denying a problem which should have been addressed years ago, or Democrats like his respondent Senator Wyden who want to try to repair the problems with expensive programs that will only prolong the inevitable. Can we get rid of the politicians while we’re getting rid of the investment bankers?
While I agree with your overall impression of the interview, I was somewhat surprised at some of the comments made about the actions of the fed going forward (throwing everything at the problem including the kitchen sink).
The subject of inflation (no mention of hyper-inflation and its effect on fixed income and savings) was stated as a possible future problem that would have to be dealt with later only indicates how serious those in the know consider our current situation even while attempting to down play our current situation. No mention of the possibility down the road of circumstances similar to the late 1970’s.
Just my perception of the “Meet the Press” program this am
Is the fed or bear sterns that is guilty. I believe its the fed. The fed needs to be punished!
He said Bear Stearns is at the root of the problem because while providing the funding for some of the largest subprime lenders, including bankrupt New Century Financial, the firm’s executives paid themselves billions of dollars in bonuses and salaries.
No company, or industry, should be allowed to become so large that it can blackmail a nation.
I agree and in the financial industry who was not only “asleep at the wheel” but intentionally allow this situation brew! You have got to believe that the FED’s actions or lack there of were intentional and this was easily preordained!
It doesn’t take a rocket scientist (and I am neither a rocket scientist or an economist) to see the inevitability of this crisis.
Here’s an idea, America needs to break up the JPM/GS/Fed cartel!
Return the control of our money back to Congress.
They were making bags of money in the short-term, and anyone who dared sound the alarm was fired. They have the ethics of parasites.
“It is difficult to get a man to understand a thing when his salary depends on his not understanding it” — Upton Sinclair
Amen. They shouldn’t be allowed to get “too big to fail.”
NYCboy:
It still boils down to what i’ve been saying. Are there people like you or me hired by those at the top?
I would love it….if say Greenspasms admin. assistant goes on 60 minutes and say I warned that old geezer how bad this will get, i took him in to a Wells Fargo office and showed him the cute airhead chicky-poos writing the NINJA loans, i showed him how easy it is to commit mortgage fraud….and how many they are committing…..and he chose to do nothing!
Better AG’s caddy went on TV and talked about how a deal was cut with the financials out on the links to coordinate the whole thing from the beginning.
“No company,or industry ,should be allowed to become so large that it can blackmail a nation .”
Also, I don’t remember seeing any real proof of what would of happened had Bear Stearns been allowed to fall .If the Feds and the talking heads can’t seem to determine the losses (or they say they can’t )than why a bail-out? Why no proof with numbers and a accounting with the United States taxpayers exactly where the losses were going to fall . How did the government come up with this figure of 30 billion to make the deal regarding Bear Stearns and J.P.Morgan ?
So far all these money drops by the Feds have not created a credit market that isn’t log-jammed . If anything the lenders are pulling in and limiting their credit giving .The Feds are just giving money injections based on 100% value on paper worth half as much or its worthless .I want to know what the real game plan is .
So, if the American people are going to allow the Feds to make these kind of big potential decisions that could result in a debt to taxpayers ,I want to know who gets the money in the final analysis .Also ,this bail-out smells of a attempt to avert Justice and criminal liability .
“If anything the lenders are pulling in and limiting their credit giving.”
They are probably building up their war chests for a big future shopping spree when assets are sold off at fire sale prices. Given the glut of assets at current price levels, that would appear to be the rational thing to do at the moment if someone were lending you money at below-market rates.
It’s the oldest trick in the game. Economists need to read 19th century economic history.
Bankers loan to farmers; jumpstart the credit cycle; let the bank depositors assume the credit risk; keep their gold free and clear; deflation wipes out the depositors; bankers pick up assets at fire sale prices.
Lather, rinse, repeat.
Replace farmers by home owners and depositors by taxpayers, and you see the bigger picture repeat itself.
“Economists need to read 19th century economic history.”
Not necessary if you assume that everything is in a time-invariant steady state.
BTW, do you have any references you like for those who don’t believe in time-invariant steady states?
“Replace farmers by home owners and depositors by taxpayers, and you see the bigger picture repeat itself.”
The end result may be the same, but some of the details seem to be different, including the existence of quasi-govt entities who are responding to the global-economy-threatening crisis by funneling war chest money at below-market interest rates to the biggest playas on the street.
When Chrysler went down, it took months of negotiation. Their leader Lee Iacocca (sp?) took a pay cut to $1 per year. They sold off real estate holdings (where I rode my horse) to the state of Michigan for collateral (now State Parks). Didn’t we have to vote on bailing them out? These other business recently failured have leaders that have split with their personal fortunes! No comparison!
Haggling – it’s not just for buying a car anymore
Major chains facing ‘eBay phenomenon’
By Matt Richtel
NEW YORK TIMES NEWS SERVICE
March 23, 2008
SAN FRANCISCO – Shoppers are discovering an upside to the down economy. They are getting price breaks by reviving an age-old retail strategy: haggling.
A bargaining culture once confined largely to car showrooms and jewelry stores is taking root in major chains such as Best Buy, Circuit City and Home Depot as well as mom-and-pop operations.
Michael Roskell, 33, a technology project manager from Jersey City, N.J., said he and a friend from high school periodically visit electronics stores. While Roskell expresses interest in buying an item, his friend acts as though he is dissatisfied with the price and threatens to leave.
“We play good cop, bad cop,” Roskell said.
In February, he said, the friends got $20 off a pair of $250 speakers at 6th Avenue Electronics in the New York area. Earlier, he and the same friend negotiated to buy two 46-inch high-definition Sony televisions at P.C. Richard & Son, a New York-area electronics chain.
List price: $4,300. Price after negotiation: $3,305.50.
Obviously I don’t know his financial situation, but $3,300 on a tv at 33 years old….could be another genius heading for financial ruin..I wonder if he paid cash or charged it.
When I read that article I thought the $3300 was for both TV’s - since $2100 would be about right for the list price for 1.
I’m sure they charged it.
Nice to see that idea getting some print. Do your little bit to urge on deflation - haggle!
I haggled so hard on my first purchase of a bar of silver that the owner of the shop congratulated me. And he was from the mid-east!
I have haggled in best buy for washing machine, this was one year back and the salesperson could not reduce the price. As he did not have authority to do so , but he did mention that his manager could reduce the price. I was not intersted in buying and I did not pursue the purchse.
“…the owner of the shop congratulated me. And he was from the mid-east!”
That is a great moment in life. Those folks love the haggling as much as the income and it is a true compliment to, and measure of respect of, a Westerner to receive an honest congratulation at the end of such a negotiation, IMHO.
“to receive” should be “who receives,” in case the Grammar Nazi is lurking this late. Anon.
I got a pretty decent stereo system in the ’80s by pitting two chains against each other. i just kept going back to the other one and reporting the new low price. No telling how low I could have gotten them to go if I had continued in that vein. It was getting late and I was too tired to keep it up when I finally purchased my system pieces for an average reduction of 30% off each component.
If you push competition between two competitors too far and they conclude that you are playing one off against the other, they may both decide that its not worth doing business, especially if you are a repeat customer. I suspect that this only works on one time purchases. imho.
Lostcontrol, I’m thinking we may both have purchasing experience but in very two different industries.
As a former professional buyer in an industry/market where my vendor list was in the 100s, competition was an expected part of deal. My vendors knew if I didn’t show proof to management that I had competitively bid out my jobs I wouldn’t be there to give those vendors a chance at those jobs. They also knew when times got tough I’d take care of them just as they’d taken care of me when I asked them to jump through hoops. I worked with some great people that would do anything to make the impossible happen.
And even though it was a high pressure industry where everyone pushed everyone else on price I can’t say I’ve ever had a vendor say no thank you unless it was a scheduling conflict. The company was too big of a fish to walk away from.
Yikes—very different industries, that is.
I bought a nice all-silk blazer at Nordstroms a couple of weeks ago for $300. All the other (idle) salesmen on the floor were watching the one helping me with a look of envy. Now I am thinking I may have overpaid…
PBear: I’m surprised at you. You should shop Nordstrom Rack. Heavy markdowns.
Next time (I was in a hurry!)…
My wife had a prescient comment when I showed her this article: “Interesting — we’re turning into Mexico.”
Isn’t that a foregone conclusion in SoCal?
Yeah, but this is the first indication I have seen that the culture has surfaced at the super malls.
From today’s Boston Globe..Kimberly Blanton
“Matt Varghese has paid the mortgage on his Millis home on time since he bought it in 1993. Varghese, the owner of a medical transcription business, has a 720 credit rating - high by any lender’s standard. Until last month, he said he had never been turned down for a loan. Leader Bank rejected Varghese’s application to refinance his $417,000, fixed-rate mortgage to reduce his monthly payments. The appraiser came back with an estimate of his home’s value that was $80,000 less than an appraisal just over a year ago. It was “not good enough to refinance,” Varghese said.”
The following is an excerpt from an email that I sent Kim this morning…
Mr. Varghese bought his Millis home in 1993 for $198,400 with a mortgage of $178,600. The house was built in 1992.
While I realize that people run into all sorts of life issues such as illness, loss of job, starting a business, divorce, etc., it would be of interest to the reader to know why Mr. Varghese needs a $417,000 mortgage to refinance a home that was purchased 15 years ago with a $178,600 mortgage. Seeing that the house was built in 1993, I wouldn’t expect that the money had to be spent on rehab’ing or other major home improvements.
Not from my email…
I would really like to see an in-depth review of these stories. Where did the money go? Was it just pure consumption?
Buying a house for $200k in 1993 with a $179k mortgage and owing $417k 15 years later just blows me away.
I wonder how much would be left on the mortgage if he had not refi’d over the years and just made the regular payments.
The 1st National Bank of Your House was such a good employee for so many, until it figured out that many employers were taking advantage of it’s gullibility of giving them money for nothing, resulting in a shutdown of lending operations in all branches, of the money tree.
Assuming in 1993 an interest rate of 8% on a thirty year fixed rate mortgage, and $178600 beginning principle balance, 15 years later (2008), the remaining balance would be about $137,000
T
What galls me is everyone is trying to figure out how to save these fools. Makes me feel stupid I didn’t get on the gravy train and get a few hundred thousand tax free for nothing. If things work out the way many hope, he’ll be able to sell and pass th debt on to some other schlub.
“Makes me feel stupid I didn’t get on the gravy train.”
Not the first time I’ve heard this sentiment. A loss of belief in any type of inherent “fairness” or justice in the financial/political system seems like a moral hazard I haven’t hear much about. The dark side of the ownership society.
This also makes me wonder how far down consumption will be when all of the consumers have been forced to tighten up. This week in Orlando TV news carried that they have canceled home equity credit lines, without prior notice (the smart thing to do) on thousands of customers who own homes no longer deemed to be worth the sum of the mortgage(s) and equity line.
If I were running Bank B and saw this (in fact, these banks have all know this was coming for some weeks now), I’d follow suit immediately because the holders of Bank B’s HE lines are very likely to run out and spend what they can before their credit spigot runs dry.
I think that the shutting of HE credit will be as much a watershed for the economy as the ARM re-sets. There probably are more Home Equity lines in number, if not dollar volume, than toxic ARMs and many more people with good credit will have been counting on their availability. Even if those people are not underwater, the removal of the life jacket will cause a whole lot of them to remain on shore, so to speak. They won’t buy with the cash they do have because they nno longer have the “insurance” of their HE line.
Talking about Orlando, I keep getting emails from Disney advertising Disneyworld discounts this spring. Even with the discounts the packages are pricey.
Disney prices boggle my mind. When I think about what it must cost a young family of four or five to travel to Orlando and spend 4-5 days at Disney and the other major parks, I feel bad for those many who cannot really afford it and worse for those who really, really cannot afford it but wanted to give their children a dream vacation. Lotta screwed parents out there. It’s OK to moralize about “our days” when vacation meant a trip to the creek for some swimming and tubing, but back then we and our parents did not have the constant beckoning of sirens on TV, touting unaffordable places.
Nice haircut.
http://chicago.craigslist.org/chc/rfs/615656627.html
Unless I am misreading the ad, it looks misleading. “Units are over 2000+ sq ft each for a total of 6000 sq ft.” If I read the details correctly, only two of the units are rentable as 2K+ above-ground apartments. The basement cannot be rented separately. So if, as stated, the units command $2,100/mo each (let’s round to $2,000 as a minimal reality check), then the rent potential is $4K per month for a $600K Wishing Price property. Or 150X rent. Lots of luck with that!
Bartiromo and Burnett - I want to hurl.
Ireland’s Luck is Running Out
By Kerry Capell
“…Once the envy of Europe, Ireland’s economy is set to grow this year at its slowest rate in two decades. The collapse of a housing bubble coupled with the strong euro is raising unemployment and slowing growth, reducing the Celtic Tiger’s roar to a whimper. And the news keeps getting worse. More than $5.5 billion (€3.5 billion) was wiped off the value of Irish stocks on Mar. 17, in what commentators have dubbed the “St. Patrick’s Day massacre.”
“The Irish economy is heading into recession,” says Alan Ahearne, an economist at the National University of Ireland, Galway, and a former senior economist at the US Federal Reserve. …”
http://tinyurl.com/386lmj
Spiegel online (english)
It was in October 2005 that I gained a new co-worker from Ireland. He told me that many of his friends and relatives had quit their jobs. They were going to make their livings being real estate investors. They were making big bucks, errr Euros, at the time. I told him that this was insane. All of the real estate markets were set to crash. He looked at me like I had just grown a third nut on my forehead. He couldn’t believe that I would question it. And he was a CPA (Irish variety).
well so much for the europeans buying us out of this mess.
Even at work I have heard that Europeans will buy up New York condos. They have their own mess to dig out from under. It is all fairy tales and fables, at this point. The bottom is in crowd is shouting at the top of their lungs. That’s why I really enjoyed this article http://market-ticker.denninger.net/2008/03/why-dick-bove-and-market-callers-like.html
.
That was a terrific read, NYCBoy. It covers everything. Thanks.
Read the Denninger article. This is a multi-trillion dollar problem. It can’t be bailed out. To do so, the Treasury would have to create trillions of dollars of treasuries. This would lead to prices plummeting and interest rates skyrocketing. That would kill the housing market even further.
Attempts can be made to limit the damage but there is no way to bail this thing out. I am now fully convinced. We are falling from 10,000 feet and the Fed is trying to land us in mud, instead of on granite. How fitting?
Contrary to popular belief, I’m not just a pretty face.
I can definitely attest to that
I love that stuff about the Europeans. Simple math will show that there are not enough Europeans with a million extra bucks to buy all the POS condos they are building in NYC for vacation homes.
I believe Ben and some of the other bloggers have been saying this for quite some time. This is too big to bail out.
Even smaller bail-outs aren’t worth it .
NYCB - great link/find. Thanks.
Ireland is like a small China in some ways…
Both were complete economic backwaters 35 years ago, that came to life in a blast of energy, got a taste of the good life, and now what?
“He looked at me like I had just grown a third nut on my forehead.”
Must…resist…temptation to…noooo…must not…
Just returned from a few weeks in Ireland to visit friends & family. I get over there at least two times a year. People are still mad about property investment, even though prices have “eased” about 10% so far. I spend most of my time biting my tongue when friends start talking about real estate. I know how their mess will end up, but I don’t want to be the bearer of bad news. I tried to talk a friend out of buying two investment homes about a year ago, but it didn’t work. He is not sleeping well these days.
The amount of debt the tiny Island has amassed is staggering. The newspapers are filled with stories of Irish real estate conquests across the globe, similar to the Japanese in the early 90’s. Looks like the Irish are behind the Chicago Spire skyscaper. Another Irish investor is pumping $300million into the bankrupt Grenelefe resort in Haines City, FL. I played golf at Grenelefe a few years ago, pretty scary place indeed. Several of the original courses are grown over. I think you can still get a condo there for $20k. They will spend $300 million on the place and it will still be a dump in the middle of nowhere. Good luck.
Hey, Noonan is this your last name or just a reference to Caddyshack?
Woes in Condo Market Build
As New Supply Floods Cities
By JENNIFER S. FORSYTH and JONATHAN KARP
March 22, 2008; Page A1
The condominium market is about to get worse as many cities brace for a flood of new supply this year — the result of construction started at the height of the housing boom….”
WSJ
http://tinyurl.com/2n8y2b
Good news…
By simply adding a 20 foot high concertina wire fence around the perimeter (with guard towers, but of course), those nagging condo worries are a thing of the past, Mr. or Mrs. Mayor…
Pentrification
“Speculation was rampant as investors believed empty nesters and young professionals seeking an urban experience akin to what they watched on “Friends” would prop up the condo market for years.”
That line gags me.
Is it just me–or has the concept of “market research” become obsolete with the fast-and-loose crowd?
Hubris without the come-uppance (so far).
Judge warns that many of us are a bankruptcy waiting to happen
http://tinyurl.com/265hf2
An endless stream of people — more than 8,100 in 2007 — come into his court blaming their woes on job losses, divorces and medical problems. Those are costly, but Ninfo said the underlying problem most often is a failure to plan for a rainy day.
“You can’t always have what you want if you can’t afford it,” Ninfo said, a fact of life that has been lost in an era where using credit cards for every purchase and failing to pay them off at the end of the month is the norm.
Americans live in houses too large for their incomes, drive cars they can’t afford, eat out too much and take costly vacations whether they have the money or not, he said.
The mantra of many and as Queen so aptly put it, “I want it all and I want it now.”
Too many victims in the War on Savers to count them all or to list all the myriad reasons for their financial woes…
http://youtube.com/watch?v=sXit0FTxa1U
Billy Connelly…women’s demands..
very funny
The credit card commercial that uses that song while the guy is checking his balance on his phone really bugs me.
On one of the political talk shows, some pundit said that now the government HAS to bail out homeowners. It would be too hypocritical for the guv to bail out Bear Stearns and not bail out individuals.
And this nonsense about “keeping people in their homes” is getting VERY annoying to me. Which people? And did they deserve to be in those homes in the first place?
The problem is that there are so many catagories of homeowners that you need more than 30 seconds to fully explain the situation. And we all know that the media HATES to explain things for more than 30 seconds. We’re lucky to get 2 mintues of coverage, and the other 1 min 30 is usually laying some sob story about how some payment “jumped,” with no explanation of how it jumped, or why it came as such a suprise to the FB.
What I STILL don’t know is, of all these in-trouble homeowners:
1. How many are first-time buyers?
2. How many DIDN’T lie about their income on the mortgage app?
3. How many DIDN’T heloc or cash-out at any time?
4. How many of the houses are primary residences?
5. How many of them only own one home?
6. How many of them were truly defrauded by their lender? (none of this “they told us we could refinance” or “I didn’t understand the papers” crap)
Let me see the number of households who meet ALL SIX criteria. I suspect it’s a lot less than the media thinks. Of those there are probably a few who I think could be partially bailed out, in the form of tax forgiveness or some relaxation of the bankruptcy law, or going non-recourse. But no way would I agree to some sweeping teaser freezer to let these subprimes live in McTownhomes for 1% interest. Not unless Uncle Sam starts bailing me out of my rent.
Bullseye Oxide! Problems is they have to throw a bone at the commoners in order to justify bailing out the fatcats - it’s election year and the current admin could care less about what happens after they leave office.
If there’s going to be a bone thrown to the third estate I would prefer it take the form of nationalized health insurance or something of societal benefit rather than a bailout of homedebtors. However, gotta go with Ben and think that the talk of bailouts is all just election-year blather.
However, as the economy continues to worsen and more people get foreclosed, some sort of bone throwing is inevitable. Just not sure what form it will take. Maybe the Democrats will make a big deal about extending unemployment benefits or some such?
The commoners will get thrown a bone but it won’t land where the commoners thought it would land. Think happy thoughts, J6P.
A bone will be thrown, but like with dogs, you throw it really really far away, so they will get some exercise and the ‘thrower’ won’t have to play or pay attention for awhile.
Fed throws bone to siberia, bone catchers run after bone, come back in 6 months..pant pant pant,
“i couldn’t find it” “throw it again so I can find it”..pant pant pant.
Well said Oxide.
From my perspective, it ain’t just houses….
Back in 99 (just an easy reference point in my life, move to KY) I noticed by 96 truck was about average for the community, 2004 the college kids had better wheels that I drove, now in 2008 the high school kids have better wheels than I do. I look in the mirror and wonder what I am doing wrong. The answer is that I take responsibility. The bigger question, and one shared for many on this site, is how to use current and future circumstances to responsibly benefit ourselves? Any ideas?
T
I know people here have mentioned the well-loved movie “Office Space” more than once. I love it too. I thought about it the other day in relation to the housing bubble, and your post illustrates my thoughts perfectly.
The movie came out in ‘99, and you may recall that the protagonists - bottom-tier cubicle drones all - lived in small apartments. Running gags were based on them (the walls being so thin you could hear everything your neighbor was up to) and many of the scenes were set in these small apartments. This was considered a “normal” way for people to live.
Only five years later, any of these characters, had they existed in real life, would have been buying McMansions! Hell, Jennifer Aniston’s character, the TGIFriday’s waitress, would’ve bought a house too! And that would’ve been considered “normal,” as well. That’s a pretty big societal attitude change in only a few short years.
Makes me wonder, as we face this huge wave of foreclosures and an economic downturn, just what will soon be considered “normal” that wouldn’t have been not long ago?
Just an observation. I don’t have any answers to your question.
This is a much older show, but I was watching old Mary Tyler Moores a while ago. I was really struck with how she lived. Rental, old car, even though it’s tv-land.
There was an episode where she threw a party and something went wrong (can’t remember what) and she expresses great disappointment because: she can only afford to throw one party a year. And it’s not a big lavish event or catered or anything. I just thought, wow. I can’t imagine that being part of the plot in a show now.
There were also references to her savings plan, no CC debt references, and even though she’s a pretty girly girl, she doesn’t shop as a regular pastime.
As a representation of American life, I found it really interesting. Especially because I could relate, financially, to her life in a way that I cannot to most contemporary television.
The movie came out in ‘99, and you may recall that the protagonists - bottom-tier cubicle drones all - lived in small apartments.
I lived in Austin (where it was set, and where it was filmed) around that time and that part was pretty realistic — most of my fellow cubicle drones lived in basic little apartments like that, of which there are thousands around the Austin area.
Most movie and TV characters’ living situations are financially ridiculous — waitresses and struggling actors living in spacious West Village apartments in ‘Friends’, or Lois Lane’s huge luxury Manhattan apartment on a reporter’s salary in the 1979 ‘Superman’.
I know what you mean. When I did my Masters in 2003-2005 I too noticed that most undergrads had better cars than I did at the time (a 2002 Prizm). I also recall that when I was an undergrad in the early 80’s that most of us had old beaters.
I work on a college campus and make what would be a good salary if I wasn’t living in one of the most expensive areas of California.
And I drive one of the least desirable cars in the parking lot — 95% of the students’ cars are newer and/or better than mine. I wonder where they get all the money.
Wait, you had cars?
Good one!
This knowlege is kept a vault deep underground away from the general public. Another illusion is in the process of being created-your government is helping the underwater mortgage holder through their various programs even while they know that such programs are ineffectual.
From this morning’s New York Times on Spitzer’s meltdown: On Dec 18, 2007, Mr. Spitzer “canceled plans to attend a forum in the Bronx on predatory lending in poor neighborhoods, suggesting it was a waste of time when ‘everything was falling apart’. . . . One aide recalled the thrust of Mr. Spitzer’s fury: ‘We’re disasters; I am surrounded by idiots.’ Another remembered it this way: ‘Rome is burning, and I’m supposed to be up in the Bronx talking about predatory lending.’
What could be more important than the problem underlying the collapse of the state’s finances? His petty power plays? Good riddance.
“While New York Governor Eliot Spitzer was paying an ‘escort’ $4,300 in a hotel room in Washington, just down the road, George Bush’s new Federal Reserve Board Chairman, Ben Bernanke, was secretly handing over $200 billion in a tryst with mortgage bank industry speculators.
Up until Wednesday, there was one single, lonely politician who stood in the way of this creepy little assignation at the bankers’ bordello: Eliot Spitzer.
Who are they kidding? Spitzer’s lynching and the bankers’ enriching are intimately tied.
How? Follow the money.”
http://www.gregpalast.com/elliot-spitzer-gets-nailed/
I agree it was a bit too coincidental.
Old Pros Size Up the Game
Thorp and Pimco’s Gross Open Up on Dangers
Of Over-Betting, How to Play the Bond Market
By SCOTT PATTERSON
March 22, 2008; Page A9
“…Mr. Thorp ran two hedge funds, Princeton-Newport Partners and Ridgeline Partners, which went nearly 30 years without a down year, and averaged 19%-20% annual returns, he says…..
WSJ: Your key risk-management strategy is known as the Kelly Criterion. What is it?
Mr. Thorp: It’s a formula Bell Labs scientist John Kelly devised in the 1950s for maximizing the long-term growth rate of capital. It tells you how to allocate your money among the choices available, and how much to invest as your edge increases and the risk decreases. It also avoids the over-betting that can ruin an investor who otherwise has an edge….
WSJ: Bill, you’ve compared what’s going on in the credit markets today to another card game: Old Maid.
Mr. Gross: In Old Maid there’s a card nobody wants: the old maid. In today’s marketplace, there are quite a few old maids. The ones America knows about are subprime mortgages. And they’ve spread to, for goodness sakes, the municipal market and sacrosanct areas that presumably are default-free. In Old Maid, you try to pretend to your opponent that you don’t have the maid, and you try to entice the other side to pick it up. That is happening extensively in today’s market.
link
http://tinyurl.com/36zzw2
Are they applying this to treasuries? They seem to be a little extended.
“It’s a formula Bell Labs scientist John Kelly devised in the 1950s for maximizing the long-term growth rate of capital.”
Good luck using an ancient formula whose name contains the words “Long Term Capital…”
The game they’ve been playing is poker, and our economy is holding aces and eights…
“To err is human, but to really mess things up, you need derivatives.”
Aleph
don’t need derivates, just some economists will do
Dead man’s hand.
The Kelly formula still works as does the Lynch formula and the Medallion formula.
Every great investment formula that works reduces risk. Give me any period of time where the S&P 500 averaged 19% per year for 30 years. You get what you pay for.
Exactly, Hoz!
Many of the market “experts” I talk with have forgotten this fact.
“In Old Maid, you try to pretend to your opponent that you don’t have the maid, and you try to entice the other side to pick it up. That is happening extensively in today’s market.”
How does the Fed possibly begin to reinsert trust into the system? Here you have Bill Gross of Pimpco stating flat out that these guys are merely trying to screw each other. The system requires trust more than it requires liquidity.
Trust is in far more scarce supply than liquidity, especially in light of Fed interventions since last August.
From Russ Winter’s blog:
“Old Maid Cards: US debt in general, but
asset backed securities in particular.”
From the wikipedia link:
“Assets are pooled to make otherwise minor and uneconomical investments worthwhile, while also reducing risk by diversifying the underlying assets.”
Nice theory. How is that working out in practice?
That explains why I felt nauseated when I read Hoz’s post.
The traditional cure for lack of trust in a market is “sunshine” or good disclosure. Not easy with markets as complicated as these and next to impossible with amount of fraud that went on. I don’t see anyone being willing to hire the people it would take to research and disclose the information related to all the bad loans in an understandable format. We will simply have to wait for them to go bad and get the market discovery that way.
By the way, a substantial chunk of the work I am doing now has to do with getting appropriate disclosure of information about a particular industry. It is hard. Really, really hard. I worked longer hours on Wall Street, but this is much more challenging work. To do it right, we have to know about the business: about the regulations they are suject to federal, state and local; how they do billing; how they get paid; how they collect bad debts; what their financial incentives are; what laws that Congress might pass that they are scared of; what is going on in their accounting practices; even how their computer systems work. And this is just a matter of disclosure - regulating is even harder.
“Sunshine” = a good recipe for asset price deflation
Would that apply to disclosing house sale prices? I’m in a non-disclosure state and thinking of making an issue of it.
The work I’m doing has nothing to do with housing.
For the securities markets, it isn’t the sale price of any individual house that is important and the people who need to put together the information have access to what they need if they would bother to do the research.
You can try to get your state legislature to pass a law to convert your state to a disclosure state, but expect the real estate lobby to oppose it every step of the way. You will need to be very very very organized to have a chance.
What Created This Monster?
By NELSON D. SCHWARTZ and JULIE CRESWELL
Published: March 23, 2008
LIKE Noah building his ark as thunderheads gathered, Bill Gross has spent the last two years anticipating the flood that swamped Bear Stearns about 10 days ago. As manager of the world’s biggest bond fund and custodian of nearly a trillion dollars in assets, Mr. Gross amassed a cash hoard of $50 billion in case trading partners suddenly demanded payment from his firm, Pimco.
And every day for the last three weeks he has convened meetings in a war room in Pimco’s headquarters in Newport Beach, Calif., “to make sure the ark doesn’t have any leaks,” Mr. Gross said. “We come in every day at 3:30 a.m. and leave at 6 p.m. I’m not used to setting my alarm for 2:45 a.m., but these are extraordinary times.”…
http://tinyurl.com/2emuwb
An excellent 6 pg article in the NYT
“Who made this big mess?”
OK Hoz, last year you educated us about CDOs. We get the 3 $trillion. What do you think of the $45 trillion in unregulated credit swaps referred to in the article? Is this the real unspoken problem?
Credit default swaps have been a problem for a while. This is not new.
“What do you think of the $45 trillion in unregulated credit swaps referred to in the article?”
I have slept little this weekend. I would prefer to be ice fishing with cold beer than working out ‘at risk’ scenarios. Yet in these risky times, there is a lot of profit to be made. There are always opportunities for profit, but rarely as much profit as in times of market stress. The credit default swaps market is rapidly unraveling.
credit default swaps spit (the financial equivalent of kissing your bankrupt ugly sister)
The quintessential real estate flipper Schadenfreude story appears as the
headline story (caution: .pdf file) in today’s SD Union-Tribune,
right along side of “BIGHORNS FACING SMALLER HABITAT.” It appears that no online link is available (perhaps to avoid the appearance that the U-T is once again unfairly beating up on the REIC), but I will transcribe a passage to provide the gist:
Investors rode housing boom, and now many are going bust
Wave of foreclosures hits owners who bought multiple properties
By Mike Freeman, STAFF WRITER
Robert and Yvonne Cromer began investing in real estate in 2000, when they tapped the equity in their College Area home to buy a nearby rental property.
Over the next few years, the San Diego County couple repeated the pattern, accumulating 17 properties in five states. In 2004, they were featured in a CNN Money article headlined “Tycoon in the Making.”
But today’s severe real estate bust has exposed cracks in the foundation of the Cromers’ property empire. Since October, they have lost three homes to foreclosure — homes they bought for a combined $2.6 million, according to county deed records. They have lost three homes in other states to lenders, Yvonne Cromer said.
The Cromers, who are both real estate agents, believe they have weathered the worst of the storm. Rental income on their remaining properties roughly covers their current mortgage payments, Yvonne Cromer said.
But their troubles highlight how the lure of big profits drove investors and speculators into the real estate market during the boom years — when home values in San Diego County were posting double-digit annual gains.
Their appetite helped fuel an already frenzied market, driving up prices. And now, like the thousands of individual homeowners swept up in the wave of foreclosures, more investors are being caught in the repossession riptide.
A review of county foreclosures over the past 18 months by The San Diego Union-Tribune found about 200 investors who had lost multiple properties. That number probably understates multiple-property foreclosures because people with common names were excluded from the survey and not all foreclosures were reviewed.
“A lot of people made a lot of money, but the people who bought at the end got stuck,” said Jon Maddux, co-founder of YouWalkAway.com, a Carlsbad company that advises borrowers who are considering foreclosure. About 25 percent of Maddux’s clients are investors, he said.
…
Studies by the Mortgage Bankers Association of America estimate that about 16 percent of California foreclosures have involved investors. “But here’s the rub on that,” said John Robbins, a longtime San Diego mortgage executive and past chairman of the Mortgage Bankers Association. “We know there was a percentage of borrowers who lied on applications and said they were going to move into a house.”
Borrowers had plenty of incentive to lie, Robbins said. Owner-occupied borrowers get lower interest rates than investors do, since speculators typically are among the first to stop making mortgage payments when home prices fall.
BANK ROBBERS ALSO HAVE PLENTY OF INCENTIVE TO ROB BANKS, BECAUSE THAT IS WHERE THE MONEY IS.
I forgot to include my favorite passage from the article:
For the Cromers, buying their first house in 1998 was a stretch. Robert, a hotel manager at the time, and Yvonne, a stay-at-home mom, used a cash advance on their credit card for a partial downpayment on the first home, which they purchased for $131,000.
The Cromers took extraordinary measures to better their lives. In 1998, Robert spent 10 weeks on unpaid leave riding a Mission Beach roller coaster for more than 20 hours a day in hopes of winning a $50,000 prize. The contest, sponsored by a radio station, was finally called off with no winner. The station sent five die-hard contestants, including Robert, home with $10,000 each.
While the roller-coaster adventure wasn’t a good investment, their first home was. They sold it in 2002 for a hefty profit. By then, they both had real estate licenses. Eventually, they would both work in real estate full time.
Maybe it’s time to start a lotto hedge fund. I’m sure i could get backing from Citi.
Actually, the Cromers kept riding the roller coaster during this bubble, trying to win the big prize of the century:
http://tinyurl.com/yursaf
In 2004, they were featured in a CNN Money article headlined “Tycoon in the Making.”
They jumped the shark right there.
That reminds me how much I detest ‘Money’ magazine. Whatever dreck product or strategy they’re pushing with their oh-so-wholesome all-American happy family on the cover, bet the other way.
Rising gas, food costs changing lifestyles
http://tinyurl.com/33cv4q
“The purchasing power of earnings is decreasing,” said analyst Sara Johnson of Global Insight Inc., a Lexington, Mass., think tank.
Johnson said the U.S. economy should turn around by summer, helped by stabilizing housing markets and people receiving and spending their federal stimulus payments.
And Peter G. Humphrey, president and chief executive of Five Star Bank in Warsaw, Wyoming County, noted that the subprime mortgage crisis has largely skipped the Rochester area. Housing prices were never inflated here and therefore didn’t encourage the risky lending that led to massive foreclosures in some markets.
“People continue to have their jobs and are going to continue to bring home a paycheck,” Humphrey said.
“They ought to be able to pay their bills if they’ve been fairly responsible.”
That’s a big if Mr. Humphrey. Between “think tanks” and bank executives still not having a clue, I can only assume that the worst part of this economic downturn is yet to come.
“The purchasing power of earnings is decreasing,” said analyst Sara Johnson of Global Insight Inc., a Lexington, Mass., think tank.
Johnson said the U.S. economy should turn around by summer, helped by stabilizing housing markets and people receiving and spending their federal stimulus payments.
WTF? I agree the “stimulus” payments will give people the illusion of more wealth, but otherwise, I don’t think wages will increase, I don’t think energy and food costs will go down (much), and I don’t think the housing market will stabilize.
Yes, people may be able to pay their bills, but being able to get by is a far cry from robust economic growth.
OT: Article on Yahoo news this morn about truckers slowing down. I went to Salt Lake the other day and that highway (191) can be a nightmare of trucks on speed. This trip, I was passing them, they were all going under 65. It finally occurred to me what was going on, they were trying to save gas. I almost got killed a few months ago by a speeding trucker (he cut in too soon and came inches from getting me) so the safety factor is nice.
Imagine the truckers?
The price of diesel is around $4.10 a gallon, and they were the integral part of our consumer nation, that made it all possible…
And now the hoi polloi has gone on a buyers strike, refusing to plunge themselves into deeper debt.
In the 1930’s boxcars full of nothing, weaved around the country and became temporary homes for the homeless, will empty 18 wheelers provide the same comforts?
I think trains in this country are going to enjoy a renaissance as cross-country trucking becomes increasingly costly. Someone told me Warren Buffet just made a sizeable investment in one of the RR companies.
Most of the freight is already on the rails. The problem is the time factor, trucks are still the quickest way to move freight. Have you noticed the move to regional trucking? Look at all the warehouses built in the Chicago area, intermodal freight is shipped in and broken down locally vs. at the port. Except for some high value electronics (cigarettes still go team otr) broken down at the port level.
(cigarettes still go team otr)
What does this mean?
team OTR = team “over the road”, ie, by truck
“Most of the freight is already on the rails.”
Where did you come up with this babble?
“America’s freight rail system carries 14 percent of the nation’s freight by tonnage, 29 percent of ton miles, and 5 percent of value.”
http://www.transportation1.org/tif1report/surface_02.html
I meant most of the otr freight has already been switched to the rails. The railroads will have to increase capacity to win over some more. The yard i work in the current layout is already maxed out. (yard has been open 5 years) That also includes local infastrucure that needs to be expanded to handle the freight.
http://www.entrepreneur.com/tradejournals/article/171140041.html
I think trains in this country are going to enjoy a renaissance as cross-country trucking becomes increasingly costly.
What are the economics of trains versus trucks — trains require more capital investment in infrastructure, but are they significantly more fuel efficient than trucks for shipping a ton of frieght from, say, LA to Chicago? If fuel went to $5/gal and stayed there, would that tip things much more in trains’ favor?
My husbands’ folks lived in a boxcar. They were temporary homes for factory workers too. The factory boss actually built a nice house for them within a couple years, so it ended well.
Still some old boxcar houses (with windows and doors and even chimneys) sitting dilapidated on some side tracks in the railyards of Grand Junction, Colorado. I can hear the trains in my little town in E. Utah (when I’m in town) and love the sound of the faraway whistle.
I used to wonder what “Do not hump” meant on the sides of the cars, my dad explained it: Railyards have humps where the engine can push the car over and it will roll on down and connect with the rest of the train by gravitational force. Some cars are carrying materials that are fragile, thus the “Do not hump.” (Americana trivia)
“Do Not Hump.” Someone should put this on a branding iron, then emblazon it above the “tramp stamps” on all those behemoth female Wal-Mart shoppers. We could slow IDIOCRACY down by a couple of months, anyway.
Heh. “tramp stamps”=tattoos? good name for ‘em if so. They look great on fat arms don’t they..
Beautiful Sammy. The proliferation of skank buzzards wearing ink is vomit inducing.
Yes, tramp stamps are those garish tattoos on the small of a woman’s back for the benefit of whatever dude de jour that happens to be viewing that un-prime real estate from his “drilling” vantage point. It signifies that she’s seen more traffic than the Lincoln Tunnel, but doesn’t charge a toll.
Tattoos will be one highly visible leftover from this era, as it costs as much to get rid of them, as they did to inkflict.
I knew you guys would have fun with that one
• Equity capital was provided to would-be leveraged entities.
• Debt was readily available for them to use in expanding their total capital and thus their ability to pursue profit.
• This combined capital was used to purchase assets, forcing prices higher.
• Price appreciation caused the entities’ equity to expand at a faster rate thanks to their financial leverage.
• The increases in equity were matched by further increases in borrowings.
• In fact, the good performance convinced lenders to increase the amount of leverage they would supply per dollar of equity. This meant the entities could grow their portfolios even faster than the rates at which equity capital flowed in and assets appreciated.
• Further, because of the seeming impregnability of the leveraged entities’ profitability, risk aversion shrank and the risk premiums and returns demanded by lenders declined. Leverage became cheaper and thus even more attractive.
• As is typical of virtuous circles, everything ran smoothly . . . for a while: additional equity flowed in; it was leveraged up increasingly; buying caused assets to appreciate further; and the upward spiral continued.
from pdf
OAKTREE 13 pg
http://tinyurl.com/37ztmx
wsj resource document
Oh my goodness. Grover Norquist is saying that the real estate meltdown occurred as a result of overregulation! He concludes that if we had gotten rid of controls on banks instituted in the depression, we would not be in our current situation. Wow.
BwaHaHaHAAA!!!
BTW, I humbly submit that up is down, black is white, good is bad and everthing else is its own opposite.
Fair is foul and foul is fair,
hover through the fog and filthy air.
Grover Norquist–[shuh!]–a cultist to the bone.
Grover Norquist has a very Vidkun Quisling way about him…
Grover is one of about 40 people that need to be purged — NKVD style — before I will even consider voting (R) again.
Grover better be afraid the proletariat don’t get their collective hands on him. Be afraid Grover. Very afraid.
The unholy week that repeated itself
By John Authers
Published: March 22 2008 02:00 | Last updated: March 22 2008 02:00
This has been an unholy Holy Week. The panic triggered by the near-collapse and subsequent rescue of Bear Stearns was the most terrifying moment for world markets for decades.
Volatility continued until Thursday, when most of the world’s markets took a breather for Good Friday.
This was the week when investors thought the unthinkable. And the seeds of this terror, I suggest, lay in another unholy Holy Week, ten years ago.
In 1998, Sandy Weill and John Reed, the chief executives of the financial behemoths then known as Travelers and Citicorp, spent Palm Sunday putting the finishing touches to the extraordinary merger that would create Citigroup.
The huge company they announced to an amazed but excited world next day would be by far the world’s largest bank. More importantly, it would break down distinctions that had been rigidly enforced by US banking laws ever since the Depression.
Commercial banking, investment banking and insurance would all be under the same roof.
What a bunch of crap.
Where did he say that??
Why keep the last measly 3% or so anyway. It’s pretty clear that that is way beyond the critical level that causes a chain reaction anyway.
“The slump in home sales is also not abating. Purchases of existing houses fell 0.8 percent last month to an annual pace of 4.85 million, the lowest level since at least 1999, economists forecast the National Association of Realtors will report tomorrow. The group’s combined figures for houses and condominiums go back only nine years.
Sales of new homes, due from the Commerce Department on March 26, fell to an annual pace of 579,000 in February, the fewest in 13 years, according to the survey median.”
************************
Wow, we’ve got sales numbers down to 1999 levels. Now we’ve got some pressure that should help push prices there. Can anyone help me with what ratio I’d apply to local 1999 pricing to adjust for inflation?
http://www.bloomberg.com/apps/news?pid=20601087&sid=a4F4XYp1yDOQ&refer=home
Spending Probably Slowed, Home Sales Fell: U.S. Economy Preview
By Courtney Schlisserman
March 23 (Bloomberg)
Almost back to 1998 sales pace… are prices soon to follow? (As often discussed here, the rate of sales is a leading indicator for price changes, and the autocorrelation at the right lag length is strongly positive…)
Not a ratio, per se, but a percentage. Given that this correction is going to be unprecedented in the so-far lifetimes of the observers, take your baseline amount and add 3% per year. That gets you to the fairytale amount/price at which all this should end. But if you are a pessimist, as I am, factor in an overshoot at the bottom and knock off at least 10% from the number you’ve arrive at.
You asked and I opined, not, apparently, having to muscle many others out of the field - all this is IMHO. FWIW, my view is the basis on which I am beginning to make all-cash offers on properties. The RE agents are unhappy, so far, but some commission is a whole lot better than no commission. In other words, my valuations are premature but reflect my opinion of the bottom in prices (by area) and I think I’d be pretty stupid to offer more than that.
Briefing
Investment banks
The $2 bail-out
Mar 19th 2008 | NEW YORK
From The Economist print edition
The wreck and rescue of America’s fifth-biggest Wall Street bank
AS PRANKS go, it oozed vitriol. On March 17th, while employees at Bear Stearns were coming to terms with the implosion of their once-venerable investment bank, one of them stuck a $2 note to the revolving doors of the firm’s midtown-Manhattan headquarters.
Briefing
Central banks
A dangerous divergence
Mar 19th 2008 | WASHINGTON, DC
From The Economist print edition
The world’s central banks are worryingly far apart—especially when it comes to inflation and currencies
Why Bear’s bankers should do penance this Easter
By John Gapper
Published: March 21 2008 17:59 | Last updated: March 21 2008 17:59
Man in the News: Timothy Geithner
Krishna Guha and Gillian Tett
Published: March 21 2008 18:09 | Last updated: March 21 2008 18:09
Mr. Wood B. Buyer can look forward to competing with Daddy Megabanks for fire-sale deals when the housing market bottoms out later this year. Unfortunately, Daddy Megabanks is armed with below-market financing, courtesy of the Fed, while Mr. Wood B. Buyer will have the privilege of borrowing money after it is marked up to provide Daddy Megabanks with a nice fat oligopoly profit, sans competition from the pesky but now-imploded subprime sector.
March 23, 2008 2:40 P.M.ET
BULLETIN
Economic Preview
No curb appeal for housing
From homes sales to consumer confidence data, economic news this week is like to show that while the Fed’s recent moves have cheered the financial markets, the U.S. economy is still in the doldrums. Economists think the housing market won’t bottom out until later this year.
Fair Game
In the Fed’s Cross Hairs: Exotic Game
By GRETCHEN MORGENSON
Published: March 23, 2008
IN the week or so since the Federal Reserve Bank of New York pushed Bear Stearns into the arms of JPMorgan Chase, there has been much buzz about why the deal went down precisely as it did.
Its primary purpose, according to regulators, was to forestall a toppling of financial dominoes on Wall Street, in the event that Bear Stearns skidded into bankruptcy and other firms began falling apart as well.
But a closer look at the terms of this shotgun marriage, and its implications for a wide array of market participants, presents another intriguing dimension to the deal. The JPMorgan-Bear arrangement, and the Bank of America-Countrywide match before it, may offer templates that allow the Federal Reserve to achieve something beyond basic search-and-rescue efforts: taking some air out of the enormous bubble in the credit insurance market and zapping some of the speculators who have caused it to inflate so wildly.
Bear Stearns started us down the road to perdition, back during the Funds of August, and it’s fitting that they are the first casualty…
Bear Stearns started us down the road to perdition, back during the Funds of August, and it’s fitting that they are the first casualty…
From the article: (emphasis mine)
“Do the Bear Stearns and Countrywide deals represent a regulatory template? Both had the same types of winners and losers. Bondholders won, while stockholders and credit insurance owners lost. Although there aren’t that many big banks left that are financially sound enough to buy out the next failure, it’s a pretty good bet that future rescues will look a lot like these.”
I remain unconvinced it would be all that hard to change accounting rules to restore transparency. My personal opinion is that the prospect of what might be learned stands in the way of any move to improve transparency.
Economic View
It’s Hard to Thaw a Frozen Market
By TYLER COWEN
Published: March 23, 2008
REAL estate bubbles have burst before, without bringing such trouble to the financial system. What is distinctive today is the drying up of market liquidity — the inability to buy and sell financial assets — caused by a lack of good information about asset values.
Fear drives markets as investors worry which bank is next
Rachel Beck, Associated Press
Sunday, March 23, 2008
I take articles like this one as a contrarian signal the stock market will go up tomorrow.
I do not think anyone believes the market is going up tomorrow.
The worry is that there is another financial event before the opening.
September 16, 1920 set off the greatest bull decade in history
September 11, 2001 set off half a decade. just a rhyme.
So what signal does this article give you?
http://www.marketwatch.com/news/story/stocks-look-strengthen-gains-after/story.aspx?guid=%7B7AE39E6D%2D81DF%2D44A5%2D84E5%2DD19FB1B4032B%7D
“Stocks look to strengthen gains after Bear Stearns drama; Bear Stearns bailout, dollar strength mark a key turn for markets”
That signals that the stock market always goes up. So do articles that say the stock market will go down. The stock market always goes up, no matter what.
My summary of Saturday morning financial cartoons:
bottom!
bottom!
Hey wait, most of the subprime rate resets haven’t even
(Host interrupts third guest) Hey, let’s get Bob in here, what do you think Bob?
BOTTOM!
BOTTOM!
BOTTOM!
Editorial
For the Fed’s Next Act …
Published: March 23, 2008
As originally scripted, the Federal Reserve was supposed to play the heavy in its role as lender of last resort, charging ailing banks a penalty rate of interest and demanding worthy collateral in exchange for emergency loans. Shame was also part of the deal, because a bank that went to the Fed for help was stigmatized as weak.
The Fed’s chairman, Ben Bernanke, has obviously ditched that script, and rightly so, assuming that his judgment of the risks to the financial system is correct. The open question is whether he and the government officials who support the Fed’s recent moves will take the next necessary step — devising new regulation for a financial system that, on its own, does not control ruinous excesses and is unable to avoid civilian casualties.
…
Sophisticated investment bankers, investors and traders do not deserve special handling from the Fed, but they are getting it anyway, because the Fed believes that allowing them to go on floundering would be worse for the economy than intervening. In effect, the Fed and, ultimately, American taxpayers have assumed the risks of some of the bets placed by people who are complicit in the mayhem the Fed is seeking to quell.
That demands a quid pro quo. We’re waiting.
Amen.
Liquidity Provider To Bear Stearns Employees (SoHo)
Reply to: sale-616071350@craigslist.org
Date: 2008-03-23, 6:15PM EDT
I am willing to provide liquidity to any Bear Stearns employee who has liquidity concerns over the recent change in ownership of their organization. I am willing to pay 75% of purchase price for any new construction condo purchased in between 2006-2008 and 65% of purchase price for any secondary market purchases of condos between 2006-2008. This offer only applies to the Manhattan area. Also, any new vehicles purchased between 2007-2008 with a purchase price of $75,000 or more, I will offer you 70% of purchase price, contingent on the vehicle being in pristine condition. I will consider other high end products on limited basis. Please send me the inquiries.
…and if you ask nicely, I’ll pay in non-sequentially numbered 2$ bills.
NY - LOL - I think you’re ballsy on the 75% for the cars. Presumably you’re counting on the sticker increase coming due to the value of the dollar. I did that, successfully, in the 1970s on a high-end Porsche and my wife was impressed, but I would never try it a second time. I hadn’t considered that as the price rises, so does the maintenance.
This is getting ridiculous….
Fed’s Next Move May Be to Buy Mortgages, Treasury Investors Bet
http://www.bloomberg.com/apps/news?pid=20601087&sid=ad0zneiPUVjA&refer=home
Wouldn’t this reinflate the bubble???
“Something like that would be very helpful, but the Fed was not designed to and shouldn’t assume a huge amount of risk on behalf of taxpayers,” said Alan Blinder, a Princeton University professor and former vice chairman of the central bank. “That should come out of the elected parts of the government, which means the administration and Congress.”
I guess it would cause other bubbles ? Like Gold as an anti dollar investment.
So far so good, the taxpayers are saving money
I’m watching the Wall Street Journal report on CNBC and some dude is saying it doesn’t do any good to worry about inflation during a recession. Hasn’t anybody ever heard of stagflation??
http://www.safehaven.com/article-9731.htm
Anti commodities and big Recession article.
Law enforcement is generally more costly than the absence thereof, but one should not underrate the value to society of deterrence and incapacitation services rendered.
Political Pendulum Swings Toward Stricter Regulation
By Elizabeth Williamson
Word Count: 1,189
The idea that less regulation is better for the economy has held sway in Washington since the Reagan administration. Now that consensus is crumbling, posing a potentially costly challenge to business no matter who wins the White House in November.