Bits Bucket And Craigslist Finds For March 27, 2008
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Equity Lines Next… No surprise here, however blocking sellers from selling is an interesting angle.
http://www.nytimes.com/2008/03/27/business/27loan.html?_r=1&hp=&pagewanted=print&oref=slogin
Thats still bad, they can just sell to the bank. Take a HELOC and simply walk away. The bank efficiently just became the next FB.
HELOC’s are being yanked in record numbers. The banks have woken up to this nightmare scenario too.
Ben posted a story link about two months ago where a ‘proud homeowner’ who happened to be an undocumented Mexican national pumped out every last possible cent of his HELOC and then took the money and toys and simply went back to Mexico. Removed and sold the fixtures, appliances, tiling, even the windows from the house before he left, as well. Hey, that’s a couple thousand bucks more, and a thousand bucks goes a lot further in Mexico. This guy made out like a bandit. ‘Course, he WAS a bandit, indulging in essentially risk-free banditry, because what, WaMu is gonna come track him down, there in Chiapas or wherever, where he’s now living like a king?
I remember wondering at the time why there weren’t hundreds more stories like that. Maybe they’re coming right up.
Sounds “rational”.
They should teach that in the economics schools as a “rational” decision by a “rational” consumer with the builder being “rational”, and the loan originator being “rational” about taking his cut, and the bank being “rational” about repackaging the loan and taking their cut.
Some pension fund somewhere or some taxpayer in Finland got screwed, you say? Their fund managers were also “rational” because everyone else was doing the same thing so who are they going to hire instead?
Oh well! Everyone’s making “rational” decisions; what can you do?
It’s certainly “rational” to run up a massive debt & then skip the country and if your creditors can’t pursue you. Very, very “rational.” Might have been “rational” for creditors to have taken measures to verify that this sort of “piracy” won’t happen. I guess we are living in an “irrational” time.
There are no “irrational” times. Ask the Economics Departments. It’s all rational all the time, and it’s built into the price.
NPR just discussed the home equity article and said, “those loans could be the next flashpoint in the mortgage crisis”. The secrets are out. Everyday, more and more, I see that the average guy understands what is going on. Are others seeing the same thing?
I heard that story too. It is funny that NPR isn’t any further ahead of the curve on this one than other MSM outlets. They pride themselves on being willing to take on stories that require more than 10 seconds to summarize. I guess it shows that the delay of coverage was more a bias against reporting the bad news (whether because of sponsor influence, reporters not wanting it to be true or any other reason) than it than an actual lack of understanding of the problem.
Sorry Polly
I have to burst your bubble, most reporters are NOT that smart. It would shock me if any of them read this blog, if they did then how could they have been so clueless until now?
Remember this is “THE MORON GENERATION” and out of the box thinking is frowned upon.
——————-
I guess it shows that the delay of coverage was more a bias against reporting the bad news (whether because of sponsor influence, reporters not wanting it to be true or any other reason) than it than an actual lack of understanding of the problem.
Hey aNYCdj,
I do agree reporters are not serving (MSM) main street.
I disagree that they don’t read blogs - some have left their day jobs to blog, and a handful are replacing MSM.
I suspect a few may even get a few “lead lines” right from here, in this neck of the woods. (Many mirror the words uttered here - and a few sound like posters on Bens blog)!
Leigh
I wouldn’t say they’re not smart. In far too many cases you have a professional journalist (who might be a brilliant writer) writing about topics that they know little about.
You are 100% right about the intelligence of reporters. Very few intelligent people stay in journalism because its really not very challenging. I went to the University of Pennsylvania and had many friends who went into journalism right out of college. Almost all have changed careers.
In the few examples I have had in my life where I had detailed accurate inside information, when the media reported what was going on they got it all wrong. They might have said truthful things but they really didn’t understand what was happening or why. I don’t blame them, they may only get 16hrs of worktime to file a newspaper column type report. Those who choose to talk to reporters have an agenda and a desired outcome and they control the information. I have never been in a postion to do so.
“I suspect a few may even get a few “lead lines” right from here, in this neck of the woods. (Many mirror the words uttered here - and a few sound like posters on Bens blog)!”
LOL, Leighsong, I know what you mean.
I’ve taken to listening even more intently to guests on CNBC and other news shows. I can’t help but wonder if they might be one of our several heavy hitters here on Ben’s blog. Ya know, the bloggers sharing all the deep insight and analysis.
Remember this is “THE MORON GENERATION” and out of the box thinking is frowned upon.
Employers pay lip service to “thinking outside of the box”, but severely punish failure. It might not be so much that its a moron generation, as a “cover your a$$” generation.
NPR has sucked since they threw Bob Edwards out. Sucked, sucked, sucked. Steve Inskeep is a jerk. Jerk, jerk, jerk. And I mean everyone to think of the derivation of those words, “suck” and “jerk,” a derivation they coyly, jerkily, suckily hinted at on NPR this A.M.
Good reporters have to fight the battle of the newspaper editor: cover only what they say and how they say. A lot of the problems come from the editorial arena - it’s all about the editor/publisher/advertiser, not the real news. Lots of agendas.
“…In the few examples I have had in my life where I had detailed accurate inside information, when the media reported what was going on they got it all wrong…”
I can say, without exception, that when the media reports on anything having to do with a general aviation mishap, they ALWAYS get it wrong.
I am a newspaper reporter and I must say some of what you all write is true. We’re not super smart and often don’t fully understand the topics we get thrown into. We also interview people who either lie or don’t understand what they’re talking about, and there’s often no paper trail. A lot of the time it really is just the best obtainable version of the truth. Of course, maybe I’m just not that good.
One of the above posters says we get 16 hours to report an article. I would say it’s more like four. When it’s breaking news, sometimes it’s literally four minutes now that we’ve got the Web and the “24-hour news cycle.” That’s when you really enter the play it safe, don’t get sued, fear of failure, cover your ass mode.
Though I never post, I’ve long enjoyed this blog. Like many of you, I’ve warned friends and co-workers about the bubble since 2001 or 2002. I haven’t covered real estate on the job because I get too worked up about the subject and worry that I might not be objective. Even I had it wouldn’t have done any good. The steady drumbeat of bad news still hasn’t stopped cab drivers from regularly telling me about their plans to snap up houses for investment purposes, and they still seem uncomfortable with my skepticism.
The media in general seem to avoid issues that take more than a single session and a few minutes of air time to describe, as if their target audience has an extremely limited attention span. The housing crisis & associated credit problems are “those” kinds of issues. Blogs (especially this one) seem better set up to follow a more complicated issue.
ok… suck jerk and npr. word association noted.
It is hard not to have an inkling anymore what with all the local examples everyone must have in their own lives. Even the president is being evicted
I recently had a discussion with a friend who is married to a woman who once told me, “I don’t see how you could ever lose money buying real estate in California”. My friend and I were discussing the housing market and my very bearish views and he said “I really hope you’re wrong, but I don’t think you are”. It’s very slow, but there is some shift in attitudes.
Some attitudes change as fast as stalagtites do. Keep those views dripping on rock-hard noggins, a few will eventually change.
I don’t understand why subprime has gotten all the attention. At least in a subprime loan there is an asset (albeit a depreciated one) as collateral. Even if housing fell by 50% and every single suprime loan (made at the peak) failed you would still have assets to back up 50% of the value (minus transaction costs).
I understand many investments had these things highly leveraged…
Anyway, with HELOC there is essentially no asset backing any of this up. As I understand it the primary lender gets paid in full before any second lenders so it takes very little to wipe out a HELOC entirely.
Do I understand this right?
I am with you.
i had been under the impression that most secondary loans are recourse loans that could follow the FB even after the house was gone, while most primary loans are non-recourse and only had the house as collateral. i’m sure it varies from loan to loan, but anyone know what the common practice is?
HELOCS remind me of CDOs. The HELOC tranche gets paid last, so it is like the high risk investment grade tranche. Once the losses are bad enough, the 1st mortgage (AAA-rated tranche) takes some writedowns. I guess this is why the banks know exactly how they are geting screwed holding the HELOCs!
Darn those contracts….
I believe that tecnically they’re not barring the borrower from refinancing. Rather they’re insisting that when the original first is paid off, they’re the new first, senior to the new 80% loan, something no refi lender would agree to.
Exactly. That’s how these mortgage liens work, first come, first served, so to speak. The second mortage holder thus is “next in line” and naturally will use that leverage to try to get their money back from what might otherwise end up a total loss later. And I bet in a lot of cases they do get the money back, with the borrower/refinancer either coming up with the money from other borrowings or wrapping it somehow into the new first mortgage (though that’s getting harder and harder, for obvious reasons).
It was news to me that HELOC creditors had any say at all in the debtor’s ability to refinance. This puts a different light on HELOCs altogether.
“If it goes into foreclosure, which it is very likely to do anyway, you wouldn’t get anything,” said J. D. Dougherty, a real estate agent who represented the buyer on the transaction.
He should know that argument carries little weight with Citi. They have two options:
Option 1: Take the $1000 on the $95500 loan.
Option 2: Play hardball with the primary lender. Let them know that they have everything to lose by foreclosure and that Citi has very little to lose. If it works out the lender may cut Citi a better deal. If it doesn’t Citi loses $1000. Big deal!
The hits just keep coming…much more of this to come.
http://www.nytimes.com/2008/03/26/business/26cnd-account.html?ei=5065&en=47d182368f31d7f9&ex=1207195200&partner=MYWAY&pagewanted=print
“We strongly disagree with the report’s conclusions concerning KPMG,” [a spokeswoman] said. “We believe an objective review of the facts and circumstances will affirm our position.” KPMG’s position stinks to high heaven, shows yet another cunning evasion that made the housing bubble inflate.
CAPITAL
By DAVID WESSEL
Ten Days That Changed Capitalism
Officials Improvised To Rescue Markets; Will It Be Enough?
March 27, 2008; Page A1
The past 10 days will be remembered as the time the U.S. government discarded a half-century of rules to save American financial capitalism from collapse.
On the Richter scale of government activism, the government’s recent actions don’t (yet) register at FDR levels. They are shrouded in technicalities and buried in a pile of new acronyms.
But something big just happened. It happened without an explicit vote by Congress. And, though the Treasury hasn’t cut any checks for housing or Wall Street rescues, billions of dollars of taxpayer money were put at risk. A Republican administration, not eager to be viewed as the second coming of the Hoover administration, showed it no longer believes the market can sort out the mess.
“The Government of Last Resort is working with the Lender of Last Resort to shore up the housing and credit markets to avoid Great Depression II,” economist Ed Yardeni wrote to clients.
I give great credit to the WSJ editors for recognizing in current time that something of great historical significance has just occurred.
Something weird is happening…
Rupert is allowing his recently purchased WSJ and start-up faux business channel, to tell the truth about what is really happening.
Now why would he go and do a thing like that?
Different markets.
Agreed Professor, but I wish reporters would point out that the Fed is simply applying “the hair of the dog” cure by expanding on the practices that first got us into this mess. I wish someone would raise an eyebrow on that line of thinking.
I give the MSM six months before “hair of the dog” cures are discussed on their dead tree print copy.
Washington sends in cavalry to fight off full-blown crisis
By Joanna Chung, Krishna Guha and Gillian Tett
Published: March 27 2008 02:00 | Last updated: March 27 2008 02:00
The US is sending in the cavalry to fight the crisis in the credit and housing markets - unleashing government-sponsored enterprises to buy and hold mortgage-backed securities (MBS) for which there is little private demand.
The move marks a new stage in the policy response to the credit crisis, in which the US government is increasingly deploying all the tools at its disposal - short of an outright public purchase of mortgage securities - to prevent a full-blown credit crunch.
It also marks an expansion of what Michael Feroli, an economist at JPMorgan, calls the “socialisation of housing finance” in the US - ever greater reliance on Fannie Mae, Freddie Mac and the Federal Home Loan Banks to sustain the flow of funds into the crisis-hit housing sector.
These moves may be historic, but their ultimate failure will be even more historic.
Watch out for the “aha” moment when the masses perceive this.
this blog is even more depressing than the peak oil forum i frequent… good thing i have coffee.
If you don’t like unvarnished discussion of the emerging facts on the ground, then go read somewhere else. I recommend
USA Today Money.
Oops — their news is depressing, too.
who sez i don’t like it?
RE: this blog is even more depressing than the peak oil forum i frequent… good thing i have coffee.
Kinda makes ya wonder what reality the rest of the world is peceiving…my guess is the basics include Dancing with the Stars, American Idol, and a trip to the local casino.
I’m sure nobody wants to study their checkbook, 401k’s and brokerage accounts at the moment.
I’m sure nobody wants to study their checkbook, 401k’s and brokerage accounts at the moment. No, I study mine every day, but then I’m retired & so watch my nest egg like a hawk.
I see all this as chum designed to entice knifecatchers to commit their funds.
Since nearly everyone of the ranch handler’s has rode “into the sunset” on the west Texas bush country…the burning shrub has to rely on his “formal” education to see him through these “rough” times:
“Go team go…rah rah rah, sis boom bah”
“Benny…. hand the hand the ball to Pauly…run Pauly run!”
“you guys are doin’ a heck of a job!”
–
“The Government of Last Resort is working with the Lender of Last Resort to shore up the housing and credit markets to avoid Great Depression II…”
And who created, or allowed, the conditions that could result in “Great Depression II?” And can ““the Government of Last Resort is working with the Lender of Last Resort” do anything to stop the process?
Jas
All the talk treats the mortgage mess as though it is a large glob of black swan guano that dropped out of the clear blue sky.
Ironically, their desire to commit all sorts of questionable acts to avoid Hoover 2.0 will end up with something at least as bad, if not worse. I hear hyperinflation would make the Depression look like a just a “rough patch.” Good thing the problems are “contained” or something like that!
A Republican administration … showed it no longer believes the market can sort out the mess.
I truly believe the market was perfectly capable of sorting out the mess, but only by creating an even bigger mess, aka “systemic collapse.”
Home Equity Loans Next
http://www.nytimes.com/2008/03/27/business/27loan.html?hp=&pagewanted=print
Er - GMTA.
From the article:
*snip…
Americans owe a staggering $1.1 trillion on home equity loans — and banks are increasingly worried they may not get some of that money back.
To get it, many lenders are taking the extraordinary step of preventing some people from selling their homes or refinancing their mortgages unless they pay off all or part of their home equity loans first. In the past, when home prices were not falling, lenders did not resort to these measures. (Cont’d)…*
Dang - borrow now, pay later?
Leigh
They will just walk away, leaving the bank as the next FB. Sold to the bank and they keep the HELOC
To play devil’s advocate for a minute, HELOCs, used responsibly, are not always bad. We took out a HELOC to buy our last car and paid it off over two years. It was the same monthly amount that the car payment would have been. Because the interest on the loan was tax deductible, while the car payment was not, we saved a bundle.
Of course. And I concocted a scheme using a HELOC for a friend to hedge the crazy gain on his house. He took it and gave it to me, I bought a telecom stock I liked and knew was undervalued (Broadwing) in the 4s and 5s, and we sold that at 12-13 and paid off the HELOC. Hell, nearly paid off the house!
This strategy not recommended for most people, however.
And if that stock crashed, would he end up losing the house?
He would have probably ended up in American Siberia, just on the outskirts of Oil City, Pa.
LOL. At $4, it had already crashed.
So there was no chance of it going to zero or very near zero? Would you say it’s safe to buy *any* stock that has already crashed? I am not sure on that, but you are the expert. I would like to invest but need to learn more.
Whatever. Second guess away if that makes you happy.
You’d better know a whole lot about a company before you buy it at $4/share. Stocks priced that low are usually priced as such for a very good reason: the business is not doing well. However, some bargains can certainly be found.
I made a ton on Bear Stearns. Got in for close to $4 and dumped at $10.
Couldn’t be happier.
BYE FL: This isn’t what is called investing, it’s speculating. Whether you consider speculating good or bad is your call, but it’s a lot more risky than just investing.
that stock was $4 because of a PIPE and the abitrage that went with it. Once that unwound, and it was only a matter of time, it lifted easiy. Sometimes it helps to actually know and understand what is going on.
If you like playing stocks with recent PIPEs, check out PRKR.
http://biz.yahoo.com/bw/080306/20080306005808.html?.v=1
This company has been getting PIPEs regularly. Same pattern: stock tanks into the PIPE, then slowly rallies back over time. Of course, PRKR is quite speculative because they are trying to commercialize an innovative product. But I thought you might like to check it out.
Right up my alley. I will check it out. Thanks!
Outstanding! I like it! Thank you. A new one to play!
How do you plan to play it? Buy soon and wait for the rise?
Yeah, need to check out the short interest and figure out the PIPEs. Weekend project.
I’m in some, TL. I like that a lot.
Looks like you’re already being rewarded. Mind you, the price on PRKR can vary by +/- 10+% on any given day. Short interest is very high because PRKR has a long history of nay-sayers claiming that the technology is not for real.
Sometimes it helps to actually know and understand what is going on. Easy for you to say, not so easy for the rest of us to do.
We heloc’d our paid off house to put in a solar energy system and it penciled out nicely, as we locked in the price of electricity for the rest of our lives…
Well played.
I kinda wonder how much electricity has gone up in the past 6 months, as my bills from so cal edison have been around $5.63 in total, over that time span… ha
Or until the panels need to be replaced due to decreased efficiency (10-20 years?).
more like 50
Aladinsane,
I’m pretty sure (but not certain) that electricity rates for residential don’t go up or down very quickly. Those are tariff rates approved by the California Public Utilities Commission. Usually when you see an increase or decrease, it was approved many months prior. This is (partly) why during the electricity crisis the utilities got killed. They couldn’t increase residential rates to keep up with the price of electricity at the hub. Reverse arbitrage is a pretty quick way to lose your pants.
They don’t go up very quick due to the regulation but in San Diego the highest tier rate is $.29 a Kwh!! I just looked up my solar panels on line. yesterday they produced 34 Kwh or over $9.00 per day. I bought a system to provide about 60-70% of my usage in order to get rid of all my high tier pricing. I only pay the basic rate and maybe the lowest tier in the winter. $.14 a KwH VS $.29 Kwh is getting energy half off.
its $.07 per kwh here in kingman az.
Yep, BWNG was almost a 4bagger for me also.
And for a while I thought I was alone in the woods positioning in that stock. You, me a Van Der Mol had a good ride at least.
I believe Broadwing rose because it was bought by Level 3. Did you think that it was a takeover candidate?
Yeah and I knew some of the bondholders and what they were doing.
Telecom is my specialty if I have one but Mr. Bye Fl doesn’t give me any credit for that
Question about Telecom do you follow mindspeed ? I forget the ticker Mspd? I used to work for those losers.
I’ve been buying SPT.L as a telecomm test / performance analysis turnaround play for a while now - made a decent amount on it - but I think there is more to come.
Dissident shareholder takeover - boot the old management and get the ship pointed in the right direction.
TXchick57 (or anyone else for that matter) - my username at hotmail.com if you want to contact me or have an opinion to voice on them - I’d be interested to hear.
So, txchick57, what’d you think about WorldCom?
This was NOT a hedge! The price of a telecom stock has nothing to do with the price of a house. If it were a true hedge, Broadwing would move up because housing became weaker. Of course, that was not the case.
This was a speculative play with a very positive outcome.
Okay, how about stocks moved up as housing became weaker? I just chose a stock I was very confident in.
That makes more sense. A hedge at that time would have been shorting homebuilders and/or subprime mortgage lenders. Since you had a read on the Broadwing’s bond holders, you had a great (and quite legal) advantage in gauging the stock’s movement. Your friend is quite lucky to have you as a friend!!
I trade telecom debt myself. It isn’t as fun as it used to be.
A hedge would have been buying T bills and writing futures on your city’s housing futures. (And not a perfect hedge at that!)
Everything has its place. Credit card usage has its place. Homeownership has its place. HELOCs have their place. But only when used responsibly. I think we all agree on that. But I think Ben started this blog to deal with the irresponsible aspects of these things. The irresponsible became the majority of usages in the past few years. Can we all just agree that these things have their place but we are discussing their negative usages so people don’t have to continue to play “devil’s advocate”?
People use HELOCs when they don’t have enough cash reserves to pay for emergencies, like problems with roofs or cars. We HELOCed to replace a roof in the past. But we had insufficient cash reserves at that time. In retrospect, we could have waited a couple of more years to buy our first house, saving more reserves and thus could have avoided the HELOC, which had an interest rate of 9%. We paid it off in a year, but we wasted about $2000 in interest, only part of which was deductible.
I won’t tell - that’s not deductible (me thinks)?
Agreed, some HELOCs are a great tool.
Problem that may be forthcoming:
Those that riffled a HELOC as an ATM?
Just thinking out loud,
Leigh
bicostal,
My response to your HELOC notation did not nest correctly.
Aplologies,
Leigh
er…spell check…apologies (need more go juice). grrr…
*hands Leigh a creamy bar of chocolate and watches her devour it all up*
Me needs liquid caffine
Up to certain limits it is, me thinks.
Automobiles?
bicostals example er….nevermind.
Be careful out there - the tax man…er…
Well, those people don’t sleep (neighter do some of us).
More friendly, as energy vs car?
I don’t know (no sarcarm).
Best,
Leigh
Warning PDF
Warning Government Document, you may go blind reading it.
http://www.irs.gov/pub/irs-pdf/p936.pdf
The answer to whether the interest on the HELOC to buy a car is deductible is:
It depends.
Up to $100,000 of Heloc loan can be deducted if used for purchases, paying off debt, cars, etc. If you HELOC $300,000 to put a second story on your home all is deductible. But the limit on non-home improvement mortgages/HELOC’s is $100,000 of debt.
That’s nice but I pay cash for my cars and project how long it will take me to rebuild the outlaw, project the interest lost until rebuilt and demand that as a discount with the start point for the price being no more that 300 over invoice after all rebates/dealer cash is factored in. Most recent car is a top of the line 06 Subaru LLbean Outback, MSRP ~34k, invoice ~30k, post rebates 27.k purchase price 25k+transaction costs all paid in cash (~26.2k).
FYI, Dealers are desparate for cash & know its getting tougher to get a loan, thus the sale is uncertain until it happens. If you got cash it will happen and thus the dealer needs to pay you a premium for that certainty. HELOC cash could be used the same way but I’m sure FB-HDs foolishly paid MSRP, and no matter what in the end you’re still paying someone interest on a depreciating asset, just at a discount based upon your tax bracket.
Cash is king.
How do you figure the appropriate discount for the cash purchase of an auto?
fiction:
March 27 (Bloomberg) — Many analysts and public officials have said that foreclosures of subprime adjustable-rate mortgages would soar this year as owners’ monthly payments jumped when interest rates reset to a higher level.
Not only is that unlikely to happen, this year’s resets of earlier vintages of subprime mortgages may even reduce some payments that increased in 2007.
http://tinyurl.com/2vola7
Buy now, borrow later? HAR!
Yeah, that will work well.
Sigh,
Leigh
http://www.reuters.com/article/ousiv/idUSL2072764720080327
From the article…
“To get it, many lenders are taking the extraordinary step of preventing some people from selling their homes or refinancing their mortgages unless they pay off all or part of their home equity loans first.”
How is requiring the borrower to pay off a home equity loan when they sell the house “extraordinary”?
sorry, meant to be a response to TX’s link above.
Server ghosts - my post also landed elsewhere.
Leigh
improper and imprudent:
In a sweeping accusation against one of the country’s largest accounting firms, an investigator released a report on Wednesday that said “improper and imprudent practices” by a once high-flying mortgage company were condoned and enabled by its auditors.
http://tinyurl.com/36ca4s
Uh oh, KPMG could be the next Arthur Andersen.
Not sure I get it… was KPMG doing a financial audit, or some sort of statutory compliance audit? A financial audit might involve sampling some contracts to see if they are properly valued, but they can’t be expected to do a bank examiner or rating agency’s job. They are not contracted to do so, and not paid to do so.
I smell lawyers looking for deep pockets here…
KPMG is not cheap. They bill out at a nice rate(not sure what bank examiner bill at, but I know what Partners make and its a lot more)
From what I read, the auditors in the trenches found some bad things and were overruled by the partner in charge so as to not lose future business. Unlike the case with Enron, they got lazy and did not shred anything, leaving plenty of paperwork to reconstruct who/what/where/when.
Most of the large economic frauds perpetrated in this country seem to be supported by the major auditors and rating agencies. It is time to make their existence miserable by putting them under some kind of federal regulatory agency. They have been unaccountable for too long.
The wall of carefully constructed lies is about to meet it’s demise.
–
“Most of the large economic frauds perpetrated in this country seem to be supported by the major auditors and rating agencies.”
Free market at its best! The companies get to choose the accountants that are more likely to oblige. Honest accountants kept losing to those who were corruptible.
Jas
Exactly! As someone who interned in public accounting, I can say the inherent conflict of interest with accounting firms being paid by the clients they are supposedly independently auditing is pervasive and real. Its the same conflict the rating agencies have with all the crap they were rubber stamping. Most other accountants I’ve met are as in denial over this (and what’s worse, don’t see it as a problem) as REIC people are about the future of their industry. Integrity, ethics, and common sense are no longer valued in this society. One is expected to be a status quo supporting, team playing, “yesman”, no matter how stupid and destructive management’ s policies are in search of short-terms profits over long-term sustainability. If you rock the boat, you are not welcome in today’s corporate economy.
well its time for me to say goodbye, i need to watch soap operas, American idol, dancing to the stars, judge judy….I have seen the light and its sad i must shut off my brain to get a job today..
———————————————-
If you rock the boat, you are not welcome in today’s corporate economy.
Big Three on the way? (It was the Big Six many moons ago when I worked in the financial services industry…)
–
My son joined Arthur Andersen right out of college in 1998. I told him that there would be Big Three because that seems to be the American Way.
My personal view about the US Auto industry is that the consolidation of 1910s and 1920s (GM and later Chrysler) was a very bad thing, long-term, because it killed innovation.
Japan still has ten independent car companies. How many does Germany have, 4-6? I believe that the auto industry is the most globalized industry and its state says a lot about the three leading countries, which also happen to be the three largest economies.
Jas
Lennar Posts 1st-Quarter Loss, CEO Says Demand ‘Quieted’ by Low Consumer Confidence
http://tinyurl.com/2296by
Spin central: demand didn’t slow considerably, collapse, or even fall, it merely quieted. Maybe those pesky consumers would be less quiet if homes were more affordable?
But they “beat” analysts’ expectations. Expect a “bottom is in” rally yet again. That is number 1,347.
Happy days are here again!
LEN up nearly 4% in early trading.
Oh, my, the victim crowd won’t like this
http://news.yahoo.com/s/nm/20080327/tc_nm/att_workforce_dc
i am surpirsed we did not hear the old
“AMERICANS WON’T DO THESE JOBS”
no but they will line up for for crappy retail jobs even in nyc
Indeed. Where did AT&T look for the skilled workers and how much were they offering to pay? Makes a big difference in how well you can find them.
I know a guy that just quit his salaried job to do the same thing at AT&T in downtown Chicago. They hired him in as a contractor so he gave up all his benefits. Pay was the same, so it actually ends up being less once you subtract the benefits. I suppose he did it to turn his 40 mile/day commute via car into a 3 mile/day commute via train.
This is the first time I’ve heard of anyone taking a pay cut to work downtown. When I did it, I ended up earning 10% more in addition to no longer spending 2.5 hours a day in a car.
I would guess that AT&T is having trouble finding suckers to take these skilled positions at lower wages, not that they are having trouble finding skilled workers.
Why do you think Bill gates is touting H1B’s to Congress? He says there is a shortage of skilled labor which is baloney. He just wants to pay crappy wages and he can’t find anyone willing to work for what Microsoft is willing to pay, which are peanuts.
You should have seen the members of Congress kissing his ass. What a bunch of brown-nosers.
“You should have seen the members of Congress kissing his ass. What a bunch of brown-nosers.”
I did see that, and it truly was revolting. Not one thought to ask if the “shortage” Gates was experiencing was related to the nickles and dimes he’s willing to pay. Not to mention that Hb-1 visas tie the worker to the sponsoring company, for the length of the visa, making them indentured workers.
Not even Levin stood up for American workers. Wankers.
How confusing it all is - Americans don’t want to work 3rd world wages while living in a nation with 1st world prices! Who “coodadnode!”
I think the problem here is that the sinking dollar coupled with wage inflation in India has caused the “savings” that AT&T experienced in the past to vanish. In a few years it could even be more expensive to outsource to India.
Hence the increased pressure on H1-B visas (there have now been three bill introduced in Congress to increase H1-B visas). Normally, this would not happen during an election year, but all three candidates (McCain, Obama, Clinton) all support an increase.
NY Times has an interesting article supporting an increase. Evidently, there are a lot of them in the NY area:
More than one-fifth — 21 percent — of the applications were for jobs in New York, New Jersey and Connecticut, according to the report, titled “Winning the Global Race for Talent.”
http://www.nytimes.com/2008/03/24/nyregion/24visas.html?_r=1&ref=nyregion&oref=slogin
That is one of the few benefits of a weak dollar.
“We’re having trouble finding the numbers that we need with the skills that are required to do these jobs,” AT&T Chief Executive Randall Stephenson told a business group
That should read, ‘No one wants to work for $40K a year in America. The Financial Industry has caused inflation to skyrocket, housing, food and inflation are very high, and Americans are priced out of jobs’.
Yea high home prices are great for American workers. Thank you Realtors.
A few years ago AT&T (when it was still SBC) looked to hire a few thousand telco workers and found that only 8% could pass both written and drug tests.
I know that at one point they had a call center in a minimum security women’s prison…
I remember in South Carolina, ADT used to hire ex-cons to install burglar alarm systems
I mean who else would work on a per job basis, some weeks you would work 60 hours next week 10.
hahahahaha…I remember that as well.
I teach and research physics. The students I teach seem to really hate math. Physics? That’s math on crack to them! Sure, there are some who don’t think so, but they are a minority.
So, ATT is having problems finding skilled workers? There are two problems then. The first is that young kids are not encouraged to go into science. Second is that these jobs don’t pay that well considering the effort involved in getting the skills. Look at me, I’m a professor, and I make $55K per year including summer salary, overage classes, and grants. I have a PhD. I refer you to “that old fool Greenspan”. He wants to make sure skilled workers don’t make any money. Also, the stress levels in those private industry jobs are high. Therefore, most of my students are medical types. High stress with high rewards. That is why you can’t find nurses. High stress with minimal rewards. It’s economics and only economics.
Roidy
I am 60 yr old engineer. I did not encourage my 2 kids to go into engineering. One just got big name school MBA with great job. The other is finishing 4th year of med school.
“I am 60 yr old engineer” a rare and endangered species most engineers get weeded out at 50 years old. Engineering sucks I do it and thats one of the main reasons I sold my House so I would have the cash cushion. tried of working under the threat of layoffs if the project doesn’t work out.
I’m not really old enough to remember these days: but by all accounts, engineers used to be treated with quite a bit of respect; on par with doctors and lawyers. The profession had quite a bit of prestige, and was sometimes even paid accordingly.
What drove the huge shift? I think there are a few factors: one is that doctors and lawyers maintained strong professional organizations and have state licensing. This helps to ensure the quality of their work, but also creates a barrier to entry. There are still professional engineering organizations, and in many states it’s possible to get a license; but it’s not seen as necessary for most engineering positions.
I also think the title “engineer” has been diluted through over-use. We’ve all heard jokes about the custodial engineer. But, there are real cases where engineer is used to describe jobs that are technical in nature, but not rigorous in their requirements. We could all probably cite examples from our personal experience/background. Sometimes these jobs don’t require formal 4 year degrees.
Finally, I think corporations found it a lot easier to outsource/offshore their engineering tasks than the medical or legal professions. Again, I look at state licensing as one of the barriers to the latter two. But, they are starting to chip away at it- it’s quite likely your mammogram or X-rays are being read off shore these days.
So, like Laurel,md- I won’t recommend my kids go into engineering.
Long term, the evisceration of the field, in the interest of short term corporate profitability will prove to be very bad for the competitiveness of these same corporations in the global arena. There is no incentive for young talented people to go into engineering. I read a great essay once, which asserted that the only reason to go into engineering was because it could allow somebody with a “burdensome personal defect” to earn an OK living without requiring exceptional interpersonal skills ;-).
The explosion for the demand for engineers erupted with Sputnick and began to diminish after the U.S. landed Man on the Moon.
Those thirteen-or-so years was the Golden Era for engineers.
There are still professional engineering organizations, and in many states it’s possible to get a license; but it’s not seen as necessary for most engineering positions.
Of course on the H1-B issue, the IEEE has sold out and come down on the side of employers. What kind of organization sells out it own members??
RE: and have state licensing.
Sure the fook didn’t help the real estate appraising industry. In order to for the state worker dickheads in the employment offices to make their placement quotas,
they licensed every jerk-off who walked thru the door.
The result is self-evident.
But engineering is the one profession where you can get a decent paying job with a bachelors degree. The top students are going into engineering. It seems to me that the problem with engineering as an undergraduate major is that it’s difficult to get a high GPA, which is required for business school, medical school, etc. So if you end up an engineer, it’s fine, but if you change your mind, your options are more limited. Sad, but true.
I agree bad pay for alot of hard work. Engineer wage Deflation
I made more money back in 1989 than I do now inflation adjusted. I was never good at kissing ass or working under fools. The H1B visa people have no problem with either of thoses requirments.
That’s an interesting angle: I’ve always imagined Wall street supporting any initiative which would depress wages- simply because it would increase corporate profits. But, depressed wages (along with returns on bonds/savings that don’t keep up with inflation) force the worker bees to look for alternative investments (the stock market); boosting the income stream for the brokerage firms, investment banks, etc. Perhaps, to some degree, the housing bubble developed as an alternative investment vehicle; an unintended consequence, so-to-speak.
Perhaps, to some degree, the housing bubble developed as an alternative investment vehicle
Of that there is little doubt. Faced with stagnant wages and vanishing pensions, many saw the bubble as the only way out.
Yep, there is virtually no doubt about this. Desperation breeds desperate measures.
At nearby Colorado State science enrollments overall are down, but especially in Engineering and Computer Science. CS enrollments are about 10% of the peak some 10 years ago: 100 vs. 900.
The kids know which side of the bread isn’t buttered.
These CEO’s aren’t fooling anyone. I was originally a computer science major. Then during my last few classes, we had database design. We inquired about job possibilities from our instructor,and were told that we would either be helpdesk jockeys, or code monkeys working for about $10 a hr to start. I (and a few others) said “forget that”, and changed majors. It didn’t make sense to take a job that paid less than what I was already making working my way through college.
It didn’t make sense to take a job that paid less than what I was already making working my way through college. Wow, just, wow.
your mail man makes that much. and he didnt finish high school
I know an engineer who left SBC/ATT, he was far underpaid and the corporate culture was absolutely mind numbing. When he realized he could make 30% more doing a similar job but in a much more fast-paced and exciting company, this was a no brainer. I don’t know why anyone would work there, especially since the pay generally blows.
Ben i know you hate the bailout talk but
http://biz.yahoo.com/ap/080327/government_bailouts.html
I think the reality is that there will be these bailouts in bits and pieces of the economy. They may bail out an investment bank. They may bail out a few loser loan-owners. They may bail out a bank or two. But they cannot stop home prices from finding the floor. They may slow it but they can’t stop it.
I told a co-worker yesterday that Case/Shiller being down 10.7% means that $2.5 trillion of “equity” just disappeared. He could hear her trembling, over the phone line. Seldom does anybody other than we few think of these things that way.
No one knows that there isn’t enough money to bail everyone/stop this better than the PTB. They’ll never admit that, however, in an election year. Next winter will be the coldest of winters for the FBs - once the winning pols start to lecture them about: “sacrifice” “bootstraps”, etc. - yes - even the D-party.
Besides this article is more AP tripe - I thought the AP was supposed to report actual events - not speculate on the future.
Indeed. Maryland’s governor was recently talking in grand terms about stopping the housing decline. But then he started meeting with those in the mortgage industry and his tone become much more muted:
From The Baltimore Sun:
http://www.baltimoresun.com/business/realestate/bal-md.foreclose27feb27,0,2284866.story
But then, this brings up the issue of just how much money are they going to waste trying to save that one FB’s investment.
Whatever it takes to keep the cost of living in Maryland unaffordable, they will spend. Higher taxes when entering a recession are also good for the economy… right…
That explains why house prices barely bulged in 90% of American cities/towns. Those FB’s think prices will stop dropping once those bailouts go underway.
Exactly. And once they abandon that hope, watch out below! (The silver lining: Used home sales people will be able to get back to work…)
I don’t hate anything. But having done this blog for a few years, I have seen this stuff go on and on. It’s just blah blah blah. Nobody, but me it seems, ever asks could it work, or what would the real outcome be? And if it is just political posturing or a drop in the bucket, then isn’t it a waste of time?
With three hundred plus comments in the bits bucket a day, I suggest we have better use of the bandwidth than to see this endless speculation over what some government hack (or reporter) thinks. Especially with the housing bubble news coming so strong and fast. Again, this is probably the biggest financial event of our lifetimes, and I’m gonna get back to work.
The potential gap between media-induced expectations for bailouts and underlying realities has serious implications for the way this downturn plays out. For example, if MSM reporting on every politician’s special bailout proposal or bottoming out by the end of whatever year it happens to be gives sellers cause to believe that they can expect a higher future sale price, they may choose to price themselves out of the market forever. This would, in turn, result in market failure, a much greater slump in the rate of sales than would otherwise be necessary, and loss of many used home sales peoples’ livelihoods. This seems like a rather high cost to pay in order to slow the pace of a price correction.
Until Katrina showed that the cupboards of government were indeed bare, it used to be that as long as Mother Nature was the culprit, we’d always get bailed out financially.
If the powers that be couldn’t come through there, the onus is on each and every one of us to be financially prudent.
Expect no help from the helpless…
My favorite: “It’s tooooooo beeeeeg”.
On a more serious note, HB news is coming so fast my head is going to spin off it’s tiny (tony) bone!
We are indeed living history, and you my friend, have a place of your own - thanks for the chair, Sir Ben.
Best,
Leigh
It seems to me these bailout plans are like putting thousands of people on the beach with five gallon buckets and trying to stop a tsunami.
Here’s somebody’s succinct explanation for why the same sniffly homeowner in hock stories and doom blab must get written over and over again and why the bailout is so tops on everybody’s talk-about list.
From Metafilter http://www.metafilter.com/70262/bank-shot#2059574:
The banks want bailout money.
Bailout money ultimately has to come from those damn taxpaying plebs, even if they borrow/print it for now and pay later.
Therefore, the plebs must be sufficiently scared to pony up the dough.
Therefore, there must be scary newspaper articles.
Therefore, there must be DoomFilter.
Surely most bankers know that you can’t squeeze blood out of a turnip. Perhaps they believe that money still grows on trees, though (or at least that it can be printed in unlimited quantities)…
It doesn’t matter if it is printed in unlimited quantities as long as you get the lion’s share.
Ben, or anyone else, could you explain why you don’t think a bailout will happen? American Governments have borrowed and spent US$9 Trillion, and at an exponentially accelerating rate. Borrowing or just printing another $9 Trillion should be enough to buy up most outstanding mortgages and solve the problem, at least as far as the banks are concerned. Wouldn’t most politicians prefer this option over a 1930s style depression?
We’ve gone through all of our $9 Trillion lives, and nobody’s gonna lend us anymore…
On the other side, if we start printing money like there’s no tomorrow, it might just be a self fulfilling prophecy.
You just answered your own question - too much money pumped into the system already, and more will mean more inflation decreasing value of the dollar. It’s a vicious cycle, a conundrum, like the old Nordic Worm Ouroboris, the giant snake/dragon eating its own tail.
You should google the words “Weimar Republic”.
Elliot’s twin visage?
I cannot make my lips assume that expression no matter how hard I try.
I know just the trick for you. Read the following line, then look in a mirror:
President Hillary Clinton.
It worked!
http://www.huffingtonpost.com/2008/03/27/report-eliot-spitzer-lin_n_93652.html
OMG I hope he disinfected that “lady” before ahem enjoying her.
Miss Microbe A-Z.
I thought she looked like a guy all dressed up.
phillygal, did you really mean to put italics on “ahem” instead of on “her”? Just wondering.
My wife thinks Elliot looks like the character Gollum.
Comment by exeter
2008-03-26 13:54:44
Thats an understatement Jill. 40k would get you a house and plenty of worthless land thrown in for cheap in 2001. Those days are coming back with a vengeance but the clueless are completely oblivious to it… yet.
My comments: Someone mentioned Glens falls, NY so I checked house prices. Just shocking. $100k gets you a 600 square foot shack. $200k gets you a 1500 square foot starter house. That town has 14k people, not much bigger than Oil City, yet those house prices match Florida’s prices! On top of that, im sure the taxes are pretty high in NY!
Wouldn’t it cost about 200K to build a 1500 sq ft generic house (nothing fancy, 3 bed room, kitchen, family, living, dining, garage, 2 bath, simple windows etc.)? The labor and material prices have gone up, to the extent that $125 - 135 / sqft is reasonable. Then you have to add the land and town betterment charges.
LOL you can buy houses for less than that. I heard somewhere the cost was $30/foot for materials to build a house. Just look at Texas, there’s new houses being sold for around $60/foot *including* the lot!
$100k gets you a nice 1500 square foot house. Going by that price, it gives reason to see those low prices in other states once the bubble goes away.
I built a spec house that was sold in 2006. Land (about 1/4 ac.) was 19k I think. In total I spent in the neignborhood of $70-75/sq ft. (that’s a rough estimate from memory and I believe doesn’t include closing costs, interest, etc. just the cost of the building) That house was 1500-something sq. ft.
Thanks for the information. Interesting!
I’ve been saying all along that housing in upstate NY tripled or quadrupled since 2001. And you’re right Bye Fl… the speculation there was on par with Florida.
RE: Someone mentioned Glens falls, NY so I checked house prices. Just shocking.
Try crossing over the Hudson into VT.
$7.00 per hour local wage scales and $300k homes.
It’s nuts.
Bullseye HD. It’s laughable.
Moral Hazard (crocodile tears)
http://www.prospect.org/cs/articles?article=moral_hazard
“Many of the mostly poor home buyers who got into trouble did NOT in fact know they couldn’t afford the mortgage payments they were signing on to.”
My comment is too incendiary to put on this fine blog. It would never get past Ben’s filters.
Four words sum up Reich’s lack of credibility:
“Social Security Trust Fund.”
At the risk of getting flamed, NYCB, I think that statement is in fact true, in a way. There are indeed many people who felt that if the lender said they could get a mortgage for X amount, then they must be able to afford it, never mind that a simple budget would prove otherwise. I know that sounds crazy, and it is, because you or I would know darned well what we could or couldn’t afford. But when the ex and I sold our house in 2005, we had some people from one of the local thrift outlets come by to pick up some furniture donations. The manager of the thrift said she’d been “approved” for $250,000. Her helper said he’d been “approved” for $125,000. I was in shock when I heard this. No way on their salaries they could have afforded those payments, not even the manager. But both felt that if the lender (or broker) told them that, then it must be true, without thinking for themselves.
Palmetto,
I understand what you’re saying but you are your own last line of defense. The individual ultimately has to determine what he’she can afford and not leave it up to the lender. I sometimes think that by the time a buyer like that reaches the lender it’s to late. Those types of buyers usually start out looking at homes first rather than doing the budgetary first. They get all pumped up by the real estate agent who then guides them to a lender who he/she knows will shoe horn the buyer into any mortgage.
I have a friend who did it that way. “We’re just gonna start looking. We’re not gonna buy right now.” They went out looking without figuring out their budget and then getting preapproved for a mortgage that would fit that budget. They “fell in love” with a house and now they’re saddle with a mortgage that is burying them. I hate the fact that it happened but it my friends own fault.
“The things you own end up owning you.” - Tyler Durden
And that’s what I have difficulty wrapping my head around. I get how some people can’t understand 30+ pages of legaleze in their loan documents. I simply don’t understand how people have NO IDEA how much they can afford to spend every month. It’s not like I have a budget, but presented with a monthly expense that’s $300-500 greater than one’s rent SHOULD give one pause.
Jim, I may be wrong, but I suspect that the buyers at the closing are embarrassed in the fact that they do not understand what is going on. I have been at three closing conferences, and prior to my arrival “the good faith estimate of costs” at closing always seem to be lower than the amount of the final costs. Also, in my case, It seems that the meeting is scheduled either before lunch or before closing, thereby there is a certain need to hurry up and speed through the docs. And finally the little flags indicating the pages that need to be signed and dated are used to encourage people not to read the intervening pages.
It all goes back to the idea that the buyer is an expert (knows more than you), they are impatent to go to lunch, restroom or leave for the day, and that if the docs are not signed that day, then prorata charges need to be recalculated, maybe re conference in a week or two.
The situation is structured to drive the client in the direction desired. Sales people do it and suspect that it happens in your profession.
(Rank manipulation)
*(mg/ms) (mangled grammar/misspellings)
You are absolutely correct, Lost in Control!
BTW, I fully agree with Robert Reich’s point that there is a double-standard in bailing out WS, while not bailing out FBs.
I did not necessarily get the idea that he was advocating bailing out the FBs, just that it was odd that the lenders — who should have known better — get bailed while the clueless FBs do not.
Once again, I think the lenders should be held to certain standards, as they are the ones who facilitated the loose lending.
Borrowers were only accepting the “free” call option. Totally normal, predictable, rational behavior.
have you heard the recent tv commercial (can’t) recall the advertiser or service/product”, but the selling point of their commercial is “I’ve got people”. I suspect that this is implying that someone else advises them what to do or not to do!
Folks, we have a fantastic marketing machine with an entire industry (govt, university and private) who’s sole purpose is to determine how to sell something-product, service, politician and etc.-to the American public.
They are so good at their job that citizens/consumers rely upon others to tell them what they should do.
Heck, even our govt recognizes this and hired them to sell us on the War on Terror( Wrapping the concept of a war around a group of individual wackos).
While individuals may be greedy with their pensions, SS and medical care disappearing, what do you think they would due. And by the way, this marketing machine also knows that this is a fear that Americans’ have.
So, while I know people may have bitten off more than they can reasonably chew, who is exactly manipulating who?
This is where IMHO, the real fault lies and the ultimate correction of the problem!
I think the comercial was for tax preparation, which fits your hypothesis quite well. Why bother figuring out a system that has such a big impact on your life when you can pay (too much) for a poorly trained seasonal worker to do it for you.
I’ve also seen comercials where a surgeon is advising a man over the phone how to do an incision on his own chest. The man asks “shouldn’t you be doing this?” It’s for financial planning, as if financial planning is on the same technical level as surgery.
Al, remember seeing the commercial about the doctor giving advice to a client on performing the surgery himself. It was humorous, but the unwritten message was clear-You would be crazy to do it yourself. This seems to ring a bell, where have I heard this before..A Ha, Advice about lawyers representing themselves…something about a lawyer accepts himself as a client is a fool!
And out of ignorance, laziness or lack of confidence in mastering the subject, both medical and financial matters are turned over to other “supposed professionals” with an implied guaranteed level of expertise to the job correctly. In the event of a screw-up, the service provider points to the small print in the contract or the fine print shown for 10 seconds on the TV screen, indicating no liability for the outcome.
And some of us are deciding on the best Presidential candidate based on which speech writer one has. Or oratory skills.
Talk is cheap - what have they done in the past? That is the true measure - politicians will tell you what they know you want to hear. What is their record?
Ralph Nader!!!
His record is well-known, and there is no doubt where he stands WRT corporate responsibility and he’s a taxpayers’ advocate.
Funny how he whines about conservatives and moral hazard, yet 2 of the 4 bailouts he mentions were under Democratic administrations.
HAR!
The real “moral hazard” repeal of the Glas-Stegall act.
Draw the lines again!
Leigh
Sing it, sistah Leigh!
My other post is gone, so a repeat:
Funny how he whines about moral hazard, yet 2 of the 4 bailouts he mentions were during Democratic administrations.
Oops, there it is.
“Trouble is, it’s the latter group that should have known better.”
The situation at hand gives every suggestion that ‘the latter group’ did know better. Who on the Street could complain about $29 bn in ad hoc taxpayer-funded guarantees to sweeten a rescue plan of a too-big-to-fail WS investment bank?
I think he is right on target.
“…Bush’s “ownership society” has proven a cruel farce for poor people who tried to become homeowners, and his minuscule response to their plight just another example of how conservatives use moral hazard to push their social-Darwinist morality. The little guys get tough love. The big guys get forgiveness.”
Did you know this? This is something I’ve sensed but it’s good to see it confirmed.
http://www.realclearpolitics.com/articles/2008/03/conservatives_more_liberal_giv.html
I still laugh about Al Gore’s $850 charitable deduction on one of his tax returns while VP.
Yeah, I almost fell out of my chair when I saw that I, little old me, gave more that particular year than the esteemed Mr. Gore. It was the same with John Kerry as well. Just truly amazing. I suspect they’d have no problem giving away MY money, though. Nor would Bush (but he does seem to give a lot, to his credit I have to say with a grimace).
“Privatize the profits, socialize the charity.”
is tithing considered charity?
Yes.
Yep I’m sure much of the charity by religious conservatives is through church tithing (notice the “secular” conservatives were the least charitable per the article.) Makes you wonder now that the HELOC spigot is being turned off, if that is going to affect people’s tithing ability. Where I live there was a corresponding “boom” of huge McChurches that went up over the past few years during the bubble. Congregations left behind their smaller more modest churches for custom built McMansion style houses of worship that sprung up all over the place. Now that HELOCs are not available it will be interesting to see what happens.
I take everything George Will says with a heavy dose of salt.
quickly followed with a shot of quervo and a lime chaser.
“The little guys get tough love. The big guys get forgiveness.”
Yes, if some of us attempted to do in our personal, everyday lives the equivalent of what the big swinging dicks do, we’d be arrested.
I think republicans are already feeling the heat for what they did. What is nice about this is that there won’t be another bailout episode like this. So in a few months we can watch the creative destruction of capitalism in action, I hope. The prime mortgages, auto, credit card corporate loans, etc. - a lot of failures lie just round the corner. It is going to be a fun ride!
It is highly important and correct that the current occupant of 1600 Pennsylvania Ave receives all of the blame for everything he’s managed to screw up, whilst still in office.
He’s a cautionary tale, made to order.
Don’t sweat it. I forecast that Goober will be the first former pres to see jailtime.
Perhaps they have plans for some other event to divert attention away from this debacle? Sorry, tin foil hat moment.
They just have to stall for another 222 days…
KPMG tied to subprime lender’s fall
Auditors’ practices flagged in probe of New Century
By Vikas Bajaj
NEW YORK TIMES NEWS SERVICE
March 27, 2008
A sweeping five-month investigation into the collapse of one of the nation’s largest subprime lenders points a finger at a possible new culprit in the mortgage mess: the accountants.
Could they go the way of Arthur Anderson?
http://www.reuters.com/article/ousiv/idUSN2631813920080327?sp=true
KPMG allowed fraud at New Century, report says
Accounting firm KPMG was complicit in “significant” accounting fraud at New Century Financial, which was the second-largest U.S. subprime lender before going bankrupt last April, according to a report ordered by the Justice Department. The report, by court examiner Michael Missal, was unsealed yesterday.
It found that some KPMG auditors had uncovered suspicious accounting, but that partners at the firm had rejected the concerns so as not to lose New Century as a client. KPMG said it disagreed with the report’s conclusions. The findings could help shareholders sue KPMG and New Century executives whose pay was inflated by the fraud.
I see az_lender is famous around the boards for giving people mortgages on cheap houses. If my dad won’t finance me(or insists I buy a $50k house to get financing when I can get a decent house for $20k, why pay $50k? Dad thinks that $20k house is junk, but it looks good in the pictures and seller says its perfect. I refuse to borrow for a $50k house if a $20k house is suitable.), what are your terms? I am looking for reasonable interest rates, 6% to 8.5% for 5 year mortgage. I can put 30-50% down and there are some houses for $20k to $30k in NW Pennsylvania. I can prove my self employment income. I don’t got much credit because I stay away from credit cards and other debt.
I thought az only lends on mobile homes and/or land in his/her area, but I could be wrong.
S/he said in another post about lending someone $84k for a house in Maine. That guy wanted to also buy a $250k house at auction and s/he said no, it’s a ripoff and s/he didn’t want to end up foreclosing.
Why would she bother wasting time with somebody that’s all talk and no action?
lol
Agreed!
Have you tried some of the smaller local banks in that area? They should be able to help you.
jiminy cripps…… Put it on a credit card for God sakes.
Interesting speculation about home buyer/seller psychology, buried in the House & Garden section of the Times:
“Ms. Saatchi (a realtor) is always stunned, she added, at how insulted some clients feel when a low offer is made on their home — even as they turn around and make a paltry bid themselves.
“I say to people, ‘Why is it that the house you no longer want is worth more than it is, and the house you’re dying to have is worth less?’ ” she said. “The paradox of that is amazing. And I realize that it’s not happening in their heads. It’s happening in their hearts. To them, their memories are worth so much, but their future is such an unknown they don’t want to pay for it yet.”
http://tinyurl.com/ysmlym
Kind of like trading in one used car to buy another.
http://www.timeout.com/chicago/articles/home-living/27818/should-they-rent-or-buy
You have to love the advice of the real estate broker, Chaz. “Buy, buy, buy!”
Yes, I think of the shack-farm denizens near me as “the landed gentry.” *Snork*
Another $70,000/yr. wunderkind with only $2,000-$3,000 in savings?
Why does she need to live on the Gold Coast while in law school? My old lady got her law degree from DePaul too - while living in dirt cheap apartment on the south side. Maybe that’s why her loans are only a fraction of that little missy’s loans.
I wish our friends from CA or FL or TX would come over and scoop up all these yuppies to fill their own vacant condoze.
viking contagion:
As Iceland goes, so go the Baltics, the Balkans, Hungary, Turkey, and perhaps South Africa. All are living far beyond their means, plugging the gaping holes in their accounts with fickle flows of foreign finance. All have let credit grow far above the safe “speed limit”, some exceeding 50pc a year.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/27/cniceland127.xml
Bring back the Flying Fickle Finger of Fate award.
I read somewhere that Iceland is one of the few countries (if not the only) that imports no energy, lives off geothermal. Sorry, can’t confirm this.
It’s true. They also are searching ways to export this energy. Ideas range from cargo ships loaded with batteries, undersea power cables, and conversion of water into hydrogen.
Iceland has aluminum smelters that use electricity to process bauxite shipped from places as far away as New Zealand.
“The struggle between faith and fear will decide the destiny of our nation.”
Adlai E. Stevenson, Jr.
The financial press is full of articles today on the big “spread” between Treasuries and other debt instruments showing the financial panic continues. What that means is that people in finance are saying that borrowing costs should be lower, given all the Fed interest rate cuts. They are artificially high.
Isn’t it just possible, however, that high interest rates merely reflect supply and demand in a country where the economy is run in a way that only an idiot will save, and the culture is such that the idiots DON’T save? Perhaps the Fed controlled interest rates, and T-bill rates, are too low.
We’ve got rising inflation. We’ve got no savers. Are interest rates really high by historical measures? The “crisis” seems to be the absence of unusually cheap loans — or, so many parties are so geared that the absence of cheap loans is causing a crisis.
Or that the foreigners that we’ve been giving our dollars to are no longer willing to buy our bonds, and insist upon owning the companies instead? The sovreign wealth funds are now getting equity rather than interest.
““Richard Pleines said it could be five or more years before the local housing market turns around. ‘We’re going to end up with a large volume of property that’s up for sale cheaply,’ he said.”
This means the bottom won’t be before 2013. I will be riding it out in Oil City and waiting for property in north Georgia and east Tennessee to become cheap. Looking at paying $40 to $60 a square foot depending on the house and lot size. Current prices of around $100/foot are bull! So ill be buying in NW PA at around $30/foot and wait it out for other states to approach NW PA’s low prices. I don’t expect prices to match but be close enough to be worth the small premium. a 3x premium is robbery!
Could be you are dreaming of a debt prison, assuming that the house market in Oil City is at a “bottom”. If you have $10K cash money to make a down payment on that $50K house and can afford about $350 per month to carry the loan, pay taxes and insurance, you will be about stretched. You will not be able to save at that point, and may defer maintenance on the house. If in five years the Oil City house is worth $25K you will have lost your hard earned $10K and would not be able to sell the house without throwing in another $18K or so. Would you be trapped in the crumbling house in the crumbling town? What if taxes double to support your unemployed neighbors? House value falls. What if interest rates (for prospective buyers of your house) go to 18%? House value plunges. House prices in NWPA only look cheap to you because you didn’t look at them 10 or 20 years ago. I personally bought a beautiful house in PA for $23K when interest rates were 18%.
Saved money is freedom. Debt is slavery.
That’s why I am eying those $20k houses. $10k down, $10k financing from whoever. Will be able to pay that off in 1-2 years. I understand the fear of price drops being real. Dad suggests I buy a $50k house, I need to show what you said to dad. He thinks im crazy for even mentioning a 50% drop. I personally think 50% drops in non-bubble NW PA is unlikley but not entirely impossible, especially if they screw around with higher taxes.
But at the moment, there is no better location cheaper than NW PA. Lots of locations similar to that with prices several times higher! There is no way to prevent losing money, only minimize your losses. Renting costs 2-3x more than owning in NW PA and owning in NW PA is the least risky vs. owning almost anywhere else.
Do you rent? How much is your rent? Do you own? How much are you “losing” on your house’s equity?
Nearly 20% of the citizenry of the city that you’ve never been to, and appear to be it’s biggest civic booster, are below the poverty line, income-wise.
There’s a good reason houses are giveaway cheap there…
He doesn’t care. He’s untouchable. He can direct-mail his oscilloscopes from anywhere that still supports a P.O.
Go buy then, although it’s probably not worth the bankers time to underwrite your loan, so you might just want to save (you said you’d pay the loan off in a year or two) and pay cash.
It’s probably also worth getting a home inspection done, $20k homes might not have all the usual maintenance work done.
I “owned” various mortgaged houses for about thirty years. I became disinvested in the last one three years ago. Half the year I live on a boat, which I own outright, that is kept at a dock, that I “own”. I have a year round rented house, which gives me a dry nest in the cold months and a year round landing spot for my children.
I pay $525/mo rent, which is about 25% of what I used to pay in taxes and debt service on a house. Basically, I’m paying the taxes on this 400 acres and farmhouse for my landlord, while he takes the equity drain. It’s a nice arrangement, and I have a cozy perch to watch things unfold.
Blue Skye,
Now that’s living. Congrats.
Nice digs…..which state??
That’s the perfect arrangement. I have often thought that a home that floats would be ideal.
There are only two times you feel good about owning a boat-first, when you buy it and second when you sell it!
Just what I have heard from current and former boat owners.
Lost,
and every time you gas up inbetween!
I haven’t experienced any remorse. She’s a vintage all aluminum tank. No mortgage. I sleep well, eat well, and drink well (when at the dock). I’ve got any view of the lake I happen to like and at night a view of the sky without streetlights. My indirect Real Estate Tax is $80/yr. Wireless technology is a great thing! Also, the woman in my life seems to really take to it, makes her feel, well, “liberated”.
Winter is a bummer.
Blue skye, lol
Just stated current and former boat say. You really have to be in love with the boat/water culture, “not saying that there is anything wrong with that!”
Former boat owers simply stated that they seem to spend every holiday, weekend and their vacations performing maintenance on their boat!!!
If you are married and in love with the boat culture, make sure your wife/husband has the same enthusiasm, or you may be fighting over the ownership in court.
impo.
married! no….but I think I’ve heard that word before.
Clinton Fears Japan-Style Malaise
Economic Proposal Pushes Plan to Buy Troubled Mortgages
By BOB DAVIS and AMY CHOZICK
March 27, 2008; Page A3
Hillary Clinton said she fears the U.S. is slipping into a Japanese-style economic malaise that will overwhelm the Federal Reserve’s considerable powers.
The Democratic presidential candidate said the U.S. government should be ready to buy troubled mortgages from investors and lenders to spur a recovery and avoid a lengthy period of stagnation because of unaddressed weaknesses in the financial sector.
Yet she wants Japanese style bailouts? LOL. Cause and effect just can’t get together in her head.
Just what the country needs: Another master propagandist in the WH to flummox the sheeple.
Flummox? The only time I saw that word with in Rex Stout mystery novels on Nero Wolfe.
“If you can dazzle them with your brilliance, baffle them with your “you know what”.
Actually, some of us may have to run to our dictionaries for that one. Good for you! Nothing easy is worth anything!
can=can not
My bad, as they say. Maybe I should just put a disclaimer at the end of each of my posts stating the grammar will be mangled, words will be misspelled.
She never ceases to amaze me. She wants to government to buy crap loans to shore things up.
Well, If they buy this stuff up, they should buy it for 30-50 cents on the dollar. Let the banks still take the losses. Maybe the taxpayer could actually profit here? Once people are refinanced at a cheaper clip, then sell the loans off for a profit.
I still don’t know who will want to buy them. I think she wants Fannie, Freddie etc to buy these things off at full face value and then rework the loans for losses while keeping all her banking buddy’s 100% profitable and their bonuses in tact.
My personal guess: It is all about rewarding financiers who fund her campaign, under the guise of a DemoRat populist program.
Beware the sniper fire…..
LOL.
A vote for HC is a vote for bubble reflation and continued malinvestment in the housing sector. BC did his part to get the bubble rolling by passing the $500K capital gains tax exclusion on the sale of a primary residence. We can look forward to having more of the collective wealth of our nation dumped down the REIC rat hole if HC wins the WH.
don’t think you need to spend even 5 minutes worrying about that.
Lil’ Hillary
Exclusive thoughts to grow on
Comedy Central
http://tinyurl.com/2wfexx
“Did you wonder what is wrong with the world? You are now seeing the climax of the creed of the uncaused and unearned. All your gangs of mystics, of spirit or muscle, are fighting one another for power to rule you, snarling that love is the solution for all the problems of your spirit and that a whip is the solution for all the problems of your body—you who have agreed to have no mind. Granting man less dignity than they grant to cattle, ignoring what an animal trainer could tell them—that no animal can be trained by fear, that a tortured elephant will trample its torturer, but will not work for him or carry his burdens—they expect man to continue to produce electronic tubes, supersonic airplanes, atom-smashing engines and interstellar telescopes, with his ration of meat for reward and a lash on his back for incentive.”
John Galt
Banks Fail to Lower Mortgage Rates (Bloomberg):
http://tinyurl.com/2yqqzm
““A Wells Fargo document released late February said that in Deschutes County and other so-called ’soft’ markets across the country, borrowers may have to put at least 10 percent down to purchase a home, compared with 5 percent in a ‘normal’ market.””
Wow. 5% down is *not* a normal market! We aren’t halfway to the bottom because 20% down hasn’t yet been the standard in most areas save distressed parts of FL and CA
Geez… next you know, they’ll be complaining that buyers are expected to have the ability to actual pay off the loan, which “unusual and not seen in a normal market” or some crud!
Chase will cut 300 jobs downtown
Decline in home equity loans causes layoffs
http://tinyurl.com/2ocdqz
This is an expanded from my post yesterday. Most PTBs are still clueless to the fact that the financial problems associated with the housing bubble are far reaching.
Zimmer-Meyer said she believes the Chase tower will increase in value after several pending downtown projects are complete. These include the demolition of Midtown Plaza to make room for the PAETEC building and other development, and the Renaissance Square multi-use complex along East Main Street.
“There’s going to be prestige to having a downtown location,” she said.
Yet, another article shows the following: Area’s population loss goes on
http://tinyurl.com/2klall
I can hear it now, yes we are moving our business to a prestigeous location that has the highest tax rates and a declining population. Maybe if you are a relocation firm this area looks promising. Stop crushing people and businesses with brutal tax rates and maybe the area can rebound. Area spin clowns continue to avoid reality.
Back to reality, thanks for listening.
Hey that story actually made the Syracuse Post Std. Guess they’re idea of capitulation is admitting other upstate areas (and not our “its different here” market) are seeing some housing industry created layoffs. This should result in another “why it can’t happen here” article from the shills complete with the symbolic pat, pat, pat on the head.
““Robert Glinert, a real estate agent in the Los Angeles area, said he has recently been saying no to almost half the sellers who have asked him to represent them. Their initial asking price is just too unrealistic.”
“‘People say, ‘I don’t care about the market — my home is still worth what I paid for it in 2006,’ Mr. Glinert told me. ‘And I say, ‘To you. Only to you.’””
Brings new meaning to “priced in forever” many of those people will be giving it back to the bank as they could not really afford the house in the first place. Those who keep the house will be giving up 10+ years of their retirement. Meanwhile houses bigger and nicer than theirs sell for half the price.
On another note, people talk about those huge price drops in San Diego, CA so I checked and there has been 15% drop since the peak. Many houses still asking $300/foot with few priced below $250/foot. Makes Florida seem “cheap” by comparsion with prices ranging from $70/foot for a REO in Palm Bay to $150/foot in West Palm Beach.
“Brings new meaning to “priced in forever” many of those people will be giving it back to the bank as they could not really afford the house in the first place.”
I love this “priced in forever” phenomenon. Some immigrant buyers purchased a condo in the complex where I rent. At first, I thought they had some smarts, because they jacked the price down at the closing and got a helluva deal from a desperate, intimidated buyer. About a month later, guess what? Second mortgage! Not too long ago, either. So they’re in hock to the max or more now. Can’t wait to see what happens to this one. Being trapped in a condo in Florida must be godawful.
“desperate, intimidated buyer.”
I meant, a desperate, intimidated SELLER. Sheesh. These are legal immigrants, by the way. From all appearances, fairly successful. So why do they need a second mortgage? One thought I had is that they may have taken the mortgage as protection against sharks who might try to take the property and strip the equity.
Frankly, right now, if I had a home, I might be tempted to max it out myself and bank or invest the money, as protection against equity sharks. Wasn’t there a story here on this blog about someone who had a lot of equity in their home and some mortgage broker was trying to falsely file a claim on the property? As I recall, the owner of the home even had two people standing on the lawn assessing the place in anticipation of a property grab.
For the undocumented ones, I can’t see how it is anything but a no-lose situation over the last few years. You put nothing down. If the house appreciates you keep it. If it loses value just walk away with probably not a single negative consequence. How the heck do you track an undocumented worker with no SSN?
Census: Texas Is the Hot Place to Live
http://hosted.ap.org/dynamic/stories/C/CENSUS_GROWING_CITIES?SITE=OHCIN&SECTION=AMERICAS&TEMPLATE=DEFAULT
AP story, March 27, 2008
Four Texas metropolitan areas were among the biggest population gainers as Americans continued their trend of moving to the Sun Belt in 2006 and 2007, according to Census Bureau estimates to be released Thursday.
Dallas-Fort Worth added more than 162,000 residents between July 2006 and July 2007, more than any other metro area. Three other Texas areas - Houston, Austin and San Antonio - also cracked the top 10.
—
(Aside by Me: It is very different here in Dallas-Fort Worth. Good thing we have all that increased demand, or our February yoy Case-Shiller index wouldn’t have been -3.3%.)
(This was a Dallas AP story. Austin, TX might have been higher on the top 10 list. And, the story title itself is too easy. Moving on.)
Finally:
“People are running away from unaffordable housing, from the economic slowdown,” said Karl Eschbach, a state demographer in Texas. “I would expect Texas to stay at the top of a slowing game.”
(Apparently form the story, 1 in 6 of all people who moved across state lines ended up in Texas, yippee.)
and:
“Home prices continue to be a big factor. A report earlier this month by Global Insight found that housing prices in the Dallas area were undervalued by as much as 30 percent.”
(All I can say is that they must mean relative to more bubbly areas.)
Yawn. Wait unti these geniii see the taxes and what the jobs pay.
Anybody catch Dean Baker tearing the eCONomist from the heritage foundation to shreds on the PBS newshour, yesterday?
Heritage == Mouths of Sauron
Oh, great… Now I see the Mouth of Sauron riding out from the Black Gate, wielding a pile of toxic loans…
Mouth, to Gandalf: “Ah, old grey beard - I have a token I was bidden to give thee if you showed yourself…”
Mouth hands Gandalf a pile of papers and says, “Know that my Master’s rates on HELOC’s are very low… and I know you have a condo in the Grey Havens that you need to get rid of…”
I’d love to see that. The heritage asshat Jerry Bowyer calls himself an economist. I want to see his degree because he hasn’t a friggin’ clue what he’s talking about. But then again, do any of them from heritage live on the same planet as the rest of us?
Wish I’d seen that. I’m a certified GOPer but the conservative think tanks and party peeps are mostly all wet on this. They think it’s all PR, that they can jawbone the thing away, that it’s all Dem propaganda. Hell the Dems didn’t even catch on themselves until a couple months ago, durrrr…whenever I get in a discussion with one of my R friends I just say No, this is different, this is big and party rhetoric doesn’t cut it. It is what it is, etc.
http://www.realtor.com/search/listingdetail.aspx?ctid=969&typ=1&sid=8cb9370efd0e4f0899141e353cf34194&pg=389&lid=1085144616&lsn=3885&srcnt=3889#Detail
$11,900,000
3 Bed, 2 Bath
1,731 Sq. Ft.
0.32 Acres
*im just shocked! Nearly speechless!*
http://www.realtor.com/search/listingdetail.aspx?ctid=969&typ=1&sid=8cb9370efd0e4f0899141e353cf34194&pg=389&lid=1093671213&lsn=3881&srcnt=3889#Detail
$7,995,000
5 Bed, 5.5 Bath
3,900 Sq. Ft.
0.17 Acres
(just insane! How much is it really “worth?” $2 million? Less?)
http://www.realtor.com/search/listingdetail.aspx?ctid=969&typ=1&sid=8cb9370efd0e4f0899141e353cf34194&pg=388&lid=1094215293&lsn=3874&srcnt=3889#Detail
$5,750,000
3 Bed, 2 Bath
1,949 Sq. Ft.
0.17 Acres
($2950/foot for a starter house by the ocean? What’s it’s true “worth” once the bubble bottoms out?)
Buh Bye. I checked those tiny houses out and was expecting a miami beach front custom. It’s san diego!
Take those realtors out to the shed.
Stocks Head Toward Higher Open As GDP Report Shows Stronger-Than-Expected Personal Spending
http://biz.yahoo.com/ap/080327/wall_street.html
Consumers increased buying at a 2.3 percent pace, which was ahead of the 1.9 percent growth rate that had been estimated.
There must still be plenty of ammo left in those credit cards.
Spending increase less than price “inflation” means consumers bought less, but paid more for it. Less is more!
maybe the first bank to crack:
Modesto’s County Bank seeks capital, CEO to retire
“… The bank will delay its annual report in order to quantify its mounting loan losses. The bank holding company said last week it expected to make a loan-loss provision of $26 million and report a loss of $15 million. County Bank has problem loans in condominium projects that have stalled in Rocklin.
The company also announced the imminent retirement of its chief executive officer, Thomas Hawker, 65, who will retire as soon as a successor is found.
The bank has 26 branches, mostly in the central San Joaquin Valley, with some in Sacramento, San Francisco and Santa Clara….”
http://tinyurl.com/3dsorx
bizjournals
Mark to Modesto
The one I’m watching with interest is Corus Bank, they’re still paying 3.75% APY on 6 month CDs and have tons of condo exposure in Miami. Give them another six to 12 months before it gets real ugly.
These USD ‘rallies’ are the saddest, most pathetic moves you will ever see. Lower highes, lower lows. The channel is a chunnel. Failed to rally to 76, dive, dive…
http://quotes.ino.com/chart/?s=NYBOT_DX&v=d1
METALS STOCKS
Gold futures edge down, stronger dollar weighs
By Polya Lesova, MarketWatch
Last update: 10:47 a.m. EDT March 27, 2008
NEW YORK (MarketWatch) — Gold futures edged lower to trade near $947 an ounce Thursday, as a rebound in the U.S. dollar put some pressure on the precious metal.
Gold for April delivery fell $2.90 to $946.30 an ounce on the New York Mercantile Exchange.
“I’d expect gold to rally back up to the high 900’s or low 1,000’s within the next month or two,” said Zachary Oxman, a senior trader at Wisdom Financial.
This is a repost, but I posted it a 3 am before bits bucket.
I was reviewing the basics on CDO’s ect, a site on wikipedia had an interesting paragraph
Derivatives such as credit default swaps also create major distortions in the traditional indicators of value of stock and bond markets. Many people wonder why indices like the Dow Jones Industrial Average and S&P 500 seem to go up endlessly. Part of the reason is that big institutional investors no longer sell companies they feel are about to fail, no matter how obvious that impending failure may be. The securities issued by such companies may retain significant paper value up until almost the very end. Instead of selling, investors can buy “insurance” in the form of derivatives and keep holding their investments. This distorts the value of traditional market indices because the decision to remove a failing company from the index can be made well before the paper value drops to zero. This saves the value of the index. It creates the false impression that the index always rises. The underlying markets, for which the index was developed to reflect value, may be far more unstable than appearances indicate. False appearances of stability allow securities markets to appear far less risky than they really are, encourage less knowledgeable players to speculate on derivatives, and allow broker/dealers, financial journalists and some academics to claim that markets are far better investments for the retail investor than they really are. The overall effect is to reduce the perception of risk even though the risk still exists. The reduced perception, however, reduces risk premiums and encourages shoddy loan practices, and may be the cause of runaway financial bubbles, when irrational exuberance gains traction on the basis of inaccurate information.
Er … NO.
The sellers of insurance hedge their risk in the underlying “linear” market.
Put differently, the price discovery mechanism is flowing from complex derivatives into the linear market.
due to the lag in data San diego down 30 or more check you data
http://www.nytimes.com/2008/03/26/business/26leonhardt.html?ref=todayspaper
Interesting article.
Be It Ever So Illogical: Homeowners Who Won’t Cut the Price
in Europe it’s even worse, I can assure you - thanks to 10 or sometimes even 20 years of non-stop price growth.
In my area there are several expensive homes that have been on the market for more than five years, at 10-20x the price that the owner purchased the property for around 1990 or so. Sellers are convinced that some day the market will meet their wishing price and make them instant millionaires. They switch realtor from time to time, but the asking price stays the same or even gets increased. Some of these homes are also on the rental market, for withing prices that are just as ridiculous. Dutch home prices are at a 300-year high now (corrected for inflation!); the owners must feel very lucky…
And for the average home, big home owner associations state that whenever you sell your home, you can ALWAYS at least make a 10% profit (which covers the 7% transfer tax and other costs associated with moving). So for every resale, a 10% price increase is the absolute minimum (but many realtors in my area start with at least a 50% increase).
Both the Dutch central bank and some local politicians (!) have warned recently about the risk of stratospheric asking prices for homes in my area, mostly because it makes the market illiquid. The newspaper even printed a letter from me about the subject, although they left out most of the uncomfortable facts. But I guess it will take many, many years before most homeowers and national politicians get it. And the realtors and appraisers, they will never recognize the fact that homeprices can decline and simply retire rich or move to greener pastures when the biggest bubble in history comes crashing down.
coffee~
Homedebtors are still ignoring the slings and arrows of outrageous fortune to take up ARMs against a sea of mortgage lending market troubles…
Thursday, March 27, 2008
Homeowners still up in ARMS
Despite the devestating of the subprime crisis, the number of new adjustable rate mortgages is on the rise. In the second of our “Housing Madness” series, Bob Moon takes a look into the lure of these loans and why they’re not a good deal.
Have I entered some kind of a time warp, or did Marketplace accidentally mix in a vintage-2005 story with today’s offerings?
“Bankrate.com’s Greg McBride says those loans became — and remain — a deceptively easy way to make the deal look affordable.
Greg McBride: “Too many mortgage products initially geared for a narrow niche of the borrowing population became mainstream mortgage products during the height of the housing boom. That masked a lot of bad loans, where borrowers got a loan for a house that they truly could not afford.
Although millions of borrowers are now in mortgage misery with adjustables shooting higher, not everyone’s been scared away. Quicken Loans reports the share of adjustables is back up to 25 percent of the mortgages it’s writing.
But after millions of foreclosure nightmares, why would anyone risk an adjustable mortgage?”
My theory: Stupid gambles on the part of lenders and borrowers are a natural consequence of politicians falling all over themselves to promise future mortgage bailouts.
4th-Quarter G.D.P. Growth Unrevised at 0.6%
WASHINGTON (AP) — The economy nearly sputtered out in the final quarter of last year and is probably faring even worse now amid the continuing housing, credit and financial crises.
The Commerce Department reported Thursday that gross domestic product increased at a 0.6 percent annual rate in the October-to-December quarter. The reading — unchanged from a previous estimate a month ago — provided a stark reminder of how much the economy has weakened. .
http://www.nytimes.com/2008/03/27/business/apecon-web.html?ref=business
How much did they have to play with the numbers to stop it from going negative?
1) How often are GDP numbers “unrevised”?
2) What percentage of recent economic data releases have turned out “worse than expected”?
A taste of the market up in Boston.
http://www.boston.com/realestate/news/blogs/renow/2008/03/for_sale_this_p.html
Good lively comments below the article. A lot of 1st time homebuyers who have done their homework and aren’t going to play the sellers game.
Earthquake hits Wall Street…
Do traders believe there is something special about S&P500 = 1340?
Yup — S&P500 = 1340 or bust.
Before anyone gets excited or flames me for fanning the flames of hysteria, I was speaking metaphorically…
When will this herd of Wall Street sheep learn to stay clear of the cliff?
Twin peaks. (I am sure the technical analysts have a fancier name for this — double headless shoulder pattern, perhaps?)
Grand Tetons?
It could make a triple top still. Too early to tell.
Isn’t three tetons considered to be unnatural?
A Scaramanga?
A graph of the long term PE ratios going back to 1871
http://tinyurl.com/38cyu9
AngryBear.com
That is some sophisticated time series analysis there. Did they fit the scarecrow’s arms chart to their data?
It’s the Pam Anderson effect.
Roidy
FGIC Sees No Need to Honor Agreement With IKB, Calyon
http://www.bloomberg.com/apps/news?pid=20601087&sid=aen_onq9Nxc4&refer=home
My personal advice for first-time buyers: Try not to catch yerself a falling knife
First-time dilemma
Home prices are dropping, but should first-time buyers jump in?
By Amy Hoak, MarketWatch
Last update: 2:01 p.m. EDT March 9, 2008
CHICAGO (MarketWatch) — Everyone likes a bargain. So it’s no surprise that as home prices fall in many markets, those who have been priced out of owning a home are beginning to take notice.
what’s in your vault?
Twenty-six people are under arrest over the discovery of 90kg (14 stone) of fake gold in the vaults of Ethiopia’s central bank, a senior official says.
The fraud was discovered after some of the supposed gold was sent to South Africa, where it was found to be gold-plated steel.
http://news.bbc.co.uk/2/hi/africa/7315137.stm
geez, how many oz Av. in a Stone?
14 stone = 3136 oz av = 2858 troy oz.
These episodes are much more common than you’d imagine…
About 20 years ago, a bank in el lay, lent out quite a bit of moolah on China 5 and 12 oz Gold coins, that were in actuality gold-plated copper.
How could they not realize that switcheroo?? The density of steel is less than half that of gold. Same with copper. Maybe I could see lead, but the density delta is still high. I was worried that my silver could be lead (not much of a density diff there), but I tested. Now, if I were a Pt buyer, I’d worry that I was getting Pt plated gold bars. The densities are similar and buyer might not expect that. Maybe they would. Whatever. Bored by my post. Sorry for the time theft.
MrBubble
The bank in question was one of the few retail banks I know of, where you could get loans on precious metal, and the scamster had 5 & 12 oz China Pandas struck in copper, gold-plated them and put them in plastic capsules, encased in wood display cases, very similar looking to the genuine article, from what I heard.
They were sitting in the bank for a number of years, before somebody thought it was strange that 1/2 the mintage of the genuine article (or so they thought) was just sitting there doing nothing…
Very costly Copper.
Judging by the price action in Lehman, they are the next victim.
“…It was early January and Saad, managing director of one of the world’s largest investment funds, was in his office as usual, reviewing potential deals in Kuwait and elsewhere in the Persian Gulf region, when the banks asked him to invest, he recalled.
“They called us. . . . We receive calls on most transactions,” said Saad, whose fund bought stakes of $3 billion in Citigroup and $2 billion in Merrill Lynch. …”
Washington Post
http://tinyurl.com/39yk5p
Mr. Saad, if any other banks or financial institutions call you asking for an investment would you please call me? Your market timing is horrible. By the way Lars is looking for a loan.
With the Federal Reserve accepting very shaky collateral from the banks and lending institutions, they may have used up all of their ammunition and now must rely on sovereign wealth funds.
JPMorgan Chase Acquires Bear Stearns In Tedious-To-Read News Article
March 21, 2008
“NEW YORK—As a volatile market reacts to news of the Bear Stearns fire-sale deal with a surge in stock prices but reduced bond yield, officers from JPMorgan Chase announced Monday that they were close to finalizing plans to purchase the securities giant in an incredibly complex series of financial maneuvers and obscure legal jargon that can only be described in the most mind-numbingly dense and unreadable way. Successfully adding yet another infuriating block of text to an already indecipherable paragraph, some investors said they hoped to stave off bankruptcy for Bear Stearns, which, during last year’s impossible-to-write-about mortgage crisis, saw its value depreciate almost as quickly as readers’ interest in this story. “Critics on the equity side have no economic standing because the deal valuation is based on intrinsic pricing models,” said analyst Jack Pinard, only further bogging down the news for anyone who might be remotely interested in grasping what the fuck is going on. While speculation spread on Wall Street that shareholders might angle to boost the selling price beyond JP Morgan’s very low but federally guaranteed bid, others claimed to be absolutely amazed that you even made it to the end of this sentence.”
The Onion
It used to be $250 to put on a corn contract. It will be difficult for farmers to hedge at these prices.
http://www.cnbc.com/id/23826374
That’s good if you ask me. Too many margin monkeys messing in those markets with no idea what they are doing.
Corn was my first trading vehicle way back in the dark ages. There’s nothing scarier looking than a corn chart.
Hedgers do not have that problem (contrary to what may be reported - different rules apply).
Black swan author outsells Greenspan.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aHfkhe8.C._8&refer=home
What bothers me is the assumption that this crisis was an unforeseen event. It was inevitable. What was unforseen was the debt and housing bubble that led up to it.
Neither the current unwinding of the credit expansion or the debt (and housing) bubble that preceeded it were “Black Swans” IMO. There isn’t much revolutionary about either, just same stuff exaggerated to a gross extent.
For a good “Black Swan” we need an event that suddenly and irreversibly turns the fundamentals inside out. I wonder what it will be, but nature has a way of kicking systems in the a$$ when they are at extremes.
For a good “Black Swan” we need an event that suddenly and irreversibly turns the fundamentals inside out. Would an exchange of missiles into the oil fields of Saudi Arabia & Iran be such an event?
Does this paragraph miss anything? LOL
“…Wil Shipley, a Seattle software developer, uses his iPhone at the Whole Foods fish counter to check websites for updates on which seafood is the most environmentally correct to purchase. He quizzes the staff on where and how a fish was caught. Because he carries the Internet with him, “I can be super-picky,” he said.
The clerks who work the fish counter don’t mind. “He’s confirming on the Internet things that I am saying,” said Whole Foods’ Ken Shugarts….”
LA Times
http://tinyurl.com/2md5od
Shipley is making a F-TON amount of money as an independent software developer for the Mac.
Very true, but I love a paragraph that has Whole Foods, sushi, iphone, internet, arrogance, environment along with the implied ocean living, beer and wine.
Whole Foods (check) sushi (brown rice, vegetarian) (check), Iphone, internet (check). However, the thing at the fish counter is really obnoxious.
This is why Claritas Corp. made all that money
The article didn’t mention how the whole foods employee added a massive booger to the fish order. Free of charge and totally organic.
I’ve got a crazy visual of the dude asking the person working the fish counter “Where is this fish from?” the look on their face when he asks “How was it caught?” and the uncontrolable laughter and back slapping when he finally leaves with his purchase.
No doubt….I’d be laughing in this nutjob’s face. Someone with waaayyyy too much time on his hands.
Seriously. Drive a few miles North and get it off the boat.
Someone I’ve dealt with is claiming that California areas along the coast like Newport Beach, Huntington Beach, Laguna Beach, Malibu, Santa Monica, even Hollywood Hills remain at all time highs. I find this hard to believe. Anyone have any reports that say otherwise?
Jas Jain posted some numbers here the other day. A few of the more affluent zip codes in the beach cities and the Bay Area were still showing gains in median sales price, but it seemed to me that in most cases the sample size was too small to yield a meaningful measure of central tendency (e.g. 2 houses sold in a month). Notice that once you get into the very high-end zip codes, the variability in pricing can be quite significant anyway — in a neighborhood of custom homes, one might have, for example, a $5M house next to an $8M house next to a $3M house, etc.
On the other hand, if one accepts that prices in these areas are indeed still increasing on a per unit, per square foot basis, one might be inclined to posit that the uber-wealthy have done quite well for themselves in recent times. I, for one, wouldn’t be completely shocked to learn that many residents of Upper Richistan have recently become significantly wealthier, relatively speaking (I am not attempting to incite a political debate here…just pointing out the possibility…)
That’s what I’m thinking - it truly is different for the truly rich.
In Santa Barbara county there’s a world of difference between Lompoc and the northern bits of Santa Maria, and Montecito.
Anybody know anything about Gore’s housing plan?
http://news.yahoo.com/s/time/20080327/us_time/isalgoretheanswer;_ylt=Ar..XpzXDUGEjimcGi7B6OZh24cA
http://www.avpress.com/n/27/0327_s2.hts
PALMDALE - In its second round of job cuts in less than four weeks, the city laid off 39 employees Wednesday, citing declining municipal income as home building, sales tax and property tax revenue and state government aid all drop.
By department, the layoffs were:
City manager’s office - executive secretary and administrative analyst.
Communications - director of communications.
Finance - contracts administrator, senior financial analyst and senior account clerk.
Public Safety - four Drug and Life Skills Education officers and a public safety supervisor.
Parks and Recreation - a recreation coordinator, a recreation supervisor, a senior office assistant and an events assistant.
Library - two library clerks.
Public Works, administration - an administrative technician, an engineering technician, a transportation coordinator and two associate engineers.
Public Works, maintenance - two maintenance specialists, two custodians and nine maintenance workers.
Economic Development/Housing - a senior administrative analyst and two housing technicians.
Palmdale Playhouse - an office assistant.
Do you think there were any homedebtors in that bunch?
Did I close the bold correctly? That was my very first attempt at html.
Public Safety - four Drug and Life Skills Education officers
I guess those teens will have to put condoms on bananas under the supervision of an ordinary teacher.
I am always confused by ‘why really intelligent people make stupid investment mistakes’ . That individuals invest in funds etc. is understandable. But why does a Mr. Joe Lewis throw a billion (half of his net worth) into a firm and then DCA on the way down? Any reasonable investor would 1) never put half his money in one stock and 2) own a stock without a predetermined stop loss. Mr. Lewis should have read:
“Why Smart People Make Big Money Mistakes–and How to Correct Them: Lessons from the New Science of Behavioral Economics (Hardcover)”
by Gary Belsky (Author), Thomas Gilovich (Author) 2000
Amazon.com
http://tinyurl.com/373xvj
For those that have not read, it is worth the trip to obtain.
Perhaps he got all his financial advice from Leon Spinks?
They just think they’re smarter than the market.
Highly evolved bull market genius.
Statement on Financing Arrangement of JPMorgan Chase’s Acquisition of Bear Stearns
Mar 24, 2008 NY Federal Reserve Bank
http://tinyurl.com/ytrmrl
“At the closing of the merger, the Federal Reserve Bank of New York (”New York Fed”) will provide term financing to facilitate JPMorgan Chase & Co.’s acquisition of The Bear Stearns Companies Inc. This action is being taken by the Federal Reserve, with the support of the Treasury Department, to bolster market liquidity and promote orderly market functioning.
The New York Fed will take, through a limited liability company formed for this purpose, control of a portfolio of assets valued at $30 billion as of March 14, 2008. The assets will be pledged as security for $29 billion in term financing from the New York Fed at its primary credit rate. …”
I would like a loan on the terms that JPM got. This is an incredible deal, a free call option on the debt that the Federal Reserve is guaranteeing. Wowee Zowee.
I suggest everybody send something like the following to
http://www.federalreserve.gov/feedback.cfm
Be sure to sign it.
Dear Federal Reserve Board,
I have some toilet paper that I’d like to use as collateral on a 100 million dollar loan. I’d like to borrow money at your low interest rate and invest half in a CD earning higher interest rates, and I’d like to use the other half to play roulette in Vegas. I figure I’ll pay you back if I win big in Vegas, and if I lose, I’m thinking the tax-payers can bail out whatever the toilet paper collateral doesn’t cover. I see all the big players on Wall Street getting this kind of deal, so if it’s good for the goose, it’s good for the gander and I assume you’ll let me in on it, too. In return, when you retire from the Fed, I will provide you a job at my company if I’m still solvent and I will make sure you get a nice employment contract with a great golden parachute package - heck, I may even go platinum on you if my gamble in Vegas works out like I think it will. I have a system that can’t lose.
Obama Housing Plan
http://www.politico.com/blogs/bensmith/0308/Stimulus_II.html
http://www.zillow.com/HomeDetails.htm?zprop=2146490797
Just another big house for sale in Cali, prices are falling pretty good on the old tract homes but still expensive.
unhappy stock market. bernake is going to have to cut rates again and bring his check book to wall street.
“Telecom is my specialty if I have one but Mr. Bye Fl doesn’t give me any credit for that ;)”
Chill TX… we all love you!!!
Grading Bernanke: A Symposium
By THE AMERICAN Thursday, March 27, 2008
Filed under: Economic Policy
JOHN L. CHAPMAN
I would give the Federal Reserve an A for intentions but a C- for execution.
With the recent “forced sale” of Bear Stearns, on top of an over-leveraged economy and credit crunch largely of the Fed’s own making, systemic monetary reform should again be put on the agenda. Here’s why….
DESMOND LACHMAN
The Federal Reserve should be highly commended for its bold and innovative measures aimed at stabilizing financial markets. I would give it a grade of A-.
After vacillating for far too long in the second half of 2007, the Fed is now demonstrating that it fully grasps the risks posed by the housing bust and the associated credit crunch. The Fed is now signaling that it will do whatever it takes to avert a financial market meltdown, which is welcome news….
ALLAN H. MELTZER
I would give the Federal Reserve either a C or C-, reflecting an average of one good grade and one poor grade…
The Fed’s only mistake was to guarantee $30 billion of Bear’s portfolio. This action transferred potential losses from the market to the taxpayers. I do not believe the present system can remain if the bankers make the profits and the taxpayers share the losses….”
http://tinyurl.com/3aatrg
I am in the A- camp, although I am not upset about bailing out BSC - I am upset about the terms - The Treasury has the money and took the risk, they should have demanded the profit.
busy at work, month end fun:
here’s one for the list your are trying to put together for your buddy:
CPST
Thanks Voz
This is what I have so far, some I have looked at are dogs but…
SIFY HED TMM ILA SFE ZL WPT.TO RMTR are prospects.
Thanks for the wpt!
I have purchased nothing yet. TMM is going to get a lot more attention, it is in an area I like.
CPST looks pretty exciting, I might take a position in that for myself! Its MAC just turned south so I might be able to pick it up for $1.60 or so. (Looks like it moves seasonally).
The two securities you recommended are setting up for an excellent portfolio = High profit, low risk.
for a corporal dog, that TMM has some high falootin major holders. you know the sectors I like, I sure hope this sheep aint comin in for a hard sheering.
Geez, guys. Capstone is a D-O-G! Alternative energy, yes. But I tend to stay away from tech companies (or any company, for that matter) that sports negative gross margins. That company has such poor fundamentals even its fleas have fleas. Unfortunately, my broker will not allow me to short that one…
Sorry, but I have followed that company for years, and every couple of years it has a spurt like it’s having right now. Followed by a swirlie the following year…
BINDY
“I would give the Federal Reserve an A for intentions but a C- for execution”
This is a good example of the “don’t ever be negative’, “put a positive spin on it”, “do not offend” drivel that infects modern society.
How can the current and future problems by dealt with when policy makers and writers act as apologists for the architects of disaster.
Al & Gang won’t even acknowledge the blood on their hands and these enablers seek to extend them succor.
BSC CEO sold all his shares today @ $10.84.
Got puts?
Did he buy the dip first (to $2/share)?
Your Uncle Buck looks sick
March 28 (Bloomberg) — The dollar headed for its biggest weekly decline in a month against the euro as traders increased bets that the Federal Reserve will cut interest rates again to avert a recession.
Futures on the Chicago Board of Trade show traders increased bets the Fed will lower its benchmark target lending rate by a half-percentage point at a meeting ending April 30. The futures showed a 42 percent chance of a reduction of that size, compared with 36 percent the prior day. The remaining bets were for a cut of a quarter-point.
But what else is FED Chairman to do when all his pals need money because they were on a drunken Mortgage binge the last 5 years? its only 0.5 trillion ( and our Social Security )
I think its time to diversify out of Treasuries.