Bits Bucket And Craigslist Finds For April 4, 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.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
August 2025 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
Hoovers Heirs…
http://online.wsj.com/article/SB120718359261185135.html?mod=opinion_main_review_and_outlooks
The WSJ editorial board is notorious for its ultra-consevative bias. But the snark in that artice seems rather beneath them.
My economic history is weak. Is what they are saying really true, or is the article full of logical fallacies; for example, deliberately confusing correlation with causality? Maybe we should ask Helicopter Ben?
D-ratic strategy: “Adopt my bailout proposal, or I will call you a callous heir to Herbert Hoover’s legacy.”
You just called the WSJ “ultra” conservatively-biased and the article beneath them, and yet you’re clueless as to the content’s being “really true”.
Are you letting your bias get in the way of your reasoning powers?
Indeed. But I see that a lot with people who tag the WSJ with that line — without even knowing the background. Everything the WSJ said in there is pretty easily verifiable: Smoot-Hawley, etc.
This article was actually one that I cut out to pass around.
Oh, and the WSJ is not “ultra” conservative, not in the American sense. They seem a lot more relaxed on some religious/moral issues than most Southern Baptists I know in flyover country, for example. It’s time to drop the tag, guys! It’s like calling the Washington Post ultra-liberal because of their stands on a selected few issues.
Their editorials are biased toward creating more wealth for their readership, often at the expense of other peoples and nations.
How’s that? Fair enough?
Obviously, they are evil incarnate.
It’s the editorial board/page that’s notoriously hyper-conservative, not the reporting
This article is spot on. The Great Depression would have been a long recession had Smoot-Hawley not been enacted. I can deal with higher taxes that will be imposed by Dems. I won’t like it, but I can deal with it. What really scares the hell out of me about Dems is this talk of protectionism.
If anyone passes similar trade protection policies in the current situation, it will be the D-rats.
Pro-business, anti-regulation mongoloids run the economy into the ground and you want to preemptively blame the next in line?
Nice Orwellian revisionism.
Why are you bringing the DotCom bust into this?
You missed the point entirely. It was run into the ground by Smoot-Hawley. That was passed in 1930 when as I stated before the country was in a recession. That recession lasted 10 years and was twice as deep as it would otherwise have been thanks to among other things Smoot-Hawley.
Laying the cause of the great depression anywhere but at the feet of pro-business, anti-tax, no regulation, self-policing failure of Hoover economics would and is factually, intellectually and patently false.
Smoot-Hawley sounds an awful lot like Sarbanes-Oxley, as far as i’m concerned.
No, I didn’t miss your point, I merely object to your reflexive conservative bias.
I agree that the Smoot-Hawley Act (sponsored by two members of the GOP and signed into law by a conservative president, BTW) was a really bad piece of policy, but it does not follow A.) that all protectionist measures are automatically bad; and B.) that the next administration (whoever it is) will be as hopelessly dunderheaded as either Hoover’s or Bush The Lesser’s.
Yes protectionist measures are bad. Always bad. Always awful actually. Doesn’t matter if signed into law by Dems or Reps, liberals or conservatives.
Do you consider patent, trademark and intellectual property measures “protectionist”? I do. But they seem to be very useful to running a capitalist society, whether or not we agree they’re being applied optimally.
Likewise, I think many of our consumer protections can be construed as anti-competitive in the global trade sense of the term, but I’m glad we have them.
No, one of the major problems with our economy is that we no longer make as much as we did. And there isn’t much foreign demand for the stuff we do. The main reason is because there are people in the world who will work for pennies a day in China and India. It’s tough to complete against much cheaper foreign labor. It was inevitable that our manufacturing economy would go abroad, and we’re starting to see the long term effects of that.
Yes protectionist measures are bad for the wealthy. Always bad for the wealthy. Always awful for the wealthy actually. Doesn’t matter if signed into law by Dems or Reps, liberals or conservatives. Always bad for the wealthy.
Our manufacturing hasn’t gone anywhere. The US remains the largest global manufacturer by far, and we produce by a factor of 10 more goods (no services) than we did in 1940 and it grew even recently. Lots of jobs have been lost to automation, which was easily foreseen at the time recall George’s job in the Jetsons vs the jobs of that era or the very low expected hours worked of in old future predictions.
http://evop.blogspot.com/2006/02/global-manufacturing-data-by-country_22.html
Oh and it isn’t just the US losing manufacturing jobs, it’s global, China lost several times as many manufacturing jobs as the US did in the late 90s.
Yep you’re right exeter. If we would only get rid of the rich, life would be so much better. Hey wait didn’t we try that before? N. Korea and Cuba are shining examples of what happens when those waskally rich people go away. And of course the USSR was a worker’s paradise too.
What we need is Wage Parity Protectionism. For example, if an importing country has $1 per day wages, the labor costs of their products should have a tariff that increases the price of that country’s goods to a level that makes their goods equal to the cost of labor input to that of a US worker doing the same job. It would work in reverse for goods imported by countries that have higher levels of wages, i.e., the cost of their goods would be reduced. This type of protectionism would not single out certain industries & products, and would increase competition in the areas of quality & innovation. This would be true “free trade” as it would be a level playing field. It is also the only way I see for the US to avoid joining the 3rd world lifestyle.
Right on KidClu. But there are some who refer to the unwillingness of level headed people to compete with tyrants who enslave their people as “protectionist”.
exeter - you rock - just clicked on your moniker. what a great cause!
Bingo Kid Clu and exeter . Could not agree more .
Putting aside wages for a moment - how about just enforcement of child labor and human rights laws?! I have yet to hear a convincing moral justification for having American companies employ children working 15 hour days in 18th century conditions. Of course, these companies claim their products are made by “independent contractors” and that they have no knowledge of or power over the working conditions or makeup of the labor force. I don’t see how any moral human being can buy this b.s. attempt at the justification of child slave labor. I think our executive class should be liable for the violation of child labor laws by their contractors.
But hey, no worries, free markets, blah blah blah. It’s okay because the kids are brown.
“America shed another 48,000 manufacturing jobs in March. Since 2001, we’ve lost more than 3.5 million of these good-paying jobs. The ripple effects are being felt in communities across our nation in the form of strained local budgets, record numbers receiving food stamps, and an epidemic of foreclosures.
“The largest challenge facing manufacturing today is our unbalanced trade relationship with China. The U.S. racked up a record $256 billion trade deficit with China last year. Since 2001, our trade deficit with China is responsible for more than 1.8 million lost jobs, according to the Economic Policy Institute.”
It has long been debunked that Hoover “did nothing.” He very actively tried to do different things all the bright lights thought would help, and FDR just continued with same, only moreso.
Not buying. FDR bit the hand that fed him; Hoover did not. FDR put people to work; Hoover did not. You are welcome to your own beliefs.
FDR could put people to work, as America was the world’s largest creditor and had oodles of Gold in Fort Knox…
How’s today’s scenario compare?
Aladin, there’s an excellent point. People assume that politicians can do something to “fix” the fact that we have been living on credit for a long, long time, and that we have made insane promises to people (like me) who will be needing a lot of medical care in the next couple of decades.
az_
Which is why you ought to tap into your social security now, rather than wait for more money, nevertheless.
Sincerely,
16 years out and out of luck in ever seeing any moolah
While nobody wants this to turn into a Depression, I don’t see how that can be avoided if in the future we will have: higher taxes, fewer jobs, and higher costs of living. That sounds like a death spiral to Depression, if you ask me.
There you guys go again with that fear mongering Dems thingy.
And you truly believe that the guys in power since 94 have been all that , um, ‘helpful’? It always goes round and round to the debacle we have now, it is definitely cause and effect.
And it wasn’t “dems”.
So how do you propose to increase income for americans? Somehow, someway we not only need to provide jobs for those working parttime but those unemployed?
We transferred numerous manufacturing jobs overseas, as I understand it. We need to not only bring these jobs back to the US, but increase manufacturing jobs. So that we do not become a third world economy, we must provide wages greater than third world wages, ie., above bare minimum cost of living standards, otherwise no savings for health coverage, retirement and etc.
So, if no protective measures, how do you propose solving this problem?
IMHO, since the US is the GREATEST CONSUMER of products that was formerly produced in the US, we need some device to return these jobs here.
Please, do not push education as the solution. We could educate everyone in the US up to the level of PHD, however, there is not a demand for that many highly educated individuals. I remember the last serious recession of 1974, where PHDs were glad to have a job at the post office. In 1974, in the bay area (SF), the unemployment rate was around 13%, if my memory serves me correctly. The only real jobs was the Alaskan pipeline in Alaska and Texas.
If you have any solutions, please so indicate and provide rationale.
I think you need some education. We didn’t push jobs overseas except in smaller numbers. Global manufacturing employment has been dropping for years. Robots are cheaper than any laborer (no matter the location labor works 8-12 hrs/day and needs shelter and food) a robot works 2-3 as long and requires only electricity, lubricant, and occasional maintenance.
http://www.pbs.org/newshour/bb/asia/july-dec05/china_10-14.html It’s down there a ways but it’s there.
Correct me if I am wrong, however I understand that the US gives tax breaks to companies that moves jobs overseas.
With regard to automation wiping out out mfg. jobs, what is your solution? Pay income to those disposed, unable to find work due to automation? And what do think the unclean masses will do to those robots that are taking food out of the mouth of their children?
Look it, I think the economic theories offered are a crock! I think that the posters are taking the micro view. The individuals in this society will not subsist on a third world living standard. If the Fed and the Govt, thinks that hell will break lose if the financial market collapses, they have not seen anything yet if the public has a large enough group of employed with the employed working at substance wages. I believe that is called “revolution”. This is something that I am not calling for, but as things go forward, with no light at the end of the tunnel, then I suspect the chances of its likelihood increases. And if it should come to pass, I suspect that a house purchase will be the last thing that anyone will be concerned about on this and like minded blogs, IMHO.
People are revolting (foreclosures) in mass numbers, it’s only a matter of time before there’s a Revoltlution…
Revolt: to abandon or reject something
You are acting under two false assumptions
1. A job is “yours”. As in I “lost my job” or “my job was moved to China”. You don’t own a job. Your employer owns your job. And your employer has every right to do with it as he/she/it pleases. Only people who own their jobs are those who are self-employed.
2. Corporations exist to create jobs. Wrong again. Corporations exist to maximize shareholder profits. That means employing as few employees as possible and maximizing their output.
I am fascinated how so many of you here talk about the inevitability of housing prices correcting. You rightly observe that government cannot stop this crash. Yet you somehow also believe that government can wave a magic wand and “bring back jobs” from China. How exactly do you propose this happens?
Impose tariffs. Great so a product that costs $5 today will cost $20 when it’s made in the US by overpaid American workers. An American consumer will spend $20 to “create” 1 job in the US. But then he will have $15 less to spend on goods and services that created 1.1 jobs prior to protectionist measures. Funny thing how those unintended consequences work out.
No respected economist will state protectionism works. And there is a good reason for that. It doesn’t
I guess all those people in the automotive and aerospace industries that were making 15-20 bucks an hour building wire harnesses should believe the economists and their books, instead of their own lying eyes.
I’m not familiar with the math some people are using here…….When a factory shuts down in the US, but a factory opens in China or Mexico doing the SAME JOB for 2 bucks a day, doesn’t logic dictate that this job moved from the US to another country?
It’s hard to say that the government gives tax breaks for shipping jobs overseas, because tax policy is always very broad and it’s almost impossible to make fine adjustments. I’d suspect those policies were designed to equalize US taxes with other nations tax regimes (which was moving whole companies overseas prior to the change).
As far as what displaced workers can do just like everyone they must add value somewhere to the things being produced.
There aren’t a lot of easy answers, but holding humanity back is a poor one. Protectionism is like the a large plantation’s blacksmith trying to stop the railroad from being built because it will mean that the farm can get metal parts from Chicago. The farm did get metal parts from Chicago, but it also meant that there were 100 unconsidered opportunities that opened for the blacksmith.
Factory automation means that vastly fewer people are required to produce the same number of goods. The original Luddites were hand tailors who broke sewing machines because of their laborsaving potential. Was that really a good choice?
As far as education, a PhD can mean little. A lot of schooling is a luxury good mostly to signal and maximize opportunities to meet other signalers in the marriage markets. I’d have to go back and look but I’m pretty sure I saw a study that the ROI on a CDL was much higher than that of a PhD.
Manny, I do not have an ax to grind or a philosophy to sell. All I am simply stating is that the general direction that the US is heading will require, one way or another, that some standard of living above third world must be established. This country and the current generations now living will not live as serfs. Not with the number of weapons currently held by our population!
I am not sure how the future will look, however I would not want to be in government if the glue that holds our society together (including respect for the law) comes unraveled.
From what I understand from reading the comments on this blog and others, it that circumstances may warrant such a possibility.
Now, maybe this website consists of a bunch of “tin hats” and I should not be worried. If so, i appologized for being overly concerned about possible dire consequences.
But If the prevailing opinion on this site is correct, then simply ignoring this possible future, is no different than what individuals here have been railing about, IMHO.
“As far as what displaced workers can do just like everyone they must add value somewhere to the things being produced. ”
Um, Bluto, do you mean adding value like when mortage brokers “added value” by shifting their clients to toxic mortgages wherein the mortage brokers made higher fees ?
Manny and Bruto,
I think there other assumptions that may need to be reviewed:
1. In layman’s terms, Economics/Finance is the application of mathematics to a human activity-life.
2. Humans are neither logical or mathematical in their thinking.
I believe I have read that “fear and greed” drives markets. If so, fear will overwhelm greed every time, as I suspect we are seeing now in the global market places.
Finally, protectionism may have worsened the great depression in the 1930s, however America’s standing as the ultimate market place for goods is not the same place that we were at in the 1930s. Nothing ever happens in the present as it did in the past. To many variables to game.
Wiring harnesses should be the buggy whips of the 21st century.
I don’t claim to be an expert but one of my majors was in finance with a healthy dose of economic theory thrown in. I read Smith, Marx, Malthus, Mills, Friedman, Keynes and my favorite of ‘em all Coase. Economics is a social science and just about every economic theory is just that a theory since it can never be proved or disproved entirely. Which is what keeps economists employed I suppose.
However when it comes to the notion of protectionism it is about as close to an economic law as you get. It doesn’t work and is a negative to any economy.
And what is also lost in the all the hyperbole about “losing our jobs to China” is the jobs that are created here by foreign companies. 6 millions of Americans work for foreign companies. And that doesn’t take into account the millions more Americans who are subcontractors/consultants that work for foreign companies but are not technically employed.
And how many jobs have we lost to other countries under the argument of “comparative advantage”? If you do the math, income loss less increased job wages and actual jobs lost vs jobs gained, IMHO, we, I mean the US, are net losers in this game.
I am sorry, I can provide sources to prove my point. Do you have sources to disprove mine?
SORRY, I meant I can’t provide sources…
Another problem, I think with the automation of manufacturing without a safety valve for the non-manufacturing and non highly educated citizen, the self worth of the individual. From what I have read (unable to provide recent source material other than Hannah Arendt’s “The Human Condition”, 1958), individuals define themselves and their worth by the work they perform.
Without work, citizens today may consider themselves worthless.
Society needs to create by whatever means necessary value for people, otherwise, I am afraid society will collapse not only from an economic standpoint but from a human standpoint IMHO.
It’s clear that there is a lot of historical ignorance about the Great Depression. Much of it is simply ignorance, but a lot of it is, unfortunately partisan.
Hoover tried to do a lot, and most of it made the situation worse.
Good discussion thread.
I think a couple of very important points have been hit on. What I’d like to see discussed (even more) is the view that in today’s world, with all the automation, there does not seem to be enough *WORK* for everybody.
The way businesses have parsed work down to highly-specialized little niches, the productivity of each of those little niches is much, much higher than it was 70 years ago. And it’s to the point that the value of the work that is performed in a 40-hour workweek, is far more valuable than what is required to support him/herself and their family. A farmer with a tractor and some equipment can literally support (feed) tens of thousands of people with the work that he or she does in a year.
So, the question is, how do we as a society equitably allocate work going forward? Some people are work “hogs” and will work as many hours as you put in front of them. Thereby building up lifestyle credits (money) that they use to create a lavish lifestyle for themselves and prepare for a very rainy day.
Other people prefer to avoid work, instead live off of the efforts of others. They seek handouts and assistance from the government, communities, and families. On the extremes, you have sociopaths, who strive to exist by coopting the work of others (by lying, stealing and cheating).
As someone pointed out above, I don’t think education by itself is the answer. If everyone has the education of an MD, then the value of MD-work would be dramatically reduced.
As technology continues to improve, are we going to become a society of 10% worker-ants and 90% queens (with machines, who don’t complain, doing most of the work?)
Food for thought…
BINDY
I still think that America needs to be concerned with the employment of it’s people ,whatever that takes . It really will come down to survival . I would rather see the government create jobs than have the employable sitting around being idle and getting into trouble .
The United States needs to start looking out for the people of the United States . I don’t care what it takes .The employment situation has to be changed or there will be a revoultion eventually . Let China produce for their own people and lets get back to producing for ourselves here in America .
I think the ultimate end game should be a society with a Buddhist desire ethic (meaning people are indoctrinated to not desire anything but the most basic of material needs) coupled with a society of robots capable of producing anything you might want at essentially zero cost.
Of course in that society you don’t have a need for people to hold excess capital for investment. Computers could allocate the cash far more efficiently as it sees product demand change.
People would still work, but just at the things they want to work at. Art, designing cool airplanes, whatever.
I have to agree with Housing Wizard.
I believe strongly we need to take care of our own problems and people here in this country.
Miscellaneous comments on previous posts:
Corporations exist to maximize shareholder profits. That means employing as few employees as possible and maximizing their output. A great many US corporations exist to maximize gains to the pirates in control, shareholders are just suckers as far as the corporate beneficiaries are concerned. That means paying wages as low as possible, minimizing dividends and maximizing awards to the leadership. See what the S&P 500 have been doing for the last 10 years. Maximizing shareholder profits hasn’t been happening.
the US is heading will require, one way or another, that some standard of living above third world must be established. This country and the current generations now living will not live as serfs. Not with the number of weapons currently held by our population The US is heading towards a much lower standard of living unless it changes its ways. If the population starts using all their weapons on each other, they can turn the country into Lebanon of the 1980’s or modern day Iraq or South Afica, but they won’t raise their standard of living one bit but will lower it further & faster. E.g., guns won’t keep the electric grid operating, but they can take it down.
A farmer with a tractor and some equipment can literally support (feed) tens of thousands of people with the work that he or she does in a year. You left out the thousands of gallons of imported oil and all the materials and equipment made possible by huge quantities of the same stuff that the farmer uses in his operations. If the price of oil gets high enough or the supply of oil is restricted [same difference], the farmer’s “work” won’t count for much.
“Maximizing shareholder profits has not been happening”.
See American Skiing company. They ran shareholder value to zero. But they still have a handful executives that are very well paid. They are the ones who get whatever is left. They said, explicitly, ‘the shareholders get nothing.’ What really puzzled me is that there was not the least bit of a public outcry, as far as I am aware of.
From Tom Raum, AP
Housing markets might not have gotten so overheated if the central bank under Alan Greenspan hadn’t kept interest rates so low for so long. And Congress - aided by both Democratic and Republicans administrations - helped to inflate the housing bubble by loosening financial regulation and enacting policies to promote and reward home ownership.
Thank God they now realize this. Everything will be fine now. Just a few bad decisions over 10 years or so. Thanks Easy Al.
this notion seems to be widespread by now in Europe, you can read it in the papers on a weekly basis. Some stories even say that Big Ben does not want to take the bitter medicine and tries to solve the US problems with more of the same reckless policies that caused them in the first place.
But it does not have any effect on EU central bank policy, they keep inflating away and governments do everything they can to stimulate more lending and keep credit (too) cheap. Central bank lending rates are a bit higher here, but mortgage rates are lower than in the US while inflation figures are very similar. And the ECB seems to be even easier regarding acceptance of crappy collateral from the banks.
The War on Savers continues, the politicians and banksters clearly have not learned anything - and why should they, for them there is always a free lunch. And of course, it IS different in Europe, we have an invincible housing bubble so there are no risks in unchecked credit growth
If a third world country tried to inflate away its debt - like Robert Mugabe and the 100,000 percent inflation in Zimbabwe - the World Bank and OECD economies would be screaming bloody murder.
Shoe seems to be on the other foot now. And humans respond in a typical fashion, focused on the short run, taking the easiest route to make the short term seem better.
Who will step in and provide discipline to the OECD economies?
Who will watch the watchmen?
IMF, OECD and Worldbank are pressuring the ECB to lower rates even further and inflate away, just like the FED. There is a very obvious bias in their policy advice
The Zimbabwe comparison doesn’t work there either. Zimbabwe had largely decoupled from the world economy, even including the African economy, as a result of sanctions and the breakdown of border control and even informal trading. And for what it is worth the World Bank and OECD economies and pretty much everyone else as well did scream bloody murder, but they didn’t have any kind of meaningful influence.
they are doing the same thing again.
This canard should have been thoroughly debunked by now. Greenspan’s low interest rates, whatever damage they did to the US economy, cannot have been the sole or even main cause of the housing bubble. Similar or even worse bubbles exist worldwide in many nations, including those whose central banks have not been especially loose with their interest rates.
And how about Bernake’s quote of the week on interest rates ?
“..We are doing the best we can to find the right place to put the interest rate…”
I found this to be screamingly funny, sort of like the interest rate is an ugly piece of family heirloom furniture that has to be displayed, but no one can figure out a spot to put it in. Maybe he should call HGTV for advice.
Key West: Free Beer and Chicken!
http://s117.photobucket.com/albums/o72/muggyFL/?action=view¤t=KWbubble.jpg
Landed at Lauderdale, 2330.
Procured Mustang convertible, 0015.
Drove the the Keys to the end, 0430.
Checked into the Inn, 0445.
Head hit pillow, 0500.
Rooster next door starts symphony, 0530.
See Muggy’s bird in photobucket, reminded of bustard I wanted in a KFC bucket, o - dark - hundred.
How long in the service?
No time served. Telco Ops many many years.
EXIT Realty?
EXIT stage right, there’s my neighborhood chicken!
“Key West: Free Beer and Chicken!”
Key West: Warm blue sky!
I loved the Keys when I lived there. Then it became Margaritaville. What crap.
That actually looks good to me right now. Of course, I’m freezing my a$$ off right now too.
Sour Public View…
http://www.nytimes.com/2008/04/03/us/03cnd-poll.html?ei=5065&en=150c88cced5c5f4a&ex=1207886400&adxnnl=1&partner=MYWAY&pagewanted=print&adxnnlx=1207304323-I2CtFL96vsntRbYPibi1vw
I had a great dream last night about some Taliban with machetes in a roomful of bankers…
______________
Dimon Rejected Rescuing Bear Until Geithner Promised Funding
By Peter Robison — April 4 (Bloomberg)
http://tinyurl.com/youysb
Hours from a market meltdown, as U.S. regulators pressed him for help in rescuing Bear Stearns Cos., Jamie Dimon said no.
The JPMorgan Chase & Co. chief executive officer was concerned that liabilities on the firm’s books would bring along too much risk, Dimon and others involved in the bailout told Congress yesterday. Dimon’s refusal prompted the Federal Reserve to step in with a loan, announced minutes before Asian markets opened that Sunday, March 16.
The testimony provided the most extensive account yet by participants in the largest U.S. rescue of a securities firm. Dimon, New York Federal Reserve President Timothy Geithner and Fed Chairman Ben Bernanke defended the bailout while some lawmakers said it only rewarded risky market bets. The officials compared the turmoil they feared that weekend to the Panic of 1907 and the Great Depression-era run on banks.
REVIEW & OUTLOOK
Bear’s Market
April 4, 2008
Yesterday Wall Street and the government’s top financial regulators were in a place they’d rather not be: Wrapped in a bear hug from Congress. Whatever the merits of the case for the Federal Reserve’s decision to let J.P. Morgan buy Bear Stearns, the deal raised sufficient and legitimate questions of public interest to justify Senator Chris Dodd and his Senate Banking Committee brethren getting up close and personal with Ben Bernanke and the rest of the boys who did the deal. No one should expect Congress to regard this as a once-only date.
Details that emerged from the hearing offered a better understanding of the high drama during the days of the sale. These particulars make us inclined to give the Fed the benefit of the doubt on doing the basic deal to forestall systemic risk. We remain unconvinced about the new precedent of the government holding $29 billion in mortgage-related securities as collateral.
The sooner the press stops with this Fed = govt stuff the sooner we can start to accurately assess the situation.
They do have monopoly ownership of the printing press technology. Hard to see how that does not make them part of govt — read their lips.
I’m willing to bet that 99% of the MSM doesn’t understand that the Fed is not an agency of the Federal government. Refreshingly, Glenn Beck had Bill Fleckenstein and another guest on his show a few nights ago, and they were all discussing this very fact.
I was listening to Bob Brinker (had a radio where I was folding laundry) and he was astounded at all the callers talking about a “taxpayer bailout” of Bear. Started to get quite annoyed with them.
News Hour with Jim Lehrer last night described the FED at the Fourth Branch of Government.
Arwen U-
Bob Brinker is such a two faced, Wall Street twit these days, IMHO. He was all for the housing bubble, until the gig was up, and he had to come clean. Then he went bear, pretending he was with them all along. I can’t listen to him anymore.
He called the tech bubble and we got out with $, but that’s before he sold his soul, again IMHO.
Isn’t that what they are attempting to avoid, an accurate assessment of the situation? Mushrooms are we.
Bob Brinker is the same turd telling his radio callers that FL real estate would go no where but up in late 2005.
They are created and commissioned by the govt to perform certain tasks. They have a government enforced monopoly of the monetary system. If the govt hired Boeing to do something which Boeing does poorly, should we not hold the govt (who has ultimate responsibility for the thing being done, regardless if they hire it done or bring it in-house) responsible for the job performed?
The Fed exists be decree of the federal govt. It inherits all it’s power from govt and would not exist in a free market on it’s own. To the extent that it is formed as a “private” entity is in name only. They don’t have the right to do anything as they see fit (outside of the specific parameters set forth by govt that allow them to make operational decisions within the bounds of their dictate) or to pursue any business they see fit. They have a specific dictate and have to work within fairly narrow parameters (compared to any real private business) as set forth by the legislature. If they were to go against that dictate they could be dissolved and replaced also at the will of the govt.
This is in every considerable aspect a government-formed entity which exists to do the govt’s bidding. What is it if not an agency (in the legal sense of the term) of the federal govt?
Can it be said that the Fed is more like Fannie Mae or Freddie Mac than it is like an actual government agency?
They enjoy some of the powers of government with none of the Constitutional safeguards which hold the executive, judicial and legislative branches accountable. Sweet deal if you can get it…
Not at all. At least Fannie and Freddie seek to maximize shareholder value. The Fed doesn’t even keep it’s owned retained earnings. After a mandated limited amount of dividends paid to shareholders (supposedly to compensate for the reserves the member banks have to hold in reserve) the rest goes back to the government.
“Dimon’s refusal prompted the Federal Reserve to step in with a loan”
IMO, there’s always been a troubling paradox here: If the overall financial system was actually at great risk (with counter-parties in immediate harm’s way) why did JPM need to have their arm twisted? And, why did no other banks step in to help? Don’t they have the most to lose?
During the LTCM rescue in ‘98 almost all member banks played a role and the FED simply arranged the meeting in NY.
I think the fear is running much deeper this time around.
No, I explained this on the blog the other day.
JPM was counterparty to most of Bear’s complex derivative trades. They were the only possible suitor to this Bridezilla.
They strongarmed the Fed, if you will.
They get to just cancel the trades on both sides, possibly get some “sweet” writeoffs, pick up Bear’s business for nothing, and get a building for their troubles.
They are taking on risk but who wouldn’t do it when the Fed is bankrolling you?
Heck I’ll do Vegas if you bankroll me!
And what would have happened if Bear Stearns had just been allowed to collapse naturally?
JPM would be Bankhaus Herstatt.
Whether this would’ve sunk the financial system is open to debate. I think yes, on balance.
JPM is the private front for the Fed (of course the Fed is technically private but who wants to face that fact). They are really one in the same. Remember JPM invented the whole CDS scam and the Fed never blinked an eyelash until everyone is saying the sky is falling and then JPM makes out like a bandit (Bear Stearns for pennies on the dollar to start with).
I believe that we don’t have a banking crisis. What we have is further consolidation of banking power in the hands of the Fed/JPM.
Thank you for the great image……I’ll cherish it
They damn well should be sour. Look at the Frank-Dodd bailout proposal for the reason — who wants to live in a country whose politicians openly aid and abet household decisions which are destined to collectively bankrupt us?
I love my Country, but am completely disgusted with the D.C. cesspool (both parties) These turds all float to the top and have no problem destroying everything we were founded on. In fact I have come to believe they get some sort of perverse pleasure out of it. The Constitution be damned!
The government create incentives for bad behavior, with the best of intentions? Say it isn’t so!
Welfare payments drop if the recipient starts working at a menial job?
Welfare payments drop if there is a man in the house earning income?
More money for every additional child born into poverty?
Naww, these policies couldn’t possibly encourage societally destructive behavior! The government would never do that.
Destined to collectively bankrupt us? That is a bold statement. My understanding is that at most a few hundred billion is involved which is unlikely to make much of a difference to the multi-trillion dollar bubble burst, though it might pluck some human flotsam from the floodwaters. Even if what they are proposing is wrong, your hyperbole seems only to muddy the waters.
Only 21 percent of respondents said that the overall economy was in good condition…
I think all 21 percent live around me. I’m still mocked as being nothing more than a bitter pessimist. Getting quite tired of it, actually.
LOL! Thinking the very same thing.
The economy is in bad shape for people who were fools and bought $500K homes on $25K salaries. It is bad for people like realtors and mortgage brokers who have no skills to offer and were making money by doing nothing for years. And so on.
Personally speaking things have never been better economically. I have no debt. I rent. I save like crazy and have enough in the bank that I could go several years without working and be just fine. And I sleep like a baby at night without a care in the world.
Yet someone like me never gets profiled in the media. It’s always woe be the “victims” of this awful economy. They are victims of their own stupidity.
If anything this survey tells me 21% of the people are like me and 79% are in the other camp.
Those horrible, awful 79 percenters.
I took that “21%” as people who think the good times will just keep a-rollin’. Stock market will soar once again. Home prices will dip no lower and will start soaring again.
Also, I tend to find that people like me (also a debt-free, renting, saver) are more of the belief that the economy is not all roses and sunshine. And, conversely, some of those who are in waaaay over their heads, think the gravy train never stops. Again, this is my experience.
bitter pessimist…
east, I just checked the prices of some lots I’ve seen driving around here. If I were somewhere other than work, I’d be laughing hysterically. $45k for .13 acre, in Aston, PA. (2005 AGI $52,693)
And that’s the low end.
The only reason you’re considered a pessimist is that those around you are optimistic to the point of being delusional. Who is going to pay overinflated prices for those lots? The only builders interested in small parcels are mom-and-pops, and they’re not going to shell out top $$ for land, not in a stalled market.
The sellers most likely are those who’ve been holding those lots, waiting for the right time to cash in. Another year of reality may or may not soften them up. But I doubt it.
There are some lots just north of LIttle Rock. They are close to the river on a hill, so have a very nice view of the river. The lots are 3 acres, but it’s totally unusable land. To build a house on one would just add a ton of expense. After you get the house on it, you have no space for anything else, it’s a steep hill.
They start at 185k.
I can believe the 21%. Our CEO sent out an email to all employees after 5 last night. It seems there will be no raises until FY 2010, and no bonus, etc. He stated that we are in a recession, and we have to further cut costs.
We are a small company of only 27,000 employees worldwide.
“Hey you! Yeah man, you! You need a mortgage?”
http://s117.photobucket.com/albums/o72/muggyFL/?action=view¤t=Rent.jpg
“We’ve got a quaint fixer-upper for you!”
http://s117.photobucket.com/albums/o72/muggyFL/?action=view¤t=Quaint.jpg
“It’s a sign! Bernanke’s coming! Bernanke’s coming!”
http://s117.photobucket.com/albums/o72/muggyFL/?action=view¤t=Rainbow.jpg
Borrowers Stay in Homes…
http://www.bloomberg.com/apps/news?pid=20601068&sid=aefAJU_88vfs&refer=economy
18 months in NY and CA..wow. Someone who has no integrity could really game those systems.
As every day goes by I am more tempted to see what happens….stop paying my mortgage, bank the payment so I have it ready when the mortgage company gets around to me, and when they do bargain with them for some debt forgiveness, etc.
Unfortunately, the plan has some flaws to include:
- My integrity would not allow me to try this scam
- The house does have actual equity so the banks would probably move on me quickly
- Can’t really risk it as the wife, child and horses like the house.
It does seem to me that the system is set up for those that like to game it. With the federal government looking to sweeten the pot for those willing to play, we are looking at many more years of a distorted, stagnant and declining housing market.
“It does seem to me that the system is set up for those that like to game it.”
Read “The Creature from Jekyll Island” by G. Edward Griffin. This housing bubble is just a variation on a scam that has been going on a long time. Griffin describes it eloquently and shows how taxpayers always end up footing the bill.
Everything has happened exactly according to plan. It helps to know the playbook ahead of time. Read “Creature.”
The Creature is one of the best books I have ever read. Just finished it several weeks ago.
If you want to have a better understanding of the FED, inflation, banking, US history and the Constitution, this book is a must. It will be the best $20 you ever spent.
Not to go into a full synopsis of the book, one of my greatest takeaways is banksters love war. Read the book and it will all make sense why.
Sniggle-
Nice to know, others have integrity too. Sometimes I think its futile, but I am true to myself.
The Law of Unintended Consequences is grinning widely, sharpening his scythe, and taking practice swings in the on-deck circle.
It tells you that inventory numbers are only going to get worse. We still have a ways to go to unwind this mess.
J6P is growing restless…
_______________
81% in Poll Say Nation Is Headed on the Wrong Track
By DAVID LEONHARDT and MARJORIE CONNELLY
Published: April 4, 2008 — NY Times
http://tinyurl.com/2uq7uw
Americans are more dissatisfied with the country’s direction than at any time since the New York Times/CBS News poll began asking about the subject in the early 1990s, according to the latest poll.
In the poll, 81 percent of respondents said they believed “things have pretty seriously gotten off on the wrong track,” up from 69 percent a year ago and 35 percent in early 2002.
Although the public mood has been darkening since the early days of the war in Iraq, it has taken a new turn for the worse in the last few months, as the economy has seemed to slip into recession. There is now nearly a national consensus that the country faces significant problems.
A majority of nearly every demographic and political group — Democrats and Republicans, men and women, residents of cities and rural areas, college graduates and those who finished only high school — say the United States is headed in the wrong direction. Seventy-eight percent of respondents said the country was worse off than five years ago; just 4 percent said it was better off.
Sadly enough it took this long for the masses to figure it out.
Sorry, we were watching the Britney Spears drama. What did we miss?
Nothing. Now go watch American Idol.
Think America is going the wrong way?
Text-message us* and tell us yes or no
*a 95 cent charge applies to each call.
“In assessing possible responses to the mortgage crisis, Americans displayed a populist streak, favoring help for individuals but not for financial institutions. A clear majority said they did not want the government to lend a hand to banks, even if the measures would help limit the depth of a recession.”
Maybe the people are finally waking up. Are those 7 and 8 figure bonuses for CEO’s of failing companies making an impression?
Are those 7 and 8 figure bonuses for CEO’s of failing companies making an impression?
God, I hope so.
I’d like to see a few tar-and-feather jobs on CEOs who’ve run companies — and, by extension, shareholders — into the ground. Maybe in this market fallout we’ll see CEO compensation descend from stratospheric levels. Maybe CEOs will stop droning on and on about how they “deserve” their insane golden parachutes. Maybe executive compensation could be based on, you know, merit.
Maybe.
Looked at in a factual way, CEO salaries are no less larcenous than bank robbery and should be treated that way.
Ah, but they “have” to pay those enormous salaries to “maintain talent.” Like the “talent” show by the clown running Bear Stearns, who was busying doing dope and playing bridge while his company started to roll over and die. Yep, that’s “talent” for yah!
I’m in the 19%. I think giving the homebuilders that massive tax break will fix all of this country’s problems. Am I the only one that is astounded that they want to give HBs a huge tax break? The whole system stinks. The Left stinks. The Right stinks. Repubes and Dems are all $hit. Thank you for tuning in this morning.
I too was astounded but not surprised - I also share your sense of smell.
“I The Left stinks. The Right stinks” Sorry, the blame belongs on whose “watch” where the economy fallen into recession, that foreclosures are the highest in history, and we are speninding 800 billion on a war that has lasted longer than WW2. Sorry, there is no equal to the failure of Bush and the Replublicans
Gimme a break!
Disk or drum type?
A break from the constant DRUMbeat from the omniscient Monday morning quarterbacks.
Well said David.
You know what Congress needs to do? Force the Fed to lend to the average American through the “Term Auction Facility” or whatever it’s called now.
Good credit risks that did not F around with subprime ARMS and stated income crapola should be rewarded with cheap credit NOW to take advantage of the current situation.
Why do the big banks get money at 2.25%, when above-average Joe with an 800 FICO can only get 5.5%?
Open up the spigots - I want to borrow cheap money too while the dollar still has some value to buy things with.
I’d say the banks are riskier customers than Joe with 800 FICO. Over leveraged, questionable assets, questionable income prospects….
They also know the Fed has their backs, so they can play heads-we-win, tails-taxpayers-lose stupid gambling strategies.
Joe Fico has already demonstrated his willingness to renege on his obligations if the collateral declines in value by 10-20%, regardless of his ability to pay. Credit score alone, alas, means nothing, which is why in saner times Joe has also been required to make a 20% downpayment. We’ll get there again I’m sure.
So 81% aren’t happy? Why then are they still turning to the same two groups of chuckleheads for answers? The left and right play “good cop/bad cop” - but other than that they both play for the same team.
And the victim drumbeat continues…
http://www.jsonline.com/story/index.aspx?id=735350
“Unfortunately, senators couldn’t agree to back the controversial idea of allowing bankruptcy judges to modify terms of home mortgages.”
Sweet.
“That simple change, which wouldn’t cost the federal treasury a dime . . . .”
No, it would just tank the mortgage market even further through perceived and real increases in risk and consequent increases in rates and fees for all classes of potential borrowers, creditworthy and noncreditworthy alike. Idiots.
Even if they did pass it, the courts would throw it out. This is more bargaining phase stuff.
Too bad they can’t accomplish the mortgage paper mods because exploding rates would be a good thing. REscum thinks things are seized up now???
“This is more bargaining phase stuff.”
Oh, I agree, Ben. I just can never figure out in these cases if the politicos are posturing or truly clueless. I always assume it’s a combination of both.
Opportunistic posturing: If their proposals get canned, they will subsequently blame any and all problems on their opponents who canned them.
but instead of a subprime borrower with AAA rating the mortgage owners now get a mortgage that is backed by a government with AAA rating; of course they will happily accept much lower rates because of this (and probably even lower rates when this government defaults on all its promises in a few years).
The NAR is the 3rd largest contributer in American politics since 1989. We can rest assured that their politicians, with the assistance of monetary lubrication, will push policies that benefit the NAR.
Top 10 donors:
1) American Fedn of State, County & Municipal Employees $39,165,934
2) AT&T Inc $38,929,795
3) National Assn of Realtors $31,928,656
4) American Assn for Justice $28,539,389
5) Goldman Sachs $28,367,132
6) Intl Brotherhood of Electrical Workers $27,580,809
7) National Education Assn $27,355,449
9) Service Employees International Union $25,408,993
10) Carpenters & Joiners Union $25,389,482
From: http://opensecrets.org/orgs/index.asp , a project of the Center For Responsive Politics
Boy oh Girl, that list sure explains a lot…
“$100 million in additional funding for housing counseling”
What exactly is this counseling? Where do these counselors come from?
Do they help you sacrifice everything to keep making home payments or do they tell you about a guy in Michigan who stopped making payments 8 months ago but still lives in the house…?
haha…$100 million in counseling = tutoring homedebters on middle school math
Imagine the sweethearts at the DMV giving financial advice.
Oh yeah! Those honies are luscious.
Yeah, but it will make up for potential job losses, they have to hire someone to do it………………..:-)
Here’s some counseling for home buyers & it should be given by anyone who originates a loan, no need to hire a bunch of counselors and spend a long time talking.
what’s your salary (verified of course)? take the calculator enter that number press the X key and then enter 2.5 and hit the equal key. That is the maximum price of a house you can buy, unless you bring a pile of money. Oh & if you have a big pile of debt already, come back when you have them paid down. You’re not ready for home ownership.
Dutch housing bubble update:
still no sign of a bubble slowdown, home prices continue to increase, currently 4.5% yoy. Dutch central bank Wellink warned again yesterday in the TV news and newspapers about the risks of the US credit crunch to the very open (and very US-oriented) Dutch economy. He expects a significant slowdown next year. But the government says everything is fine, government coffers are swelling from all the extra taxes on energy bills and on small businesses (and unemployment is relatively low, that helps). According to the Ministry of Truth Dutch inflation is way lower than anywhere else in Europe.
So no need to worry, politicians sure are not going to do something about excessive mortgages and the like (I/O, 100%, no downpayment etc. still no problem over here). The Dutch have lots of savings in the bank (about 265 billion), but the mortgage debt is at least twice that number. With a +/- 1000% appreciation over the last 15 years the ‘equity in the bank’ could quickly vanish when the bubble pops.
local bubble examples: one couple with good connections purchased two government-owned historical buildings three years ago for around 600K euro (which was probably a bit low price then, because of some restrictions). After some minor internal renovations and decorating, they sold one of the buildings last year for 1.5M euros. The other one is now on the market for nearly 800K. That is a cool 200% profit in just a few years. In a small town nearby a historical building is now on the market for 2M euros; the same building was purchased from the government 20 years ago (in excellent condition) for nearly 200K guilders (= 91K euro).
In my own hometown, the government is now buying back some large buildings from private owners for 10-15x the price they sold them for themselves 10-20 years ago. Nice to have a buyer/seller of last resort, that doesn’t give a damn about pricing
Nhz, I go to Eindhoven and Heerlen frequently for work. Occasionaly I’ve looked at real estate on my weekend days off. I’ve been shocked at how expensive housing is there, especially in relation to Dutch technology salaries. I live in SF so trips to the Netherlands, with stops in Cambridge UK, always leave me feeling that home prices are just insane everywhere.
Even though the $ is practically worthless I still look forward to my trips to Holland - people are great and so is the food.
yeah, I think housing for the whole country (not talking about desirable locations) is about as expensive as CA hotspots like SF area, but tech salaries are probably at least 50% lower.
I guess pricing near Cambridge is just as mad, judging from the home buying programs I see on BBC television.
This will probably happen here in the US as well: already there is talk of “funding local governments to buy foreclosed homes.” My theory is that they take the taxpayers dollars and then the homes go straight from the bank to the government. The government then refuses to sell the house for anything less than an absurd price (since they can do whatever they want) with the taxpayer eating the losses AND having to fund more toxic loans when the Bubble gets going again. As a final option, the government can bulldoze the extra homes, creating an artificial housing shortage to make sure “real estate only goes up!”
what you suggest is different from the Dutch situation: our government sells their properties near the bottom and buys them back near the top of the market. When buying or selling they usually don’t care about price which makes the sell/buy difference even bigger. Most of this applies to relatively expensive properties (usually big buildings - potential luxury homes, certainly not for the average citizen).
As for bulldozing, that has been very popular in Netherlands over the last years, especially with the housing corporations (former government organisations that own most of the rental housing stock). Because they rent mostly to people entitled to housing subsidies, keeping an artificial shortage by demolishing the cheapest homes is very attractive to them. Prices go up, their ‘customers’ have to live beyond their means and the government has to provide more subsidies to make it possible. As a result, the housing corporation gets far more money for the same properties. Plus they can build small numbers of very luxurious villas for wealthy buyers, instead of the former cheap rental homes - all with lots of government subsidy.
fraud:
WASHINGTON — Reports of suspected mortgage fraud rose 42% last year as banks became more leery of lies on loan applications.
The Treasury Department’s Financial Crimes Enforcement Network said Thursday that there were 52,868 reports of mortgage fraud in 2007, up from 37,313 a year earlier. Mortgage fraud reports were the third-most common type of suspicious activity.
http://www.latimes.com/business/la-fi-fraud4apr04,1,7034205.story
What is Predatory Lending?
http://article.nationalreview.com/?q=ZjAxZjY2NWI5MGMxZjUyYmUyYjM5N2QyYmUwMTg3NzQ=
Good article.
If the housing market had continued to rise, we never would have heard complaints about subprime loans.
This point has been made here many times. The “crisis” began when FBs found themselves underwater and unable to refi.
And if my grandma had danglers, she’d be my grandpa.
Does anyone question the basic flaw that prices can’t rise forever?
No but the denial expressed in the sentiment that prices stay static and don’t fall is still very strong on Main Street.
As long as people can service the mortgages which we all know they can’t. You can only burn the furniture for so long before there’s no furniture left to burn.
Good point. We saw the wheels coming of the consumer jalopy yesterday with the report on CC’s/Auto loans.
You can burn the furniture UNTIL the water gets shut off.
Then things get “exciting”.
And if a frog had wings it wouldn’t bump it’s ass a-hopin
Gee…. More denial from the very asshats who denied there was a problem with housing in the first place. No thanks… I prefer an honest set of eyes like Dean Baker and Paul Krugman over liars like Kudlow.
Kudlow is on Squawk Box this morning. For every one intelligent thing he says, he says 192 stupid things. What a loser! Money can’t change that fact.
I watch Kudlow and Jerry Boylover get eviscerated by Lavorgnia and Batipaglia the other nite. Discussion? Real estate.
Was that the night some guy said 1.2 trillion in losses was no big deal?? I found his shows this week rather repulsive myself.
It was Monday or Tuesday nite. Some clueless douchebag from ColdBrainBanker made outlandish statements (sales are great! Buy Now!) and Jerry Boylover and Cocaine Larry backed him up. Lavorgnia and Battipaglia proceeded to rip all three of them to shreds with cold hard facts. It was a beautiful sight.
He’s a positive creep.
Honest? Former Enron adviser Paul Krugman is a kook:
Of course he’s a kook from a kooks perspective. Your point?
I don’t care much for Lowry, but there is nothing I can find to object to here. Classic mania, with politicians of all stripes taking credit for a false sense of prosperity.
He neglects to mention, however, that renters pay our taxes, too. And with one less large tax break than those virtuous homeowners he cites as the real victims. Just a bit of class bias sneaking past the editors of the National Review.
Oh, the class bias isn’t “sneaking” past them, they’re completely oblivious to it. This is the National Review after all.
Still, an interesting read.
Rich Lowry is a declared conservative political columnist, so beware of bias.
But he’s got some good points.
However, I am always wary of the statistic that “Out of the 46 million mortgages in the country, 42 million are being paid on time.” OK, how many of those 42 million are being paid on time only because they haven’t adjusted yet? There are plenty of Alt- A’s who overbought (or cashed out) in 2005 with a three-year I/O. They still have a few month’s grace.
I guess, to paraphrase Warren Buffet: the tide is only beginning to go out, and so far we only see the naked folks near the shore. The lowest ebb will be most interesting.
half-empty, half full, but ZOMG! 8.6% of borrowers can’t keep up with their mortgage payments! How long before it’s more than 10%?
8.6 percent? That’s massive. Given how much a lender loses (especially these days) when they have to execute a foreclosure, that is a very bad sign. And rest assured that few people actually manage to catch up on their payments once they fall behind on mortgages. Inevitably, most of those who fall behind either sell off or get foreclosed. Given the state of housing prices, how many will actually be able to escape via the sell-off path? Not bloody many, I reckon.
As veloblues says (below), it’s just second inning. Hey Neil, I need some more popcorn!
Isn’t the government working on tacking on payments at the back end?
Possibly. The trouble is, who wants to insure those back-end payments tacked on. In the real unsubsidised world, it costs interest to do that. And who will guarantee the “loan” of those extra payments? Obviously the lenders are not so interested; they could if they wanted, do it already.
So it’s possible that government will force the issue and make the banks eat the interest cost and/or have you and me as indirect guarantors via government backing of these “tacked on payments”, aka extended loans.
I guess, to paraphrase Warren Buffet: the tide is only beginning to go out, and so far we only see the naked folks near the shore. The lowest ebb will be most interesting.
Wait, I read in the owner’s manuel that all Heloc Hummers can be transformed into amphibious vehicles, and doesn’t silicon float?
Exactly. A lot of folks out there seem to think we’ve cleared the seventh inning stretch. As mentioned here on the HBB, we’re maybe at the top of the second.
The central fact is that $400B/yr was the peak mortgage lending level we saw 1999-2000. That level was arguably sustainable.
From 2003-2006, lending went from $700B/yr to over $1T/yr, totalling about FOUR TRILLION of bubble lending in that period.
That’s the total mortgage debt overhang. How much slides down the mountain onto us remains to be seen. ONE TRILLION in losses is still possible, if not probable.
This is just adjendist blame shifting. Notice the strawman that all blame is being put on predatory lenders? This was a mania and everyone was involved. Without bogus appraisals or FannieMae and nearly anyone else with capital to risk buying up mortgages and CDOs of mortages this never would have happened. Most of the laws like the CRA were lauded by the business community at the time and worked well as long as the loans were subject to strict oversight. If the blame were where this author suggests, then why exactly did things start flying out of control in 2003 and not five years earlier?
Because (2003) thats when people realized, minorities included, that they could become rich overnight. Isn’t it obvious why a bubble occurs?
First big change was in 1997. That’s when the government made a huge shift to capital gains tax policy that made housing a much more attractive investment. It went unnoticed (at the time we were in a very hot stock market as well) until more people cashed out, and many stocks took a nose dive. But the split between real and intrinsic home prices shortly after the lifetime capital gains exclusion was turned into an every two years on your primary residence capital gains tax exclusion. By 2003, everyone had finally figured it out, and we were well off to the races.
a hungry mob is an angry mob:
SHANGHAI — A spike in the price of rice and other food staples is triggering consumer panic, including food riots in Yemen and Morocco, and hoarding in Hong Kong.
http://tinyurl.com/36wgmg
got corn?
NEW YORK - Corn prices jumped to a record $6 a bushel Thursday, driven up by an expected supply shortfall that will only add to Americans’ growing grocery bill and further squeeze struggling ethanol producers.
http://tinyurl.com/333s2o
“will only add to Americans’ growing grocery bill”
No worries, the core CPI will stay low, plus J6P can always hedonically adjust his grocery list from corn and other staple food products to, say, cat litter. That is, as long as he doesn’t buy the corn-based litter that my wife and I use for our cats.
I’m thinking of buying stock in Costco (COST). Just thinking…
They could always eat the cats.
meeeeeOW!
This market seems to have 9 lives…
Price Of Rice…
http://www.washingtonpost.com/wp-dyn/content/article/2008/04/02/AR2008040202997_pf.html
Wonder how this will play in North Korea? If they actually get most of their food thru charity donations, maybe it won’t affect them unless the donations stop? Rice problems turning into mushroom (cloud) problems.
Traders who hoard Philippine rice face life imprisonment,
government warns
http://tinyurl.com/5xg3fp
India introduces rice export ban
http://tinyurl.com/2rmvwd
Nice. I want to see the day that WallSt scumbags face similar consequences.
I would suggest that we watch this carefully. The unraveling of societies over food shortages will begin in the third world (greater percentage of income devoted to food).
Like CA, food shortages and the populations reactions in the 3rd. world will be our most likely future, IMHO.
ERROR, mean “Like CA as a trend setter, food shortages…
well spoke to my landlord last night and she said she would love to have me stay with $0 rent increase (but the wife is on the warpath)
i actually saw a coop apartment i liked and my wife is all mad because i am for obvious reasons cautious
i can easily afford the place with at least 20% dp and with the mortgage and maintenance would be paying $200 more a month than i currently pay for my rental. the building is a pre war doorman 1 block from the long island railroad in queens with a 17 minute ride to penn station (midtown nyc 7 blocks from my office)
it is a pet friendly building (we have a dog and it is not easy to find this) my only concern is there is no parking garage in the building so i would have to rent a spot from a homeowner in the area ($150 or so a month)
if i would buy this at my target price i am looking at paying
125x rent for the place
my piti would be 27% of net income and i would still have a nice stash of cash left in th bank after all is said and done
my target price is with a 13% price cut from the ask
what do you guys think?
I’d buy it if you like it. You can afford it and timing an absolute bottom in a place like NYC will be tricky. It is NYC after all. Yes, it will suck for awhile but that is one place that will never stay in the dumper.
“I’d buy it if you like it. You can afford it and timing an absolute bottom in a place like NYC will be tricky.”
Well said.
Let’s see what I see in NYC. Massive building going on in all boroughs. Huge job losses coming. A rent bubble. A real estate bubble. A commercial real estate bubble. An end to the age of debt that fueled the huge rise in NYC prices.
I like it here but it ain’t Oz.
Like txchick57 said, “if you like it”. That’s important. If you’ve kept your eyes open, and there have been few if any similar places that come on the market, then you’ve found yourself a place at a price you can afford. And that’s no bad thing.
If, however, you are looking for a pure financial deal comparing renting with buying, then renting still might be better, but quality of life can outweigh finances if the numbers aren’t too badly skewed. And they are not badly skewed in the deal you describe. 125 times rent isn’t a great bargain but also isn’t terrible like it would be in many other places (I see 200x and higher here in DC Metro).
All I’d say is to be very sure you won’t have to move/sell anytime soon, and then why not, go for it. You can afford it, and affordability is what’s been missing in the whole bubble debacle so far. At worst, prices drop more and your equity is “wiped out”, but if you aren’t going anywhere, all you’ve lost is an on-paper shot at a better deal that might (or might not) have happened. And in the meantime, you are living where you want to be.
“It is NYC after all.”
Et tu, TXChick?
I think she’s just trying to be placatory.
Sometimes in life you have to do the least worst thing.
Me? Not going anywhere near the sales offices. They’re like vampires right now, and discreet “rentals available” signs are sprouting all over the UWS like little mushrooms after the spring rain.
If there is a 10% drop in market prices you will be wiped out. What is your bet about how far the market might go down in the next few years if all the megatrends work in concert? Do you want to take that loss?
http://tinyurl.com/24vllw
I once temped for the NYC water agency for a few weeks in the late 80s. They decided, one day, to send an enormous (80% of a year’s charge) special assessment to all the property owners in Manhattan, in order to pay for some project that had gone over budget.
My job was to answer the phone and get yelled at so the rest of the agency employees could get back to whatever it was they were doing all day that sure did not look like work. I got yelled at in a number of new and interesting languages. I also concluded that I would never buy rental property in NYC. Why take on all that risk just to be the bureaucrats’ cash cow?
What have you done with the real Txchick and when are you going to return her to us?
lol
“(but the wife is on the warpath)”
Who’s in charge here?? Just kidding.
Why only 13% off ask??
Give it a try at 25% off asking and see what they counter. How long has it been for sale?
not too long a week or two apts in this building usually sell pretty fast at close to ask or a few % below it
Which LIRR station?
Also, how much is maintenance? Is 125x rent price before or after maintenance?
125x rent is after with the mtg and mtc after a 20% dp of course and the place is really nice and very large in good shape
kew gardens is the station just east of forest hills
as for the 13% reduction that is up to the seller but i am pretty firm in what i will pay if i do this they are nego. of course
I hope it works out for you. We are moving again. Smaller apartment but at least it’s more expensive. D’ohhh.
With all due respect, your negotiating posture doesn’t sound right. Any reductions are ultimately up to YOU IMHO.
blano i can be a real chizzler in a negotiation
i have my line in the sand if i do it and will not cross it
MG as long as you don’t have to pay for both the LIRR ticket and a metocard….it could be a good deal..
Also is there any flip tax In case you have to sell quickly? And parking that adds to your cost. Why not look at Sunnyside along the 7 train…..lots of condos co-ops just off queens blvd.
Parking is no better or down my end near the LIE lots of 2 family houses with garages and off street parking
—-OT nice video cover of a phil collins tune on my handle—
not a fan of woodside or sunnyside and do not get me started on the 7 train
i like kew gardens actually and i walk to work form penn as does my wife so no x-tra metrocard
I see a lot more downside to RE in NYC especially in Queens. Queens is not Manhattan and when I look at income vs price I see it still 20% to 30% overvalued.
Also if your in Kew Gardens, why not take to F or E express subway instead of the LIRR?
i hate the subway ed that is why
but i could do either one from that location
I’ve looked in that area for more than two years. Its all locked up - no or little price drops, properties never leaving the market, etc.
I just negotiated an 18% rent reduction. I told the LL to look at recent ads for similar house rentals and told him I would leave otherwise. Done.
Good job! We will try this next fall…
Why would the WH say yes to a bill with such weak political support?
REVIEW & OUTLOOK
Uncle Subprime
April 3, 2008; Page A14
Mortgage foreclosures haven’t yet hit their peak, it’s an election year, and Congress is back in session. Hold onto your wallets because a housing bailout is moving forward unless the White House says no.
This Op-Ed piece is chock-full of useful information. For instance:
‘A new study from the Boston Federal Reserve destroys the myth of the victimized subprime borrower. Boston Fed economists examined 1.5 million homeownerships over nearly 20 years and found that the overwhelming reason for subprime foreclosures is not unsustainable debt foisted on ignorant borrowers or even financial setbacks. People walk out on subprime mortgages when the value of their home declines.
Homeowners who’ve suffered a 20% decline in home prices are 14 times as likely to default as those who have enjoyed a 20% gain. “Subprime lending played a role but that role was in creating a class of homeowners who were particularly sensitive to declining house price appreciation, rather than, as is commonly believed, by placing people in inherently problematic mortgages,” says the Boston Fed study. In other words, even if the government moves these borrowers into FHA-guaranteed mortgages with fixed rates, but home prices keep falling, lots of borrowers will stiff the taxpayers like they’ve been stiffing private lenders.’
‘Hold onto your wallets because a housing bailout is moving forward’
Oh, yes, it’s just around the corner. Like the super SIV, the GSE freak out a few weeks ago. To congress looking into the abyss and realizing they can’t begin to touch it.
The bubble is bursting all over the globe now, and IMO posters should begin to realize that the media (and some blogs) just use this stuff to get attention. As for me, I’m going to focus on the biggest financial event of our lifetimes, not some insignificant media side-circus.
Notice that I was just quoting a passage from the WSJ Op-Ed piece (sorry I forgot the quote marks). So far as I can tell, pols are thus far merely dangling the scepter of bailouts in front of the populace as a palliative substitute for action — a sort of puppet play for their constituents who are in financial straights. They have been talking about bailouts for how many months already without passing any?
I don’t fear Congressional bailouts. By the time any bill crosses Barack’s desk, it will be either too watered down to help very few FB’s, or too late to help any FB’s at all.
What I fear are lightning-quick non-legislative actions like changes to the Fed, or allowing Fannie/Freddie to become the Greatest (and last) Fools of all.
What I fear are lightning-quick non-legislative actions like changes to the Fed, or allowing Fannie/Freddie to become the Greatest (and last) Fools of all.
Good observation.
The non-legislative financial moves will probably hurt (or help) the most. The precedent-setting bailout of an investment bank, for one.
Bingo: It is amazing how fast “change” can be forced down peoples’ throats when we get past all that annoying democracy, due-process, and checks and balances stuff! Will any of these power grabs “fix” anything? Of course not, but that was never the intent of a power grab!
Closed-door arm twisting?
I heard George Soros on the radio last night he says the Government will / has to use taxpayer money to support housing or home prices will crash far below the long term trend line. A mirror image of how home price rose far above the trend line.
I heard that too. I am wondering where George thinks the govt will find the monies to prop up home prices at unaffordably high levels? (And he did not seem to grasp the unaffordable price problem, or at least did not allude to it if he does grasp it.)
They’ll borrow it…….where else??
Like the Great Depression, years later they’ll look back at this mess and speculate around the root cause. The conlusions will vary widely, appear vague, no lessons learned, and a door left open for the mess to occur again. Ben, have you thought about writing a book about the housing bubble? Perhaps in 100 years the book will resurface and they’ll say Ben got it right. Of course the discovery will occur in the year 2108 after a housing bubble pops with Al Greenspan the 7th at the helm of the fed. At that point the book morphs into a financial bible of sorts and everyone starts asking who’s buried in Ben’s tomb? Of course the answer is Ben
Late in the 19th century some lady wrote a novel about the (un)fortunes of people in the street I live in, based on historic research. The book is mostly about the first half of the 18th century, speculation in housing and stocks is the major background theme. The housing speculation at that time was mostly a result of a stock bubble (stocks for VOC, one of the first multinational companies). Many lives and careers where ruined by the popping of this housing/stocks bubble, and the remains (like unfinished estates) can still be seen in the area surrounding my city if you know what to look for. But people never learn, they are doing it all over again on a far bigger scale now. Prices in my street are up nearly 10x over the last 20 years, and probably more than 50% of the residents are speculating in stocks and (usually foreign) housing. Only a few ever heard about this novel or the stories (and lessons) that it contains
I hope Ben’s ghost comes out and haunts the bejeezus out of them.
“focus on the biggest financial event of our lifetimes”
I’ve tried to explain this here for 2 years. The global housing ‘bubble’ is a symptom of a far more serious financial calamity in process. Far too many posters and readers here don’t get it. They’re just looking for information about real estate markets and are chomping at the bit to buy a house when they think the time is right.
“They’re just looking for information about real estate markets and are chomping at the bit to buy a house when they think the time is right.”
Er, sorry Fred Hooper, but I disagree….I think a large number of readers of this blog are NOT chomping at the bit to buy a house anytime soon…and there are lots of us who think the American economy is set to fall off a Wiley E. Coyote sized cliff.
Exactly. What we are witnessing is the beginning stages of collapse. People will soon have much bigger issues to worry about.
Lots of people writing and speaking eloquently about this incredible time in history: James Howard Kunstler, Carolyn Baker, Dimitry Orlov, Stan Goff to name a few.
Remember the line in Jaws “I think you’re gonna need a bigger boat”?
I’m looking for a compound with turrets surrounded by a moat
Fred. It`s not chomping at the bit, it`s champing at the bit.
Thanks Earl, I didn’t know that. I’ll bet you know the difference between shit and shinola too. Most people don’t.
But then again, maybe you don’t:
http://en.wiktionary.org/wiki/chomp_at_the_bit
All in jest. Regards.
How about “Chumping” at the bit?
” biggest financial event of our lifetimes”
yea how about that ? even had TV shows on TV “million dollar listing ” being the most obnoxious IMO. Bunch of idiots
Absolut Redraws USA - Mexico Border
http://www.outsidethebeltway.com/archives/2008/04/absolut_redraws_usa_-_mexico_border/
Whoa! Yeah, Mexico ran California from 1821 to 1846–that is, for twenty-five years. Didn’t Johnny Carson run The Tonight Show for thirty years? So after 25 years, the California Show Starring Mexico was CANCELED!
ABC news video on the yahoo homepage about a couple who “fought” the bank and “won.” Never mind that they signed for a mortgage over 300K with only 30K income COMBINED.
http://www.yahoo.com/
Given their income, it looks like what they actually “won” is a lifetime of indentured servitude. You sure showed that nasty ol’ bank, folks!
Good specimen of the species “Staten Islandus Moronicus.” Someone needs to call Wild Kingdon to tag and bag this pair.
Marlin and his trusty companion Jim?
Take a look at bni, it’s bouncing between the upper bband and the 20 day, good for 5 points. Signed up for the b&b, now i see what you are looking at.
Got an easy $2 so far off the jobs report via SKF. That’s my favorite vehicle now. Reminds me of an internet stock
unp too, looks like a double top if it hits 137.5.
Time to buy a pullback? dow and s&p stochastics are oversold on the 5 and 10 day charts.
Probably. I took the $$ and ran.
I caught the second spike down, 12500 should hold.
How’s BIDU treating you these days??
SKF has been good to me over the past few months. Talk about a gift that keeps on giving.
SKF question, as I’m not sure I really understand these ETF’s much: am I reading it right that it moves opposite some basket of financial stocks?? So if financials do well, SKF doesn’t, and vice versa?? Thanks.
You’re on the right track. SKF uses 2x leverage which amplifies the gains / losses. Works out nicely if you trade it correctly. SKF is not designed to be bought and held forever as you’d be betting financials fail and never come back. Not sure I’d take that bet. Then again I suppose anything is possible in this market.
12 minutes ago
(RTTNews) - March Payrolls down 80K; Unemployment rate at 5.1%.
Market smells a rate cut. Dollar doesn’t like it, and is tanking. Kudlow just called the USD the american peso.
April 4 (Bloomberg) — The U.S. lost jobs for a third consecutive month in March and the unemployment rate rose to the highest since September 2005, pointing to an economy that may already be in a recession.
Payrolls shrank by 80,000, more than forecast, after a decrease of 76,000 in February that was more than initially reported, the Labor Department said today in Washington. The jobless rate rose to 5.1 percent, the highest since September 2005, from 4.8 percent.
That’s the 1 intelligent thing. Now comes his 192 stupid things he will say.
As long as the stock market holds up, why does the dollar’s fate matter?
They said that in Zimbabwe, didn’t they?
as long as you have your money in stocks and not dollars
I don’t I have mostly dollars. very sad but at least I traded RE for dollars so it could be worse.
mgnyc99–I live in Forest Hills. Would the building you’re thinking of
buying into be the Beverly? A few years ago we saw a rather scruffy
2BR, 2BA there for 300K with a maintenance of nearly 1K/pm, and
declined. The newly renovated condos at Talbot Gardens are quite
swank but wildly overpriced, in my opinion. Have you seen those?
I live in queens as well, 300K with 1K maitenance - sounds like 2005 prices
These appartments used to sell for like 180K back in 1998…..
Plus coops in NYC are pure hell, at least from experience from my parents who live in a Jackson Heights coop (1BR, bought for 45K in 1996. Asking prices fro similar apts in JH are around 200K, pure insanity.
I guess i just need to wait longer.
Forest Hills is a nice neighborhood, my friend just rented an very nice large 1BR there for $1200/month (65dr and Wetherole).
But 300K with 1K maintenance(that always seems to go up) for a queens apartment? Insanity…
http://tinyurl.com/5empo6
Bear’s principal regulator was the Securities and Exchange Commission, which says it was watching closely. “At all times,” wrote Christopher Cox, the S.E.C. chairman, in the aftermath of the collapse, “the firm had a capital cushion well above what is required to meet supervisory standards.”
Even when the Federal Reserve concluded it had to subsidize a takeover of Bear by JPMorgan Chase to preserve the financial system, Mr. Cox wrote, Bear qualified under the Fed’s rules as “well capitalized.”
Could that indicate there is something wrong with the Fed’s rules? Does it sound a little like a doctor emerging from a funeral to proclaim that he did an excellent job of treating the late patient?
The S.E.C. does not see it that way. It its view, this was a case of an old-fashioned bank run, and no capital standards can stop such a run when confidence is lost.
“That kind of statement is a condemnation of the kind of supervision that the S.E.C. did,” said one expert on financial regulation, Edward J. Kane, a finance professor at Boston College, in an interview this week. “If there is good capital, you should be able to convince your counterparties of it.”
The SEC, OCC, CFTC, and a whole bunch of acronyms just got terminated. Denial will only get you so far when a power grab occurs under the wings of a crisis.
They got their clock cleaned as a free side show to the whole JPM/BSC event. I think only the WashPost observed it correctly but then observing such politics is their bread-n-butter.
Not a chance that these agencies will be terminated. The entire process was pure posturing to keep Congress from doing anything.
Not terminated, neutralized.
That is an important distinction.
FPSS, you know full well that it is a ploy to get Congress from enacting any legislation. Mr. Paulson’s plan is a smoke screen. Business as usual, next. The SEC has been impotent since 1982.
Oh yeah! that was assumed.
Nobody asked the question about whether the action was legal or not? Droids, all of them.
Let’s also look at this from an individual level and not forget that Hankster the Bankster wants a job (and a legacy of some kind) after January 2009.
So by looking proactive now, he can talk about it later.
Whether or not it happens or what turn of events occurs.
April 3
Federal Reserve Governor Ms. Janet Yellen
“…The current problems afflicting the shadow banking sector began when it became apparent that delinquencies and foreclosures on subprime mortgages would be far more prevalent than had previously been appreciated. Surging credit losses, and prospects for further losses, meant lower values for the securities that were based on them, such as mortgage-backed securities, the more complex collections of mortgage-backed securities called collateralized debt obligations or CDOs, and a variety of related derivatives. Write-downs on such assets reduced the equity cushions in these firms and increased their leverage at a time when the growing risks in the financial markets made them desire less leverage, not more. Attempts to sell assets to enhance the strength of their balance sheets resulted in even lower prices of the assets and yet further selling pressure.3 This vicious cycle has led to outright illiquidity in markets for private-label mortgage-backed securities, making it almost impossible to determine appropriate prices for the securities and largely eliminating them as a source of new funding to borrowers….
My basic point is that a process of deleveraging, in which many financial intermediaries are simultaneously trying to shrink the size of their balance sheets, has produced a situation in which the quantity of credit available in the overall economy from a wide range of intermediaries has contracted sharply and suddenly—a credit crunch. Moreover, concerns about credit quality and solvency for intermediaries can devolve into liquidity problems, as in an old-fashioned bank run. Firms in the shadow banking sector are particularly vulnerable to this because, like banks, they typically issue short-term, highly liquid debt. The fear that an institution may be unable to meet its obligations to its creditors may trigger a withdrawal of credit—as in a bank run. Of course, the perceived inability of one institution to meet its obligations is likely to cast doubt on the ability of others to meet theirs, triggering chains of distress and systemic risk….
The Stockton area, which I mentioned earlier, provides a good example. From 2003 to 2005, one prominent measure of house prices there averaged an increase of nearly 30 percent a year; but from 2005 to 2007, this measure was down at about a 7½ percent rate, and delinquencies soared. This strong link between house-price change and the performance of subprime loans is confirmed by formal statistical analysis that controls for other factors, such as economic conditions….”
FRBSF
http://tinyurl.com/48nlqe
“Firms in the shadow banking sector are particularly vulnerable to this because, like banks, they typically issue short-term, highly liquid debt. The fear that an institution may be unable to meet its obligations to its creditors may trigger a withdrawal of credit—as in a bank run.”
Maybe it is time to rethink the wisdom of lightly regulating the hedge fund industry? How about if they regulate it enough so the bitter fruits of this industry can fall on some other nation’s balance sheet?
The current problems afflicting the shadow banking sector began when it became apparent that delinquencies and foreclosures on subprime mortgages would be far more prevalent than had previously been appreciated.
Correction. The current problems began when financial institutions began funding loans which would generate a lower return (more defaults, etc). It may be that the current problems where realized when the risk of the loans became apparent but by then the damage had already been done.
Surging credit losses, and prospects for further losses, meant lower values for the securities that were based on them, such as mortgage-backed securities, the more complex collections of mortgage-backed securities called collateralized debt obligations or CDOs, and a variety of related derivatives.
Again, by this time the damage had already been done. Surging credit losses didn’t lower the value of the loans and corresponding securities, it only made apparent the lack of value already inherent in them.
Write-downs on such assets reduced the equity cushions in these firms and increased their leverage at a time when the growing risks in the financial markets made them desire less leverage, not more.
So losses (and by inference perceived future losses) made the firms “desire” less leverage and by extension fewer losses (leverage = amplification of either losses or gains)? No shit sherlock.
Attempts to sell assets to enhance the strength of their balance sheets resulted in even lower prices of the assets and yet further selling pressure.
Again, this only led to a realization of the risk and losses already built into those assets.
My basic point is that a process of deleveraging, in which many financial intermediaries are simultaneously trying to shrink the size of their balance sheets, has produced a situation in which the quantity of credit available in the overall economy from a wide range of intermediaries has contracted sharply and suddenly—a credit crunch.
Um, yeah. They loaned more than they had (using leverage) and burned a lot of money on bad loans. *poof* So they are having cash flow problems you say? Why don’t asshats like this just say what happened in plain language? The financial institutions burned through billions on garbage and are left with a lot less than they started with. They were subject to bad management and now have a lot less money for it. Big fughing surprise.
“The price didn’t have anything to do with the value of the company.”
Mr. Jamie Dimon
April 3, 2008 to the US Senate when asked about the $2.00/share price
another great quote from the same source same time:
“We could lose money on this. Really.”
NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) said it bought 11.5 million shares of Bear Stearns Cos Inc (BSC.N: Quote, Profile, Research) on the open market, in an effort to gain enough voting power to essentially guarantee its acquisition of the investment bank.
JPMorgan Chase said it plans to buy more shares of Bear Stearns, potentially until it has as much as 49.5 percent of the shares….”
“President of Internet database Foreclosures.com in Sacramento, California, said she toured a property where the departing resident tried to make off with the outdoor air conditioning unit by sawing the metal legs off its concrete apron.
“People take what they want to take,” McGee said. “They feel that they’re owed.”
Of course, no cost to the rest of us…
http://tinyurl.com/5ctyrm
Mr. Tom Toles cartoon in the Washington Post
April 4
http://tinyurl.com/awy2d
this is the investor tattered and torn…
Sooo good.
Don’t tell J6P but oil is back over 105.
Market Last Change %
Crude Oil 105.67 +1.84 +1.77
How much longer before the powers that be go from Gallons to Litres?
Litres would only be like 89.9 Cents, such a deal!
Metric system? Too french.
You don’t need to tell J6P, he knows already. This oil price thing is turning the world upside down sooner rather than later. It’s causing food price inflation all over the world. It’s not good.
I know I sold my APA at 110 , bummer. See ag fertilizer stocks go to the moon MOS and CF WTF is going on? pure speculation on global famine? like dry shipping last year this is nuts. I blame it on the internet
I don’t know exactly what’s going on, but there are lots of rumblings. In a couple of years we will think 2008 was heaven as far as food and oil are concerned. Governments are going to try to to something, and that is only going to make things worse. Bad times are coming. Sorry for the OT.
The Fed focus on a possible Wall Street meltdown is wrong. We should also consider all the other stockmarkets in the world. I have been told that WS is the most transparent of them all. I’m not going to comment on that specifically. However, if Bear Sterns was in enough trouble, and I assume that they were, that they needed a buy out, then what is the possibility of some “Bear Sterns” in some other market suddenly collapsing? This could cause the dominoes to fall and meltdown the economy anyway. The counter parties have to unwind and call in because they are now insolvent and away we go. Remember that we are not “decoupled”.
No, Bear Sterns will happen somewhere and when we least expect it. I don’t think anything was saved. I’m really having an “Oh no!” moment here.
Roidy
“what is the possibility of some “Bear Sterns” in some other market suddenly collapsing?”
From last week:
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/30/ccking130.xml
Hmm, I’ve been reading about Spain. They had a housing bubble worse than we did. Looks like this meltdown risk is really spread all over.
Roidy
Paul Krugman makes some good points about Healthcare.
http://www.nytimes.com/2008/04/04/opinion/04krugman.html?ref=opinion
I especially like this bit;
“the international evidence on health care costs is overwhelming: the United States has the most privatized system, with the most market competition — and it also has by far the highest health care costs in the world. ”
And yes, that is true.
Considering over 33% of all $$$ related to medicine goes toward HMO profits, is it any surprise that the healthcare system in this country doesn’t work?
Link?
Source?
Facts?
And please refrain from quoting the GARBAGE seen on TV, written by Mother Jones or Daily Kos, among others.
It’s been posted here many times. Dean Baker, CEPR. Sorry but the rest of the world doesn’t buy into Jerry BoyLover and Cocaine Larry.
What you’re saying is 1/3 of every health care dollar, in other words $0.33 of every dollar, is HMO profit?
Posted here?
Go find it and show us.
Yes that is correct.
That is correct.
Golly, Ed:
1.) That Krugman weenie sounds like some kinda pinko communist agitator;
2.) HMOs — as American as hot dogs and apple pie;
3.) Profits good! Healthy citizens? Only so-so;
4.) These crazy healthcare schemes clearly don’t work anywhere else;
5.) Always trust a corporation to do the right thing. I do.
You forgot to add;
Free Market, Free Market, Free Market, Free Market,
Free Market!!!!!!!!!!!
Ms Gillian Tett has a good article in the FT this morn
The financial fairytale of Goldilocks and the credit bears
http://tinyurl.com/5abevp
You were telling us about this more than a year ago, Hoz. Maybe if you had used fairy tale or nursery rhyme analogies, others would have listened too. Anyway, thanks for the warnings that enabled me to move my retirement money from the stock market!
SD commercial RE follows residential down the drain:
Local office vacancy rate skyrockets
Construction, housing bust, slowing economy blamed
By Mike Freeman
STAFF WRITER
April 4, 2008
San Diego’s office vacancy rate spiked to its highest level since 1996 in the first quarter thanks to a combination of weak demand and new buildings coming to market.
Direct vacancy – landlord-controlled office space that’s empty – was 15.1 percent countywide, according to a CB Richard Ellis report issued yesterday. That’s up from 11.5 percent a year earlier.
The availability rate, which includes sublease space, buildings under construction and offices on the market but not yet vacant, came in at 21.3 percent for the quarter. Last year, availability was 18.2 percent.
Brokers say new construction is a big contributor to the spike – particularly in business districts with much speculative office building, such as Rancho Bernardo and Carlsbad.
But they also point to a slowing economy and the fallout from the housing bust as contributing to the vacancy boost. Many mortgage companies, title firms and home builders have closed or downsized over the past year.
RB-Poway office space availability = 33 pct.
Whoa.
What’s the opinion on this board regarding States receiving a billions to buy up foreclosed homes?
Other than the fact that banks get theirs, of course.
Whats the payoff for HBB’rs?
Senate scuttles relief plan for homeowners in bankruptcy
By Andrew Taylor
ASSOCIATED PRESS
April 4, 2008
…
The defeat of the bankruptcy plan highlighted a weakness that many people find with the bill – that it showers generous tax breaks on money-losing businesses like home builders but does little to help people facing foreclosure.
PB did you notice the huge ad for the BOAT Show right next to the article of this bk plan defeating.. Del Mar Boat Show and Fishing. I would hope they sell more fishing poles,rods/reels, cause we caint afford the costs increasing.
But boats? Maybe, but I don’t think so many sales.
Brilliant and insightful analysis by the CEO of Bear Stearns as to why the firm failed.
Sen. Richard Shelby (R-Ala.) asked the corporate-welfare recipient whether he shares any blame for his indigent circumstances. “Do you believe that your management team has any responsibility for the company’s collapse?”
Schwartz could think of no missteps — not even his decision to remain at a conference at the Breakers in Palm Beach while his firm was imploding. “I just simply have not been able to come up with anything, even with the benefit of hindsight,” said the blameless chief executive, escorted into the hearing room by superlawyer Robert Bennett.
http://tinyurl.com/56pca6
These types of hearings really seem like show trials.
But the defendant is a money-distributing executive, who is really the master of the judges who purport to be interrogating him.
“You can’t think of a thing you did wrong? No problem, have a nice day.”
Roger Clemens, for lying to Congress about something as personal and socially inconsequential as his steroid use, will suffer a much higher penalty than a CEO who is wink-nod weaving tall tales out of whole cloth before Congress.
Show trials.
Good analogy. My guess is also that Schwartz’s attorneys instructed him to admit nothing that could be used against him and Bear Stearns in the multitude of lawsuits that are sure to follow.
Mr. Schwartz has full legal indemnification as part of the JPM takeover. JPM estimate legal fees at $6B.
Mr. Schwartz’ statements are confirmed by the Federal Reserve testimony. Should it turn out that other parties started rumors solely to profit from short positions, then Mr. Schwartz may be fully exonerated. I suspect that JPMs strategy will be to have the lawsuits lumped in federal court and subsequently settle for a few billions. As opposed to Enron and Worldcom there was plenty of evidence that Bear Stearns was in financial difficulty, caveat emptor.
It might be interesting to revisit the Hawaii real estate market with the demise of Aloha Airlines and ATA over the last few weeks; both carriers featured low fares to Hawaii. I’ve flown ATA to Hawaii many times for significantly less than the other airlines. If airfares go up and stay up that would have a chilling effect on tourism/real estate in Hawaii.
When ATA announced bankruptcy yesterday I knew that prices would be heading up so I priced out a ticket from Denver to Maui, May 20 departure and May 30 return. I priced out the exact same trip just this morning and you guessed it, the prices went way up. Here are the numbers:
Delta: $768 (4/3/2008) -> $861 (4/4/3008)
Frontier: $683 -> $918
USAir: $679 -> $731
AA: $731 -> $790
United: $733 -> $795
My nephew in Hawaii bought a house on the North Shore about 10 years ago, I think he paid around $350k with an acre of land and outbuildings. He’s been watching it go up (theoretically) to over 1 mil. and remarking at how wealthy he is (on paper, anyway). I’ve been telling him not to count those pennies yet, but he’s been a very happy camper. Now he’s sobering up - finally realizing that what I’ve been telling him is true. He bought a new pickup and is now wishing he hadn’t. As I mentioned the other day, he says tourism is down 7% over the past few months (sorry, no link for that other than him). These higher prices are going to have a marked effect on Hawaii.
I have a brother in HI who contracted with a builder for a 2200sqft shack in 2002. Paid 275k. All through 05-06 he boasted how it’s now “worth” 750k. My advise to him was similar to yours. He hasn’t made a peep about it in nearly 2 years.
Factor in we had 3 cruise ships circulating the islands and are now down to 1 - a loss of 3 billion $ annually. Tons of properties for sale with sales declining precipitously. Prices are down about 20% off the peak by my estimates, and foreclosures are starting to tick up every week. The media claims its different here and that Hawaii wasn’t as involved in the risky loans like the mainland but by my estimates we’re around the 40% subprime mark like the mainland (2006 estimate). Lots of “rich” haoles own homes both here and in Cali and are struggling to make the payments because rents don’t cover them.
This place is toast. Prices vs. income is even more out of whack than coastal California.
CNBC shills just had a RE agent on with a cherry spin about how foreclosures were down 4% in the latest data.
Of course the other side of that story is the banks are hiding the losses by just not foreclosing!
http://bloomberg.com/apps/news?pid=20601206&sid=aefAJU_88vfs&refer=realestate
assume crash postions in MA:
The state’s cities and towns better start saving, State Treasurer Timothy Cahill said yesterday, because they’ll need it to weather the state’s coming economic storm.
“No matter how bad this year was, 2009 is going to be worse,” Cahill told the Herald in a wide-ranging interview about the state’s economic outlook. Cahill encouraged even cash-strapped cities and towns to try to save some of this year’s local aid to help ease the blow next year.
http://news.bostonherald.com/business/general/view.bg?articleid=1084401&srvc=home&position=3
Yep, your post makes a great case for going to cash.
At least the people in MA aren’t as stupid (or should it be ’stoooopid’) as the Alaskan gov’t. They have a few billions in unfunded liability in state pensions. Do they use the latest huge oil windfall to cover it? Of course not, instead they have the ‘brilliant’ idea of (1) selling a few billion dollars in bonds and (2) investing the money in stocks. WhooHoo! Yes, borrow in the middle of a credit meltdown and invest in stocks at the beginning of a recession. This WILL end badly…
http://www.businessweek.com/ap/financialnews/D8VR61BG6.htm
Here’s a good one–buy my house and get named as primary beneficiary on a life insurance policy if I die in 10 years…
Humanity sometimes make me sad.
http://www.chicagotribune.com/news/nationworld/chi-040408-house-insurance-webapr05,1,2098576.story
Sounds like an incentive to murder. Buy house, kill previous owner, collect insurance, default on mortgage.
Watcher, sounds like you have the mix for a good dime novel.
The March of Dimes was last month…
Early in the history of life insurance, it was possible to take out a policy on anyone at all. Really paid off quickly for the unscrupulous. Then the regs were changed so that you had to give your permission for a policy on your life to be taken out.
Zero Hour (.pdf)
http://image.minyanville.com/assets/FCK_Aug2007/File/Pics9/zero%20hour%20febr%202003.pdf
A nice historical reference
I also like this one, it seems to be a rhyme at this time.
“1937 - 1938 Stock Market Crash:
Just when investors thought the market was finally good again, following a recovery of almost half of the great depression losses, the market plunged again due to war scare and Wall street scandals.
2nd Worst Stock Market Crash:
Date Started: 3/10/1937
Date Ended: 3/31/1938
Total Days: 386
Starting DJIA: 194.40
Ending DJIA: 98.95
Total Loss: -49.1%”
I really like the midterm bounce after a 15% drop. Then the bottom fell out.
Think that pattern is repeating ? scary I think about that also. we have alot of RE debt to write down. 1 trillon maybe because of leverage ? the FED is going to have to make many loans and often to fix this mess.
I have no idea, just some random thoughts:
Financial earnings come out in 2 weeks - are they going to be worse than expected or is there any optimism?
Exports are flying off the docks. Where the eff are the jobs that go with these exports?
The insolvency crisis is not going to hit until August when the small caps cannot get refinancing. How many large companies are going to go down?
There is so little volume on the exchanges, why take a risk in selling or buying?
None of the quality investors I track are doing anything, are they all on vacation? I do not recall seeing a 100,000 share block going across all day.
This looks like bottom picking to me, but I do not wish to sell or buy into it because there is nothing bid below nor is there anything offered above.
I was not trading in 1938, but I think the scenario is more like 1893 which was caused by mortgage defaults in friggin Kansas.
“Exports are flying off the docks. Where the eff are the jobs that go with these exports?”
ahttp://www.jaxport.com/sea/g_stats.cfm
Collaboration of export statistics. Go to third (last) table and compare Feb. 2008 to Feb. 2007 in outbound shipments. Rails and ports are a bright spot - really the backbone of the local economy here. But my guess is that longshoremen shift from innies to outies and are collecting some massive overtime.
Maricopa County preforeclosure data for March (along with sales and median price data) here.
I think you should try population adjusting the default and sales numbers. It would make the foreclosures look slightly better, but REALLY blow the sales data down. Fewer sales than 2000, but 20% higher population.
Probably should “income adjust” the medain too.
SD office vacancy up to 15.1%
http://www.signonsandiego.com/news/business/20080404-9999-1b4office.html
A question for the financially savy out there:
I am bumping up against the $100k FDIC limit with my Everbank foreign currency CD’s. Is there any other institution offering something similar?
aladinsanebank will match Everbank’s rates…
so will desertdweller’sbank dot com.Well, can’t match, but will hold it for you.
Have mattress, will hide.
U.S. Dollar Index today:71.942 1yr ago this week: 82.960
S&P500 today:1,377.14 1 yr ago this week: 1,443.76
US 10 yr Treasury rates: today: 3.49% 1 yr ago this week: 4.66%
Money Market funds: today 2% 1 yr ago this week : 5%
There is your bailout.
w/o a parachute, that is.
You forgot to mention:
oil: 65 a year ago, 105 today
gold: 720 a year ago, 920 today
corn: 400 a year ago, 600 today
soybeans: 820 a year ago, 1250 today
The needle and the damage done.
Yes, but those are not part of a bailout. The items I posted are a tacit bailout of homeowners and screw the rest - particularly the dollar and treasury rate (synonymous).
The Taliban aren’t the only ones that chase people with machetes you know.
http://centraltampa2.tbo.com/content/2008/apr/04/man-tried-resolve-rent-dispute-machete-deputy-says/?news-breaking
A man who was apparently upset that a rent check wasn’t big enough pulled out a machete and chased the renter outside, according to a sheriff’s deputy’s report.
Tutsi pop!
Over $100 million income for Clintons since leaving the White House……much better than them silly little cattle futures.
So how much has GBI made?
Yes, George, “whats in Your wallet”
Or Dick?
Heck, who needs cattle futures……
http://thepage.time.com/2008/04/04/the-tax-woman-cometh/
I wonder how much in speaking fees GWB will earn once he’s out of office? Heck, who would pay to hear him????
Next question, will Cheny and the Suds be the only ones fronting for the financing of GWB.s library or will they simply designate the sand boxes in all of the US elementary schools as “The GWB”!
This is not directed at anyone in general or in particular, however it looks like for a lot of people, who I would considered highly intelligent, Its “screw you” and “every dog for themselves”.
This is an interesting approach (Protestant Ethic), that may come back to haunt us.
Hey, where is Bye Fl? Is he moving to NW Pa today?
Bye is hopefully celebrating his birthday. The guy is young, give him a break!!!
You were 26 once. what were you like then?
Don’t answer. We know.
Toronto housing sales suffer big drop in March
“You couldn’t make it down Toronto streets” because of snow, he said. “That made people stop buying or not list their properties.”
But prices “still didn’t drop and we were still seeing multiple offers on any really well-priced good listings, so demand remained strong.”
But in March, there was a 27-per-cent drop in sales compared to the same period last year.
[...]
Silver is predicting a spring and summer with a return to double-digit growth.
FrommBloomberg:
MBIA Loses AAA Insurer Rating From Fitch Over Capital (Update5)
Fitch Ratings cut MBIA Inc.’s insurance unit to AA from AAA, saying the bond insurer no longer has enough capital to warrant the top ranking.
MBIA, the world’s largest financial guarantor, would need as much as $3.8 billion more in capital to deserve an AAA, New York-based Fitch said today in a report. The outlook is negative, Fitch said.
Monoline Insurance company downgraded and a loss of 80K in jobs the same day - no wonder stocks held steady!!
I am amazed at how little people know the relationships between things.
They say gold prices have a direct link to oil prices but have no clue about the dollars role or other commodities.
Job loss tends to be a lagging indicator that with the $$ pumped into the system and since we now have big job losses then it confirms we are at the bottom so it is a great time to buy.
If only people knew 1/10th about economics as they did about Paris, Britney, and Bradjolina our country would be a net saver and not a net debtor nation.
Funny how in mid-February the world held its collective breath, waiting to see if the bond insurers would get downgraded. Two weeks later, one of the protagonists in that story (a Mr. Elliott Spitzer) obliterated that story from the headlines with his dramatic fall from grace.
Now that the 1st quarter is “history” so to speak for many banks, we finally get a downgrade. Coincidence?
“Job loss tends to be a lagging indicator that with the $$ pumped into the system and since we now have big job losses then it confirms we are at the bottom so it is a great time to buy.”
you first