The Housing Bubble

Lessons from Japan… The is a long article, but well worth the read IMHO. For you anti-PM folks just skip those parts. Lot’s of good info inside.

http://www.financialsense.com/fsu/editorials/willie/2008/0408.html

“Ignore what’s going on around you
Let things get out of control
Claim ignorance when things crash
Ask for special powers after the fact
On 2
Break”

- Taken from page 1 of The Federal Reserve’s Playbook. The play is known as The Usurper Flee-Flicker Blue Dog 22.

The airline was unable to sustain its low-fare model because of a 73 percent surge in fuel costs over the past year and competition from Cathay Pacific and four other carriers on direct London flights. The fourth airline shutdown worldwide in two weeks left thousands of passengers stranded in Hong Kong, the U.K. and Canada.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a6vpdkAJYPYs&refer=home

Question,

state law requires you notify DMV within 30 days of changing your address; so if a foreclosure results in a person becoming homeless and living in their car, what do they notify DMV of regarding their “new address?”

Turns out that hedge funds are a scam. Really, who knew?

http://www.bloomberg.com/apps/news?pid=20601039&sid=aPM_46b_7s3k&refer=home

Deferred Prosecutions New DOJ tool:
In a major shift of policy, the Justice Department, once known for taking down giant corporations, including the accounting firm Arthur Andersen, has put off prosecuting more than 50 companies suspected of wrongdoing over the last three years. Many companies have avoided the cost and stigma of defending themselves against criminal charges with a so-called deferred prosecution agreement, which allows the government to collect fines and appoint an outside monitor to impose internal reforms without going through a trial. In many cases, the name of the monitor and the details of the agreement are kept secret.
Deferred prosecutions have become a favorite tool of the Bush administration. But some legal experts now wonder if the policy shift has led companies, in particular financial institutions now under investigation for their roles in the subprime mortgage debacle, to test the limits of corporate anti-fraud laws.
This stinks.
At a Congressional hearing last month, Mr. Ashcroft defended the agreements, saying that they avoided “destroying entire corporations” through criminal indictments. “Prosecutors understand that a corporate indictment can be a corporate death sentence.” he said.
A corporate death sentence is a feature, not a bug. Some corporations deserve destruction. They euthanize people, don’t they?
Michael McDonald, a former Internal Revenue Service investigator in Miami who is a private consultant and has given seminars on deferred prosecutions, said such deals “should not be on the board” in the subprime mortgage investigations.

“In light of what this did to our economy, people shouldn’t just be able to write a check and walk away,” Mr. McDonald said. “People should be prosecuted for it and go to jail.”

This sounds like fun stuff, if it weren’t people’s lives you were dealing.

“…An executive who works with a big Icelandic bank recalls: “Upon entering the bar I was approached by one of the hedge fund managers. He informed me that all people in this party – except for him, of course – were shorting Iceland.” The executive says the fund manager described Iceland’s profit-making potential as the “second coming of Christ”.

“As dinner progressed – some people actually decided not to eat at all but just sit at the bar – and more drinks were downed, the conversation and questions started to get more hostile and short positions openly declared,” the executive says….

The suspicion is that speculators exerted undue pressure on the illiquid CDS market in the knowledge that the wider the spread went, the more fear of a banking collapse would contaminate the stock and currency markets. There are also concerns about the way rumours were spread about the alleged reliance of Iceland’s banks on internet deposits, which triggered reports in UK newspapers that such deposits could be withdrawn rapidly…..”

FT
http://tinyurl.com/57kny8
It is one thing to be right about a country’s creditworthiness as Mr. George Soros proved to the Bank of England,. If it is collusion, I hope they are castrated.

Fed Weighs Its Options in Easing Crunch
By Greg Ip

“WASHINGTON — The Federal Reserve is considering contingency plans for expanding its lending power in the event its recent steps to unfreeze credit markets fail.

Among the options: Having the Treasury borrow more money than it needs to fund the government and leave the proceeds on deposit at the Fed; issuing debt under the Fed’s name rather than the Treasury’s; and asking Congress for immediate authority for the Fed to pay interest on commercial-bank reserves instead of waiting until a previously enacted law permits it in 2011….”
WSJ
http://tinyurl.com/6ap6sl

Modern Day Feudalism

I’m head in the sand about my taxes this year, having made a few mistakes last year (listened to bad advice and didn’t sock away enough pre-tax money by the deadlines). But we got smacked by AMT big time and I expect the same this year. Still, better to write a check than loan money for a year to the g’vt.

Someone asked on the previous thread, “What do you call someone who works for enough money for food and housing?” The answer was Modern Feudalism, but you aren’t bound to the land.

But aren’t some of these stuck homebuyers kind of bound to the land, especially in recourse states?

http://www.townhall.com/columnists/ThomasSowell/2008/04/08/random_thoughts

Random Thoughts

Some people actually think that televising Congress gives us information. What it really does is give politicians millions of dollars worth of free advertising, while they play charades on camera to fool the rest of us.

Alfred E. Neuman of Mad magazine said: “What, me worry?” During election years, Democrats running for office say: “What, me liberal?”

Senator John McCain could never convince me to vote for him. Only Hillary Clinton or Barack Obama can cause me to vote for McCain.

What is more scary than any particular candidate or policy is the gullibility of the public and their willingness to be satisfied with talking points, rather than serious arguments.

One way to reduce illegal immigration might be to translate some of our far left publications into Spanish and give everyone in Mexico subscriptions. After they read how terrible this country is, many may want to stay away.

Predatory Lending or Mortgage Fraud?

http://www.realclearmarkets.com/articles/2008/04/predatory_lending_or_mortgage.html

http://www.youtube.com/watch?v=Ees3s8tvYys

The honorable Paul Volcker on Charlie Rose, about the Bear Sterns bailout.

http://tinyurl.com/4m4ubp

FHA to the rescue.

“Housing officials say the agency will face a deficit for the first time in its 74-year history, starting in the fiscal year that begins in October. And they blame a rapidly growing and increasingly troubled sector of the F.H.A.’s mortgage portfolio, known as the seller-financed down payment loan program, which has suffered from high delinquency and foreclosure rates in recent years.

Under the program, a home seller arranges to cover the buyer’s down payment — using financial help from a nonprofit company — but typically adds that sum or more to the total cost of the house. The arrangement has been particularly attractive to financially struggling buyers and to owners in depressed housing markets, according to Congressional officials. ”

And they call this home ownership?

“In 2000, such mortgages made up less than 2 percent of F.H.A.-insured loans, officials say. By 2007, statistics show, they accounted for 35 percent of F.H.A. loans.

Housing officials say these mortgages have foreclosure rates two to three times those of others, leaving the agency reeling from the losses.”

Gee, what a surprise, people who don’t put in a down payment are more likely to default.

Any Floridians attending this?

http://www.ushomeauction.com/

I registered, there are two homes in my zip I am interested in. I most likely will not bid but I am curious to see where the prices end up.

breaking the law:

April 8 (Bloomberg) — Former Federal Reserve Chairman Paul Volcker questioned the central bank’s decision to rescue Bear Stearns Cos. with a $29 billion loan, saying it was at “the very edge” of its legal authority.

http://tinyurl.com/5ccpy9

heck of a job, bushie:

WASHINGTON — The Bush administration plans to expand a government program that helps struggling borrowers keep their homes, as it moves to respond to the housing crisis amid more sweeping, costly Democratic proposals.

http://tinyurl.com/68puqy

deficits matter:

WASHINGTON — The Bush administration and Democratic leaders in Congress are counting on the Federal Housing Administration to rescue hundreds of thousands of homeowners from foreclosure by helping them refinance from risky subprime loans to stable government-backed mortgages.

http://tinyurl.com/5gu9qa

how many zeros?

Worldwide losses from the credit crisis could near $1 trillion, the International Monetary Fund said yesterday, reflecting the massive cost of the breakdown in markets for home mortgages and other kinds of debt.

http://tinyurl.com/6b3mwm

Operations Halted at Weserbank

“A small bank based in Bremerhaven has had its services suspended by federal financial authorities in Germany. As insolvency proceedings are ordered, Weserbank’s leaders are blaming the global financial crisis….”
http://tinyurl.com/4gll2w
Spiegel

Interesting development regarding yield at neighborhood credit union. A co-worker told me his wife, a CU employee, called this morning and said they’re offering 6% yields on 11 month CD’s. 11 months terms seem to be popular at CU’s around here too and I’m not sure why. I have a small pile earning 5.5% on an 11 month term at another local CU that I’ve turned over 3 terms in a row. I figured any yield above 4.25% would be history but now this 6% thing.

Can anyone comment on the 6% yield?

So for 6 years of anemic growth we told how well Greenspan and the Bush Administration have been handling the economy. And now that it’s crashing down around us, we are told that there was nothing much they could have done while the big shitpile was growing.
http://online.wsj.com/article/SB120760341392296107.html?mod=hps_us_whats_news

Greenspan says the crisis didn’t start until 2006, so why should he have regulated lending in 2004? What an a-hole.

From the NYTimes;
“It’s not just the apparent recession. Recessions happen. …
The bigger problem is that the now-finished boom was, for most Americans, nothing of the sort. In 2000, at the end of the previous economic expansion, the median American family made about $61,000, according to the Census Bureau’s inflation-adjusted numbers. In 2007, in what looks to have been the final year of the most recent expansion, the median family, amazingly, seems to have made less — about $60,500.
This has never happened before …
“We have had expansions before where the bottom end didn’t do well,” said Lawrence F. Katz, a Harvard economist who studies the job market. “But we’ve never had an expansion in which the middle of income distribution had no wage growth.”

http://www.nytimes.com/2008/04/09/business/09leonhardt.html?_r=1&oref=slogin

I am waiting to hear from the folks here on how it’s all the fault of the Dems who have controlled Congress for one year.

CHICAGO (AP) — The Boeing Co. delayed its 787 jetliner program again Tuesday, pushing back its expected debut in commercial service to the third quarter of 2009 as it continues to grapple with problems involving its supply chain and the need to redo some outside work.

‘redo some outside work’ so hows that outsourcing going for you? Hahaha CEO is going to lose his job because of this I bet but wait maybe the FED can bail them out?

yet another feel good story involving a realturd

http://www.nypost.com/seven/04092008/news/regionalnews/shady_characters_real_estate_racket_fall_105604.htm

Haven’t seen much news coverage of this on the real estate side of the news, it seems to be getting covered mainly on the political side:

“Among the early victories claimed by O’Malley was a package of bills addressing the rising number of foreclosures in the state. The measures stretch out the legal time frame before a home can be repossessed or sold and require banks to establish a borrowers ability to pay before making a loan.”

http://www.baltimoresun.com/news/local/politics/bal-sessionstory0407,0,2219429.story

Sad story about a guy who seemed to have a perfect life, then bought a new home for $750k outside DC with two mortgages and no money down. He robbed a bank recently and was shot dead by police. Authorities are still “working on the motive”.

Washington Post Story

Ha!

http://cbs13.com/local/clinton.campaign.debt.2.694498.html

There’s a house for sale in a neighborhood that would be ideal for my son and I. Small, 1955 rancher. 1000 sq. ft. Less than 1/3 acre lot. Perfect for someone like me right? Well not at their asking price.

Anyway, I haven’t actually seen the inside of the house. Seen photos only (and I can tell it’s the original kitchen and bathroom - but I’m ok with that). I’m tempted to mail the sellers a letter stating the maximum price I can pay (which is considerably less than they have it listed at, but - IMO - still more than a house like this should sell for). I refuse to go find a realtor to submit a low offer because, well frankly - even though they are supposed to submit whatever their client wants, I’ve had trouble with this in the past. Plus, why bother wasting anyone’s time if it’s such a long shot?

The letter is very well written. Explains my situation. Explains that the offer is not meant to A) offend them or B) have me mocked. Just plain and simply, the bottom line.

Dumb idea? Or should I mail it?

Goldman Ain’t Immune…Level 3 Increases….

“April 9 (Bloomberg) — Goldman Sachs Group Inc., the most profitable securities firm, reported an increase in harder-to- value assets during the first quarter, exceeding those at Morgan Stanley and Lehman Brothers Holdings Inc.

Goldman’s share of Level 3 assets surged 39 percent to $96.4 billion at the end of February from $69.2 billion in November, according to a filing with the U.S. Securities and Exchange Commission today. The ratio of Level 3 to total assets rose to 8.1 percent from 6.2 percent.

While many subprime-related stakes that lost almost 100 percent of their value since July were categorized in Level 3, other holdings such as private-equity stakes, real estate and rarely traded corporate debt are also included because market prices for them aren’t available. More assets have become difficult to value in the last three months as investors shunned a wider array of credit, reducing trading.”
per Bloomberg

San Diegans…

Your real estate market is in shambles, and most of your drinking water comes via pipes, from the Colorado River, and the lion’s share of your reservoirs have the Quagga mussel in them, already…

A double-whammy about to hit, all at once~

Selling your house now, @ whatever the market will bear, might be prudent.

What’s the value of a house worth, when you turn on the faucet and nothing comes out?

_____________________________________________________________

“One quagga mussel can produce 40,000 eggs in a single spawning and up to a million eggs in a year, Retallack said. “I have a pipe that was suspended in Lake Mead for one and a half months,” she continued. “The pipe is 9 inches long, 31/2 inches in diameter. It has small mussels all over the outside and is completely coated on the inside. Not only do you have this first layer, but you also have a second layer where quagga mussels were starting to settle on top of the other mussels.”

http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2008/04/03/SP9MVTE6S.DTL

_________________________________________________________

The impact of foreclosures on pets (Washington Post):

http://tinyurl.com/43wxxp

Oil is breaking out to new highs. So much for the commodity crash.

Market Last Change %
Crude Oil 111.17 +2.67 +2.45

Woman charged in thefts at Open Houses (Washington Post)…

http://tinyurl.com/4lry56

I was looking at yesterdays bits and buckets and some posts on the illegals kind of stuck in my mind.

There are some complaints that the health care system is getting over run by illegals that skip out on there bills.

Thinking about that a little: you can make the same arguement about poor people in the US as well. So, are we going to send them off to Mexico as well. Are we going to deny medical care in critical situations?

Its pretty rare for that to actually happen in the US with the exception being extrodinary care for people with terminal illness. The cost of care in those situations being extreemly high and the resources very limited. In those cases (even for many citizens) there just isn’t much you can do.

Further complaints that illegals just tax the systems resources seem invalid. The illegals are in low income levels so even if they did pay taxes how much would it add up to? Probably they would add zero tax revenue. Further more most of the illegals I see are productive members of society.

They just get work as they can and actually produce stuff. Yard work, construction, agriculture… they provide a lot of labor so they contribute more than a lot of wall street gangsters.

I can see valid complaints in border areas where illegals cross for medical care and then leave the country. Not sure what to do about that but it is only near the borders where that would seem to be a problem.

Like a lot of us I get pretty hyped up when I see Mexican nationalists showing California/Texas and New Mexico going back to the Mexico. I also get mad when the illegals go around waving a mexican flag in my face. Or criminals flee to mexico to take advantage of antigringo laws.

Those are the things I take issue with. Mexico is so F-d up the people are fleeing. I understand you have a sense of identity HOWEVER realize you are actually fleeing that place for its poor government. You should be embracing the US government and systems that is helping you escape to a better life not waving a nationlistic tripe in our faces.

Anyhow, if we really want to end the problem all it would take are a few landmines along the border. Force the Mexicans away from the US border by a few hundred yards. Poof. Problem solved. Hell on the coyotes but should work just fine otherwise. Cheap, passive and pretty much ends the problem. Need a few navy patrols to keep the Ocean/Gulf clean but those are lower volume entry points.

If your not willing to do this then I suggest you get over the situation.

Robert J. Samuelson
Wednesday, April 9, 2008

High Finance Laid Low

“Except for oil executives, no group of business leaders is now more resented than the titans of finance — bankers, traders, hedge fund managers. They are blamed for the housing crisis, global financial turmoil and a possible recession. But this broad indictment, though true, is only half the story. The job of modern finance is to allocate Americans’ nearly $2 trillion in annual savings to its most productive uses; the paradox of finance is that its virtues and vices come tightly packaged together.

What we call “financial services” — insurance and real estate, as well as banking and securities trading — has been a growth sector. In 1976, it was 15 percent of gross domestic product; now it’s 21 percent. The expansion has produced many benefits: more credit for families and businesses; more investment choices for people saving for retirement and anything else; more investment capital for start-ups and smaller firms. Unfortunately, financial advances have also created periodic episodes of massive waste that threaten to destabilize the entire economy. …”
Washington Post
http://tinyurl.com/4×9jbl

First Starbucks and now this

http://news.yahoo.com/s/bw/20080408/bs_bw/apr2008pi2008047931670;_ylt=AhV5Ic5O0zxG6hFdOTLWzTCs0NUE

This morning on the way into work I was listening to KNX1070 news radio as usual and hearing the Sheeple prepared news. Gas all time high, yada yada, $3.70 in SoCal, yada yada. Then they talked about “BEER GOING UP IN PRICE” because of the cost of Hop’s hitting $25.00(per unit?) an increas from as low as $5.00 just last year.

Now this thing is getting serious, Joe Sixpack may soon be Joe Fortyouncer. Writing my House of Rep. bozo again as this just wont do.

We may need to take to the street’s, first the contractors have 1/2 the work now Beer is gonna double in price. You laugh(and so do I), but I know some people that this will actually be a wake up call for. I need to meet new people, LOL.

Revised method of direct purchasing treasuries.

http://www.marketwatch.com/news/story/buying-treasury-bonds-easier-safety/story.aspx?guid=%7B686F180A%2D340A%2D43D6%2D8961%2D09593B73CCD3%7D

Oil up 3 dollars 10.
Paging Dawn Wells.
Paging the Professor.
Who wants brownies?

Where the hell is thee chick from Texas to tell us how to play this SKF thing? Happy Appomattox Courthouse day to all my HBB peeps.

Oil just hit $112.21

http://www.marketwatch.com/news/story/crude-rallies-11221-us-inventories/story.aspx?guid=%7B9AFBF59B%2D5034%2D4604%2D90E7%2D4537997547F5%7D

My brother, Jack Mormon, says I have enough savings to live on, as long as I don’t become a crack head.
When I read this blog I see pesos.
He says to get over the whole low interest rate thing and quit worrying about my stock portfolio.
When I read this blog I see shredded paper.

from Le Metropole Cafe

“Something Big out There

Hi:
Found this on a chatboard,
cheers,
Ed xxxxxx

I have worked retail for several years. I am in mid-level store management right now. I don’t want to say exactly what company I work for, but it is in the top 3 largest. I work at a store in a major city.

There have been some crazy things going on recently. The changes that we are being asked me make per corporates direction makes me think that the people at the top think something VERY big is going to be happening to the economy soon. I don’t think the media or the government is giving us the full details of what is actually going on, but I think the CEO’s and others at the top are fully aware and are making plans.

For one thing I check sales every day. At the store level we usually compare what sales are today compared to sales for the same day, week, month, and year last year. Sales at our store, our district, and company wide have taken a HUGE drop compared to the same time last year. When I looked at them today my store and every store in our district was down over 30% for the same time last year. The company as a whole is also in the negative for the same time last year. (but not as much, but it gets lower every day).

Honestly at my store I could say that we have done everything in our power at the store level to increase sales, but it just isn’t happening. Departments like electronics are literally almost completely empty the entire day. The only departments that actually are getting sales are consumables, health, and chemicals. Just walking the store these are the only departments I ever even see people in ever since christmas ended.

Sometimes I will cover the service desk so a team member can take a lunch/break. When I do I sometimes process peoples credit card payments which lets me see how much they owe and how much they are paying. There are tons of people with THOUSANDS of dollars on their card only making minimum payments. These balances are usually at interest rates over 20%. Then there are people bringing in checks for the full amount, but they are BALANCE TRANSFER checks…. they are just moving it to other cards.

But that isn’t what really worries me. What worries me is the changes corporate is making. I have worked here for years, and in the last 4 months I have seen more changes than all that time combined.

We are getting emails all the time from corporate telling us to reduce costs anyway we can. We recently got one telling us to start pulling fluorescent light bulbs, that we don’t need all of them in order to provide illumination…. and those bulbs barely use any power.

Corporate has instructed all stores to lower the AC. It has been lowered enough to the point we get complaints from team members and customers.

Corporate has sent us emails telling us to make sure we fill bags to the absolute possibly maximum. They are not even sending us large bags anymore to some stores.

Corporate has recently eliminated (what I would estimate based on how many positions we lost vs the thousands of stores we have) several thousand management positions at *all levels* of management at stores.

This NEVER APPEARED ON THE NEWS! I suspect because it was not a traditional lay off. What corporate basically told us was “Your position is eliminated, but you are not laid off. Once you quit/get your self fired/whatever your position just won’t be filled again” So we are basically slowly losing jobs as people company wide quit, get fired, etc…. but the jobs are never filled again. So basically we are cutting jobs, but the way it is being done is preventing it from getting reported in the media or tracked by the government as job losses.

No non-management positions have been eliminated, instead hours have been cut for them.

Raises this year have also been lowered in amount compared to in previous years. They have been lowered enough that corporate is keeping it a secret until we have to tell team members.

The company is also buying less. Our distribution centers are sending us, for example, 3 of a certain item when normally we would get 50…. and they don’t send us more until those sell. I have not been able to keep departments full of product despite contacting corporate and asking for more because we are being sent such small amounts of product.

We have had trucks cancelled all the time now simply because we sold so little that they can’t justify sending so few items to a store.

People are simply NOT buying things. They are not buying anything that isn’t a consumable basically. I asked our pricing team to do a store mark down and lower the price on almost all of our TVs by 30-50%. We still have not sold a single one in over a week after! Our TVs were not priced very high to begin with.

Our pricing team is also being sent price increase changes from corporate in huge numbers. I am talking entire aisles of product for them to raise the prices on.[Bag here: Inflation? what Inflation?] The other day we got a STACK of pages of product to increase prices on. We thought it HAD to be a mistake because that has simply never happened before. We have emailed corporate asking if it was a mistake… we have not heard back yet, but I suspect it was not.

Many stores are now changing to non-overnight stores. They will be closed overnight and ALL power except in office areas will be cut overnight to save on costs.

There have even been changes to job descriptions recently. Corporate is basically giving job dutys to people at lower levels which used to be reserved for people at higher levels. Even some management tasks are being given to people in non-management positions. Basically they are paying people less to do what people used to get paid more to do.

Things are NOT looking pretty right now. I can tell you from a consumer spending point of view something is definantely going on…. All these changes tell me the people at the top are trying to brace for something big that is going to be happening to the economy.”
http://www.lemetropolecafe.com.
subscription required (2 week trial for free)

from USA Today an interactive foreclosure map of Denver and environs
http://www.usatoday.com/news/graphics/foreclosure_map/foreclose.htm

Tucson-based mortgage company goes bust, but leaves its personnel files behind. Makes me wonder how their client files were treated after they went Chapter 11.

http://www.newsflashr.com/feeds/business_blogs.html

This is great for links.

A preliminary calculation from Treasury department data suggests that China has sold about $200B in its dollar reserves.
http://www.treas.gov/tic/shlprelim.html

Just something to think about

http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article3716586.ece

Bless the Brits. Their comment section is always entertaining.

doin one for Hozzie.

noted comments regarding China policy statement bout rice.
noted currency corner on the Krona.
noted comentation of retail, dovetails with book transhipment layoff, anecdotal public radio.

I think Im seeing:
significantly less air travel.
uprising in the emerging centered mostly around food which is tied to wages.
interest rates too low.
deflation of thingies, but not oil.
the sum total of the coinage that makes up a dollar, is greater than a dollar….I dont like that.

its either foreign currency collapse, or mad max…. whose the mad printer?…..does the virtual world trump reality?

Im really tryin to take a weee bit of time off, and Im still working 12 hour days.

ben?

“As Anasazi society became more complex, it also became more fragile.”

http://www.nytimes.com/2008/04/08/science/08anasazi.html?_r=2&ref=science&oref=slogin&oref=slogin

____________________________________________________________

We are far more complex than our country’s ancestors, the Anasazi.

How fragile are we?