Weekend Topic Suggestions!
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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STAGflation investment ideas other than gold and food………
Fairly priced real estate — if you can find any. That might take another year or two.
tx ,but hoping for something more liquid
confession- I bought some REITS recently
flat, you’re gutsier than I would be.
I’d like to know what ideas some people have for surviving an economic collapse. What banks are safest to keep your money in? Any stocks that might be able to weather a collapse?
Is the crisis 85 pct over? I guess it depends upon whom you ask, and how their book is aligned.
Financial Crisis Mostly Over - JPMorgan’s Dimon Says
Jim Rogers Says Financial Crisis Hasn’t Hit Its Worst (Update1)
There is no way in He!!… this is “over”… the Democrats are not fully in “position” to take all the blame for the last 8 years of Cheney-Shrub… that will occur however, shortly after Jan 20th 2009 … Should make that day: “National Pundit Appreciation Day”
CONvincing greater fools that the crisis is nearly over might help holders of toxic debt unload falling knives on the unwitting.
Its not even close to being over….
Was it over when the Germans banks bombed?
Hell no!
“Was it over when the Germans bombed Pearl Harbor? Hell no!”
ask AIG
but I’ll take some regionals on the next big swoop down
Actually, I think a topic on what books you have found relevant would be a great weekend topic. I’ve got Irrational Exuberance out of the library right now. Recently read Barbara Ehrenrich’s Bait and Switch - sort of a follow up to Nickel and Dimed, but not really. It was terrifying. She meant to try to get nice, middle class corporate job as a middle aged person “transitioning” from being a consultant. Wanted to write a book about the souless anonymity of coporate work and ended up writing about the soul wrenching drugery of trying to get hired. She was trying to do it without using her own contacts, so it wasn’t very realistic, but the people she met along the way didn’t seem to have a lot more sucess. At the end, some of them had taken “bridge” jobs at places like Home Depot. What happens in this recession when even those bridge jobs don’t exist?
IIRC the only “jobs” she was offered were commission only, no benefits sales jobs. I know far too many people who were put out to pasture by Corporate America who are stuck trying to make a living selling insurance or grooming dogs, etc. In spite of all their degrees and experience, no one will touch them.
Of note was how “networking” did not help these people find work, which doesn’t surprise me. Maybe it works for executives, but only once have I ever landed a job through networking. All the other times it was simply applying for an advertised job. Maybe I just don’t know enough people, but whenever I tried to network my contacts always seemed to say the same thing: hiring is frozen right now.
I know that networking doesn’t work at my current job. We are not allowed to give a friend’s resume to a hiring manager. They must apply through the job website (AKA the black hole), and the hiring manager might never see it for whatever fickel HR reason. Ugh!
Networking is one way to get a job, but you can’t just go out and network with other people without jobs. Since the places that promote “networking” want to make money off it, they promote their activities to the jobless since those are the people who will pay for help getting a job.
When I was laid off, I was given a few months of support at an executive outplacement service. When we all met with eachother, they called it a support group or a seminar. When we went out and talked with people who actually had jobs, that was networking.
I had to go through the federal government HR process to get this job and networking can’t get you on a “most qualified” list. But once I was on the list, the fact that a professor of mine had told the hiring managers that I was smart and capable and one of her top students of that year helped a lot. Networking.
Oh, and the “you can’t just network with other people who don’t have jobs” refers to the book, not you, Colorado. The part of the book that was ridiculous was that she had to claim to have done this stuff as a freelancer to apply for mid level positions, but she hadn’t so she didn’t have any former clients to network with.
Relevant books is a good topic.
OUTSIDE THE BOX
What bear market? What recession?
Strategists and analysts toss these words around, but Howard R. Gold argues that there’s little evidence of either.
…
So, let’s go to the videotape, as they used to say.
The bear market issue is the easiest to settle. Unless the Dow Jones Industrial Average ($INDU: Last: 12,736.68-130.10-1.01% 1:50pm 05/09/2008) and THE Standard & Poor’s 500 Index (SPX: Last: 1,386.56-11.12-0.80% 1:49pm 05/09/2008) ultimately fall well beneath their January and March lows, we just ain’t in one.
Do you think this genius bothered to consider the value of U.S. stocks in foreign currency? Nah — why bother…
Global imbalances
The cure was said to be a cheaper dollar and a US recession. Now that America’s currency has dropped by about a quarter on a trade-weighted basis since early 2002, and its economy has ground to a halt, are global imbalances being resolved? - 20:05
Are Mozillo and the other subprime lenders the Devil, and has the loss of folk wisdom by Americans gotten them into the HELOC/cash out refi mess?
I refer to the old idea that the Devil isn’t a powerful being who can coerce people into giving up their souls (like the government), but rather someone who has to trick them into doing it (like a businessman). The devil will give you worldy goods, power or knowledge now but later…well, we’ll worry about that later.
Stories of this type demonstrated an age-old skepticism by Americans of those offering something for nothing, and asking people to sign a contract. Americans expected to have to work for things, or give something up to get something else.
Very different from “genie” cultures where three wishes are offered with nothing in exchange. Of course, in many countries like that poverty borne of years of low effort was suddently reversed (for some) by oil popping out of the ground.
The argument for Mozillo being the Devil: in each case a person has an illiquid asset with a temporarily inflated value — houses with values puffed up the housing bubble, or the souls of the greedy. Both the Devil and the subprime lenders offered a way to monetize the inflated value of that asset before it depreciated back to a realistic level.
The case against the subprime lenders being the Devil is this…in none of the “deal withthe Devil” stories was Satan ever accused of disguising the eventual cost of the up-front benefit.
–
WTE,
Everything you listed above can be fully explained by the power of propaganda. People (vast majority) can be brainwashed and one can create a culture that makes people very susceptible to, or easy victims of, propaganda. Maybe we have that condition whereby people are very easy to brainwash in the areas of politics, economics (finance) and investments.
Jas
Many Americans have evolved into people manipulated by soundbites. Whoever applies the soundbite with the strongest emotional power wins the dollars from these people.
People who can think past soundbites become immune to the manipulation and end up with the dollars.
Trust no one.
I’ve long considered this.
Overly susceptible to peer preesure to mostly unsusceptible?
The important spectrum of people in the world.
I don’t believe anyone needs ‘coersion’ to enter into the arena of ‘the devil’. Man is lead of his own lusts–innate. It takes power to resist ‘the devil’.
[offer a picture of a naked woman to any man---how much power does it take to look?]
Does the passage of the mortgage rescue bill change the picture?
House approves mortgage rescue bill
Bush has threatened veto but may be open to talks
By Lori Montgomery
THE WASHINGTON POST
WASHINGTON – The House approved an ambitious plan yesterday to rescue hundreds of thousands of homeowners at risk of foreclosure by helping them trade exotic loans with rapidly rising monthly payments for more affordable mortgages backed by the federal government.
W better veto this POS
of course
WAPO uses the term “rescue”
I’m sure I said months and months ago that Bush would veto anything that came out of this Congress. He set it up exactly the same way they set up the stem cell research thing. They came out with their idea (in this case the voluntary “Hope Now” program) and said this is exactly the right amount of government intervention and not a drop more is appropriate.
It is their favorite politcal move.
Two questions to which I don’t know the answer:
1) What would be the eventual cost to taxpayers of $300 bn ($400 bn?) in mortgage guarantees? (I saw a figure of $1.7 bn in yesterday’s paper which seemed implausibly low, especially considering that nobody actually knows the magnitude of mortgage losses at this point.) Pricing this bailout on the private insurance markets would provide a plausible answer, but probably one that Congress would rather not know.
2) Who pays for the guarantees? Apparently the cost would be borne by future generations of taxpayers, given the lack of a funding mechanism to provide current premium payments to cover the insurance liability created if the rescue bill passes into law. One could argue that inflation between now and when the guarantees are covered by tax dollars could actually reduce the future tax burden, but also charge the tab to retirees on fixed income pensions in the process.
Have the FBer’s pay for it themselves with the forfeiture of mortgage interest income tax deductions.
Will stimulus checks stem the tide of bad news from retailers and producers of consumer goods?
For many, a wholesale change in shopping
Consumers seeking deals, making retailers anxious
By Anne D’Innocenzio
ASSOCIATED PRESS
Toyota can’t steer clear of bad news
Rising costs, slow sales spur 1st yearlong profit drop since 2002
By Yuri Kageyama
ASSOCIATED PRESS
Its even worse than that, people are resorting to buying food that’s past its “Best by” date:
http://69.59.180.86/businessRh/business-story.asp?ID=16435
I wonder if there are people to whom the most economically rational response to the stimulus cheque would be to spend every dollar of it and not touch their debts; on the grounds that they are so far underwater that they’re heading for bankruptcy anyway, and might as well have the stuff that a few dollars can buy.
As our standard of living continues to decline to 2nd world status, what will happen to the long term vale of residential real estate? I don’t know of one poor country, that has expensive real estate. As a future buyer (an ex-homeowner, now renting) that is one of my concerns. Is it just me, that smells a real estate depression and no way out? Pockets of the job market will be strong, but that will be the exception to the rule imho.
“I don’t know of one poor country, that has expensive real estate”
India & Dubai… to start with, if you consider poor to wealthy population demographics.
India is in their industrial revolution, and Dubai is rich in oil wealth, I believe. Both countries produce something. The U.S. has bleed its economy from trade agreements and globalization.
Sir Greenspent’s retort:
American: “Financial Innovation” & “Worker Productivity”
That and 1% interest rates & the “Box Index”… sprinkled with a little “Irrational Exuberance” … what more do you need?
I recall reading that Mumbai is now more expensive than Manhattan and that some cities in China are approaching.
In real estate economics, you learn that the value of land is residual — it gets what is left over after the other factors of production get paid.
I think it’s been said here — if people have less (borrowed) money and are paying more for necessities, the cost of housing is the swing expense that can and will be cut back. The land value of housing will fall and, given a surplus because Americans tend to be over-housed, the value of the buildings will fall also.
If price inflation of consumer staples such as food and energy are far outstripping incomes, the residual share of the household budget available for housing shrinks. Aggregated across households, the result of this shrinkage is a drop in housing demand and lower equilibrium prices (a lot lower in some markets!).
I don’t believe the Fed anticipated this response to the rapid drop in FFR rates, which sparked inflation fears and a drop in the dollar, fueling the food and energy inflation which is now pinching households. The silver lining (for Megabank, Inc) is that toxic mortgage debt held by the big banks looks much more affordable to investors when valued in devalued dollars.
‘I don’t know of one poor country, that has expensive real estate.’
The bubble has been building for a long time. How about parts of Mexico, Nicaragua, Costa Rica, Panama, Eastern Europe. And then there is Moscow, perhaps the most overpriced RE in the world. Men drink themselves to death because of the lack of a future.
I met a fellow two days ago whose wife frequently travels to Mexico on business. The areas she frequents had a boom in second (”investment”) homes which has gone completely bust. Turns out there is no local demand for these investment homes, and what’s worse, the water supply to these myriad vacant homes is very tenuous, as they are basically out in a coastal desert with very little available fresh water supply. I can’t help but wonder how many other “equity locust spillover” busts are playing out in third world locales with no local demand whatever.
IMO, you can make the same argument for rural 2nd homes in the U.S….
In Uganda, of all places, they are throwing up luxury condominiums. Home prices in Kampala are up to NY or San Fran levels, but they are fairly comparable to major midwestern cities in the US. And this is a country with a median income below $5/day.
Real estate has become expensive in VERY poor countries.
sorry, should say are NOT up to NY or San Fran prices…
Someone mentioned pent up supply. With boomers moving ever closer to the cemetary, banks holding onto unknown quantity of housing units and not to mention HUD/VA/Fannie/Freddie inventory how can anyone not see a slow painful decline of everything housing related.
RE prices are high in Mexico City. Here is a 300K (US$) house in a northern suburb. Bear in mind that the average white collar worker makes about 25K per year.
http://www.vecasas.com.mx/vec_detalle.html?Anzeige=6241535-1
Real estate in Yemen is incredibly expensive.
For those that will be able to afford to retire and those who can’t, where do you want to live in your sunset years?
First choice — move from my Brooklyn rowhouse to a small apartment nearby. Second choice — stay in the rowhouse.
Can’t beat the value of being able to walk to things as a senior. We’ll be able to afford to retire, but I hope not to unless I have something better to do. You can’t beat 3 million jobs within a short subway or bike commute.
WT Economist-
I agree, walking to things will become very important to us geezers in training. I would trade some square footage for a canopy of trees shading the street, and a walk to the neighborhood shopping center. A park nearby would be nice too.
I agree also….I believe proximity to services, entertainment and transportation will be a magnet….
I’m thinking a cardboard box under a bridge in San Diego.
Call me old fashioned - but I’ll probably move the Florida, and get a boat and do lots of fishing and diving and island-hopping.
Of course the fact that my wife’s family is from Florida has nothing to do with it
As close to the best hospitals and MD’s as I can get.
I’d like to live about 20 minutes away from groves of Giant Sequoia trees, far away from the maddening crowd of age underachievers, otherwise known as human beings.
I here ya aladinsane but, for me, I can only take so much of the peace and beauty….I love to visit and do all the time in my R/V but I could never live there full time…
My financial adviser got let go from UBS. His severance package constituted a forgiven loan on which he will have to pay taxes. Is this a way to circumvent the charge of for laying of people and carrying the loans as a receivable on the books so they don’t have to take the loss immediately?
Makes sense… If you pay them severance they will use it to survive and eventually default on the loan. This way the loan is paid.
Housing is deflating, but it won’t deflate to zero. What will be trends that will act to stabilize and inflate housing values in the future (ie bottom calling)?
Will the eventual stabilization/turnaround come from a consumer level, some amazing new govt legislation, or from Wall St?
What trends should we be looking out for?
What trends should we be looking out for?
IMO, significantly higher interest rates in the next couple of years ….
imo, when there’s a balance between supply and demand, the market is stable, and prices will have genuine support. Govt intervention is a form of price fixing and prices will be destablized to the degree that there is govt support for them.
Considering the volume of pent-up supply that has yet to reach the market place, we might be waiting a while.
..foreclosures due to coming mortgage rate resets
.. foreclosures from more people just walking away..
..homes that are now deliberately being kept off the market waiting for prices to recover
.. new construction
..bank REOs
..postponed foreclosures which should be REOs but are not yet.
..homes for sale due to coming economic ripple effects, like job loss.
..for-sale homes that are now just rented out, waiting..
.. the normal amount of supply sources from people moving, dying, needing more space, changing jobs, etc.
There are probably more sources of properties destined to be For Sale before a bottom is more than just a gleam in some starving realtor’s eye.. first thing that needs to happen is supply must stabilize.
Our major export nowadays (as it was in the 1930’s…) to the Far East, is scrap metal…
I keep reading accounts of it being stolen, at a detrimental cost to society, as the criminals typically receive a trifling amount, compared to replacement costs (copper wire taken from electric lines, manhole covers, etc) for the cities, which can no longer afford upkeep, as they are not doing so well, financially.
they are not doing so well, financially ??
The terminator is Coming out with the final budget deficit numbers in a few days….My bet is its north of 20 bil…That’s 20% of the total budget….This problem for municipalities will be systemic throughout the country with pockets of strength IMO….Another reason to “short” the 2nd home market in rural area’s without the tax base to maintain services….
He’s going to have to pull off his greatest performance, complete and utter suspension of disbelief…
There was a big local news story in Atlanta yesterday about the “epidemic” of man-hole cover thefts taking place all over the metro area. Local governments are having to spot weld them shut. It’s not just happening in the ghetto neighborhoods–nicer northern suburban areas such as Cherokee County are getting hit hard. The man hole covers weigh 110 pounds and the thieves only get $15 for them as scrap metal. Got to be pretty desperate to steal them. But hey, we’re NOT in a recession
When the Soviet Bloc fell apart, in the west we could buy East German militaria for next to nothing & Russian arts & crafts were everywhere.
What does America have for sale in a similar vein, should we fall apart?
Very little. Currently we export paper money in order to feed our oil addiction (1.5 billion per day and rising). That money is then used to buy our natural resources and valuable assets. There’s really nothing of value which we haven’t already sold. I suspect our last export will be our children going in search of a better life.
hotdogs?
I hate to ruin the world-view of all those who think the US “doesn’t build anything anymore”, but…….these guys are going gangbusters right now.
-Aerospace……we are still the world leaders, in whatever line of product you want to name. A contact at the major OEM I used to work for says that 2008 will be the first year (in the 80 year history of the company that export sales/deliveries will exceed domestic sales
-Farm products of all types…….this may have the added advantage of making land more valuable as farmland, than as a place to park wall to wall McCrapshacks.
Anybody receive their rebate check from Uncle Sam yet? Yeah, those rebate checks that Bush says will help stimulate our economy (although I suspect most of the rebate will be used to buy more fuel imported from countries that dislike us, and from countries that suck away our jobs while exporting plastic do-dads and electronic swag that we American’s can’t live without. Got milk? I do and it costs a lot more.
Answer me this, financial experts on this blog:
-Why, pray tell, is the US Government letting people invest in overseas economies/companies, and giving them a tax break for doing so (401K/IRA deductions, plus others I’m sure are out there….). True, the government will eventually be able to tax any disbursements, but it just seems counterproductive to me.
-What will keep some foreign government/company, in the event of a major default/bankrupcy by some US entity, from grabbing/nationalising said investments as damages/compensation?
I mean, after all, the good ol USA isn’t going to be able to do anything about it, right?
I guess as long as the profits are repatriated and taxed here all is good. What difference does it make if I buy IBM vs Daimler stock? Buying IBM stock isn’t going to stimulate the US economy.
True…….what annoys me, is that these people who are supposed to be so much smarter than I am (and pulling down X-gazillion dollars for it) couldn’t seem to figure out that if you continually raise the cost of doing business here, while at the same time making it easier and cheaper to do business abroad, that your industrial base was going to disappear sooner rather than later.
What makes me laugh is all the jackholes that said it didn’t matter, because all these jobs would be replaced by “higher-value” jobs in business and finance management, and the world would have to beat feet to our door, to find this kind of expertise.
Howz that plan working out now??
Ria - it hit my bank account this AM.
What are you seeing/hearing in micro terms that may reflect macro trends? Some of the things I’ve noticed: Target’s advertising has switched to emphasizing value, there are a lot of radio ads for windshield repair, and today I heard an ad for a children’s consignment store that said “you could go to garage sales, or save the gas” and go to their store. The places I usually buy lunch are a lot less busy than they were in the fall.
AIG’s record loss
Published: May 9 2008 14:31 | Last updated: May 9 2008 19:39
Twinning a $12.5bn capital raising with a 10 per cent dividend increase is a bit like hitting your average shareholder with a baseball bat while offering them a Band-Aid.