Bits Bucket And Craigslist Finds For May 10, 2008
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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FED Closes Bank…The FDIC is planning to beef up its staff, including temporarily hiring up to 25 retired FDIC employees who worked in the agency’s more than 200-person division that handles failed banks. They will handle an anticipated increase in bank failures.
Once again I thought our troubles were behind us? Paulson just said it’s all good.
http://biz.yahoo.com/ap/080509/bank_closed.html?.v=4
Paulson molests baby goats.
Not that there’s anything wrong with that.
Goatboy holds press conference. News at 6!
Is this the same man who said, “the sub prime problems are behind us” now? I really believed him, especially when he was one of the respectable Wall St. firms CEO. Are you saying we can’t believe/trust these guys? My faith shattered I’ll put my faith back in Santa Class and “wait” for my presents to arrive.
The “sub-prime” problems ARE behind us
(trust me……yeah, that’s the ticket……)
Nobody is talking about the “Alt-A and Prime” crisis that is just starting to spool up.
Forewarned is forearmed.
Hah. I was checking an account with actual electric money in it on Citibanks website when I saw this news linked from there.
I see the IRS has stiffed us so far on our stimulus payment, should I be worried?
I was worried because I heard the transfers were going out early, but mine arrived yesterday per the schedule at irs.gov.
Geez. Don’t read the comments to that link before you get your coffee. You may turn right and head for the soupline in your bathrobe.
More evidence there that the worst is 85 percent behind us. Because I am sure that at this point, 85 pct of the banks that are going to fail in this financial episode have already done so.
ANB Bank stiffed depositors to the tune of $1.8 Billion, leaving $50.2 Billion in the FDIC, to bail out other banks deposits.
Considering i’d never heard of them before, the rest of the FDIC insurance money in reserve might be gone, sooner than later, as bigger banks go belly up.
This bank played the real estate game, imagine how many other banks have the same story to tell?
“Where regulators found lax lending standards, mostly for construction and development loans for projects in Utah, Idaho and Wyoming, as well as Arkansas.”
Is the $50.2 bn a hard number, or is there some way the Fed could reliquidify the FDIC if necessary?
This is just the tip of the iceberg, and if the Fed has to print a few trillion Dollars (FDIC insurance has enough moolah to cover 1.22% of deposits) to make things ok, say hello to my not so little friend, hyper-inflation.
Recall the Resolution Trust Corp: http://en.wikipedia.org/wiki/Resolution_Trust_Corporation for the S+L crisis in the late 1980’s.
They were big in Arkansas (I lived 15 minutes down the road from B-ville), they just kind of exploded onto the scene in the early 00’s. The NW Ark area has a HUGE real estate bubble that rivals anything you’ll see anywhere because of WallWorld and all of it’s vendors and contractors that had to set up shop in what was basically cow pastures along the Bypass.
Won’t the slowdown be good for WallWorld and, by extension, the NW Arkansas housing bubble?
There are only so many folks in NWA who can afford the houses that they built. Just 15 years ago you had a hard time finding a job in the area. I bought my 2200 ft brick in a good neighborhood with a hospital down the street and a Blue Ribbon school over my back fence for $69,500.
Even with the Wally World effect, it’s still a very poor area once you five minutes outside of town. Not much industry (outside of poultry) and the area is flooded with illegals to the point even realtors advise against buying in towns like Rogers.
You’re assuming a 100% loss to the FDIC. The non-insured and other creditors will take a 100% loss. FDIC will recover something on the assets though how much is anyone’s guess. If the aggregate loss on the assets is 25%, which is a huge loss, then the FDIC should effect a 90% recovery (insured deposits represent about 80% of assets).
I, on the other hand, think this is the barest tip of the iceberg. In a $15 trillion market what’s a couple hundred billion? And that’s just the US market; what about all the overseas overvalued markets?
A $15 trillion market that’s ultimately going to see a 50% haircut, might I add
I got dibs on the new bottom. Calling it here;-)
“How many bottoms must the economy look down upon?”
A mid-sized bank in Arkansas busts itself with ADC lending. Gee, this reminds me of something from 20+ years ago. What was it?
Who has “Crash Proof”, the Peter Schiff book that I started to pass around last September? I haven’t seen anything about it in quite a while. How many people have signed it? Is my $1 bookmark still in the book?
NYC, I’m not sure, I got it first,read it signed the inside flap and sent it out, to I think Carrie Ann. I may be wrong but I remember mailing it out about 3 weeks after I got it. Of course the dollar book mark was there.
yeah I was thinking I hadn’t seen any prompts for the next reader. I sent it off to Vozworth w your $ still there.
Kids got a kick out of that dollar.
That book had been mailed out about 10/08 btw.
funny, I mailed it off 19 October 2007….might wanna recalculate your memory, 10/08 still a few months out.
I mailed the book on to a realtor in SoCal, I cant remember his name…I’d have to check the email archives.
However, I do recall calling him out and he posted his offer to send the book on down the line three times, and I thought the book had traveled on to greener pastures.
That’s what happens when you trust a realtor.
not a realtor… but have some land I’d like to sell you….
Rich @ Carr Commercial Real Estate, Tustin CA….Im sure he still reads here occasionally….was the recipient of the book, dollar intact.
you may have to ask a couple of times to get the attention of the books most recent recipient.
Hey Voz, youre right. I read it and sent it on to a Bryce Mason on 10/31/07. I will email him to see who he sent it to.
The book was in excellent shape, with dollar intact, when it left here. I took a copy of the notations (there were 5) before I sent it on.
Rich
Rich sent it to me, and I sent it to Atlanta Renter in Georgia. I’ve sent her an email to update us.
Comment by Lost In Utah
2008-05-10 11:08:22
Thats what happens when you trust a renter.
I had asked for it, but never got it.
I have the book. I had lent it to some friends. Sorry, I didn’t mean for it to get out of the HBB group. On the positive side, I recruited some new HBB readers.
VTD, what’s your email. If you email me your address, I mail it to you.
Bill On Shaky Ground… Not only do I hope it’s on shaky ground, I hope it goes into the Washington quagmire where it belongs. These circus clowns just need to let it go!!
http://www.nytimes.com/2008/05/10/business/10bailout.html?_r=1&adxnnl=1&oref=slogin&ref=business&adxnnlx=1210419336-bVbBEHDOdMv3nrQsBOSqCA
“broad wave of bailout resentment” mentioned in NYT piece
– guess what, that’s us! Keep the wave going
Bu$h’s chance to do one right thing before leaving office. I’m not optimistic.
Why would Bush veto this bill? That would seem to me to be inconsistent with his (and AG’s and BB’s and Paulson’s) past policies. Just for retribution against the banks for contributing to the Dems?
Why wouldn’t he veto the bill? It looks like a beautiful opportunity to thwart Democratic Congresscritters in the name of upholding traditional Republican conservative principles, and there is not much time left in his second term for the Dems to get even.
I find myself highly skeptical that $300 bn or $400 bn worth of insurance for an event of unknown unknown magnitude would end up only costing $2.7 bn. I don’t see how one could even come up with this figure without pricing out the business to private insurers.
‘The Bush administration on Friday said it would only support legislation that did not require taxpayer funds. The Congressional Budget Office estimates that the House-passed measure would refinance as many as 500,000 homes over the next five years, at a cost to taxpayers of about $2.7 billion.
“Taxpayers shouldn’t be taking on the risk of foreclosure,” said Tony Fratto, a White House spokesman.’
“…in the name of upholding traditional Republican conservative principles”
Why Republicans can always claim the moral high ground, just ask new twit grinch or stiffy limbaugh:
http://news.yahoo.com/s/ap/20080510/ap_on_go_co/congressman_affair
I don’t care where politicians of either stripe choose to put their pee wees, but I do care where they choose to put my money.
Did Fossella ever claim to take the moral high ground, or is this just another generic branding?
I would like to think that it will get vetoed, if not I for one will be yelling louder at my reps. than I already have been. I would be embarrassed to be a member of either party, the economic illiteracy in Washington is mind boggling. The good of the Country is last on their list!
“Taxpayers shouldn’t be taking on the risk of foreclosure,” said Tony Fratto, a White House spokesman.”
For once, I can breathe deeply. Who knew President Bush would come to the rescue?
Oliver Stone better put this drama in his upcoming movie about Mr. Bush.
Even if you don’t agree with the President on other stuff, you have to admit… this veto took guts.
“Who knew President Bush would come to the rescue?”
I think we all need to grab some tinfoil for a moment. What Bush does, by vetoing, is insure the stripping of the last shred of clothing off the little man. Think about it.
The fed is backstopping the banks while the little guy looses his a$$. I don’t see how this ISN’T typical Bush. Not that I would support a bailout either, I just see it as Bush winning under the guise of common sense.
Well played, George, well played.
What percent of the voting public approves of this bailout? Is it 20 pct, or lower than 20 pct? A presidential veto would not only be right in principle, but it would also align well with voter preferences.
Bail-out blah blah blah. There isn’t any bail-out because there can’t be. The MS media (and others) are playing you guys like a violin.
“Write congress, call the white house, and tune in right after this commercial!”
Cool.
Keeping up appearances is easier done, than keeping up finances.
“Keeping up appearances is easier done…”
Last year’s ’subprime is contained’ appearance was dashed by the onset of the so-called credit crunch in August. How long will the ’slowdown, not recession’ appearance hold up this year?
this crash is a helluva lot bigger than any bailout can support. can you spell d-e-p-r-e-s-s-i-o-n?
Oh, Florida.
Jeep dealers are advertising guaranteed 2.99 per gal gas for 3 years if you buy a new Jeep. Must tell a friend who *just* bought one a couple weeks back. Any best on if you’ll be required to go to the dealer for it, and if there is a tank limit? A local Honda dealer does this with “free oil changes for life”. Well, did. I haven’t heard about it lately.
From that scorched earth circle I live in:
More foreclosures. More houses at wishing prices, sitting. Water restrictions just eased slightly, but lots of brown lawn. My HOA is only 4 years old, and is owed about 6 weeks worth of total dues (if we take in 1k a month in dues, we are owed about 1.5k). Mostly due to owners who have *never* paid, especially the foreclosures.
I’ve heard Florida law has changed re:liens and HOAs? Anyone have any links proving/disproving? Yes, a lawyer will be consulted, but hasn’t happened yet.
What else - oh, one of the Ag parcels I’ve been watching is for sale. Short sale. Sold for 190k 1994, listed for a while at 999,000. Eventually sold twice for a final price of 627k. New owner apparently remodeled the entire interior of the house (out of towners who changed to Florida license plates after a while).
I called the number on the FSBO and … well … a big bank holds the mortgage and has said they’d accept 400,000 in a short sale. The owner is asking for offers 450k and higher, just to forestall any problems with the bank, he says. And yeah, there is a buttload of sweat equity and new fixtures in that place. Last month he ripped out all of the insulation, I hope to shout he replaced it.
What else? Oh, yeah, the president of one of my credit unions (the one where my tax money is CD’d until September 25th) resigned. Gahh.
Whereindahell do I put my money? I’m worried about WaMu going under, too. GAHHHHHHHHHHHHHHHHHH. I’m hearing good things about Riverside Bank not investing in commercial real estate and trying to stay small … but for how long (or until they are bought out!).
Oh, one more - City National Bank of Miami - bought out by some forgien bank. Applauded in the MSM for being conservative and well-run. I know a company who used to bounce checks on them all the time. I’d get a paycheck or reimbursement check from them and go straight downstairs to cash it. A few months before I left, every check I cashed had to be approved by the manager on duty. After I left, paychecks were delayed and bouncing, and apparently not satisfied with screwing their employees that way, the company snuck out of their lease and hadn’t paid employee taxes, FICA, or health insurance in years. Nice little shock to get a letter from a gov’t agency claiming I hadn’t earned any credits or paid any taxes … but at least I didn’t find out about the no health insurance thing after emergency surgery like some did ….
Nice post firefox and thanks for all the anecdotal evidence.
One really needs to understand and not forget that we are likely still in the first (or perhaps second) inning of all of this great unwind so the kind of losses and dislocations that are starting to show up and gather steam are likely to be unrelentingly truly intergenerational in scope and size and duration going forward.
There is no way that the foundations of the (global) banking system can withstand this going forward and one really needs to think outside of the box in terms of surviving this and trying to keep one’s savings intact.
The Arkansas bank failure left about $ 40 million in uninsured deposits and you can bet that the people who lost their savings there “overnight” will soon come to realize that nothing is truly safe anymore.
The Bank of the Mattress is one place all need to consider as well as (imho) outright ownership and holding of some physical gold and silver. These worked last time and there is no reason not to think they won’t work this time.
Thanks so much for your comment. It really puts things into perspective.
Yeah, I’ll just have my employer pay me in cash. And just walk my mortgage payment to the local office.
I don’t think it does quite work that way as it did before. Someone’s got to be left standing when the music stops.
With any luck and higher gas prices, maybe sedan chairs will come back into vogue so sets of same-height realtors will have something to do for those with chairs.
So, is the Bear Market Rally over for WS? It certainly looks like reality has sunk in. As a matter of fact, it looks like a whole lot of Bulls in a whole lot of markets are now steers.
Roidy
If the Fed suddenly announces a ZIRP and TAFs to $200 billion I betcha there would still be some life to it. This is a waiting game until regulatory attempts at a bailout are through.
In a little while we will be heading to one of the world’s centers of real estate denial. We are going to that wonderful oasis known as New Jersey. The place of big hair, medical waste and inflated home values. I want to see if the “For Sale” signs are still in bloom. Maybe I will find a neighborhood to walk around and heckle the residents with a blowhorn. Wait, that isn’t a blowhorn. Bwahaha.
Have fun and don’t get too close to one the numerous EPA Superfund sites…
You can thank Monsanto for the majority of EPA SUPERFUND Toxic sites all around the USA and the world.
Just so’s the bottom line is the super mega stock holders get their moneys worth, who gives a rats ass about what it does to the rest of our lives.
Craiglist Gems:
Jonah apparently was a biblical homebuilder. Check out this beauty that was built by the homeownner (sic) and modeled after an English Country bread and breakfast in Whales (sic):
http://westpalmbeach.craigslist.org/rfs/646486807.html
Only 2.1 mil. And they don’t mention their nice religious neighbors, with their adjacent Kingdom Hall. On the good side, though, while it means a busy weekend traffic, the rest of the week it’s quiet.
Oh, except for that kid that got dragged to his death while he was trying to skateboard home and there are no leads in the hit, drag, and run. But other than THAT, it’s quiet.
==============================================
SURPRISE! BUY ONE HOUSE, GET TWO! WHOOOOOOOOO!
http://westpalmbeach.craigslist.org/rfs/675127736.html
See, it’s a 3/2, but it’s not. It’s a 2/1 and a 1/1. A duplex or vaguely legal In-Law apt. SURPRISE! Built in 1948, and nowewon’ttalkabouttheneighborhoodorprovideanyusefulpicturesofit. SURPRISE!
Front house: “Notice the expansive countertop”. SURPRISE! No cabinets above the countertop.
Back house: Notice the “step-saver kitchen”. SURPRISE! Your fridge is in the livingroom/kitchen!
==============================================
Equestrian home opportunity at 500k off appraisal! More than one home to choose from!
http://westpalmbeach.craigslist.org/rfs/674753201.html
“Once these ready to move homes are sold, this opportunity will be gone.”
OH NOES! ONCE THE HOUSES ARE SOLD, I CAN’T BUY THEM! NOOOOOOOOOOOOOOOOOOOOOOOOO!
What is it with all these new kitchens with a TINY sink????? And the faucet so high? What if you use a carving dish for say a Turkey? It wont fit into the sink, and water will splash all over you and the floor if you wash it……My sink is twice the size of that and i think that is too small for 2 people.
When i grew up we always had Double sinks …What are these people thinking? What …….you order take out if you have guests over?
anycdj and probably the rest of us, have those wonderful family photo from Kodak of the baby sitting in one of those sinks!!
Geezeee just think, we bathed in the kitchen sinks and we are still alive and healthy. Gosh, when you think about all the things we are warned against, and the toys no longer available to kids that we chewed on nonstop.
I’m okay okayokayokay tic tic.
Seriously, what were our parents and grandparents thinking!
hehe
I’m pretty sure those haircuts mom used to give my brothers and I qualify us for some kind of post-traumatic-stress related disability payments and counseling.
That second one is hilarious. I love the exercise equipment within arms’ reach of the fridge. There is just something so wrong about that!
Ummm yes, something is very wrong about that workout machine right next to the refrigerator. Or you could just open the fridge,eat while working out. And cool off at the same time, saves on air conditioning.
Or someone opens out the fridge door and pings off the poor guy on the excerciser!
What’s really cool is the “basketball player’s” microwave sitting on top of the fridge.
Alberta has largest sales decline
http://www.canada.com/calgaryherald/news/newhomes/story.html?id=6b7b615f-3eb8-4d21-accf-f98ad01a13c1
The Canadian Real Estate Association, the umbrella group for the country’s provincial and local boards, says Alberta had the largest sales decline compared to the same time last year.
The province’s sales fell 30 per cent. It also saw the strongest gain in the number of homes for sale, posting a 36-per-cent hike.
As for price increases, well, we’re no longer the headline story in the nation.
That honour lies with Saskatchewan, where the average price rocketed 42 per cent for the comparative January to March periods.
Canada had a crystal ball in the US market, but as usual, things are different there. Since Saskatchewan is like going to north North Dakota, it must be those endless fields of ethanol that allow for a 42% increase in prices for the January to March periods. I wonder what the Canadian banks and FB bailout will look like.
My father was born in Saskatchewan. That is a place you leave. It only shows that there are no new real estate bubbles anywhere in the world for an awfully long time.
Speaking of books, just read “Fooling Some of the People All of the Time: A Long Short Story” - great book!
http://www.amazon.com/Fooling-Some-People-All-Time/dp/0470073942/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1210421708&sr=1-1
I gave your iTulip book to our friend in Boston that bought a Southie condo in 2005. I figured it would be good for her to read. Maybe it would keep her from making any more really bad decisions. She is a really nice person. You would have been happy that it found that home.
Read the one I just mentoned. Very well written and very interesting.
I thought BAHSTIN would take the biggest hit- wrong so far
but southie, especially those triple deckers = whammo
Don’t know if you saw it, but the author was interviewed on CNBC yesterday morning. Very interesting and definitely sounded like a good read.
For a wonderful throwback and some great trading strategies read:
Munehisa Honma
The Fountain of Gold (1755)
An incredible long/short hedger earning the equivalent of $100B/year. He made it in Rice futures. His family is still very powerful in Japan. And have never lost the inherited wealth. The fountain is still there. Samurai Honma was the inventor of technical analysis.
Speaking of books, I am reading Al Gore’s “The Assault on Reason” this weekend. I know it came out last year, but it has just made it to our local library. So far its a very good description of how our country has gotten to be in such a mess. I am only about 1/4 of the way through, and the end of the book is supposed to be about things we can do to change the way our country is run–Hopefully it will not be just “Vote Democrat” pablum.
Here’s a quote that will make you want to sharpen the old pitchfork : “The truth about this particular brand of faith-based politics is that President Bush has stolen the symbolism and body langauge of religion and used it to disguise the most radical effort in American history to take what belongs to the American people and give as much of it as possible to the already wealthy and privileged.”
You don’t actually think Gore wrote that book do you? Hillary doesn’t write her books, Bill doesn’t write his book, Rush Limbaugh doesn’t write his books, and Al Franken doesn’t write HIS books. Almost all celebrity books, especially those by politicians, rocks singers, and sports figures, are ghostwritten, often using teams of “researchers”(a.k.a. hitmen) and multiple writers. Judith Regan, who publishes many of them, openly admits it. But, the public keeps buying and believing.
http://www.randomhouse.com/kvpa/cormacmccarthy/
Also on the subject of books: I give my highest recommendation to THE ROAD, by Cormac McCarthy (same guy what wrote NO COUNTRY FOR OLD MEN - I’m guessing you’ve heard of it?!).
“A father and his son walk alone through burned America. Nothing moves in the ravaged landscape save the ash on the wind. It is cold enough to crack stones, and when the snow falls it is gray. The sky is dark. Their destination is the coast, although they don’t know what, if anything, awaits them there.
“You should read this book because it is exactly what a book about our future ought to be.” [Esquire]
“You can fool some of the people all of the time, and those are who you want to focus on” George W Bush.
http://www.bloomberg.com/apps/news?pid=20601109&sid=arigOxlIiRm4&refer=home
Municipalities paying huge fees to end derivative contracts.
`Tough Lesson’
“Some of the termination fees are ugly,” said Christopher “Kit” Taylor, former executive director of the Municipal Securities Rulemaking Board, the market’s regulator. “It’s going to be a tough lesson for a lot of issuers.”
“Wisconsin Public Power Inc. in Sun Prairie spent about $11 million to terminate swaps on $192 million of tax-exempt auction-rate bonds it refinanced on April 21, according to a Standard & Poor’s report. Marty Dreischmeier, the company’s chief financial officer, didn’t return calls for comment. The swaps were done with Bear Stearns Cos. and JPMorgan Chase & Co., both based in New York, S&P said.
CareGroup Inc., a hospital system based in Boston, plans to borrow $371.1 million to refinance auction bonds and terminate interest rate swaps with Citigroup and Bank of America Corp. of Charlotte, North Carolina, at an estimated cost of $12 million, according to reports from Standard & Poor’s. CareGroup’s spokesman Jerry Berger confirmed the information from the reports and declined to elaborate.
Bentley College in Waltham, Massachusetts is preparing to terminate swaps on $56 million in auction-rate bonds that it’s refinancing, said Paul Clemente, the CFO. The penalty changes daily depending on interest rates, and Clemente declined to speculate on the final cost. The swap was arranged by Lehman Brothers Holdings Inc. in New York and Bank of America.
“It’s probably going to cost us something,” Clemente said. “These are the risks of getting into interest-rate swaps.”
Buffett: “Derivatives, as is hell, are easier getting into than out of”.
Lets have a list of Buffett quotes! Warren AND Jimmy, that are sage advice for current economic times? My fave is “only when the tide goes out do you see who is swimming naked” (to paraphrase).
An Audience With Omaha’s Oracle
…
• Charlie and I don’t have the faintest idea where the markets are going.
• If you’re in the position to make choices, go to work for organizations and people you admire.
• If you find something that turns you on, you’re probably good at it.
• Read daily newspapers and learn as much as you can about the world.
• $700 million is probably too much to pay for the Chicago Cubs.
“You can occasionally find markets that are ridiculously inefficient or at least you can find them anywhere except the finance departments of some leading business schools”
Warren Buffett,
annual report 2007
“Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that causes the stock to be misappraised.”
“It is better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
“Price is what you pay. Value is what you get.”
“There seems to be some perverse human characteristic that likes to make easy things difficult.”
“I violated the Noah Rule: Predicting rain doesn’t count; building arks does.”
“If you have a harem of forty women, you never get to know any of them very well.”
“There is nothing like writing to force you to think and get your thoughts straight.”
“What we learn from history is that people don’t learn from history.”
“Investing is simple but not easy. There are only three types of stocks: undervalued, overvalued, and fairly valued. What determines the catagory is simply the price you pay.”
“The price you pay determines your rate of return.”
“Once a blowhard, always a blowhard”.
palmetto, hbb
That’s the best one here.
“some people claim there is a woman to blame, but I know, its my own damn fault”
“only time will tell if its time well spent”
“if we couldn’t laugh we would all go insane”
“We are the people our parents warned us about”
Jimmy Buffett, not so much the oracle of Omaha…but a million parrotheads cant be all bad.
“When Gandhi was asked what he thought of Western civilization, he said, “It would be nice.”
Anon
Money flows from the impatient to the patient.
Mr. Buffett has a very large loss from being short 20 year puts in the S&P500. And they sold the Puts so cheaply that even though they will probably go out worthless, a naked buyer had 5yrs of free volatility and the calls trade at such a large premium relative to the puts that the traders and firms that employ ‘reversals’, locked in 18% annually for 5 years. Risk free.
Pretty stupid use of Puts by Berkshire.
hows this quote:
“Anyone that expects us to come close to replicating the past should sell their stock; it isn’t going to happen. We’ll get decent results over time, but not indecent results”
or this:
“We think Berkshire is an attractive investment. We don’t
think it’s the most attractive in the world”
He is one honest man
this is the part of the game that I do not understand. Conceptually, it takes a deep pocket long steady hand to engage in this type of financial behavior and risk taking.
Hoz, I do not ever discount your skills, and based on your observation, I would assume that you are a holder and a believer in the “firms” that have locked in risk free gains of this magnitude.
this is information as money, forget the gold/silver standard. We live in the brave new world designed around the information standard, where the information as money travels at speeds not yet known.
I am trying to engage the marketplace with behavioral pshychology, technical analyisis, anecdotal experience/observation, and fundamental assumptions, all suffering paraniod schitzoid tendencies towards rapid fire decision making.
I have two followers going into the TRAMX in my tiny investment group.
now, Im off to the garden and then a 15 mile bike ride. hope the weathers good where you are.
always enjoy your posts. hat tip..
J’agree - estupido. His strategy has always been high margin/low risk - furniture, jewelry, consumer products, oligopolies, etc. Here he’s taking in cash that has very low expected returns and subjecting himself to enormous risk on the outlier (but very real) probability occurrence of depression/deflation. Didn’t he say just a few years back that he made a mistake on not being properly paid for risk taken on extraordinary but rare events, such as terrorist attacks on facilities?
Perhaps he feels the need to go for these risky marginal returns because he’s somehow trying to justify that 50% premium to NAV? But this is like placing a mega-bet on Secretariat to show - the downside is just too dangerous to his general business. And now Secretariat has broken slow out of the gate (as he often did) and although he can always be counted on in the downstretch, you never know the future.
The elephant in the room
Fannie’s total debt stands at about $800bn against core capital of less than $50bn. The company’s debt-to-asset ratio of 90 per cent is the kind of high-octane leverage that provokes palpitations among risk managers.
It makes Bear Stearns’ use of leverage look like a small-time card sharp by comparison.
http://news.yahoo.com/s/ft/20080509/bs_ft/fto050920081327143194;_ylt=AmfWtfT0YX_.3HHL9_BMfM6s0NUE
That elephant is too-big-to-fail if any elephant is.
Trying to hold back market clearing prices can be done for a while. In the end run, it’s the lack of affordability and tightened credit standards that’s going to be the 450 Nitro Express Elephant rifle that drops this beast IMO.
If you watch the Animal Channel, you can see elephants fall, once in awhile. Or at least they are laying down when they are really ill and dying.
The sheer scale of Fannie’s portfolio and its use of derivatives has boosted the bottom line of investment banks but worried the Federal Reserve, Treasury and various politicians through the years.
The debate over how the GSEs will ultimately be regulated remains a long-running saga in Washington. In the current environment of housing distress, however, systemic risk from the GSEs for the financial markets is evidently tomorrow’s problem.
In March, the surplus capital requirement imposed on the mortgage giants by Ofheo was cut to from 30 per cent to 20 per cent.
This week, the regulator cut Fannie’s limit to 15 per cent and said a further reduction to 10 per cent in September was likely.
I don’t know but it sure doesn’t sound like the FED and treasury are too worried to me, their pooring more gas on the fire.
We are paying the OFHEO 60 million per year (or is it two years?) to hold their hand as they sink.
I expect that both FNMA and FHLMC will go bust and the government will wipe out the shareholders and rescue the creditors. An alternative would be the government, maybe through HUD, will simply lend to the GSEs without limit so that they, the GSEs, can honor their obligations. The latter approach mimics what the Bank of Japan did for its zombie banks.
“There is a dirty little secret no one is talking about. Private direct investment into the United States has come to a standstill. The external current account and budget deficits are now being financed by foreign central banks almost exclusively. The US is living on the grace of foreign central bankers. They are rightly defending the value of their foreign reserves denominated in dollars and they have trillions and trillions of them to defend.”
To the connected financial types among us: Is there any truth in the above statement or is this emotional hype?
http://www.financialsense.com/fsu/editorials/andros/2008/0509.html
It’s been like that for over a year, maybe two years. It shows up in the Treasury’s flow of international capital report (TIC). The dollar’s decline against major currencies since 2001 (about 40%) has spooked private, foreign investors. The huge US current account deficit is offset by foreign sovereign wealth fund and central bank investment.
The U.S. is to foreign central banks as was Donald Trump, in bankruptcy status, to his creditors.
Make that pouring, some kind of Bernake slip.
I liked ‘pooring’ better. It made perfect sense.
Lake House McFarland
Anyone want to help this kool aid drinking realtor out??
Motivated seller. Buy before Foreclosure. Waterfront home on McFarland side of Lake Waubesa 8 yr. old, 4 bdrm, 2 3/4 bath, 2600 total sq.ft. finished space. Hickory cabinets, tile floors, Anderson windows, vaulted ceiling, 2nd floor loft, large master suite w/bath & WIC, deck, walk-out basement, 2 car garage w/2 add. parking spaces, and pier. Seller is licensed Wisconsin Real Estate Agent. Sq. Ft. approximate buyer should verify.
sounds nice. how much does he want
I’ll be in ‘Sconny next weekend. I will check it out for you, Chick. There aren’t many lakes in Wisconsin and Minnesota so I’m sure it is a rare find.
And, a lake big enuf for a pier….not a dock, a pier!! Im sold on it. Packin’ my bags now.
A few years ago, 2005 a ghetto shack house in McFarland on the lake would be $600K. 10 minutes from Mad City- great schools.
With Citigroup getting rid of 500 bln in assets, I would think that home prices will be hurt greatly as they dump this inventory onto the market. I imagine we’ll be seeing alot of this from banks in the very near future as they realize the market isnt coming back.
Do you really think banks are leaving the denial stage of the housing bubble stages of grief already? I see scant evidence in the pricing in my area — still generally way above what local incomes can afford.
and apparently they are still doing mortgages with only 3% down in Syracuse.
“I see scant evidence in the pricing in my area — still generally way above what local incomes can afford.”
Is that local incomes as in x1 wage earner or x 4?
I checked out o’side prices and thousands of them are 800k to 1 million. No budging here.
Wasn’t it just $400 billion yesterday or the day before in assets that Citi needed to sell? Was the increase to $500 billion a magic bean counter error on the original estimate, or is Citi deteriorating that fast ?
The _New York Times_ has an article in Today’s (saturday’s) paper titled “Mortgage Bailout on Shaky Grounds”. The Democrats are adamant about having some “principal reduction”–ultimately taxpayer funded–made part of this. But they also know that they don’t have enough votes to make something veto-proof.
This Bailout talk from the Democrats made me–a lifelong Democrat–switch alliances. Barring any major problems coming up with McCain, or an extremely poor choice of running mate–he’s getting my support. I’m not going to vote for a person representing a party that wants to confiscate the hard-earned money from responsible Americans to pay for greedy specuvestors. Helping poor people and people who are just too mentally deficient to work is one thing; helping people with enough smarts to secure complicated financing is disgusting. It takes some amount of effort to buy a house and nobody does it by accident.
So, you would rather help the wealthy
who are crooked enough to have gotten away
with this debacle for so long by voting McC?
You would rather vote for a person who keeps
changing his stance and who has Hagee as his spiritual
advisor?
Just wondrin
Yes, I am!
Most people would consider me a “liberal democrat.” Heck, I even have one of those “same-sex marriages!” I would love to see things like Universal Health Care.
But I’m going to vote for John McCain.
I cannot let the government keep handing over my hard earned money to specuvestors. Granted, the Republicans aren’t much better–Bush, for example, signed into law something making forgiven mortgage debt exempt from income tax. But with a Democratic president, we’re doomed! Barney Frank makes we want to vomit when I hear all the money he wants to shower on greedy specuvestors.
Listen, the greedy specuvestors would love to be among the “wealthy” people you detest so much; they’re just not smart or ambitions enough to be among them. If you’re going to hate “the wealthy” you should also hate wealthy wannabees!
I’m not going to vote for a person representing a party that wants to confiscate the hard-earned money from responsible Americans to pay for greedy specuvestors
Hello
What is AMT vs tax cuts on investments - moving tax burden from elite to middle and upper middle class
What is inflation? - Taxing earnings and savings rewarding speculators and gamblers.
What has rolling back regulation on banks ect brought - It’s made CEO’s rich at the cost of pension funds, 401k, and real estate where the majority of the middle class has it’s wealth.
Bread prices on a roll
Higher costs of flour, ingredients hit bakeries hard
By Penni Crabtree
STAFF WRITER
The soaring price of flour – once the cheapest of staples – hasn’t soured Bread & Cie bakery owner Charles Kaufman’s sense of humor. But it has given it an edge. “I’m thinking of renting our bread,” said Kaufman, wryly. “If I don’t want to raise prices, the only other reasonable options are to rent the bread or get rid of the parking lot and plant a wheat field.”
I like Gold Medal Harvest King bread flour, makes great French and Italian breads. It’s gone up about 20% recently. Still, it’s a lot cheaper to bake than buy.
“Still, it’s a lot cheaper to bake than buy.”
Even after factoring in variable production costs (energy and labor) and capital costs (your oven)?
Yep - “No Knead Bread” invests about 10 minutes of actual labor and produces a Boule you would pay $5-$6 for in a store. For about $2.00 in actual costs. I also have a favorite French bread recipe that produces 2 full sized loafs for about a $1.00 compared to $2.00 for one mediocre loaf. Once you learn the basics, it goes so quickly you barely notice.
I make that too. You’re referring to the Bittman recipe?
Yep. It’s a beaut to. I use my Great Grandmothers dutch oven for it. Very nice bread at little effort
http://www.startribune.com/lifestyle/taste/11461321.html
Say what you will about those Sun-bonneted polygamous cult babes - I bet they bake some bodacious homemade bread.
I imagine they will remain too-big-to-fail after this shrinkage.
Citigroup to sell off assets, shrink by one-fifth
By Madlen Read
ASSOCIATED PRESS
NEW YORK – Citigroup’s new chief executive, Vikram Pandit, plans to stick with a global banking model after months of intense review – but only after shrinking the company by about one-fifth first. The three-year plan, revealed yesterday, includes getting rid of more businesses, mortgages, real estate operations and jobs.
Citigroup pulled a fast one when they sold the Junk Bonds to ADIA, it looked good in theory, but when the numbers were finally revealed and broken down. Abu Dhabi gave Citigroup the money and Citigroup essentially gets a free put at $31.75.
After ADIA figured this out, they will not loan any more money to Citigroup, nor will any other sovereign wealth fund. Citigroup needs real moneys. Sell everything, Mr. Pandit. You burned the people with the moneys that could help you.
Hoz, in yesterday’s bit bucket you were talking about the Chinese stock market being up 60% over the last year. What is it you watch for China? I look at the SSE Composite Index and it’s been a massive dog…
Thanks in advance.
iShares FTSE/Xinhua China 25 Index (FXI)
Quality not quantity. lol
Thanks for the response. I always value your posts.
I haven’t bought a stock (other than in a 401(k)) for a long time and so I don’t know much. I’m a very traditional buy and hold forever kind of person. I naively look at the graph for FXI and think it’s on its way down from some sort of meteoric bubble rise, just like everything else. Is this something you consider a buy and hold long term? (To me long term means one might sell it sometime around when one’s retiring to get something more conservative.) My ignorant analysis says the PE ration is high and this stock has more to fall since 41% of its holdings are in the financial industry…
Sir,
Read the prospectus. Look for the risks in owning any ETF. Until FXP (the short), I used FXI as a short hedge against long stocks.
As to P/E ratios, the current S&P500 is trading at a P/E of 23 and change. The current S&P500 has earnings growth of 4%/yr. China is trading at a current P/E 41 and change with earnings growth of 26%/ annum.
It is far riskier to invest in the US than anywhere else - there are 159 different countries stock exchanges - the US ranks 155 = a huge improvement! Last year it was 156th.
Unfortunately many of these countries exchanges cannot handle an order for $1MM, let alone $500M. So stick with the top 50! It is courageous to buy a stock in a far far away unpronounceable place with sales of $500K/yr. A private business in the US. So you buy a basket of the best and cross your fingers and sell to a hedge fund - receiving a standard 2% agio or 5% or more if your record is good. lol
I’d think twice about investing in a country with a dictatorial and predatory government, a corrupt and unaccountable managerial class, a justice system that serves only the rich and well-connected, a seething mass of peasants and urban poor that are falling further behind the neauveau rich class concentrated on the coasts, a floating army of rural unemployed, rising ethnic tensions and separatism…wait, are we still talking about China?
Inflation will kill China
China makes it’s living manufacturing goods, inflation will force the world to cut back on consumption of manufactured goods and instead spend their dollars on things like food, water, oil, and shelter.
Beware of can’t-miss investment ideas in bear market conditions with lots of hedge funds making side bets behind the scenes.
Falling Off an ETF Seesaw
It sounded like a can’t-miss idea: a pair of ETFs developed by a Yale economist to track oil futures. One let investors bet crude would rise, the other that it would fall. But it turns out the funds, which will cash out at the end of June, were too smart for their own good.
In 50 years we’ve gone from a manufacturing economy that supplied the world to this…
And how much longer will it support the lifestyle to which we’ve become accustomed?
“The two funds were designed to act like a seesaw. When oil rose, the securities would move from Oil Down ETF, lowering its value, into the Oil Up ETF, raising its value.”
So the money ends up chasing up the price of oil.
The strategy works well, just as this strategy worked well running up the price of real estate, until …
Their creator, Mr. Shiller, didn’t respond to requests to comment.
—
At least he is keeping his mouth closed, rather than Yunning.
REPLY TO ALL
By PETER JEFFREY
The Core of My Existence
Stripping the Volatility Out of Life
May 9, 2008 10:46 a.m.
The solution to inflation was in front of me all along. Right here in the Journal, in fact.
Rising prices at the supermarket and the gas station had started to stress me out and play havoc with my brain. Filling the car up on Tuesday as crude oil was rising through $120 a barrel, I watched the shape-shifting digits on the Chevron pump frenetically reassemble themselves — and for a split-second on the way to 57 bucks, $38.14 read like PAIN.
At D’Agostino’s I saw a small, $45 free-range chicken and found myself thinking: You bastard. I called a chicken a bastard.
Then, reading the Journal, I hit a phrase I knew by heart: “core inflation, stripping out volatile food and energy prices.”
Oil and corn hit record high
By Javier Blas in London
Published: May 9 2008 08:41 | Last updated: May 9 2008 18:49
Crude oil and corn prices surged to record highs on Friday as the world’s hunger for fuels continued to convulse the energy and agriculture markets.
The rise in oil prices to a record of $126.2 a barrel – double the level of a year ago – was the culmination of a stunning week in which prices jumped by $10, stoking fears of higher inflation in spite of lower economic growth.
A year that began with people asking whether oil prices would finally reach $100 a barrel is seeing some traders already betting on when it will hit $200.
EDITOR’S CHOICE
In depth: Oil - Apr-29
Call options bet on oil hitting $200 - May-08
Euro bounces back from low - May-09
Lex: Commodities special - May-08
The Short View: Oil squeeze - Apr-15
IMF warns on global inflation - May-08
$45 for a CHICKEN!!!! YGTBSM! I feel bad when I spend $8.00 on the occasional organic air chilled pullet! $45!?? I guess it’s really good to be one of the rich folk.
the necessities of price inflation in the critical must have commodities is a function of the devastating deflationary price reductions of the how much a month wants of the JULS of America.
The squeeze is designed to continue the erosion of the standard of living for Americans on the margin, when the Americans on the margin get squeezed hard enough, the cycle of labor unions excercising controls will begin to manifest, leading to isolationism based on fear and ignorance.
If the voters select the poorly, and an isolationist groundswell occurs in consumption patterns, its gonna crack the commodity boom in a way that is most painful, deflating commodities, deflating asset prices, and an inability to service debt structures will…well, lets just say, it aint good.
The hope of the federal reserve and treasury is that through this type of strong arm dollar policy, inflation will take hold, and somehow rights the ship. IF one believes that a red,white, and blue iron curtain will somehow lead to a more prosperous America, I think you are gonna be quite suprised.
I humbly disagree.
Tax benefits for off shoring of jobs, transfer of US corporate wealth to the lowest wage charging companies and the bleeding of the US public of their pension/retirement funds must be corrected or we become a third world nation.
In order to correct this problem, tax cuts for corporations must be eliminated. Borders closed, zero immigration, cancel all pension funds including SS and the govt. make massive investments in standard and high tech manufacturing. Otherwise every asset that is owned by the US will be bleed off until nothing is left.
If the US is at war, then this country needs to go on a “War Economy like WWII”.
The US, if it is serious about whats happening to them, needs direction! This country has skills and abilities that they have yet to use. They need continued leadership, guidance and direction.
If these drastic steps or other similar ones are not taken, then the end result will be similar to the “war on poverty”, the “war on drugs”, and the “war on terrorism”.
/rant off
Its time to stop being the nice guy.
From what I understand of our opinion in the world, we are the bad guys. We can not help others, if this is our goal, until we re-right the economic viability of the US.
Considering the current opinion of us, grab what we need by military force, if necessary. Rebuild the US as the economic powerhouse of the world. Rebuild our saving rate. tighten the belt, bit the bullet. Its your chilren that will inherent this mess otherwise.
I am sorry that we, the baby boomers’ have caused this mess. Its now time to make amends, and solve this problem and put the US back in its position as the “shinning light on the hill”. Anything less will hurt future generations and our and history’s opinion of our contribution.
/rant off
I am sorry to bore you all, however in my family, everyone bitches and complains about how the world/US is screwed up!
Stop “bitching and complaining” and do something, anything.
The world or the US will not change, if people are not actively involved.
/rant off
By the way, re-institute the WPA. If the FED is going back to GD procedures, then maybe, just maybe, the Congress and the Administration should do the same. If there was ever a war against the US, multi-nationals are the instigators.
We need to hardness all the knowledge, expertise, and the labor of the American people.
We need a full accounting of where we stand. Not this b#llshit of “hiding the sausage”!
/rant off
The squeeze is designed to continue the erosion of the standard of living for Americans on the margin,
Correct
Then you say
when the Americans on the margin get squeezed hard enough, the cycle of labor unions excercising controls will begin to manifest, leading to isolationism based on fear and ignorance.
Not isolation based on fear and ignorance, isolationism based on a history of getting screwed by those who told us outsourcing would be good for Americans. The goal of the corporate elite is to drive down wages to the point that cover food and shelter only, ie slavery. The only balance to this is the union and government. A lot of people will become born again democrats after they loose their jobs and become poor. It amazes me that the elite are so short sighted given the ample historical evidence of what happens when you drive the middle class into poverty.
Sir, I understand what you are saying, however I think I have a better solution-
Strip personal rights from corporations, LL*.
Restrict financing.
lLimit campaigning time.
Break down financial instiutions that are to big to fail.
re-institue Glass-Segal regulations.
Balance the Budget.
Draw down the US fiscal deficit.
Ban Credit cards to the public or restrict usury rates and fees.
Return to 1980″ criteria for income to home value of real estate.
I know that I have not covered everthing, but this would be a good start.
I dont have all the answer, Im just trying to increase the levels of interaction by pushing buttons.
thoughts provoked, are thoughts that should be here, and heard.
thank you for your insightful comments.
rants always on/
Kroger has a “deal” going in honor of the tax rebate check, where if you buy a Kroger gift card for $300, $600, or $1200, you get 10% added to the amount of the gift card for “free”. I was wondering how they could afford to do this, since food retailers are supposedly being squeezed on their profit margins. I went to Kroger yesterday and discovered that prices of pretty much everything in the store had gone up 10% since last week. So if you shop there, you now HAVE to buy one of their gift cards to stay even with the price increase.
They just want the “free float”, that’s all.
Optimism Suffers Setback As Dow Drops for the Week
Wall Street’s budding optimism confronted reality during the week. Reality won.
Bonds Tied to Mortgages Have Hope
Maybe there’s a way to thrive in the howling wasteland that is the home-loan market. Bonds backed by mortgages look like a buying opportunity, assuming a new spate of defaults doesn’t send their prices tumbling again.
Good morning, I am looking forward to another Saturday morning bitsing it up here at the HBB. Here I go:
*NYC (I was there last weekend): can you say commercial? Holy smokes! It seemed like every other ground unit was for lease. I guess Burritoville can only open so many stores.
I visited a friend on the west side that rents a tiny McCondo for, drumroll…. $3,700/mo. Have fun with that. Thank jeebus he didn’t buy (he wanted to, but I talked him out of it, thanks HBB!) I also was told that, “they aren’t making any more Manhattan.” This means that RE will only go up, you know the drill.
I had no problem catching a cab anywhere; the streets were crowded but not as frenetic as usual; I did not gauge steakflation at The Palm, I instead had lunch at Houston’s - not bad but I feel weird eating at a chain in NYC. We were seated right away.
Also, per the usual, every freakin’ NYC’er wouldn’t shut up about what they pay and where they live. That gets so damn old. If I hear one more person talk about an “up-and-coming” neighborhood I’m'a smack ‘em with some fresh mozz from Hoboken. I attended a wedding where several guests - when they heard I was from Florida - immediately hit me up for my opinion of Florida RE. I let it fly with no mercy. It was great; none seemed shocked so I guess we’re beyond denial.
And, of course, my flights were complete hell.
You should feel weird eating in a corporate chain restaurant in NYC. If you didn’t feel weird I would recommend a visit to a shrink.
“You should feel weird eating in a corporate chain restaurant in NYC. ”
I swear, it wasn’t my choice.
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
Now I understand why exeter is always so grouchy
http://news.yahoo.com/s/livescience/20080507/sc_livescience/conservativeshappierthanliberals;_ylt=AhodMqwdRHuAPNlwOu8fub8DW7oF
“This country would be better off if we worried less about how equal people are.”
My kids would be happier if they worried less about how equal people are, too.
weird thing about our little representative republic, some people, as well as, some peoples votes are more equal than others.
Votes and economic interests are more equal than others.
Our own little animal farm.
“To justify economic inequalities, a person could support the idea of meritocracy, in which people supposedly move up their economic status in society based on hard work and good performance.”
Hey, that’s a direct quote from Paris Hilton or Jessica Simpson or Anna Nicole Smith or Briitany Spears or…dang it maybe it was someone else…
Or dubya?
Naw, he could never pronounce meritocracy.
Are you saying Dubya’s strategery all along was meritomocracy?
The results support and further explain a Pew Research Center survey from 2006, in which 47 percent of conservative Republicans in the U.S. described themselves as “very happy,” while only 28 percent of liberal Democrats indicated such cheer.
I wonder if it’s because dems are generally so much smarter than those other kinds of folks? I bet that’s it, right texychick?
or maybe they’re just better informed…
But Ex doesn’t think he’s a liberal.
Even if the Dems won the White House AND controlled Congress AND controlled the Supreme Court AND every rich conservative went to jail AND Jimmy Carter was revealed to be God, he’d still despise the center-right.
Doesn’t surprise me at all since the neocons and right wing true believers still think we’re winning the war in Iraq and that Jeebus will be waiting for us in heaven and give us all Mercedes Benz SUVs and McMansions in the afterlife…
Unlike the Democrats who want to give us all Mercedes Benz SUVs and McMansions right now courtesy of the govmint.
Hah, spoken like one of those brain dead true believers , Cracker Jim…very nice..
Name calling and slurs to someone you don’t know does not do much to furthur your position. If someone has a different opinion than you they must obviously be “brain dead”: good argument.
Hmmm…..let me think about that one..
The super underrepresented minority ticket?
Obama takes lead among super-delegates
Clinton circle hints at running-mate interest - 23:11
Don’t ‘ya just love hearing each of the candidates trying to “out pledge” their opponents with middle east pork?
Helmet hair says no. It’s on the Huffpo site.
my brothers alma
Bentley College in Waltham, Massachusetts is preparing to terminate swaps on $56 million in auction-rate bonds that it’s refinancing,
hehehehhe
85 pct through, my arse…
Finance & Economics
American housing
Map of misery
May 8th 2008 | WASHINGTON, DC
From The Economist print edition
America may well be only halfway through the house-price bust
Will raising the conforming loan limit help to alleviate the statistical lie in the OFHEO housing price index (leaving out the most bubbleliciously-overvalued homes from the price index calculation)?
“Mr Bernanke’s maps use figures from the Office of Federal Housing Enterprise Oversight (OFHEO). Its statistics have broad geographic reach and track repeat sales of the same house. The monthly national index suggests average prices have fallen only 3% from a peak in April 2007, and the quarterly figures are still positive (see left-hand chart). But OFHEO’s figures include only houses financed by mortgages backed by the government-sponsored giants, Fannie Mae and Freddie Mac. By excluding subprime and jumbo loans, they leave out the top and bottom of the market—where prices rose fastest during the bubble and where the mortgage mess was most severe.”
“Assessing how much further house prices are likely to fall gets even trickier. One route is to look at market expectations: investors expect a further 20% drop, judging by the prices of futures contracts linked to the Case-Shiller 10 city index. But the futures market is small and illiquid and may overstate the possible declines.”
Don’t buy until after there is a further 20% drop, unless you want to try to catch a falling knife.
“Using a model that ties house prices to disposable incomes and long-term interest rates, analysts at Goldman Sachs reckon that the correction in national house prices is only halfway through. They expect an 18-20% correction overall, or another 11-13% decline from today’s levels. But their models suggest that six states—Arizona, Florida, Virginia, Maryland, California and New Jersey, could see further price declines of 25% or more.“
Sounds like late 2009 might be a good time for any household left standing in the wake of the economic slowdown to start shopping for a home.
“Given the typical pace of rental growth, Mr Feroli reckons house prices (as measured by the Case-Shiller index) need to fall by 10-15% over the next year and a half for the rent/price yield to return to its historical average. Again, that suggests the national housing bust is only halfway through. And, given the scale of excess supply, house prices—particularly in hard hit areas—are likely to overshoot. All told, Mr Bernanke’s maps are going to get a lot redder—and the pressure on policymakers to help struggling homeowners is bound to increase.”
The “Annual rents as a % of house prices” graph is worth a closer look. I assume this is on a national basis; it shows rents as a pct of home prices is predicted to rise from a current level of 4 pct to a future level of 5 pct by 2010 or so. Given the backdrop of an economic slowdown coupled with a supply glut of new homes and foreclosed homes plus crippling increases in food and energy prices, little of this adjustment is likely to come on the side of rent increases.
For the sake of illustration, let’s assume that the adjustment all comes on the price side. Here is some simple arithmetic to show the rough implications:
Current rent-price ratio = rent/price = 4/100
Current price-rent ratio = current price/rent = 100/4 = 25
Predicted price-rent ratio = future price/rent = 100/5 = 20
Implied future price decline = (20/25-1)*100 = 20 pct
This back-of-the-envelope calculation based on the price-rent ratio forecast is consistent with a 20 pct future home price decline.
For perspective on what a 20 pct decline means for loss of household wealth, this drop would suffice to wipe out a year’s worth of pretax income for a household earning the median income in SD County.
W00t - 6 x post combo!
That percentage decline in my house would be 100% of annual savings+investment for me, or 10000% for the average homeowner…
In many areas we are currently passing through 2004 values with 2002 coming up on the horizon. I expect full afterburners once everyone maxes out the CC’ds. Say end of the summer.
Oh yes, factor in I paid $4.02 a gallon for gas yesterday.
I recently had my first $50 fillup of my Honda Civic’s gas tank. Must be fun to fill up an SUV’s tank these days…
My fill ups are $75 and the credit card stops at exactly that (???). Luckily I barely have to drive anywhere, because that is painful.
Me too… now that gets me about a 3/4 full. They say I can just swipe my credit card again to fill up, but I wish they’d just raise the ceiling.
$43 fills my Taurus even today. Wifeypoo isn’t so lucky…
The outdoor-one-arm-bandit took me for $4.10, yesterday.
Gas price on Beaver Island in Lake Michigan now $4.99, Diesel only $4.78. Six weeks ago they were rationing fuel there (as usual for that time of winter). It really is different there.
I paid a mere $3.89. I drive a small convertible that gets about 33 mpg overall (more when I drive the speed limit) and it still wasn’t too fun watching the numbers tick up up uppppp. I watched a soccer mom type pull in and start to gas up a big ol’ Black GMC behemoth, a skinny little coiffed woman with 2 little kids rattling around in that enormous thing. She looked even less happy than I felt, and this cheered me up again. I must not be a good person. But jeeze, why do you ‘need’ a vehicle like that?! Stoopid.
Gas prices went up 7 cents overnight in MIddle-of-Nowhere Ville. $3.56 a gallon for regular. I see LOTS of pick em ups for sale…
Price is impacting demand, looking for oil to take at least a 15% haircut very soon. Oil is up 48% off the jan 08 lows, that is not sustainable.
Ya know, I think along the same vein, but I really think interest rates have got to rise before the spec’s get out of commodities. There’s probably $20-$30 a barrel minimum that’s just pure fluff.
Once U.S. interest rates rise in a meaningful manner, that’s when I see oil dropping - and quick. JMHO.
16% haircut in oil, is one dollar over my stop.
I like the way you think.
But jeeze, why do you ‘need’ a vehicle like that?! Stoopid.
Safety, I suppose. Gotta keep the rug-rats safe in case you get into a collision with another SUV or minivan piloted by some soccer mom gabbling obliviously on her cell phone. Hey, wait a minute….
I just love telling the Behemoth crowd about how their “safe” monsters roll over so easily.
Beer is cheaper than gas.
Drink don’t drive.
Records show Sharpton owes overdue taxes, other penalties
http://www.iht.com/articles/ap/2008/05/09/america/Sharptons-Money.php
Sharpton’s own debts include $365,558 owed in New York City income tax and $931,397 in unpaid federal income tax, according to a lien filed by the Internal Revenue Service last spring. His for-profit company, Rev. Al Communications, owes the state another $175,962 in delinquent taxes.
Everybody who runs for office in the Democratic Party wants to meet with him,” said former Mayor Ed Koch, who once battled Sharpton but now calls him a friend and a “bona fide leader.”
Bona fide leader……..HAHAHAHAHAHAHAHAHAHAHAHA!!!!!!!!!!!!!
Funniest thing I’ve heard in a while.
Excerpt from todays New York Times business section..
“An estimated 9 million American households, or 10.3 percent of all single-family homes, owe more than their home is worth, according to Moody’s Economy.com. By comparison, 4.8 percent of home loans were in foreclosure or delinquent by 60 days or more at the end of last year, according to the Mortgage Bankers Association.”
” SOUTH LOS ANGELES Four people were arrested and a school went on lockdown after a fight between black and Hispanic students raged, according to authorities.”
“The fight allegedly involved some 600 students”
http://cbs2.com/local/Fight.South.LA.2.720562.html
_____________________________________________________________
Blacks & Hispanic gangs are really going at each other’s throats, in el lay.
Friends that live in Torrance are just a mile away from gang activity, and they are worried about further encroachment towards their safe suburban home.
“Friends that live in Torrance are just a mile away from gang activity, and they are worried about further encroachment towards their safe suburban home.”
I’ve commented in the past that the mass incursion of illegals would make California and other border states war zones, at which point, who cares about the RE Bubble? Your property will be WORTHLESS, as no one will want to live there.
So much for integrated society and “multi-culturalism”.
L.A. is like around 10 million people, that hardly know one-another.
They see each other only in passing, from around the shoulders up, @ 40 mph.
“Friends that live in Torrance are just a mile away from gang activity, and they are worried about further encroachment towards their safe suburban home.”
The really bad gang pockets are in harbor city, eastside torrance, carson & wilmington. They are relatively close but westside affluent torrance seems safe. I witnesses gangs, gang fights, gang-activity while i was living and working in carson area during 80’s. 99.9% of it involved intergang or gang to gang rivalries which will occasionally escalate to bloody stabbings & shootings, and which rarely involves the general public and non- involved homeownwrs. The intergang rivalry indeed can get vicious and bloody: one incident between the large Wilmington Wilmas gang and the local Carson gang resulted in a Carson high schoolyard stabbing-murder of of a 17 yr old carson homeboy by a wilmas gangsta.
Eastside torrrance has this area called T-flats which has had a local gangnest for over 50 years: it is east of western ave and on other side of the large torrance industrail zone are so majority of torrance suburbs are somewhat insulated.
The infamous harbor city 205th gang is right near this area called tortilla flats.
Recently someone here on the blog posted about how much more food would cost if we didn’t import illegal labor to work the fields and that is was something we should give some thought to. Ever since I moved to this part of Hillsborough County, Florida in 2000, I’ve had the opportunity to see how this works out, since this has been primarily a rural, agricultural area mixed with retirement and waterfront living. Although many people are in denial on this point, this is probably the worst area of Hillsborough for gang activity, most of which is perpetrated by the devil spawn of those hard working illegals, if not outright by some of those imported ag workers themselves, one of which kidnapped and abducted a local kid while he was waiting for a schoolbus.
I considered what the poster wrote and while it is something to consider, the problem is what happens once these ag workers get here. If they just harvested or processed the crops and then went home, it might not be so bad. But that doesn’t happen. Many if not most stay. And why not? We have three subsidized housing complexes right here in this area for these workers that are nicer than anything a regular citizen could rent for $600 per month. These complexes have pools, tot lots and jitney transportation to take them for their free medical care courtesy of Hillsborough County. A regular citizen is lucky if he can rent a mold infested dump, if he’s on a budget.
Anyway, so some ag worker gets ensconced in one of these complexes. Bully for him. Then he gets a mate or perhaps he already has one. She spoinks out a few kids. Now they’re really on a roll, their living is subsidized, their medical is free and now their children are cash cows, because they get so much a month in welfare payments per child, until the kid is 18. No need for mami to work, her job is now to raise the cash cows and see that they get into the free school system. Meanwhile, papi decides field work is beneath him and he gets a landscaping job or a job in construction or whatever. Now he’s really in the money and mami has found out where are the charity food banks are handing out the free bags of food each week. She might go to two or three of these a week, it’s kind of a circuit. Now we’ve got the food covered. And even though neither mami nor papi are working in ag anymore, they’re still subsidized because no one’s going to check.
So now, papi, he’s no longer working in ag and what do you suppose happens? The ag businesses start screaming they don’t have enough workers, because the folks like papi have flown the coop and are out and about doing other things. And that doesn’t count the various papis who get into the pharmeceutical business. So the ag companies start beating the drum for more workers, and relatives get their family from back home to come. Lather, rinse, repeat.
Meanwhile, some of the kids turn into devil spawn and are recruited into the pharmaceutical business by various gangs. When the sheriff’s men raid the various gang houses, they find major supplies of drogas and weapons, like AK47s. No joke. It’s really not a good syndrome.
This reads like version 2.0 of the “caddie-driving welfare queen” myth that Raygun Ronnie was so fond of reciting back in the ’70s and ’80s.
I live just south of where Palmetto talks about. He is not reciting any myth.
He is not reciting any myth. Aw shucks, GeorgeSalt had my hopes up. At least the term “Raygun Ronnie” is still stinking up the place.
Yep, all those illegal immigrants living high on the hog while all the hard-working white folk toil to support them. Tell it to Hillary - she’ll understand.
Palmetto’s story is the same here in flyover country.
Just substitute “meatpacker/cutter” for “ag worker”, and add “Mexican Restaurant worker” along with “construction worker”
Meatpacking 25 years ago was a union job that paid enough for someone to eventually buy a modest house, and maybe help the kids with college. Then the meatpacking companies let the unions go on strike, then replaced all of their employees with mostly illegals.
What Palmetto says is also true for many parts of California.
I could drive you around and personally show you neighborhoods that were once safe, clean, middle-class neighborhoods…now turned into filthy, drug-infested “immigrant” gang ‘hoods.
It might not be politically correct, but it’s the truth. Time for us to shed the PC garb and speak out. Otherwise, it will continue to spread.
It’s also no myth that each illegal worker costs the taxpayers $18,000 a year in various subsidies. Why should we pay for megacorporations like ConAgra to have cheap labor ?
It’s one of those hedonic-y sort of things: we get cheap food, the corpists get the cash, the ex-union guys now working 3 jobs are too busy/tired to put up much of a fight, and a Mexican family gets remittances….See? Everyone wins
This is an interesting story, but it doesn’t have much relevance and it isn’t well thought out.
Conflict over immigration has been going on since there was a land bridge between Asia and Alaska. The specific issues with labor from south of the border have been locked in similar political back and forth since the second world war or earlier. Gangs like this have been around in similar forms since the postwar days as memorialized in works such as West Side Story. Where I am the population is about 40% caucasian and so are the gangs, and the spoiled white trouble makers seem worse in every possible way. So all of this is old news, and there isn’t much evidence that the bubble was related. The bubble was pushed up by hype and fraud and eventually collapsed from its own massive scale.
Finally, the assertion that illegals get services for free and don’t pay taxes has been broadly debunked. Exactly where the balance ends up gets much debate, but it is common for illegals to have taxes withheld without any opportunity for getting a deduction back. The level and quality of service they receive is also quite spotty, and the results of not providing any services are increased illiteracy, outbreaks of disease and so on, which are not a good option and would put the larger community at increased risk.
Taxes withheld by whom, since they technically don’t work for anyone, and no tax forms are filled out? I live in the same county as Palmetto, and I see what he’s talking about all the time. The supposed savings in food costs are more than taken away by the drain on the public treasury. A huge percentage of those incarcerated in Hillsborough County and Tampa jails are illegals, and it costs a fortune to keep them there.
People who hire illegals to save money should be required to to pay for their medical care, schooling, and anything else now being dumped on taxpayers. These “employers” are exploiting the poor for their own profits, not helping the country (even if the poor are thrilled to get the low-paying jobs). It’s like setting up a water stand in the middle of a desert where humans escaping oppression HAVE to cross, and charging ten thousand dollars for a bottle of water. Of course, those who buy are better off than those who don’t and die, but it’s still exploitation, and it’s still immoral.
If our economy can’t survive without exploiting people, then it doesn’t deserve to survive.
“Friends that live in Torrance are just a mile away from gang activity, and they are worried about further encroachment towards their safe suburban home.”
The makeup and composition of gangs in the Carson & E torrance area needs elaboration. There are Black gangs, hispanic, Samoan, poor white cracker wannabees, philipino gangs, islanders, ect. There was also a very virulent drug culture & drug use pervasive in carson area in the 80′ involving mostly coke , and a lot of current gang activity involves the seling and distribution of illegal drugs at the street level.
You cannot separate the illegal drug selling & distribution of drug from gang activity. It is a prime causation of the gang warfare along with fights over woman, insults, tauntings, initiations, ect. It has deep roots going back to the earliest days of tribal man and primitive cultures.
Has anybody blamed whitey yet??
Friends that live in Torrance are just a mile away from gang activity, and they are worried about further encroachment towards their safe suburban home.
Let me guess: Those same friends from their safe suburban home have voted year after year for Republicrat whores and swindlers - party affiliation matters not - who have been selling this country down the river for decades. The GOP “elite” and their corporate shark allies welcome cheap exploitable labor and the DNC sees Democrat-on-Arrival legalized illegals as yet another constituency to add to their votes-for-entitlements schemes.
Just tell your friends to stay in Torrance and deal with the mess they helped create, rather than running off to Colorado.
They are just regular fairly liberal folks, that live on the cusp of crime, now.
Bank lay-offs
First ink, now blood
May 8th 2008
From The Economist print edition
The West’s financial centres run red
THE axe is now swinging with abandon. UBS unveiled yet another set of embarrassing quarterly results on May 6th and also announced 5,500 job losses, many of them at its investment-banking unit. The cull comes soon after similar carnage at Citigroup and Merrill Lynch, which also announced thousands of cuts last month.
I think 20%+ of the S&P500 is made up of financial stocks. Do we really need that many people working in finance?
State commissioner offers strategies
http://www.signonsandiego.com/news/business/20080510-9999-1b10real.html
Several years ago, during the fevered housing boom, some agents could make sales simply by going to work and answering the telephone, Davi said. “Well, those days are over.” (That’s the good news.)
“One in 53 adults in California has a real estate license,” Davi said, drawing laughter from the crowd.
He said he needed the help of Realtors to regulate the industry. (Are you kidding me! That’s like asking Bear Stearns, LTCM and mortgage brokers to help regulate their industries. Theives regulating theives.)
“We’re going to be in a trough for a while, but ‘08 is basically the bottom,” Smith said. “ . . . This is an outstanding time to buy real estate.” (the county’s assessor, recorder and clerk). It’s hard to tell the difference between government clowns and NAR Bozos house price bottoming spiels.
This may have been more appropriate for the CA thread, but it was so funny, I thought it would be good for a morning laugh.
http://tinyurl.com/5cqjkm
Don Luskin declares that housing is now affordable.
“Bottom line? I stand by my affordability argument. I still firmly believe that home prices today, given incomes and mortgage rates, are as cheap as they’ve been in over 35 years. We may not be right at a bottom yet, but there’s one somewhere nearby. I now believe that all the more having had a taste of the backlash from the cult of bearishness. When so many people believe something with so much conviction, well, it just has to be wrong.”
I’m glad everyone quoted believes we are at the long awaited bottom.
Oh wait, according to Don that may not be a good sign.
Cheapest in 35 years? No way. Not even close to cheapest in 5 years. I will gladly take 2001 prices here in OC based on my income in 2001.
He wins most stupid f’ing comment of the day.
A local observation that is telling:
Here in the Florida Gulf Coast, the past 7 years saw massive new construction all along the coastal areas, on every strip of property available. Many “old” buildings were dozed to make room for new “luxury” condos and townhomes.
Last week I was driving down Edgewater drive in Dunedin, where several new condos are being completed.
Large banner reads: NIGHTLY RENTALS.
These are brand-new condos on the Intercoastal Waterway. The Holiday Inn is just up the road on the other side of the street.
Conclusion: No Buyers for the “luxury” price and location.
Owners trying to contain there losses as more incidental landlords. The rest of the story is that in Dunedin/Clearwater there are a number of other building just being completed. Are there tenants for them, I wonder? I also wonder if this was a Condo-hotel from its inception, as hotel licensing is required for overnight rentals. In many locations, special licensing is required for rentals that are less than monthly or annually.
This may make being a landlord much more difficult for some of the many condos that are now sitting vacant.
Flip-Flop-Houses
When will they get to hourly rentals?
Roidy
Newsflash - Time for all HBBers to get off of the fence and buy!! How do I know? Dave Ramsey is saying so. He also says that subprime is going to be a small problem and no recession.
I am ashmed to say that I have been listening to the guy this past week. Methinks he has made a deal with the devil.
I listen to his podcasts. His advice is 90% sound to his callers, but it seems to me that during his pontifications he gets sucked into the politics of economic news, if that makes any sense. He does have a show on the Fox Business network, after all ;).
It would only be fair for him to disclose how much investment property he owns.
The Realtor ™ I worked with 7 years ago (Indianapolis) has me on her mailing list, and over the years I’ve been getting her upbeat updates. It used to be “Great Investment!”. Then it shifted to “Great Time to Buy!”. And the last one:
“Do you know someone who needs our help? Are they struggling to make their mortgage payment? Can’t sell their home for what they owe?? REACH OUT TO THE JEAN xxxx TEAM FOR HELP! CALL US TODAY!”
Poor Jean’s sweating a bit. And she’s just added her son as part of the “team”. Great career start there for the lad. He’s probably stuck with it. Military recruiting standards may have dropped a bit, but not far enough to accept RealtorSpawn.
Comment by mamooth:
“Poor Jean’s sweating a bit. And she’s just added her son as part of the “team”. Great career start there for the lad. He’s probably stuck with it. Military recruiting standards may have dropped a bit, but not far enough to accept RealtorSpawn.”
Plenty of nepotism here. Our ‘hometown professionals’ (yeah right) personify this. Last I heard, two offspring in their mortgage division, and three working in their offices as part-time Realtors. “Honey, do your homework before you show that 3/2.” Lol.
I wonder what % of recent mort broker profit was from loans generating 1-2-3% commish
man is that over with
More homes on ‘millionaires’ row’
For sale signs
There has been a sharp rise in houses selling for £1m or more
Sales of £1m properties in Scotland rose by 138% in 2007, according to research from the Bank of Scotland.
Although they far outstripped the 3% rise in total property sales, £1m properties accounted for just 0.2% of all Scottish property sales in 2007.
In 2006, 144 £1m properties were sold in Scotland, but that rose to 343 £1m properties in 2007.
Edinburgh came second only to London in the number of properties being sold for £1m or more last year.
It also saw a 30% increase in the number of homes being sold for £2m or more. However, the capital’s overall share of million pound homes in Scotland has gone down.
Figures show that there has been a seven-fold increase in the number of £1m property sales in Scotland since 2003, while there has been a nine-fold increase in the number of properties selling for £2m or more.
Total £1m property sales in Great Britain rose by 36% in 2007, to 8,257.
Martin Ellis, chief economist at the Bank of Scotland, said: “Although there has been a marked increase in the number of million pound property sales in Scotland since 2003, Edinburgh continues to account for the significant majority of £1m sales.
“Nonetheless, Edinburgh’s share of all million pound property sales has declined over recent years, with a number of million pound property clusters starting to appear across Scotland around places like Glasgow and Perth and Kinross.”
we will here Dannyboy playing more and more.
The beat goes on:
http://www.ncdc.noaa.gov/oa/climate/research/cag3/na.html
Contrarian Chronicles5/12/2008 12:01 AM ET
Why all roads lead to inflation
A combination of global expansion and money printing to avoid today’s economic pain has set us up for tomorrow’s spiraling prices.
By Bill Fleckenstein
Inflation is a topic that does not receive enough attention. I’ll try to address that deficiency in this week’s column.
When more debt doesn’t do it
Faber points out a major concern: The debt-burdened U.S. economy may have reached “zero hour” — that being when a dollar of new debt has no incremental positive impact on U.S. gross domestic product.
For the past 30 or 40 years, it’s taken increasingly larger amounts of debt to increase GDP. From 2000 to 2007, total credit market growth was $21 trillion, and nominal GDP growth was only $4 trillion. We have reached the stage where a dollar in debt produces only 20 cents or so in economic growth (versus about 90 cents produced in the 1960s).
Although it’s impossible to know whether we will actually reach zero hour, it does seem possible when thinking about adding more debt to a post-housing-bubble economy. An economy that reaches Faber’s zero hour is one in which increasing debt creates no growth. It only increases prices.
The unanswerable question is how long the world debt markets will allow inflation to ratchet up before they start to decline, as they price in, say, a 6% inflation rate and 2% to 3% of “real” yields!
Faber offered that either the debt markets will have to crack or commodity prices will have to break — though if commodities were to break, he suspects the break would be temporary. (Of course, “temporary” could be measured in many months.)
At some point after the world’s current boom ends and a slowdown begins, growth will resume and the supply-and-demand problems in commodity markets will persist.
Bottom line: Over the long term, inflation is liable to stay with us, and interest rates are headed higher, although the ebbs and flows of economic strength and weakness will have an impact.
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/WhyAllRoadsLeadToInflation.aspx?page=all
Your tax dollars at work or Just another day in congress:
http://www.washingtonpost.com/wp-dyn/content/article/2008/05/08/AR2008050802999_pf.html
I apolgize if i am out of place, however I would like to make an additional comment on the current situation-
The general public has bought into the rules of the game. They accepted promises (SS, Medcare, health Ins., life long career, etc.) and they expended their life. You can not just pull the rug out from under them and say “sorry, its different now”.
I look at society as “organic”. If someone feels mistreated, they will fight the system out of survival, if nothing else. If a small enough minority fight the system, then we are looking at a situation that exists in Iraq.
Everyone is a player from the standpoint of contributing or destroying the system.
/rant off
Have a challenge-Do you think than Ana Rand is the greates prophet that ever lived?
I don’t think so…
When a small but dedicated minority opposes the new order and they feel left out, then you have “Iraq”.
What more can I say?
/rant off
The war on drugs
http://news.yahoo.com/s/ap/20080511/ap_on_re_la_am_ca/mexico_drugs
How can drug addicts be worse than criminal gangs that gun down police officials in broad day light.
25,000 troops to provide security, this is equivalent to our involvement in Iraq for Mexico.
We should just legalize the stuff, tax it, and use the money to throw users who brake the law in jail. Use laws similar to laws that increase the penalty for crimes committed with a gun.
Absolutely.
IMO, if we legalize drugs (especially pot), direct and indirect crime would drop dramatically.
Regulate it and tax it like alcohol. Just might be what we need to help with our deficit problems.
This, coming from someone who doesn’t even drink.
Ill do just a quick anecdote:
last year at the height of Christmas shopping Saturday season, I noted that Wall Mart and the mall were absolutely empty, scary empty…more workers than shoppers.
today, Wal-Mart–couldnt find a parking space. Long lines….bulk buying….and you think the stimulus checks are not gonna give a strong signal? guess again.
also, non genetically modified seeds are priced double, not only at Wal Mart but the local Farmer Co-op. this is my first really big garden, and the small orchard I started a year ago looks good. Blueberries, Raspberries, and apple trees are the best perfomers.
More local produce and local meat at the market, big meat sale…..culling the herd is to be expected at theses input pricing levels. If the orchard really starts to produce, I must take out a small stand of doug fir, to lay in the other half, Im thinking nuts would be best.
you have to build stuff…a business, a home, a garden, an orchard….make it more simple than “they” want it to be. I want a windmill, and solar, for water pull and low sustainable electric.
Good ideas, voz.