Bits Bucket And Craigslist Finds For May 25, 2008
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The Housing Bubble
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I’m reading more and more about this Moodys mess. Is there any possible way they make it through this as a company? I have been saying “no” for a while.
This is a touchy subject since I know somebody that is going to marry a Moodys employee. I have to bite my tongue when I want to say, “these f—ing ratings agencies should all be sued out of existence”.
The situation has taken another tongue biting turn. Her Moodys fiance wants to quit his job and go back to school full time for his MBA. I have three letters for him. WTF? Let me get this straight. You quit a job for 2 - 3 years that is paying probably $90,000 or $100,000 per year? You spend another $50,000 on the MBA progra? Let’s call it $250,000. You come out of the program, into the state of destruction that will be the American finance system in 2010 or 2011? I know nobody will listen but Holy Moses! Anybody that can’t do this math shouldn’t be an MBA in the first place. How do you get a return on that investment. Talk about generals trying to fight the last war.
Everybody thinks 2005 is just around the corner. You just have to have faith.
I’m just amazed at how many people in their late 20s and early 30s view school as a, “I don’t know what else to do” option. They are not going back because they are focused on something. They are going back because they are not focused on anything. And the MBA glut continues.
Someone will still need to do ratings, and there are only three rating agencies. The question is half reform followed by a scandal, or real reform? Either way would be tough on Moody’s in the short run — might not be bad to hide in grad school for a while. Without real reform, we’re all in trouble in the long run.
When asked by someone on the regulatory side, I said the Federal Government had to impose a tax on all new securities to finance ratings — so the buyers would, in effect, by paying, not the seller. I would set up an accredation for who could rate, including not only the three incumbents but startups.
And pay would be for all the ratings on all the securities in a given year — and it would not pay up front. The pot would divided based on the accuracy as the default-adjusted actual return versus the default adjusted expected return in the ratings. The more accurate the ratings for the year 2008, the more money that rating agency would get in 2010 and again in 2013 as the money was paid.
In any event, advise your friend to drop the ego and consider an MBA at CUNY-Baruch, part time over 4 years while working, instead. It worked for my wife in the 80s — those who went the big bucks for prestige route landed hard when they graduated in the early 1990s. Of course it all depends on the opportunity cost. But if your friend is fired while at Baruch, he can always switch to full time.
“In any event, advise your friend to drop the ego and consider an MBA at CUNY-Baruch”
Bwahahaha. Thanks for the laugh, WT. Like anybody listens? There are days when I don’t even know why god invented ears. The only guess I come up with is that it keeps the earphones in place while wearing their iPods.
Yup, when in doubt, grad school!
For your friend, went on some interviews a few months ago, around the financial world. At two different places I was told that MBA’s have lost their shine. Employers have no idea what you really learned. You could have taken marketing, finance, HR, environmental interdisciplinary courses…? They hire someone at “knowledge premium” then find out they have to teach them everything anyway. They are now looking for CFA’s.
As they like to say about B-school, it’s not so much what you learn, it’s the connections you make. Sounds like facebook.
Having done both the CFA program and an Ivy MBA, I can say the CFA program was probably more useful and certainly more cost effective.
“Her Moodys fiance wants to quit his job and go back to school full time for his MBA.”
Keep working the job as long as it exists and save as much as possible. If/when the job goes away, then go back to school if it makes sense then. There are more opportunities to go to school then there are jobs that pay big bucks. Make the money when you can. You can go to school any time. Going to school during a recession and startng the new job when the economy is coming out of recession is a better strategy than quitting too soon to go to school.
Pumping out MBA’s has become big business for schools. Like any commodity, when there’s an abundance, value goes down. Besides, a college degrees help get a first job, after that it’s performance and experience that count, on a resume’. Colleges like to promote degrees as tickets to prosperity, it just isn’t so.
“Pumping out MBA’s has become big business for schools.”
Since one doesn’t have to be real sharp to get an MBA, the schools have a large pool of applicants to select from, and there are no costly labs to maintain like an engineering program, so it really is a win-win for the schools.
Im not sure he would be graduating at a bad time. If he can tap into some ppl with cash, there will be plenty of money to be made at the bottom. In 3-4 years, his experience will be one of recovery, rather than one of the collapse. I know I certainly expect to see that period as probably the most profitable of my life. Maybe not short term, but buying great assets, and sitting on them for 5-10 years.
Exactly. That’s is about the time when all the buying opportunities will exist. I forgot what buying opportunities for prudent people with savings looked like. It’s so close I can taste it!
what if his work is paying for the MBA?
an MBA combined with experience can be powerful. I do agree however that with every school cranking out an MBA program, not to mention all of the online crap, having an MBA ain’t what it used to be.
You might have missed the part that he wants to quit his job and then pursue his MBA. That is what is so questionable.
I’m a computer scientist/software engineer/programmer analyst/etc. and a year or so ago I wanted to switch “careers” - or rather I wanted to move from a company that worked in one industry to one that worked in another. The financial world intrigued me so I started looking around and doing some interviews.
I was appalled at what I was hearing in these interviews. Plenty of buzzwords but no understanding of what was needed to truly accomplish that goal. I got the feeling that the head computer people in many of these places did some programming back in the dot com boom - learned enough to create hugely complex systems but never went through those theoretical computer science classes back in college that make a good programmer think about what happens when things get really big, really fast, or any number of other boundary cases.
When things get really hairy, you’re going to see a lot more “computer” errors. We’ve already seen Moody’s and a week or two ago the Intercontinental Exchange had a nice long outage (a power outage should trigger the backup system; it’s inconceivable that they didn’t have a backup so clearly their backup didn’t pick up as it was supposed to). There will be a few companies left when the dust clears, the rest will blame it all on computers instead of the people that failed to prepare for when the computers break down. And computers will always break down.
Sadly, the dotcom boom in 1999 severely lowered the standards of software development. I work as a consultant and many of my projects have a software component. I’m appalled that the “senior” people they hire for these jobs can’t do basic mathematics! Trig is beyond their reach! This is 9th grade math. If they have to display a rectangle rotated on the screen, the math stumps them!
I have an undergraduate degree in Mathematics and a Master’s degree in “Computer Science” (got back in the age of Punch Cards!)
Before 1999, a Computer Science degree was largely an applied math degree. You’d take the entire core math sequence, several semesters of Calc, Diff-EQ, etc. and also learn theoretical aspects of algorithms and computation.
Of course, some schools still have these programs: Stanford, MIT. But the vast majority of people who companies hire to do software development have “IT” degrees. Essentially trade-school programs where they learn rudiments of a particular proprietary technology (e.g., the toy language “Java”). For the most part, these people can’t do any math! They are a sham!
(One thing I do when screening resumes is to discard any one that uses the term “Engineer” if they’re not a licensed PE and can’t legally use that term. That gets rid of 90% of them off-the-top!)
California public schools taught me math well.
8ball of meth cost $250
1/4 oz of pot $50.
Vicoden $8
getting it from the teacher priceless.
where you getting that 8ball?
200 dollar OZees, maybe mexicali dirt weed.
pills, 2 buck chuck, please.
your’re obviously not snorting enough oxycotin. more kool-aid for, uhhhh Mr. Peter a.
BA Math / C Sci 1985, MSCS 1990. California State University. I had a core of math classes to take for Computer Science but took more since it was a combination degree for my undergraduate work.
I’m into embedded software and find that occasional upper division math background comes in handy. But it’s not as prevalent as you’d think (or wish). I can see in some applications such as missile guidance you would need vector mathematics. In nuclear physics and chemistry applications, derivatives come in handy. But I don’t think most software developers are involved in nuclear physics, chemistry, or missile software.
For the most part, basic mathematics below trigonometry is used in embedded software from telecommunications to information security.
The most important lesson from a mathematics background is the analytical skills. For non-embedded work such as data bases, you don’t need a Mathematics degree. Even fuzzy logic software applications (I was involved in it on a project years ago) don’t need upper division math.
Agreed. It’s the ability to think that makes the higer math a good idea and proofs are just as useful for that as diffy-qs.
What you really need is an instinct for numbers. When I was working as a lawyer on wall st I reviewed a document with a gross up provision to change the pay out on a bond if the tax law changed. The formula just looked too simple to me - number instinct. So I plugged in $100 and checked it. Totally wrong. Spectacularly wrong. When I told the corporate associate he had a panic attack because the documents were from a model his department had been using for several months. None of the corporate lawyers had checked the formula. None of the other tax lawyers had checked. Nobody.
It didn’t need anything beyond basic algebra and 10 quiet minutes to fix. But no one did it. And at this firm, half the attorneys probably graduated from top 10 or even top 5 law schools.
I was a computer programmer before law school. I didn’t need much higher math there either. Thinking? Yeah, I did need that. I took the math. It was fun. But I didn’t need it to be a good programmer. I needed the brain that math develops.
Nothing says idiot ahem I mean extremist more than opinions like that. People lose skills that they don’t use, period. Regardless of field of study.
I have a CompSci degree, I put engineer on my resume and if I had to rotate a rectangle 90 degrees, I’d have to look up how to do it. Its the sad nature of being human. That and linear algebra is highly tangential to what most people in our field do.
Luckily you’re better than that. Good luck with your hiring practices.
Badda-bing. Been a SW geek for 15 years and never needed trig. Not once. Ask me rotate a triangle in 3d space and you’ll get a blank stare. Ask me to build a high quality complex transaction based system and I’ll give you a lecture and an outstanding product. Math nerds….bah……
higher education is usually not about ‘remembering’ complex formula’s and algorithms but about knowing the general concepts and which book and chapter to refer to when details are needed. I would take a good generalist any day over a very good specialist (which by no means implies that there is no place for specialists).
My resume says bah bah Specialist, not bah bah Engineer, and I have two XS engineering degrees.
You wouldn’t put Ph.D. behind your name if you weren’t entitled to it, so why illegally misuse Engineer?
Sorry, I wouldn’t hire someone to write software for *anything* if they couldn’t remember 9th grade trig. Period.
All of trig can be derived from a few definitions and the Pythagorean Theorem. All of it. Why get all obsessed over whether someone can remember if cosine is opposite over hypotenuse or adjacent over hypotenuse? I still use a rhyme that includes “we’re the sine of 90″ to remind me which is which. When I care. Which isn’t often.
And if you are dealing with adults, trig isn’t a 9th grade class. Most take algebra one in 9th. Math geeks take it in 8th and skip to geometry in 9th (though algebra two would make more sense). Trig wasn’t until 11th and it was part of the precalc class. And I know my high school wasn’t alone because the math team competitions were premised on trig being a class that only 12th and possibly 11th graders understood.
Most trig functions are one google search away. Unfortunately you can’t google search ‘common sense’ which is what most software requires.
I never understand the MBA mentality. For half that amount of money, why doesn’t he start a business. He will get twice the education he needs in half the time.
You can’t get government guaranteed student loans to finance a business. You have to save some money and have a business plan to convice a bank to lend you the rest of what you need.
Yeah and it doesn’t impress your relatives as much to be just another failed business owner.
I don’t know, depends on the family. Mine was quite supportive as I went through 2 failed startups, finally getting it right on the third. IMHO what’s usually more impressive is tenacity rather than eventual success, but thats just me.
My son graduated a year ago from a big name MBA program. It is $50K a year for two years. It can be less on the Ramen noddle plan, but if you don’t do the NYC, boston, etc junkets to polish your business social skills why go for a MBA. Got a great job out of it, but layoffs are spreading to his classmates. If you don’t go to a big name MBA school, don’t go…save your money unless your company requires the letters for an advancement.
MY son said that the hardest part of the MBA was getting in…big companies use it as their executive selection training program. They will only interview at the big schools.
I have several friends who went to UofC for part time MBA’s. Total cost around 100k, once out of school they are doing the same jobs they were doing before but now they have 100k in debt. Part time MBA’s seem like the thing to do to fill up time after marriage and before kids.
New Survivalists…
http://green.yahoo.com/news/ap/20080524/ap_on_re_us/environmental_survivalists.html
I wonder if any “y2k suvivalists” have property for sale.
http://www.countdown.org/y2k/prepare_2000.htm
Don’t forget the bird flu pandemic survivalists.
I’ve got a great idea. Let’s let the government take care of us from cradle to grave. I’ll take a “survivalist” any day of the week over a system believer. Wonder how all the “gonna get rich” because the system said so house buyers are faring these days? Amazing how the AP will denigrate someone like this and then turn around and mash teeth over all the poor people who are losing there houses? The lemmings are alive and well.
Lanser on Real Estate
There’s a pretty good Q&A with a SoCal land developer.
Us: Has the O.C. housing market hit bottom, and if not, when do you think that will happen?
Cameron: I don’t think it has and I don’t think it will until housing prices get to point that homes are affordable again. In Southern California we’ve seen home prices more than double in the past several years – the market just couldn’t sustain that kind of appreciation. Homebuilders and homeowners are going to see those values drop even more than they already have until there’s a balance between what homes cost and what buyers are willing to pay. I have confidence that is what has to happen, I’m less confident about when that will happen.
Us: How long until we get back to the peak?
Cameron: I think the market will start to come back in 2010, but it will be a slow climb back to the peak.
“Cameron: I think the market will start to come back in 2010, but it will be a slow climb back to the peak.”
We might be near the “bottom” in 2010. A “slow climb” from that point may be a great understatement. For awhile, it may be so slow as to be barely perceptible. I still think some places will never return to their previous peaks.
“… I still think some places will never return to their previous peaks.”
What is your time horizon for “never?” 20 years? 200 years? 2,000 years? 20,000 years?
How’s the Highlands area holding up? Talk about a Kool-Aid stand on every corner.
“What is your time horizon for “never?” 20 years? 200 years? 2,000 years? 20,000 years?”
In the case of places that are “bulldozed”, never. There will be other places that simply will not reach their previous peaks in the lifetime of the previous “owner”. Those places that saw the largest appreciation and greatest departures from fundamentals could take 20 years or longer to return to previous peak values. I just can’t imagine places that went up 600 percent in value in 6 years returning to anywhere near that peak value in a time horizon not measured in decades.
One of the factors that makes such projections difficult is the possibility that the underlying economic circumstances of the past 50 years that supported those values (not just bubble values) may no longer exist. If that turns out to be the case, the time-line for return to peak is longer, possibly much longer.
for long term projections charts like this one from Shiller (based on Dutch home prices) are enlightening:
http://www.nrc.nl/achtergrond/article816285.ece
The chart is just for a wealthy part of Amsterdam, but it is generally representative for the whole country. One could guess that home prices in Netherlands are likely to decline by possibly 75% in real terms from current values. The nominal decline could be far more or a bit less when taking actual inflation into account. The chart does not say when there is going to be a bottom, it could take one or two generations (bad news for those who are priced out …).
These charts also don’t tell you how the correction will play out in real life: ravaging inflation or far higher incomes with static nominal homeprices? much smaller space per citizen? abolition of HMD, free starter loans, renter subsidies etc. (which would keep homes pretty much unaffordable despite real declines in prices)? But it does show the likely range for real home prices, based on historic precedence - the bigger the deviation from the average, the bigger the potential correction. The Netherlands currently sits at a 300-year high in real terms (previous record was from 1736); anybody who buys now must feel very lucky.
I haven’t seen long term charts like that for the US (something like the OFHEO index maybe?) but I guess they exist.
Flint and Detroit would be good examples of what you’re talking about.
IMO it all depends on the rate of inflation. The faster we inflate, the sooner we get there.
that remains to be seen; if rates go up to reflect real worldwide inflation and increased risk, while wages are increasing far less than inflation (due to global competition on wages) all bets are off.
I agree that we may not see peak prices (inflation-adjusted) in our lifetimes.
What’s interesting to me is how inflation is so embedded in people’s minds, that they can’t envision anything else.
Ultimately, there are many reasons to believe we are in for deflation until our wages drop to such a point that we can once again compete with other countries.
Silver Bear… This fellow thinks water is an issue…
http://www.silverbearcafe.com/private/5.08/liteacandle.html
“Economists are essential to the financial industry. They distract the customers while the boys on the sales desks pick their pockets.” ~ Bill Bonner
Brilliant.
Measton posted in the Bits Bucket a couple of days ago that “increasing property taxes is a no-no, although they are very low compared to other countries”, or words to that effect.
Errrrrr, no. Gasoline taxes, yes, but property taxes in the US are ENORMOUS by both Australian and UK standards. The tax mix is completely different.
The average resident here in Australia would consider 0.5% of the total house and land value outrageously high. On the other hand, you pay 15% income tax starting at a bit over $6,000, which goes to a top rate of 47% at $150,000 and up.
And another point - someone else posted that a significant amount of the cost in the US for gas was taxes. I don’t think so - from what I have researched in Florida it’s only 38 cents per gallon in taxes.
I don’t buy gas and I don’t own property. And still I have to listen to people at work tell me that I should move to the NYC burbs and buy, buy, buy. The stupidity is just amazing. I will be back in a few minutes. I have to go check the balances on our bank accounts, 401k accounts and brokerage accounts.
Being a renter requires watching a lot of stuff. Maybe that’s why people are so intent on buying. It simplifies their lives, having only one asset (errr, liability) to their names. Perhaps I should look into buying. Debt slavery clearly has its benefits.
“And still I have to listen to people at work tell me that I should move to the NYC burbs and buy, buy, buy,”
I get the same thing, a little less now. Mortgage slaves are disparate to bring in new suckers, to keep the Ponzi scheme going. If the young people, of this country, stop buying into the B.S., prices would crater. The current prices in the NYC suburbs, make purchasing a house an economic black hole.
The retiring generation is finally starting to get it: Their nest eggs (in the form of real estate) are both illiquid and rapidly losing value. The retirees are not only the bag holders, but as a result their retirements are grossly underfunded. The pain is going to be enormous. America’s largest, most prominent and most arrogant generation is going to get pummeled and bloodied on the way out. Expecting the entire next generation to be the greater-fool is tough when that next generation is smaller, poorer and already maxed out.
‘America’s largest, most prominent and most arrogant generation is going to get pummeled and bloodied on the way out. Expecting the entire next generation to be the greater-fool is tough when that next generation is smaller, poorer and already maxed out.’
Testify!
All I want is for those incredibly annoying commercials to stop. You know the ones, where retiring boomers are looking at blueprints for their eco-house in the desert, or standing in a vinyard waxing eloquent about their plans or flying around in that little plane thingie. You’re gonna prance around having fun for the next 20 years, while I pay increasing taxes and work for The Man, huh? Don’t bet on it.
The next generation of greater fools is $20K to $200K in debt on their student loans.
“…their retirements are grossly underfunded.”
From what I read lately, this is dawning on pre-retirees at a rate that is alarming Florida’s politicians. A previously-unimaginable number of “eligibles” are now deciding to work much longer than they had planned. So, fewer retirees moving to Florida to sop up vacant, overpriced and overtaxed real estate and eat out get x-rays and keep the service economy humming. With gas costs and the general economy poised to crimp tourism, Florida could be in a world of hurt for a long time.
My name is ouro verde and I am a rental refugee.
I am powerless to buy a house at outrageous prices
so I rent and I rent and I rent.
I used to love weekends so I could go party, but now
I get a chance to soothe the wounds of inflation
because it’s the only time that oil can not go up!
I guess it will be up tomorrow even though it’s a holiday here.
why do you need to check your accounts on a sunday? the markets are closed.
I haven’t opened up my portfolio since around 1998.
I need firewater to do that!
Oyyyyy! It was a joke. My point was that renters have accounts that they can check. Help a brother out and go with the flow, man.
I didn’t really check those accounts. I’m getting ready to go to Long Island. I won’t bring up real estate but I hope it comes up at some point. I’m dying to know what the Islanders are saying.
While I do fly a lot for work, when I’m not on the road, I probably drive less than 50 miles/week. (My 1.5 year old car has 3200 miles on it.) Prices at the pump don’t affect me! (Of course, the ripple effect from it does.)
I live in Sunnyvale. If all the dumbshits who bought houses in Pleasanton–because the wife wanted a house and yard “for the kids”–and commute into Sunnyvale in their SUV for some loser QA job at Symantec had listened to me and rented a small place, or bought a small house, near work, they’d be much happier now! In fact they would probably have saved enough money to put 50% down in a few years when prices fall some more….
When you say 47%, is there only one tax? Certainly you can’t have multiple taxes with one of them at that rate, right?
I’m in the 25% federal bracket, but I then pay 5% state, 7.6% Social Security and Medicare, plus the employeer match on SS+MC that directly reduces how much theyarewilling to payme by another 7.6%. Add it up and it is 45%.
Add on 8% sales tax, property tax above .5% of assessed value, vehicle tax, gas tax, etc. etc.
The Australian income tax is graduated so you pay nothing on the first $6,000 or so, then 15% on the next $14,000, then 30% and so on until you are paying 47% (maybe 45%, it’s changed recently) on each extra dollar.
In my opinion, that top marginal rate is too high and should be the same as the company tax rate of 30%. This would allow a simple 3-step zero/15%/30% scale.
We don’t have state income taxes, or Social Security taxes as such, but we do have a general Goods and Services tax (VAT) of 10% and some items have salex taxes and/or excise on top. The GST is collected federally, but is then distributed in full to the states and territories according to a rather complex formula. This is the major funding source for the states and territories, and is probably the reason why they can keep property taxes relatively low.
As I said, it’s very difficult to directly compare because the mix is so different, but taking all prices and taxes into account I think an income of x dollars will go a bit further in most of the US than it will in Australia. Especially if x is large.
I agree that it is hard to compare. Our 15% Social Secrity + Medicare is from first dollar (no deductions). Our income tax is also “first dollar” of “taxible” but there are minimum deductions that mean a single person really gets $8K-ish tax free and a familiy of 4 minimum of $22K-ish. State taxes vary greatly with California about double Arizona.
My point is, Americans hear about 50% tax rates in other countries and think themselves lucky. Many, if they took the time to add all the taxes together, would realize we’re not far from it if you make 2-3x the median income.
Social security + medicare is about 7 1/2%. I’d like to know what Aust/NZ pay for super- annuation (i.e. social sec)?
My point is, Americans hear about 50% tax rates in other countries and think themselves lucky.
Modern governments cost about the same to run. No surprise.
Social security + medicare is about 7 1/2%.
If you are referring to the US, you are off by a factor of 2 (it’s ~15%) because the employer is matching it. If you own your own biz or are self-employed, you never make that mistake.
I think the land barons only charged their peasants 10% to work the fields. Oh how I long for the good old days!
At many past jobs, I was offered W2 or 1099. When making that decision, you better bet I calculated SS+MC at 15% if I went 1099. AND, I can guarantee you the company was factoring in thier half of the SS+MC when making a W2 wage offer.
Unless youare minimum wage, the company match directly reduces your salary by that amount. YOU are paying it, even if you don’t realize it.
kirisdad,
In Australia the compulsory Superannuation levy is 9% of wages, paid by the employer into a fund of the employee’s choice. The Medicare levy is paid by the individual, and depends on whether or not you have your own Health Insurance. If you don’t it’s 1.5% of taxable income.
Some employers pay a higher Superannuation rate, and some (like my own) have legacy defined benefit schemes.
There has been a bipartisan push here over the last 20 years to get a higher percentage of retirees self-funded, and as a result there are some very juicy tax arrangements available. TOO juicy in fact, as there is a real danger we will see the emergence of an extremely wealthy group (retirees supported by passive incomes) paying virtually no taxes while the general population is struggling. That’s a classic trigger for social unrest.
Australia has privatised Government-owned enterprises over that period, and a lot of the more recent proceeds were paid over into an instrument called the Future Fund. This fund is intended to assist with the cost of providing old-age pensions (which are means-tested for both income and assets) for those retired people without adequate superannuation.
In concept the Future Fund is similar to the US Social Security Trust Fund, I believe, but since our supply of Federal Government Bonds is diminishing it has to invest in the financial markets in general. (No bad thing, IMHO.)
Currently, old-age pensions are paid from Federal Government General Revenue, as are unemployment benefits.
Also, we may get a HUGE tax increase in the US soon. Barack Hussein Obama want to uncap Social Security. This means the 5% of the people that pay 20% of the taxes will see tax increases of 45K/year or more. You will see a massive decline in US productivity if this happens, and many small businesses ($1M/year consulting firms, etc) moving off-shore!
Now before the “lucky duckies” here who pay little taxes start whining about how this is fair, let me remind you:
1. SS Benefits *are* capped! At least, if you’re going to uncap the taxes, uncap the benefits, too
2. SS Benefits are now TAXED if the government thinks you’re “too rich”
3. Many Democrats want to start means-testing Social Security and Medicare benefits so if you’re “too rich” you’ll get reduced benefits.
The only way someone could make a reasonable argument that uncapping the SS tax was fair is of they also uncapped the benefits, didn’t tax them, and took means-testing off the table.
Of course, the wealthy are welcome to take minimum wage jobs so they can be taxed less!
Adding to the mix, just look at any bill you have, Utilities, Phone, Cable… note the number of taxes and fees there, too.
ozajh - I think you must be confused. I think the only thing I commented on a couple of days ago was on the gas tax and how the US would be better off if we had increased the gas tax to 4 bucks a gallon and given the money back to the US tax payer by reducing income taxes or payroll taxes ect. I actually couldn’t tell you how high US property taxes are compared to other countries so I doubt I made that comment.
I am referring to your post in the Bits Bucket for May 23rd, and I just checked it.
Maybe your reference to property taxes was a typo, because the rest of the post was indeed about energy taxes.
Whatever, it’s started some conversation here.
(* grins *)
it was me saying something like that; I was talking about the Netherlands, compared to the US
Netherlands has sky-high ‘energy’ taxes, income taxes a bit higher than Oz (but high- income individuals pay hardly any tax thanks to the HMD, and very wealthy people pay nothing at all), and we pay a whopping (compared to US and Oz) 19% VAT on almost anything. As this thread clearly shows, it is always difficult to compare. But looking at other countries can be a warning, governments everywhere are on the lookout for new/higher taxes to fill the holes in their budget. Downsizing is never an option - so if some local tax is relatively low by world standards, there is a fat chance it will be going up soon.
There is limited pent up demand from some of my California friends to buy in Florida. I don’t think they get just how farked up the market still is here and there. Trying to advise them to wait and to sell the California place first. At the moment they still need to refinance out of their ARM in CA, too.
They named their Florida price range, and I started giving them property tax and insurance estimates … I hope that all slowed them down a bit. We’ll see.
They didn’t hear a word you said. People are f-cking morons.
But - their spouse is extremely conservative financially. A lot of what I’m advocating is even more conservative than the spouse.
Speaking of Florida, are areas closer to a major city a better investment? Given that the price of oil will continue to rise and greatly effect the price of both transportation and food, where would it be better to live? I’m inclined to think that urban areas, within walking distance of all necessities, are a better option.
Articles such as the one below get me thinking about housing in terms of survival.
http://www.independent.co.uk/environment/green-living/oil-a-global-crisis-834023.html
“Houses
All new houses in Britain will have to be zero carbon – burning no fossil fuels such as oil – by 2016, the Government announced, and housebuilders are struggling to meet the target. At present the standard can be reached only at great expense, but the industry is confident of bringing the cost down as mass production kicks in. It is even more important to adapt existing homes.
The key step is to super-insulate the house to make it as energy-efficient as possible – and only then to provide renewable energy sources. Solar water heaters, ground source heat pumps and boilers powered by wood pellets are favourites. Rooftop windmills do not work well enough yet. Photovoltaic panels, which get electricity from the sun, are expensive but their price should come down. Britain has lagged behind other countries. Soaring energy prices should shake things up.
Shopping
Effectively, almost everything is partially made of oil, and so is going to get more expensive. About 10 calories of oil are burned to produce each calorie of food in the US, and farming a single cow and getting it to market uses as much as driving from New York to Los Angeles. Some 630g of fuel is used to produce every gram of microchips.
The cult of local, seasonal produce will enter the mainstream, as everyone learns about food miles and a modern-day Dig for Victory grips gardeners – bad news for the farm workers overseas who provide 95 per cent of our fruit and half our vegetables. Trips to out-of-town supermarkets will seem extravagant, heralding a high street renaissance and a new surge in online grocery shopping, and soon we’ll all be eating our own potatoes.”
All new houses in Britain will have to be zero carbon….and boilers powered by wood pellets are favourites.
Um..wood pellets may not be fossil fuels, but they aren’t zero carbon, not by a long shot. And I bet it takes quite a bit of fossil fuel energy to make them from trees too.
I thought journalists were supposed to be curious. Why don’t they ask questions and, you know, investigate things.
Wood pellets seem to be a bad idea for a few other reasons too. Reminds me of a time, not to long ago; when our government was giving tax rebates for Hummers.
http://wood-pellet-ireland.blogspot.com/2008/02/wood-pellet-prices-and-sei-grants.html
“…So what do you think is happening with the price of wood pellets????
You got it – they are shadowing oil prices almost to the penny!!! This was not supposed to happen – do you remember? When they sold you that very overpriced pellet boiler, the main selling point was that you would save a fortune on fuel costs – what a load of bollix that has turned out to be!!!
…Do you regret going wood-pellet?
Forgive me for being cynical – it’s hard not to be in this instance. SEI grants my arse, what use have these grants been to people in terms of savings or payback??? They have invested a substantial lump sum in heating gear only to be rewarded with no savings or payback on their systems. In fact the pellet systems are likely to run at much higher maintenance costs due to the silly prices being charged for parts.
Do you regret getting your wood pellet system??? I have been hearing reports of endless technical problems with some, and now on top of that, there appears to be price tracking of pellet prices against oil prices. That’s very handy for the dealers with a captive audience which has kindly been provided by the SEI grant scheme.”
My husband got all hot to buy a pellet stove about 3 years ago. We got a $500 credit on our state taxes for it the first year, but nothing carried over to the next.
It runs okay, but we’re in a split and the pellet stove is in the lower half as auxiliary heat. Yeah the cost of pellets immediately rose. He has to haul the bags in, load it up, and keep it clean. Lot of hassle IMO. It’s nice dry heat like a wood stove but needs a fan to help circulate it around the house and we get that nice woodsy aroma when it starts up. We spent a lot of money switching to gas forced air from baseboard elec when we moved in. He did a helluva lot of work cleaning up the mess from the duct retrofit. Now we end up using both gas and pellt at the same time often.
What gets me is it needs electricity to operate so wouldn’t even work as emergency backup heat. The gas fireplace that came with the house works as well as any of the other garbage we put in.
I posted weeks ago on masonry furnaces. They burn plain old wood in a highly efficient manner & circulate the heated air passively. The residence must be designed around them. They are extremely expensive solely due to their je-ne-sais-quoi quality.
The best “investment” is to rent or telecommute. Figure out what you want from Florida and plant yourself there.
I picked near commuter lines and grocery stores and schools at a higher price than I wanted to pay at the time (this was in early 2003 when I was anxious about the bubbleness and not inclined to rent. we had made the decision to stay here for 30+ years and bought accordingly).
If you can telecommute, you can live anywhere.
If you want beach, go near beach. Not a lot of grocery stores near the beach anymore.
It’s too bubbly to really buy, IMO, unless you’re going to hold it for a while and it’s not going to hurt if what you buy keeps decreasing in value for the short (10 year) term.
And, you aren’t “investing”, you’re buying or more likely renting from the bank a place to live.
If you are buying investment property, buy low, sell high, consider stuff that’s accessible to what people need more likely to stay rented.
Happy and healthy long weekend to all. I was wondering firefox user about Fl. I could use a little of your expertise. I lived in Fl. in 90s and am about to return from Ca. I live inexpensively in a manufactured home (bought for little $) that people desire. I’m relocating for asset protection from the catastropic (no health insurance and recovered from a ladder incident) since my ira is immediately protected in fl. as is a home purchased after 2 years. I would only be spending 150k at most. Any advice on what I’d be facing would be greatly appreciated. Kudos to Ben and everyone re: renting.
Count on adding $400-500/month for insurance and taxes.
Jeff - have you thought bout having a small concrete-block house built? That would allow you to be sure you have R-30+ insulation under the roof, rebar and injected-foam insulation in the blocks, extra roof clips, shutter studs, etc. This should save you a lot in electricity and will reduce your insurance. You’d probably have to be at 1,000-1,200 s.f. on a modest lot, but it is do-able.
There are many houses for sale for $150K in Florida right now. For a quick out-of-thin-air example, search realtor dot com in Cape Coral for $50K-$175K, 2+ bedrooms and 1+ baths. 77 properties. The second one, 4411 SW 9th Ave, “wishing” for $175K, is a 2005 house (me, I’d want one built to 2001 code). Might be frame at that price, for such a large house, but you get the idea. I recommend you check with property insurers to determine where the coastal lines are relative to rates, if you want to be near the water.
If you buy a $150K house in an area where the “good” comps are in that range, then you should be looking at about $200/mo in property tax, maybe a bit less when the higher homestead exemption kicks in. And insurance might cost no more than that, including wind and flood.
All of the above is IMHO. Me, I’d (1) sell, (2) rent and look around, then (3) build or buy. If you are worried about forfeiting rent, assume that you sign a one-year lease. There is no way you’re going to find and close on a house within 90 days, so assume your greatest exposure is 9 months’ rent, decreasing every month thereafter. You should be able to knock that loss off your offering price.
Everything he said.
Though what we could afford in time, family, and money was to buy a concrete block larger home/cookie cutter, given my druthers I’d get a square of land and build a 1 story CBS or heck, adobe again, house up to Hurricane Andrew + spec.
Looking for a bit of land or a house at a price you can afford that isn’t insane and isn’t snatched up by all the sharks out there right now is a full time job in itself.
No expert, just going on guts and what I see - only been here 14 years.
I looked hard at some waterfront property in SW Florida until I saw their two tiered property taxes. As I didn’t plan on living there more than six months a year I said FU.
But doesn’t a Montana/Florida retirement sound good.
Mike
Very smart, it amazes me that so many people buy homes without investigating the tax/ins. liabilities.
Mike,
You think it sounds good but you did some research and decided against it? Aren’t you a patriot?
Commie!
A Patriot. I like the sound of that!
Sounds a lot better than FB!
Mike
March driving down for 1st time since 1979:
http://tinyurl.com/4se7v4
“According to the Department of Transportation, Americans drove 11 billion miles less in March 2008 than a year earlier, the first time estimated travel on public roads fell in March since 1979.”
“The data marks the sharpest year-on-year drop for any month in the history of the agency’s reporting, which dates back to 1942.”
That’s a stunning statement. My guess is that it’s more than just the increased cost of gas that’s contributing to the decline in driving. Perhaps it’s also another indication that the decline in the economy is greater than shown in the official stats.
And the debate on whether oil at $130 per barrel is sustainable will continue. I saw the DUG discussion yesterday, well after the fact. Who has the ‘nads to go long on DUG at this point?
Everywhere I turn I hear stories that oil is just going to keep going up, and up, and up. Don’t short oil. But isn’t the best time to buy something when everybody says it’s the worst time to buy it? And vice versa. Everybody is oil crazy right now. It seems like a mania. Oh, geez, the decisions to be made. How sweet would it be to make money, knowing it came because oil speculators were getting hammered?
I went long at 26 but only with my gambling money. Airlines are cutting fleets, trucking companies are setting speed limits, people are driving slower and less often and buying smaller cars. Even if oil stays where it’s at, US oil companies will be facing a pinch is my guess. Of course if we start dropping bombs on Iran …..
The decrease in miles driven is definitely a commentary on the state of the consumer as much as it is the price of gas. People feel poor and less secure and thus they are starting to pinch pennies everywhere.
Measton - on the Interstates in the South, I am noticing that on average, trucks are driving much more slowly than they used to. I wonder if the owner corporations are monitoring average speed, figuring the higher payroll is more than offset by the lower fuel expense.
The big truck corporations have governors on the engines of semis which strictly limit trucks’ maximum speeds. Lately many governors have been adjusted slower. Many of their driver employees are paid by the miles they drive, not by their time on the road, so going slower just decreases the driver’s pay per day while improving the return to the company. Many of the driver-employees are paid nothing for their time while the truck is parked or needs emergency repairs, and the law limits the # of hours they may drive daily, along with the posted speed limits. Auxiliary engines which power the semi’s A/C, electric, etc. when they are parked, are available & these are much more economical than idling the main motor for the same reason; these engines cost the company about $8,000 extra when installed on new trucks. Some driver employees get a bonus for increasing their mpg even with these other fuel-saving measures being in place. Independent owner-operators operate by different criteria.
The bullish hammer on DUG that showed up on daily charts on about Wednesday is now showing on the weekly chart. It’s a nice technical setup and for oil bulls like myself who are options-ignorant, might be a way to hedge some profits.
Here’s the other side of the coin: The entire world is waking up to Peak Oil in a big way, although there is still a lot of disbelief. Once people realize that oil was a one-off bounty from nature with unique properties in terms of portability and energy density and versatility (think Vaseline) that can never be equaled by alternatives, oil will go way, way, up.
Jeffrey Browne’s Export Land Model shows that we can expect approximately zero oil exports wordlwide by 2025. What is happening now and will continue to happen is that
a) oil consumption is going up rapidly in many of oil exporting countries, like Russia, Saudi, Mexico, Iran, etc. Many of these countries subsidize fuel costs for their citizens.
b) The 40 super-giant fields that account for 50% of all production are mostly in decline. Very hard to make it up with new discoveries.
c) The result is much less available to export.
The question is: Will demand destruction be faster than the depletion rate? So far, no, but we may be seeing signs (DUG).
I just know that countries like China and India will try to attain a lifestyle in which each citizen uses approximately as much oil per year as someone in Korea or Japan.
We all know it can’t happen. The numbers just don’t work.
As Ken Deffeyes says of oil, It’s too valuable to burn.
how long you gonna play oil higher? till there aint no exports?
Equity sell-off, secondary treasury market rally, after options expiration, into inflationary price spiral on critical must have social maintenance inputs/consumption, going into full-tilt 2 and 5 year primary treasury auction week…
How long you gonna play treasuries higher? Till there aint no exports?
Why has Bill Gross loaded up 60% of the super-fund into MBS via agencies? Fears going up again, I like the VIX higher…pushing and shoving, or orderly selling?
got us another one of those conundrum thingies…
..as the food costs rose sharply, the social unrest got a bit panicky in the emerging markets, countries talkin bout “strategic rice reserves”, rioting for food, hoarding and such…note: those countries cap the fuel prices. The ag pulled back, and the surge went to oil…..
India is raising the price of fuel. The idea that these energy intensive build out campaigns can maintain this level of expansion under a price capping regime is a total and absolute farce. Its almost like the FED can create solvent banks by lowering the discount rate and expanding the alphabet soup of money swapping. China is gonna have to let go of a couple small items. little things, like the currency,energy, and food prices..
Somebody better get a handle on the command and control black boxes and just shut em off… the jack-booted thugs are gonna lose control of globo-bubble-dom and the fallout shelters are gonna be the tin-foil survivalists livin in a van down by the f-ing river.
“But isn’t the best time to buy something when everybody says it’s the worst time to buy it”
I’ll stick with “The Trend is Your Friend”, and “When in Doubt, Stay Out”.
Until Nero stops fiddling on Jan 20, 2009 we got “Trouble in River City”
Betting against crazy trends can also be very profitable. I am still in the “stay out” mindset now. But I’m definitely looking at this.
If the majority of Americans feel a new President will cure our economic ills, we are in big trouble.
If the majority of Americans feel a new President will cure our economic ills, we are in big trouble. We are in big trouble.
Everywhere I turn I hear stories that oil is just going to keep going up, and up, and up.
Just ignore them. After all, the elves are (at the time of this writing) making billions of gallons of oil and planting them right underneath Kansas for all the fat Americans to enjoy for centuries! zzzzz
ooops! My dream is over. Hmm…Now my gloominess returns because I understand fully the meaning of why “fossil” is in “fossil fuels.”
the elves are (at the time of this writing) making billions of gallons of oil and planting them right underneath Kansas for all the fat Americans to enjoy for centuries! Actually those elves are at work even now. Unfortunately, their production will not be available for several hundred million years. Have patience, everyone!
Friday night, the news had a special segment on the memorial day traffic leaving Boston. News footage showed two frightening scenes:
1. The Rt 95 tolls to NH and ME: there was no back-up at all from 4pm-6:30pm, cars were simply driving up and paying the tolls. Normally this is a nightmare traffic jam.
2. Traffic over the bridges to Cape Cod: There was heavy traffic, but it never reached stop-and-go, bumper-to-bumper. Again, totally abnormal.
Gas prices could have affected it in two ways, either people aren’t driving on long trips or they have adjusted their travel schedule to drive at more fuel efficient times.
Additional comment, the weather forecast had been that it would be a beautiful weekend. And it is!
My husband took our little girl to the Northern Neck (southeastern VA on the water) yesterday and they sat in a backup on I-95. It took them almost 3 hours to go 20 miles. I think gas prices need to get a little higher ;).
I was having a conversation about this on Thursday. I don’t think it is the cost of the gas to go on a vaction that is the problem. Not for most people. When you are travelling a few hundred miles, the difference just isn’t that big compared to a hotel, eating out, cost of activities, etc.
It is the cost of the 50-100 mile per day round trip commute that is the problem. And the price of milk, eggs, etc. People are broke. They aren’t skipping the vacation because the gas to go on vacation is too expensive. They are skipping the vacation because they are broke.
Polly - that is what I am counting on to drive down house prices in places like 50-miles-from Atlanta, where the commutes will become unbearable and folks suck it up and move to a condo in or near the city.
where the commutes will become unbearable, such places would become ghost towns.
Old farts gotta live somewhere. They’ll buy many of them.
Traffic over the bridges to Cape Cod: There was heavy traffic, but it never reached stop-and-go, bumper-to-bumper. Again, totally abnormal.
And for comparison: When I last did that drive, there were passengers who got out of the car to play roadside frisbee and could keep up with their car.
It’s a Staycation. Let’s all stay home and scare the crooks.
“According to the Department of Transportation, Americans drove 11 billion miles less in March 2008 than a year earlier, the first time estimated travel on public roads fell in March since 1979.”
That got me to thinking that the state govt boyz in PA who sold the Pennsylvania Turnpike to that Spanish company for $12 Billion may have timed the market perfectly and sold at the top.
“That got me to thinking that the state govt boyz in PA who sold the Pennsylvania Turnpike to that Spanish company for $12 Billion may have timed the market perfectly and sold at the top.”
Bwahahahaha, good one, Bill! Maybe they can even buy it back for a billion in the not too distant future. Now that’s smart government planning! Anything that screws the “global” system is OK in my book.
I suspect the new Spanish masters of the Turnpike will be able to raise tolls to make up for any significant loss in traffic. The people on the East Coast still have to eat, and so much of their food & other necessities is carried by trucks on that Turnpike. There has also been discussion in other states of turning other east-west interstates (I-86, I-70) into toll roads. When there are no alternatives, truckers will pay what they have to in order to operate, and their shippers will add the new fees to the prices of their goods. Never underestimate the power of governments & their sponsored entities to squeeze blood from beets.
woould not buy in fl for at least one more year..the bargains in foreclosures are just starting to come in…especially in the luxury communities…have to laugh..the sfl attitude was to move to the gated communities to stay away from those kind of people…now the those are buying next to the underwaterers for 40 percent less..you can run but u can’t hide..
“would not buy in fl for at least one more year”
Did the government suddenly change the definition of “1 year” to be 1825 days? I must have missed that announcement. I feel so much younger, all of a sudden.
More than that - and only if you spend a lot of time researching and getting exactly what you want for late 90s or lower prices.
I zillowed a property I sold in 04. The difference in property taxes between what I paid in 03 and what was listed as paid in 07 was a 60% increase over those 4 tax years (this property is in Nevada).
I suspect the bank slow handling of foreclosures is more due to incompetence/unpreparedness than malice. Keep in mind that there are three shocks to the system.
1. The number of foreclosures is much higher than the banks expected. They probably lack the staff to handle this surge. And, even worse, the only people who can train new staff are busy processing foreclosures. I have seen similar problems; it is tough to solve even when everybody has the best intentions (such as the happy case of an increase in sales).
2. The sliced and diced mortgages mean that the owners of the notes have differing priorities. These negotiations may prove interesting.
3. The Ohio ruling requiring real paperwork for a foreclosure just makes life tougher for the banks…now they have the same rules as everybody else.
I suspect the banks are overwhelmed. They are simply incapable of handling the situation. And, therefore the losses will be enhanced. They will become even more cautious about lending in the future.
That will help prices overshoot on the way down.
55,000 notice of trustee sales, with 15,000 of those cancelled. MANY of those cancelled transactions were really just refiling with different listed guarantor or a different trustee.
I agree. It is probably a paperwork bottleneck.
Another thing I am seeing more and more is lenders winnng properties with prices below what they are owed. It seems to me they are trying to do some calculations of likely liquidation price, and aiming their bid for that. Maybe.
“It seems to me they are trying to do some calculations of likely liquidation price, and aiming their bid for that.”
Darrell - I think that would be a smart move if it influenced the property’s tax — this with regard to its appeal to a liquidation buyer. Also a good move if they want to spread out their losses, which would seem logical.
“I suspect the bank slow handling of foreclosures is more due to incompetence/unpreparedness than malice.”
The recent news item that only 2 pct of recent foreclosure auctions on California courthouse steps successfully found a buyer leads me to believe that lenders are extremely unrealistic in their assessment of market demand. What else could explain such an abysmal success rate?
Belief that they can do better in the general market than at the limited attendance of the foreclosure auction.
Remember, Foreclosure auctions are a pain. They only take cashiers check, meaning you have to have lots and lots of cash to really particiapte.
Also, there is no incentive to drive up the auction price when owed less than market value, but there is huge incentive when owed morethan market.
Let’s say there is a house you think it worth $100K but only $60k is owed. Well, if you hace $300+K cash, you can go to the foreclosure auction with checkes for $60K,$65K,$70K, etc. The banke isn’t going to bid against you since they are going to get thiers. Now let’s say $110K is owed. Well, the bank is likely to come in with the full $110K bid so that they can get the “full market value” on an open market where people have he oppertunity to buy using debt instead of only cash.
“Belief that they can do better in the general market than at the limited attendance of the foreclosure auction.”
Aren’t used home sellers still charging commissions? And aren’t prices dropping at somewhere north of ten percent per year in California? Those are two reasons I don’t think ‘they’ will end up doing better in the ‘general market.’
Attendance at foreclosure auctions is most likely limited because smart money does not trust the lenders to sell at prices the market will bear. This is George Akerlof’s Lemons Market problem in action…
“When the individual is relieved of the obligation of self-respect, he acquires the habit of helplessness; he is inclined to retreat to the security of the prenatal state. The more he is taken care of the more he wants care.” ~Frank Chodorov
Why can’t we call a spade a spade? Before 2005, real estate always went up. Now that some markets have dropped by over 20 pct, they are declining, but the GSEs are not allowed to point out the obvious or prudently reflect in their lending practices after June 1.
I have two questions regarding this GSE policy reversal:
1) How many buyers who would have otherwise (sensibly) been denied financing in this falling knife market will be hereby encouraged and enabled to join the next generation of knifecatchers who eventually walk away, sell short or get foreclosed?
2) How will this policy change impact the risk that future generations of taxpayers will be stuck with the tab for an eventual GSE blowup?
NATION’S HOUSING
KENNETH HARNEY
Fannie, Freddie scrap declining-market label
WASHINGTON – Could the controversial mortgage industry practice of listing hundreds of local real estate markets as “declining” – and restricting lending through higher down payments or credit scores – be scrapped?
The two biggest players in the home mortgage field, Fannie Mae and Freddie Mac, did precisely that May 16. Reversing its policy of penalizing buyers in troubled real estate markets with 5 percent higher down payments, Fannie switched to a nationally uniform policy of charging borrowers the same minimum down payments irrespective of location. A spokesman for Freddie Mac, Brad German, said his company would be “suspending” its declining markets policy indefinitely as well.
Starting June 1, mortgage applicants who are underwritten by Fannie Mae’s automated system online will qualify for 3 percent minimum down payments, wherever the property is located. Borrowers whose applications require “manual” underwriting will pay 5 percent minimum down.
“What’s the trend line here? Fannie Mae’s and Freddie Mac’s policy switch should open the door to some additional low down-payment mortgages – and home sales – in local areas once tagged as declining.
But without the participation of private mortgage insurers – who report solely to stock market investors rather than Congress – many borrowers will likely have to turn to the Federal Housing Administration, which accepts 3 percent down, does not have declining markets restrictions, and whose loans can be purchased by Fannie Mae and Freddie Mac.”
Why is it presumed to be a good policy to encourage low-income buyers to catch falling knives, by offering them below-market deals on low-downpayment loans?
One of my long-term predictions was that the gov. will keep changing the rules as they go along to re-spike the punch-bowl and provide the funding that the private money market won’t. As a taxpayer ,I just love lending in areas that are still crashing .Next set of FB’s walking ,step right up .
The goal has always been to take over the crap loans and free up the lenders . Has anyone noticed that no matter what the powers talk about they proceed with the plan in one way or another in becoming the easy money low down lender of choice .Easy lending is not something that is very intelligent in a declining/crashing market .I would like to scream when the government acts like refinancing equity of a home is the American Dream of entitlement to purchase junk .
Amen, PB and Wiz!
Where are our representatives (other than Dick Armey, of Angry Renter fame)? Why are so few trying to challenge these policies?
When prices were going up, Fannie & Freddie’s loan limits were raised accordingly. You’d think they’d lower their limts, not raise them, as prices go down.
I swear, sometimes I want to sail off to a deserted island somewhere and just get away from all the clowns in D.C.
lol. I often joke with my wife that it would be nice to own my own private island where I could set myself up as supreme benevolent dictator, ruling over a country of 3 people, just to get away from the political BS. Of course, my wife knows that she would be the one with the real power, vs. just the figurehead. I still subscribe to the quote, “the US has the worst government in the world, except for all the other governments”, but I fear the gap is ever-narrowing.
More loan losses for FHLMC/FNMA down the road. I think that all FHLMC and FNMA debenture, commercial paper, and MBS holders, are now indifferent to the financial condition of these two GSEs. The debt investors rely solely on a government bailout to ensure that they get repaid. That’s a political bet I would never make, a creditor bailout might not be 100% and the “co-pay” will hurt. I’d take the lower yield on the GNMA PCs and sleep well at night.
As for straight debt, I would go with the FHLBs over FNMA and FHLMC. FHLB debt is system-wide and there are 12 FHLBanks. Plus an FHLB bailout would have precedence. About 20+ years ago a Federal Land Bank went under and the government effectively bailed out the Farm Credit System bond holders. The Farm Credit System is very similar to the Federal Home Loan Bank System except FCS is agriculture-oriented (finances the co-operative farm credit and land bank associations).
SAN DIEGO: AMONG THE 5 WORST
SmartMoney magazine looked at the five cities with the biggest home price declines, as identified by the Standard & Poor’s/Case-Shiller Home Price Index last month, and had this to say:
“Strong job growth, great weather and a smattering of palm trees: Who wouldn’t want to live in San Diego? But what makes a place desirable also tends to make it more expensive. Home values here rose by 150 percent between January 2000 and December 2005. At its peak, this city had the highest ratio of median home prices to median incomes in the country.”
S&P’s chief economist, David Wyss, said San Diego homes at the peak were worth about 14 times the amount of money that owners made each year, compared to the national average of 3.4 to 1 in 2006.
“The expectations for this city – that it was employing rapidly and that everyone wants to move here – got way too high,” Wyss told the magazine. Home values are now 24 percent below the peak.
The other five cities on the list: Las Vegas, down 24.5 percent from the peak; Miami, down 22 percent; Phoenix, down 24 percent; Los Angeles, down 22 percent.
– ROGER SHOWLEY
Visited SD a couple weeks back, walkable downtown, nice restaurants. Not too much traffic. Quite a few towers going up, condo-looking things.
Inflation’s back
May 22nd 2008
From The Economist print edition
Double-digit price rises are about to afflict two-thirds of the world’s population
Illustration by Kevin Kallaugher
RONALD REAGAN once described inflation as being “as violent as a mugger, as frightening as an armed robber and as deadly as a hit-man”. Until recently, central bankers thought that this thug had been locked up for life. Thanks to sound monetary policies, inflation worldwide had stayed low in recent years. But the mugger is back on the prowl.
Even though America is close to recession and growth in other developed economies has slowed, inflation is rising. Jean-Claude Trichet, president of the European Central Bank, this week gave warning about the mistakes of the 1970s, when inflation was let loose at huge cost to growth.
RONALD REAGAN once described inflation as being “as violent as a mugger, as frightening as an armed robber and as deadly as a hit-man”
Then why did he appoint Don Greenspan as Fed chair?
Actions speak louder than words.
First and last, Raygun was an actor.
“…gave warning about the mistakes of the 1970s, when inflation was let loose at huge cost to growth.”
14+ % mortgage rates … sounds really bad…but sometimes a lot of heat is needed… to destroy the millions of little things… that have reproduced throughout the body… that were leading to it’s eventual demise… all this violent shaking, coughing, sweating…and then the FEVER broke.
The Real Estate Industry & Wall Street… didn’t just have the flu… they had: “profitgreeditis”
“Taken as a whole (and using official figures), the average world inflation rate has risen to 5.5%, its highest since 1999. The main cause has been the surge in the prices of food and oil, which briefly soared above $135 a barrel this week.”
The author of this article, name not given, is obviously is one of the Wall Street pigmen or MSM idiots. Inflation is first and always a monetary phenomenon. Create too much money, and it devalues.
The Fed and banking system don’t want you to know this. They also don’t want you to know that an inflation rate of say, 6%, means your money has devalued by 50% in 12 years. So you can only buy 1/2 the gas or food for the same dollar amount. What a deal. Cash is trash.
House sales to hit 30 year low
“One homeowner trying to sell his property told the BBC that he had been forced to cut the asking price by more than 10%”
perish the thought
But not everyone can afford to cut the sale price and even if they can it won’t guarantee a sale, estate agents believe.
They spout the same bollocks the world over
Wait until they start describing it as a “stand off, each side waiting for the other side to blink”.
Well, we see how the stand-off ended here.
“One homeowner trying to sell his property told the BBC that he had been forced to cut the asking price by more than 10%”
Forced? Nobody’s FORCING him to do anything. He can hold on to his wishing price for as long as he can make the mortgage payments.
Boo hoo hoo if nobody’s going to come along and GIVE their retirement away any more than he’s going to GIVE his house away…
There is little doubt that the US economy is recession bound or worse. Gov’t, NAR and MSM stats and figures on inflation, housing, unemplyment and cost of living are TOTAL and ABSOLUTE Bull$H@T !
Corporate and Gov’t Policies in the past 6-7 years have sent this nations economy and finances into an unpresidented decadent decline due to greed, stupidity, arrogance and waste.
States, cities and family budgets will be squeezed as never before without the old economics engines of major manufacturing, autos, tech or finance jobs and wages to pull them through.
War, service jobs and selling over priced foreclosed shacks to each other in tight times certainly aren’t going to support a nation of 320 million very well when people are broke, homeless, unemployed and about to go hungry.
Every entity, from local gov’ts to corporate goods and services are going to be SCRAMBLING to SAVE their taxes or profits to support their “High Life” that they have enjoyed the past several years by passing the costs on to the US consumer and taxpayers during a time of austerity.
Now is the time to buy that 52 inch HDTV and order the Super Premium Cable Package so that you don’t miss Faux News Propaganda, cartoons and non stop commercials.
Everyone MUST buy a McMansion and willingly pay for the services and taxes to support these Castles NOW…before this housing and hedge Fund MESS implodes and we’re all sucked into the awful Black Hole of living within our means.
Oh…and Cadillac has a few orphaned Escalades…that need new HOMES, so buy or adopt now…before the Super Bowl rush.
rant over
“before this housing and hedge Fund MESS implodes and we’re all sucked into the awful Black Hole of living within our means.”
Live within our means???? Are you nuts?
yup..and always on the lookout for those damned house squirrels
Somebody should do something! There ought to be a law against corrections to restore market equilibrium conditions!!
Breaking News
Feldstein: Government Must Act on Home Crisis
Published: May 21, 2008 3:42 PM Dow Jones
HOUSTON -(Dow Jones)- Warning that the effects of continually declining home values could be severe, Harvard University economist Martin Feldstein Wednesday urged policy makers to take immediate action to address the housing and credit crises.
Feldstein didn’t endorse a specific set of policies, but said Washington shouldn’t wait to act until the new presidential administration takes office in 2009. Although he remains confident about the long-term strength of the U.S. economy, 2008 and 2009 will be “very difficult years,” Feldstein said.
“They can’t move too fast,” Feldstein said of President George W Bush’s administration and congressional leaders. Feldstein worked as chief economic adviser to former President Ronald Reagan in the 1980s and now serves as president of the National Bureau of Economic Research, a nonprofit research organization. NBER is the official arbiter of the economic cycle.
Feldstein, the kick-off speaker at an energy conference at Rice University, offered a generally grim assessment of conditions in the U.S. The biggest worry is a “downward spiral in housing prices” that could increase the number of residents facing negative equity, accelerate foreclosures and further depress consumer spending. Feldstein described conditions in the credit markets as “worse than I have ever seen.”
The downward spiral in house prices is the solution, not the problem, Bozo.
If house prices become fundamentally undervalued (much cheaper to buy than to rent) like during the Great Depression, then government action to support house prices would make sense (as it did then).
The downward spiral in house prices is the solution, not the problem, Bozo.
———————
Amen.
This needs to be repeated to everyone who says we have a “foreclosure crisis.”
The f’ing crisis was that home prices were allowed to escalate like they did.
I pull in resolution, and begin
To doubt th’ equivocation of the fiend
That lies like truth.
-Shakespeare’s Macbeth-
Breaking News
Oppenheimer Analyst: Crisis ‘Far From Over’
Published: May 21, 2008 4:26 AM Dow Jones
By John Spence
BOSTON (Dow Jones) — Shares of large-cap U.S. banking stocks traded lower Tuesday after analysts at Oppenheimer & Co. said they see the turmoil in credit markets lingering at least into next year.
“Our view is that the credit crisis will extend well into 2009 and perhaps beyond, and although the complexion will change, the net effect will be the same: three years of multibillion-dollar revenue reversals,” the Oppenheimer analysts wrote in a note, led by Meredith Whitney. Whitney has built up credibility for her bearish and prescient calls on Citigroup Inc. (C) and other Wall Street giants during the credit storm.
Debt eaters
Breaking News
Fannie, Freddie to Buy $74B in Mortgage Bonds
Published: May 23, 2008 10:21 AM Dow Jones
By Prabha Natarajan
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Fannie Mae (FNM) and Freddie Mac (FRE) together committed to add $74.2 billion of mortgage bonds to their investment portfolios in April, a clear indication to the markets that these agencies plan to spend at least a sizable chunk of their additional capital in buying mortgage-backed securities.
Breaking News
Fed Official: More Assistance Needed
Published: May 22, 2008 12:35 PM Dow Jones
By Michael R. Crittenden
Of DOW JONES NEWSWIRES
AMELIA ISLAND, Fla. -(Dow Jones)- Lenders and other mortgage servicers need to embrace a wider range of options to help borrowers struggling to stay in their homes, a Federal Reserve official said Thursday.
“Not enough is being done,” Sandra Braunstein, director of the Fed’s consumer and community affairs division, said during a panel discussion at the Conference of State Bank Supervisors in Amelia Island, Fla.
Braunstein called for lenders to use templates and other systematic approaches to help more homeowners who are trying to keep their homes. Though she acknowledged that many lenders and counseling groups are overwhelmed with the massive number of borrowers seeking help - “they’re swamped,” Braunstein said - additional steps need to be taken.
“We’d like to see more principal write-downs, but that remains to be seen,” Braunstein said.
I am sure the lady would like the home principals to be reduced to 3 X the FB’s annual income, however by admitting that would cause chaos in the financial system-
“We’d like to see more principal write-downs, but that remains to be seen,” Braunstein said.
I am calling a “bottom” to the housing market when we see RE agents puttering to their empty open houses on little Honda motor scooters while balancing trays of stale cupcakes
Sure glad to see they’re conserving my tax money at this conference in v-e-r-y expensive Amelia Island.
Breaking News
Accounting Regulators Probe Subprime Cases
Published: May 21, 2008 2:55 PM Dow Jones
By Judith Burns
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Accounting regulators have enforcement investigations under way stemming from the subprime mortgage debacle, Public Company Accounting Oversight Board Chairman Mark Olson said Wednesday.
In remarks to the Association of Audit Committee Members in Philadelphia, Olson said the board’s enforcement division has “a few matters under investigation that touch upon subprime” and is coordinating its efforts with the Securities and Exchange Commission.
Congress created the oversight board in 2002 to inspect and discipline public company accountants. According to the text of Olson’s speech, released here, unease in U.S. credit markets resulting from mounting problems with risky, subprime mortgage loans prompted regulators to take a closer look at the need for a regulatory response.
“We continue to monitor the markets carefully with an eye toward areas where there may be potential audit risks,” Olson said in his prepared remarks.
Breaking News
Majority to Repay Debt With Rebates
Published: May 19, 2008 3:23 PM Dow Jones
DOW JONES NEWSWIRES
A small majority of consumers plan to use their federal tax rebates to pay down debt, according to a survey conducted last week.
The survey, sponsored by the International Council of Shopping Centers, found that 51% of consumers receiving a rebate intended to use it to pay off debt. In a similar survey taken Jan. 31 through Feb. 3, 46.2% said they would use the rebate to pay some of what they owe.
In the survey conducted from Thursday through Sunday, of taxpayers who have not received the rebate, 55% said they would use the money to pay off debt. Among households with income of $50,000 or less, the percentage rose to 61.5%.
this is how you print your way to deflation.
unintended consequences.
My rebate never got here, my accountant said it was part of my tax deduction.
Oh give me a home where they leave me alone
where the beer and cantaloupe thrive
where seldom you hear about a bailout this year
and the price of our oil stays low.
Oh home on the foreclosure page
please start to lower your prices
if we can’t lower comps and we never change loans
then you see that we all have a crises.
OVtm
Consumer Action
Foreign Buyers Flocking to U.S. Housing Market
By Aleksandra Todorova
Published: May 23, 2008
AMERICANS’ LOVE AFFAIR with real estate may be cooling, but thanks to falling home prices and the weak dollar, attention is heating up from another group of suitors: foreign investors.
How does one say “knife catcher” in:
Spanish - atrapa cuchillos?
French?
German?
Italian?
Japanese?
Mandarin?
Rule no. 1: If your offer does not insult the sellers, it is not low enough.
Deal of the Day
5 Ways to Negotiate a Better Deal on a Home
By AnnaMaria Andriotis
Published: May 20, 2008
NOW MOST HOME BUYERS can shave thousands of dollars off the total cost of a home — just by asking.
In a sharp reversal of the housing boom of just a few years ago homes are lingering on the market for months with few — if any — offers, forcing homeowners to sell for well below the hoped-for amount, says Robert Irwin, author of “Buy Your First Home.”
Since December 2006, single-family home values nationwide have fallen almost 12%, according to Beth Ann Bovino, a senior economist at Standard & Poor’s. In some parts of the country, home values are down by as much as 17% to 23% from a year ago, according to the S&P/Case-Shiller Home Price Indices.
While the situation seems dire for sellers, it’s anything but for home buyers (at least for those who qualify for a mortgage in today’s tight lending environment). Even if a home is in mint condition and reasonably priced, buyers can easily shave 5% off the asking price, explains Irwin. And in the hardest-hit places they can low-ball their bid even further. “People are coming in 25% or 35% below the asking price,” he says. “The seller may laugh or [they] may counteroffer and begin negotiations.“
I’ve been reading this website for years now, but even I’m shocked at how fast this decline has taken place: there are houses all around the “subprime areas” of So. California that are down more than 50% from their peaks. I’m talking sales prices, although in many cases list prices as well. At this rate, I would think 2009, definitely 2010, would be the bottom. However, given the sorry state of our FIRE (finance, insurance, real estate)economy, I can easily see prices wallowing there for 10 years or so. I am advertising a rental right now, and I haven’t had a single applicant yet with what I would call a productive, private sector job…I’ve had navy seabees, preschool teachers, an assistant to an inspirational speaker, retail workers. How long can this country survive on war and selling made-in-China trinkets?
I guess the whole US can all do “non productive” jobs. Only 4% of the world population, providing world-scale government type services like global police, emergency services as well as white collar jobs like global finance.
and what do you do for a living? would you qualify under your own guidelines?
Yep, working on a university research project on solar cells. It’s ending though so I’m looking toward the private sector.
I suggest you rent to some “productive” real estate investors…
I’ve seen an ocean view 1200 sq foot home for sale below $400,000 on the central California coast. Also my ziprealty agent in the LA area sent me a link to $400,000 Hermosa Beach condo. Comps on zillow are at $500,000 in that same building. This one is on the bottom floor of 4-story structure. No thanks, although HB is a great location.
Summer of 2008 is going to be the start of significant LA price drops in the beach cities. I’m only interested in single story houses/bungalows in that region!
Pensacola, FL
Perhaps the seller would consider a trade for a copy of “Who moved my cheese?”.
http://pensacola.craigslist.org/bks/688516831.html
Sign of the times.
Global housing markets
Structural cracks
May 22nd 2008 | LONDON AND MADRID
From The Economist print edition
The pain in Spain falls mainly on Mr Drains
PESSIMISTS used to wear a sandwich board announcing “the end is nigh”; now they just set up a website. And Jeremiahs are no longer solitary figures, particularly when it comes to the housing market. Proof that misery loves company can be found on the forum http://www.globalhousepricecrash.com where the running total of discussion topics this week was 14,455, eliciting some 171,609 responses.
With regard to taxes, I have only one comment to make-
Why are we paying for the war and consumer protection if the various arms of our government are paying outside contractors (as opposed to keeping such activities in house) not to do the job?
I must say that those chores inside the govt. are not doing such a good job of enforcing the law, however, they may be cheaper in the short term.
If such agencies as the consumer protection agencies (drugs, water, food and SEC) can’t or refuse to do their job, then shut them down. At least the GOV. will admit that they will/can not do the job. Put the public on notice that you are on your own-can’t count on the govt. to do anything to protect you-some like ‘the war on terror”.
With regard to “Blackwater” in Iraq, send them to the US-Mex boarder. I suspect they will solve our illegal immigration problem.
When Blackwater is at the US-Mex border, it will be to keep YOU IN not ‘them’ out.
Just walk backwards…
Former Mass. governor buying home in La Jolla
UNION-TRIBUNE
May 24, 2008
How old is he? Can he get in a third governorship before his next run, or is there a limit of 2?
Anyone ever been a governor of two states?
My sister (far more politically astute than I) instantly jumped to the hunch that Mitt might be thinking of following in the Gubernator’s footsteps. Perhaps he has a penchant for governing states where gay marriage is legal.
America’s mortgage giants
Haggling on the Hill
May 22nd 2008 | NEW YORK
From The Economist print edition
Reining in Fannie Mae and Freddie Mac
THERE was lofty talk of bipartisanship in Washington, DC, this week as a bill to rescue struggling homeowners cleared a key Senate committee, the biggest hurdle it is likely to face. But the noise in the background was the unmistakable sound of horses being traded.
Democrats got their expansion of the Federal Housing Administration (FHA), the government agency that supports low-cost housing. It will guarantee up to $300m of refinancing of “underwater” mortgages as long as lenders agree to cut the principal owed to below the home’s current value (a big if; the scheme is voluntary).
But Republican sceptics extracted their pound of flesh. The cost will be limited to $500m, and covered not by the taxpayer but by America’s housing-finance giants, Fannie Mae and Freddie Mac (known as Government Sponsored Entities, or GSEs). More importantly, Fannie and Freddie will face much stricter regulation. As Rajiv Setia of Barclays Capital puts it, to secure the mortgage-rescue plan “the Democrats essentially gave in on the GSEs”.
$300 million? Try $300 billion.
I wondered as well whether that m (not bn) was a typo in The Economist’s article. We have not seen many losses recently reported in the mortgage debt market on the range below $1 bn.
Brits do millions and billions differently than we do.
It will guarantee up to $300m of refinancing of “underwater” mortgages as long as lenders agree to cut the principal owed to below the home’s current value (a big if; the scheme is voluntary).
let’s see, say each loan is for $100K, then $300M will save 3000 houses. BFD.
Does anyone know if this sucker is going to get past dubya’s desk? and if it doesn’t do they have veto proof majorities in both houses?
Economist challenges government data
Sam Zuckerman, Chronicle Staff Writer
Sunday, May 25, 2008
Economist challenges government data
Oakland economist John Williams doesn’t seem like the kind of guy to pick fights with the government.
He’s slow moving and soft spoken, conservative in politics and personal habits, a pale and portly 59-year-old who favors Oxford shirts, Rep ties and sensible shoes. Williams is the sort who pays his taxes on time, waits when the signal says “Don’t Walk” and snaps to attention when the national anthem is played.
But don’t be fooled. The New Jersey native is leading a one-man crusade to expose official economic data as grossly misleading at best and, at worst, a pack of lies.
His Shadow Government Statistics Web site (shadowstats.com) has become a magnet for those convinced that official data put a happy-talk gloss on the nation’s economy. The growing popularity of the site, which costs subscribers $175 a year, is testimony to the deep suspicion many Americans harbor about government information as the economy falls into a swoon….
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/25/BU6K10JTEF.DTL&tsp=1
It seems as though there are contrary indicators of inflation.
Commodities prices are increasing, the Fed is loosening, Government bailouts, gas prices going up, etc. all of which make me think we are headed for 70s era inflation.
But the thing I keep coming back to is 10 year treasuries are at 3.875% and inflation indexed 10 year treasuries are at 1.750% which says the market expects 2.1% inflation over the next 10 years.
In general I am more inclined to believe the 2.1% number given the size of the treasurey market.
Last 2 comments on this story
houston1369 Posted: 7:05 PM On May 21, 2008
Zillow is the last place to check home prices. They are extremely inaccurate. Their information is soley derived from ‘appraisals’ listed at the county clerks office and have nothing to do with the actual value of the property. They do not update their information based on recent sales figures or foreclosures.
Learning the market you’re buying in and the ‘comps’ for the area along with a keen eye on the number of foreclosers in the area is one of the best ways to get the best price. Have a set amount that you want to finance including any renovations and upgrades and subtract that from the list price. If you can’t get in at ‘your’ price, be patient, they will be many more opportunities over the next several months.
tgwhiteley Posted: 6:08 PM On May 21, 2008
This article is written with the basic underlying assumption that the Seller is ‘highly motivated’ to sell. One by one, I would respond to these tips: (1) the size of the mortgage has nothing to do with the value of the home, unless recently financed; (2) Zillow is among the most inaccurate of all sources for estimated selling prices. These people are lazy and prone to use local appraisal districts valuations, which are often way off the mark; (3) time on the market is not always a sign a property is overpriced. Most important factor is recent sales of comparables. Often, larger, more expensive homes take longer to sell. This is simple mathematics.
The only valuable thing about zillow is to see the history of sales of any individual house and prices of recently sold houses. My parents’ 1523 square foot house is “valued” at $197,000, which I sold for $75,000 in 2001. But a 1430 square footer just sold for $130,000 about 6 houses away. Its “Zestimate” is $183,000. What a joke!
Zillow is for commissioned sales people to show to buyers to get them to over spend .Zillow is always about 6 months behind . You have to look at new listings and foreclosures to get the trend in a area .
The worst thing about going into “seller mode” is the mind warping I’m undergoing. I zillowed my house then looked it up on the local appraisal district website. The first thought that crossed my mind was something like:
Those B*****ds, they haven’t changed my appraisal for 5 years. What happened to the +10%/year they did the two years BEFORE the 5 years of back data they show in the website. It’s so unfair!
Gah. Do they have pills for this condition?
Do Sharp Cuts In Home Prices Spell Buyer’s Dream Or A Trap?
BY SCOTT STODDARD
INVESTOR’S BUSINESS DAILY
Posted 5/23/2008
The latest housing headlines look bleak. The supply of unsold homes hit a 23-year peak last month, the National Association of Realtors said Friday.
Builders have slashed construction, but still-falling sales and a flood of foreclosed homes mean a recovery in prices might be far off.
“We’ve dug ourselves a hole. We just have too many units hanging out there,” said William Wheaton, director of research at MIT’s Center for Real Estate.
Many policymakers seem to think the remedy is to dig ourselves a deeper hole, buy backstopping prices at unaffordable levels, thereby encouraging further overbuilding. How can this possibly seem like a sensible plan to anyone with at least one college economics course under their belt?
‘How can this possibly seem like a sensible plan to anyone with at least one college economics course under their belt?’
How can this possibly seem like a sensible plan to anyone who is smarter than your average pint of strawberry-banana Yoplait yogurt? You don’t need to have taken even ONE college economics course to see it.
Lots of the designers and supporters of these hair-of-the-dog stimulus programs have PhDs in economics, for that matter. I guess their studies never exposed them to the Austrian school.
Check who pays their salaries. Public pronouncements (and endorsements) by government, bank, trade association, major media, and foundation-supported university economists, are all suspect. Of course that’s the only economic commentary that you’ll find in the MSM. I’m sure these economists generally know better, but they are quite aware of who pays their salary.
Spot on. Some of us were quite shocked towards the end of David Lereah’s career as chief NAR economist, when we came across a power point presentation he gave for a select group of insiders. It showed bubbles in the background pattern, and a picture of a polar bear on the title page which was quite prophetic of where the housing market has headed in the ensuing years.
No Volcker To Protect The Dollar
Bill Bonner - Thu 15 May, 2008
The Fed’s dual mandate – protect the dollar and full employment – are incompatible.
“One market bubble may be an accident;” begins an article in the Financial Times, “two in the space of a decade begins to look like carelessness.”
…
People are beginning to put two and two together – to make the connection between the Fed’s aggressive attempts to put more money and credit in circulation and the asset bubbles. And now that they’ve got their slide rules out… they’re wondering about the oil price too…and gold…and food…and consumer prices…
…and now, in this moment of high anxiety, the whole world turns its weary eyes to Paul Volcker. Like France recalling the old Hero of Verdun - Marshal Petain - in ’42, the press goes to Volcker and asks his opinion.
“Yes, dear reader, battle between inflation and deflation has been noisy and indecisive. But the real cost of this war hasn’t even begun to register. Unbeknownst to most observers, almost a whole generation of wealth building has been wiped out. Wages are back to levels of the ‘70s. Stocks have gone nowhere in 10 years. And houses are headed back to levels of the mid-‘90s.”
I don’t foresee this last prediction being off the mark, provided Bonner is talking about inflation-adjusted prices. Unprecedented levels of overbuilding leading to record vacancies make this outcome hard to avoid.
“One market bubble may be an accident;” begins an article in the Financial Times, “two in the space of a decade begins to look like carelessness.”
God, I love the FT. Paraphrasing Oscar Wilde in all this mess is just so British.
“To lose one parent, Mr. Worthing, may be regarded as a misfortune; to lose both looks like carelessness.”
Lady Worthington, The Importance of Being Earnest
Isn’t it Lady Bracknell?
(Longtime lurker popping out for a second…)
Yeah, I think you are right. I needed to confirm the quote and that is what IMDB said. Should have gone to Wikipedia. My bad.
At least I recognized the paraphrase.
Where is my song poem?
Professor Bear is clearly not doing his patriotic duty and stimulating the US Economy by driving around/holidaying/shopping this weekend.
I stimulated the economy all afternoon yesterday. This morning I am trying to stimulate housing market liquidity by helping to convince sellers that they better reduce their list prices or else prepare to hold on to their falling knife inventory forever.
I will stimulate the economy by buying me a gun and ammo
He’s a commie!
Eta nyeh pravda, tavarshiska.
As one of our astute posters mentioned yesterday, we are sitting at home watching our cars save gasoline.
Of course I’m burning through and refueling a few Bloody Mary’s so I guess that it’s all a wash
not only that, everyone seems to be watching the meltdowns from black boxes… dont matter the market.
looks like another meltdown is underway, Japan off more than 2%, Red Chip red dragon looks to be down over 4%…
guess I chose the wrong week to stop sniffing glue.
No worries — the Wall Street gang will kick start the market again on Tuesday. It’s all good, as the stock market and the housing market always go up, in the long run…
I’m trying to stimulate. I dearly wanted to write a check for the almost $2000 balance on some home repairs, but it didn’t occur to the contractor to try buying our style of out-dated materials prior to finishing the work on a 3 day weekend Sunday. No, on second thought it must be Home Depots fault for not stocking it anymore.
Just for grins, I searched for “Stimulus Check” and “Economic Stimulus” on my favorite photo-community site, Flickr.
Other than a few great photos of a porn theatre marquis that said “Check out our Stimulus Package, I was surprised to see what the common theme was.”
The lucky-duckies who got this handout were, by and large, complaining that they didn’t get enough $$$$! Statements like “This’ll only get me 1/2 tank of gas” were typical.
WTF?!
I’m ticked they can rip thousands more than $1200 out of the bank account on Apr 15, but its going to take another month to put $1200 back in.
(The IRS simulation schedules are apparently only for those whose returns were processed before Apr 15.)
“Strong job growth, great weather and a smattering of palm trees: Who wouldn’t want to live in San Diego?’
Me. Me SQUARED. I wouldn’t live in San Diego if you paid me with pallets of gold ingots and beer. When I used to visit my sister there I could not believe how noisy it was, and icky air, and you never had a real night, with stars and bats and a quiet wind in the trees, and then all those massive crowds of unattractive people stumping around breathing moistly. It made me crazy.
I tried my best to persuade her to leave, since she’s my favorite sister and I care about her, and she finally did. To Salt Lake City, which is well known for its wonderful air quality and enlightened populace. Oh, wait.
Sigh.
I wouldn’t live in San Diego if you paid me with pallets of gold ingots and beer.
…quietly figuring and plotting how how many bimbos that incentive would buy
It’d buy this one. Only not in San Diego.
“…he remained interested in well-managed German family-owned companies” & “If the world were falling apart I’d still invest in companies,” he said
http://biz.yahoo.com/rb/080524/buffett_us_recession.html
Somehow these two sentences should not follow so closely together…unless we have collectively already forgotten about how to make a company profitable while nations fight each other.
Carlyle Group, Halliburton, Blackwater = War lubricant: No Bid Contracts
http://newstandardnews.net/content/index.cfm/items/1394
Do you guys think its possible to change the usery law in California to 10% or more. I would like to get back at some banks and I think IF I could get a ballot measure done it might pass.
State usury laws probably wouldn’t apply to any federally-chartered institution, so they would just cover state-chartered banks, S&Ls (if there are any), and credit unions. If such a law was passed the state institutions would simply convert to a federal/national charter (OTS and OCC). The credit unions might be able to live with it, though they too could switch to federal charters (NCUA).
My CU Visa is 6.9%
For some reason this kind of thing makes banks foam at the mouth.
test
In Austin a flipper grows desperate. He is now offering a lease option …
http://austin.craigslist.org/rfs/692235445.html
PRICED TO SELL!!!!
Price has been reduced from $349,900 down to $319,900 for a quick sale.
****************************************************************************************
Also available for a 2 year lease-option with 6% down which can be paid in installments.
This will be credited back to you at closing if you choose to purchase the home before or at the end of the option period.
If you choose to opt out, downpayment will be refunded back to you less a small option fee.
Call or see craigslist ad under “apt/housing for rent” and search for “Aerie” for additional terms.
****************************************************************************************
How long will the 6% keep him current with the payments?
I awakened this morning and dutifully jumped on and read all the posts as I always do. Feels like a bunch of friends to me here.
As the day wore on I began to think back on my life and all that I have witnessed. Then I received an email from a former comrade in arms. We served together in the Marine Corps in Viet Nam.
He sent me a letter from the commandant of the Marine Corps reminding all of us to really think about this holiday weekend. Then I felt very ashamed for some reason as I had thought about the turmoil in the world of finance and I suddenly realized how many good men will never get that chance.
Yes, we have a lot of issues but we also have many opportunities and much of it was paid for in blood. The commandant called it the “blood split” in our world. Those who died and were wounded for us. I look back on our fathers and our father’s fathers and cannot help but be grateful that I now sit on my butt and pontificate about what fools we have become.
Many good people have come before us and I have known alot of them. We have great opportunities to be all they had hoped we would be as a nation.
It is a myth that men die for their countries as it is merely a by-product of dying for your buddies and protecting each other. You never think it is going to be you but you put yourself in harms way lest a friend will be hurt by your inattention or mistake. To see someone die for your lack of attention to duty is the greatest fear you have.
Duty, Honor, Country is the order of the qualities really great men possess. Therefore, men like me who lived have a duty to honor these men by making this better country. We owe more than most as we were truly saved by our buddies.
They are out there today and will be tonight and tomorrow doing their duty so please remember them as well as those who have gone before. Just as a child can be foolish and spoiled so can a country without proper guidance, leadership and self discipline. It is time for bootcamp and getting squared away as a Nation.
We have some very strong leadersip right here(HBB) that makes me proud to be an American. Inevitably these are the men and women who will lead us out of this, not Washington. In every battle it comes down to the troops not the officers.
Semper Fi
My boys and I had the opportunity to take a tour of a Navy submarine at the Point Loma base last Saturday. I felt proud to be an American after hearing first hand of the dedication and bravery of the young men and women who are responsible for operating these vessels. There was an awkward moment or two when the officer showing us around inadvertently allowed underage eyes to spy on some bodacious calendar pics…
Very well put. Thank You for your service to our country dimedropped (Orlando).
For some great war stories told by veterans, go here:
http://feeds.radioamerica.org/rd-bin/rdfeed.xml?Veterans
too bad the mob is Semper I.
I liked your post.
Beautiful post, dimedropped.
Thank you.
Absurd Craigslist find of the day -
Realtor: Wine Glass House Not Condo! I help you!
http://sandiego.craigslist.org/csd/rfs/692793432.html
Uh huh. Is that Thunderbird or Night Train?
I would argue that many people are paying in excess of 3900 a month for an assisted care facility in SoCal, and this one would allow for an elderly to have a 2k a month nursemaid to boot.
Everything is fine and dandy, NOT.
Buffett complained about the lack of effective controls.
“That’s the problem,” he said. “You can’t steer it, you can’t regulate it anymore. You can’t get the genie back in the bottle.”
So it couldn’t have been prevented after all? Were MBS/CDOs just too new & too popular for anyone to get a handle on?
Comment: The sorry state of banking
Thu May 22, 2008 4:15pm EDT
(Peter Morici is a Professor at the Robert H. Smith School of Business at the University of Maryland. He told Reuters the housing rescue plans taking shape in the Senate “will help a little bit but we’re still going to have a lot foreclosures between now and the end of the 2008. Housing prices are going to continue to fall until the private banking market is resurrected to its health.” The opinions in the excerpts below are his own)
…
Neither the sovereign investment funds nor Bernanke have required the banks to change their business models, which essentially pays bankers for creating arcane investment vehicles that generate transactions fees, rather than writing sound mortgages and selling simple, understandable mortgage-backed securities to investors.
Rather than reform their business practices to reenter the fixed income market, Citigroup and other large financial houses are scaling back or abandoning mortgage finance, and trolling financial markets for other lucrative opportunities to write derivatives that pay outsized profits and huge bonuses.
Most recently we have learned Citigroup’s hedge fund engineers have been practicing slight of hand to sell derivatives based on bank-owned life insurance policies, bilking investors and other banks for fees.
Until Citigroup and other major New York banks abandon such tainted business practices, the bond market virtually remains closed to mortgage finance, other than CDOs offered by Fannie Mae, and cannot supply the volume and array of mortgage products necessary to support a full housing recovery.
Anyone else on here wathcing the market in Southern NH? Today a Real Estate agent told me the market will rebound at the end of the summer, but it doesn’t seem to me we have even seen bottom yet.
keep up that mantra;
There aint a recovery until a bottom is reached. Target market: Lower 48 Continental States.
Not sure I’d seek my analysis from someone who stands to gain from encouraging you to jump in. Even going to a bank like BofA and asking their lenders would be better, IMO. Or ask an appraiser, if you can find one. Many buyers make the mistake of focusing on asking prices (what we here refer to as “wishing” prices). Instead, find the local tax records online and analyze what properties have really been selling for. The Zillow Website lists recent sales in many areas, though less likely in rural areas.
Finally, why in the world would the market in a really cold place rebound at the end of the summer? If it isn’t logical, it most probably isn’t true, either. All IMHO.
Note that there are some pretty unfavorable views of Zillow posted earlier in this thread. I rely on tax record searches for my own interests.
from Jenzen on iTulip:
“The best solution is to return to 1986 law. No disparity in taxation of capital gains and ordinary income, return of reasonable bankruptcy laws for the insolvent–not an extension of Chapter 13 restructions that exist only for the benefit of reckless credit card issuers.”
my recollection of the tax change in ‘86 was the gross extension of the depreciation expense allowable for “commercial property”…it simply killed a large portion of the benefit for being a landlord.
anybody wanna argue about how this helps the housing market for renters? Then think how this is about to become a solution on the agenda. Disparity of taxation regarding capital gains, goes hand in hand with deprectiation and frame of time. Incentives…aint just for green energy and 179 deductions on trucks and equipment.
hydrogen, natgas, and all battery hybrids in between are the car market in America… build it, they will succomb.
lookin like a bloodbath in Asian markets.
rogue trader at SocGen gonna be the fall guy on this one too? computer glich?
FXP longs get ready to get paid.
Hat tip Hoz reconoitering the rim.
MONDAY, MAY 26, 2008
EDITORIAL COMMENTARY
A Change of Status
By THOMAS G. DONLAN
An Unhappy Anniversary
WHAT DO YOU CALL A PERSON WHO OWES MORE ON HIS MORTGAGE than his house is worth? Some would call him a victim. Many would call him a homeowner in distressed circumstances. Almost nobody observing the current crisis has thought to give his situation its proper name: He is a renter.
Such an occupant makes monthly payments to live in a house in which he has no equity. Absurdly, the payments still are designated tax-deductible interest (mostly) and repayment of principal (a tiny fraction).