The Housing Bubble

Troll Brothers reporting their 3rd consecutive quarterly loss this morning as reported by WBBR. Not that this is a surprise. Not even Troll’s bankruptcy would surprise me.

Toll Brothers takes a few more lumps
http://www.bloomberg.com/apps/news?pid=20601087&sid=alKWY3baRQbs&refer=home

Standard Bank in South Africa now reports that the median house price is down 13.2% year/year in June. It was down 5.5% y/y in April…

Toll brothers wants the government ( to make people buy their overpriced houses) provide a tax incentive to anyone who buys a new house. Apparently all we need is a little motivation to get the real estate market moving again.LOL

http://money.cnn.com/news/newsfeeds/articles/djf500/200806030538DOWJONESDJONLINE000148_FORTUNE5.htm

401-K Dipping… I would expect this trend will accelerate.

Cash-strapped consumers are developing a bad habit: using their retirement savings to tackle everything from credit-card debt and late mortgage payments to income tax bills.

In 2007, 18% of employees reported taking out a loan from their 401(k) or 403(b) (the employer-funded equivalent for public educators and nonprofit employees), up from 11% in 2006, according to the Transamerica Center for Retirement Studies, a nonprofit. Of those borrowing, 49% said they needed the money to pay off debts, nearly twice the number that previously cited that reason. Major employer-sponsored retirement planproviders, including Fidelity Investments, J.P. Morgan Chase and T. Rowe Price Group, have reported similar trends. The average outstanding loan balance: $7,292.

“Consumers are dipping into their 401(k) accounts because they don’t have any other options,” says Mark Nash, a partner at PricewaterhouseCoopers’ Private Company Services Practice in Dallas, which advises clients on retirement issues. The credit crunch and slumping real estate market have limited homeowners’ ability to secure home equity loans. Combine that with a national savings rate that has languished near zero percent since 2005 and consumers have few accessible liquid assets with which to handle a possible job loss, wage decrease or crippling debt.

In the coming year, Las Vegans can expect it to take more time to obtain business licenses.

It’ll take longer for graffiti to be cleaned up and for city workers to replace damaged street signs. Hours at several city pools will be cut, local parks and trails won’t be as well maintained and expansion of the city jail will be delayed.

These are just a few of the ways the local economic downturn will affect residents as Las Vegas confronts a budget crunch — one that might not end anytime soon.

http://lasvegassun.com/news/2008/may/31/economic-chill-freezes-vegas-budget/

LAS VEGAS — In the shadow of Sunrise Mountain, where Rolling Hills Drive turns into Gold Mine Drive, a plain two-story home sits unoccupied, like thousands of other houses here in southern Nevada.

Some of these empty homes have “for sale” signs. Others bear signs saying “foreclosure.” Authorities say hundreds of them, including this one on Rolling Hills Drive, should have a different sign out front, one that reads “fraud.”

http://www.usatoday.com/money/economy/housing/2008-06-02-mortgage-fraud-las-vegas_N.htm

Here’s the skinny: In late May, Vallejo, Calif., became the largest city in California history to declare bankruptcy. Its financial demise was brought about partly by the real estate crash, which decimated home prices in the area and put a major dent in the city’s tax revenues.

But the real nail in Vallejo’s coffin was the city’s labor costs. Under the current labor agreement, the average police officer walking the beat in Vallejo will be paid $122,000 this year before overtime, according to city documents. An average sergeant will make $151,000; a captain, $231,000. The average firefighter, meanwhile, will bring in $130,000 before overtime.

http://money.cnn.com/2008/06/02/pf/retirement/vallejo.moneymag/index.htm?section=money_latest

BANGALORE (Reuters) - Lehman Brothers Holdings Inc (NYSE:LEH - News) may raise billions of dollars of fresh capital, suggesting the investment bank will post its first quarterly loss since going public, the Wall Street Journal said on Tuesday, citing sources familiar with the matter.

http://biz.yahoo.com/rb/080603/lehman_capital.html?.v=7

After months of gloomy forecasts, analysts have finally confirmed the news that homeowners had been dreading for months: that large numbers of British householders have slipped into negative equity.

http://www.guardian.co.uk/money/2008/jun/01/houseprices.housingmarket

Gasoline Prices… This women is going to vote for whoever can get the gas price down! Now that’s funny and sad, funny because she thinks a politician can do something about it, and sad that there are so many ignorant people in our Country. It would be nice if the Fed & State taxes were cut, but that won’t happen.

Christina Martinez, who lives in Whittier and works at retailer Fred Segal in West Hollywood. She spends about $80 a week on gasoline. “It’s frustrating that even during election season I’m only thinking of politics in terms of who will get me lower gas prices.”

http://www.latimes.com/business/la-fi-gas3-2008jun03,0,6874230.story

There was a post late last week about Applebee’s closing several locations in Southern California.

Based on a statement on the “Investor” section of the company web site yesterday, it seems to have much to do with eliminating company owned locations in favor of those owned by franchisees.

Notice the lawyered-up disclaimer:

http://tinyurl.com/3t2py8

“The Investor Relations section of DineEquity, Inc.’s corporate website contains forward-looking statements involving known and unknown risks, uncertainties and other factors, which may cause the actual results to be materially different than those expressed or implied in such statements. The Company cautions visitors to the IR section of its website to evaluate such forward-looking information in the context of these factors, which are detailed in DineEquity’s most recent Form 10-Q and 10-K filings with the Securities and Exchange Commission. In addition, DineEquity disclaims any intent or obligation to update these forward-looking statements. ”

Followed by the investor overview with lots of corporate speak:

http://tinyurl.com/6m4p47

“Over the last five years, DineEquity (formerly known at IHOP Corp.) has successfully re-energized the IHOP brand while transforming its restaurant system into one which is 99% franchised. DineEquity believes that it can employ similar strategies to transform and re-energize Applebee’s. The Company intends to franchise a substantial majority of Applebee’s company-operated restaurants and expects to realize significant cost savings as a result. Additionally, management intends to take a comprehensive approach to re-energizing the Applebee’s brand with the goal of returning to positive system-wide same-store sales growth over time as enhanced marketing and operational strategies take hold. This fundamental business transformation, along with the plan to sell Applebee’s-owned real estate, is expected to significantly enhance DineEquity’s consolidated cash generating profile.”

The favored word is “re-energize”. At least in Southern California, it appears to be “de-energizing Applebee’s.

Last night I met up with a friend that took a job with a hedge fund last spring. I had been telling him since late ‘05 that the economy was a sham and that major troubles were ahead, especially the coming housing crash. He half believed but thought I was yelling that the sky was falling. When I saw him early last summer he told me his fund should be okay. They had really smart guys running their programs. Wow, I said. That makes you so much different than all of those other hedge funds that think they are so smart.

My, how the times have changed. Last night he was telling me how afraid everybody is. They have zero return for the year, “but at least that’s better than other funds”. Bonuses might be smaller. How does a hedge fund pay out bonuses if they aren’t making anything? That just amazes me. These funds have to be shaking in their boots that they will see huge redemption requests. From what I heard, I would expect many of those requests by later in the year. If the hedge funds play hardball they will get sued. I’m no legal expert but I believe that will be the case. His friend that also went to a hedge fund is getting laid off.

It is getting uglier and uglier in Fantasyland. I am becoming amazed at the different people I am speaking to that are now so vocal with gloom. My friend did acknowledge that I made it easy for him not to buy a house. He may have been tempted if it hadn’t been for me breaking down his will. He would have been buying in Queens or Long Island in 2006 or 2007. His MIL was pushing him hard but he kept using my “realistic” analysis to counter her arguments with his wife. I guess I will count that as one that was saved.

While Wachovia Corp.’s residential-mortgage woes have gotten most of the blame for the ouster of Chief Executive G. Kennedy Thompson, another real-estate specter looms.

Wachovia has been the country’s second-largest maker of construction loans after Bank of America Corp., with $23.9 billion of debt outstanding to developers of single-family homes, condominiums, office buildings, stores and other commercial projects at the end of the first quarter.

http://online.wsj.com/article/SB121245454516740039.html?mod=todays_us_money_and_investing

I finally got word that I’ll be getting stimulated by the govt by June13. Damn good thing…. things are getting tight… lmao. Besides, my next flat screen payment is coming due on the 15th.

From Internatioanl Diamond Exchange

Recession Hits Las Vegas Shows

The halls of the JCK Las Vegas show this Saturday were clearly less crowded than last year, and almost all exhibitors noted a decrease of traffic into their booths. Walk-ins, visitors without prior appointments, were not only less present in lower numbers, but a number of exhibitors also noted they were less inclined to place orders.
A large Indian manufacturer commented that even the larger and much sought after 2 and 3 carat goods that they had on display were not being snatched off the shelves. While that comment may not have reflected sales of bigger goods at the show, it does reflect the mood. Stones of 3 carats and above have proved to be good sellers so far at the show.
Many booths were notably empty, with despondent business owners pacing back and forth waiting for someone to walk in.
All expressed hope that activity would pickup on Sunday.

Conversely, gem traders reported good business, watch sellers said they were doing OK and jewelry wholesalers offering non-diamond/non-gold items were seeing brisk business – rubber and leather items combined with steel, for instance, which offer an alternative in terms of design and a much lower retail price at the same time.

The news from Couture was mixed, as even high-end buyers were not quick to commit.

The JCK show suffered from repeated alarms and even a gate shutdown.

History may have been made if one rumor proves to be true – a De Beers director was reportedly at the show. If so, this will be the first time it has ever happened. We are seeing new times indeed.

http://www.idexonline.com/portal_FullNews.asp?id=30423

Looks like GMAC and Cerebus are stripping whatever is worth buying from ResCap and letting the rest die.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aW1PKilzp0Qc&refer=home

In response to SOH portability and the collapsing RE market, many FL cities get ready to increase the tax (mill) rate:

http://www.palmbeachpost.com/localnews/content/local_news/epaper/2008/06/02/0602taxrate.html

Must say, I’m just shocked. Nobody could have predicted this!

Idiots, the voters in FL are truly idiots.

A jump start on “local market observations” … I have been tracking homes locally (North of Boston) for some time, in the 375-575 range. The amount of inventory appears to be sky-rocketing. Anyone else seeing this?

I’m watching the seasonal inventory build in my old haunts of northern new england. Most of the new stuff hitting the markets is hilariously overpriced, clearly based on 2005-2006 sales. For instance, a 100 year old drafty brick colonial just came on last week with a fantasy price of 215k. This same shack changed hands in 1998 for 42k. I can only guesstimate the cost to heat it would be somewhere around 200gals fuel oil/month times 6 months. (1200/gals)(4/gal)=4.8k of after tax income. When the best commutable salaries are 30-35k, far less locally, the northeast is in for a remake of the 1991 recession.

The coming credit hurricane

http://www.minyanville.com/articles/MER-GS-P-lehman-CFC-countrywide/index/a/17398

Lehman needs 3-4 billion more in cash. First loss since going public expected.

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20080603&id=8719473

Here is an upbeat, if square-eyed, assessment from a former Fed governor. Cheers!

It’s Only Going to Get Worse
By Lawrence B. Lindsey
Posted: Monday, June 2, 2008
The Weekly Standard
Publication Date: June 9, 2008

After Mortgages, Construction Crisis May Be Building
By LINGLING WEI
June 3, 2008; Page C1

Factory orders probably declined in April.

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

The coming credit hurricane.

http://www.minyanville.com/articles/MER-GS-P-lehman-CFC-countrywide/index/a/17398

Interesting lead story on local am tv news: Cost of tires going up weekly so more and more people are choosing to run their cars longer on tires with dangerously low tread. Many are choosing to buy used tires. I assume that the latter was directed more toward the lower income folks of the central CA valley.

GM ending work at 4 truck plants

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20080603&id=8719332

Here’s another local market observation. On Saturday I had to drive up to Victorville for a birthday dinner. I drove through Rancho Cucamonga. It was unreal. Houses as far as the eye could see. It looked like computer generated graphics, no exaggeration. Just acres and acres of flat land and huge houses 5 feet apart from each other, EVERYWHERE. All the way up to the bottom of the mountain. So last night I checked Realtytrac (91739). The whole city is either bank owned or heading that way. What on earth are they going to do with all of those houses?

I’d like to extend how happy I am that San Diego became the very place to offer brand new “buy one, get one free” homes…

Dominos pizza has nothing on you, Tijuana-adjacent

We have a new guy at work who is an ex-used house salesperson.

Actually, he retired a year ago, sold RE for a while, and is back. He said sales dropped off and customers started asking him about the future. He would tell them that prices are still coming down and no telling what interest rates will do.

Honesty is a great way to lose your customers.

The Black Swan?

http://bigpicture.typepad.com/comments/files/black_swan.gif

NEW YORK (AP) — Residential Capital LLC, the mortgage lending unit of GMAC LLC, said Tuesday it needs more than three times more cash to stay in business than it estimated just weeks ago.

http://biz.yahoo.com/ap/080603/rescap_gmac.html?.v=2

“…housing-led economic downturn.”

News Flash: The MSM has dropped the words “Sub-Prime” from the diasater forecast descriptions.

Gas prices a risk for casual restaurants, Starbucks

Starmucks is applying for liquor license’s…plans to add Jack Daniels to the morning brew…stop

http://news.yahoo.com/s/nm/20080602/bs_nm/economy_oil_restaurants_dc;_ylt=AqkacVxqEmIRi2lnh8TCDGpv24cA

This was apparently not what the stock market wanted to hear…

THE FED
Bernanke signals discomfort with weak dollar
Says rates are “well-positioned”… for now
By Greg Robb, MarketWatch
Last update: 9:22 a.m. EDT June 3, 2008

Fed chief Bernanke signals more rate cuts unlikely

Tuesday June 3, 9:32 am ET
By Jeannine Aversa, AP Economics Writer

Bernanke signals rates probably will hold steady as Fed copes with risks to inflation

“For now policy seems well positioned to promote moderate growth and price stability over time,” he said.

The Fed’s juggling act has gotten harder. It is trying to right a wobbly economy without aggravating inflation.

“Inflation has remained high,” he said. “The possibility that commodity prices will continue to rise is an important risk to the inflation forecast,” he said.

If consumers, investors and businesses believe inflation will continue to go up, they will change their behavior in ways that aggravate inflation, turning it into a self-fulfilling prophecy.

Were consumer prices to keep climbing over a sustained period, that might “lead the public to expect higher long-term inflation rates, an expectation that could ultimately become self-confirming,” Bernanke said.

http://biz.yahoo.com/ap/080603/bernanke_economy.html

does anyone know what he means by the “self-fulfilling prophecy” statement? maybe i havent had enough coffee yet, but his statements seem to be contradictory.

Mega bubble due for collapse - Farrel

http://www.marketwatch.com/news/story/megabubble-pop-2011-here-20/story.aspx?guid=%7B537F9AC4%2DDAE4%2D48BF%2D9ED1%2DA54AE6B6C0B9%7D&dist=TNMostRead

Housing market is correcting in Calgary, Alberta, in spite of $130 oil.

http://www.canada.com/calgaryherald/news/story.html?id=30d8c64a-09b4-4784-bf69-522215febaee

Salary packages expected to plunge

By Brooke Masters in London

Published: June 3 2008 06:06 | Last updated: June 3 2008 06:06

“Compensation packages for mid- and top-level financial services workers are likely to fall at least 10 per cent this year, according to a survey of 20 top Wall Street and City of London recruiting firms by the Smart Cube, a global business intelligence group.

About 80 per cent of Wall Street recruiters surveyed said the financial downturn would have a moderate or severe impact on financial services hiring, and two-thirds expected compensation packages to drop between 10 and 20 per cent. …”

http://www.ft.com/cms/s/0/3d2e8680-30fb-11dd-bc93-000077b07658.html

Along with the continuing layoffs, lower comp packages and significantly lower bonuses will lead directly to lower house and condo prices. New York and London are toast.

Blame for the price of crude?

http://www.marketwatch.com/news/story/theres-no-easy-scapegoat-our/story.aspx?guid=%7B13BD07DA%2DAEBB%2D420B%2D8DFB%2D13C0517A03D8%7D

The Kansas City Fed has subprime loan reports for several cities it the district at: http://www.kansascityfed.org/home/subwebnav.cfm?level=3&theID=10511&SubWeb=3

Four cities now and they expect to add more reports.

Wonder what this guy has been drinking? He contends that the housing market could turn on a dime because of rising incomes, he didn’t mention inflation…

http://www.marketwatch.com/news/story/housing-market-may-turn-more/story.aspx?guid=%7BB71418B0%2DDB22%2D49BF%2DAEA2%2DB1C858B089E9%7D&dist=MostReadHome

***** LOOK HERE!! ****YOU CAN WIN!!!****NOT RIGGED!!!****
*****ALL HAVE A FAIR CHANCE!!! *****AT LEAST TRY, FOR CRIMINY”S SAKE!!!!***

FIRST EVER HBB SQUATTER’S CONTEST!!

HBB friends, welcome to the first ever HBB Squatter’s Contest. The winning entry will receive a FABULOUS unheard-of prize, SO unique that you can brag to your friends and none will be able to match it, not even Donny Trump! Guaranteed!! (If not, we’ll double your winnings). This kind of prize can NOT be bought!

THE CHALLENGE: Write a short essay - one sentence even - or just a few cryptic phrases, if your handle is taxmeupthebooty…let’s see, where were we..oh yes, an essay on how I can keep my LL from stealing the stove, frige, dishwasher, and other fixtures when she comes in a few days to collect her furniture from the house I’m renting for free, at which point she gives the house back to the bank (after herself collecting the unheard-of prize of $100k in HELOC $$).

THE PRIZE: A free night at the Squatter’s Inn B&B, located in one of SE Utah’s most infamous, redneck, and non-scenic towns (but there ARE trains you can watch go by, though they rarely stop). Rest in the luxury experienced only on an Alps Mountaineer Special Edition Squatter’s Cot, complete with 600 thread count organic Egyptian cotton sateen Ralph Lauren sheets, down comforter (optional, since it’s now about 100 degrees), and down pillow. Pretend you’re Crocodile Dundee, camping in the wilds with no electricity (I’ll turn out the lights to help the illusion) and no comforts of ciVILEization (not an illusion, especially when one of my dogs tries to get in bed with you or chews on your hand dangling off the edge of the pretty-much-too-small cot).

Good luck! Contest deadline: when this thread dies from lack of interest…(and it may already be a goner)…

***The Squatter’s Inn B&B***
***Our Goal: To Set the B&B Experience Back 100 Years***

(If you want to increase your odds of winning the prize, send $100 to my PayPal account with the header: HBB Squat Contest. Or lots more, since Ben will probably make me split it with him.)

Fine print:

* Realtors need not apply/enter unless they can quote Abe Lincoln.
* Winner has to figure their way out here at their own expense, and it won’t be cheap to get out to the middle of nowhere (but at least you can hop a freight if you’re not afraid to get off when it’s still rolling, and I mean rolling).
Utah liquor laws apply (in other words, BYOB).
If we get busted for squatting while you’re here, you’re on your own and I don’t know you.
* Olygal, you’re already disqualified, in order to give everyone else a spittin’ chance.

WASHINGTON (AP) — Federal Reserve Chairman Ben Bernanke signaled Tuesday that further interest rate cuts are unlikely because of concerns about inflation. High oil prices are a double-edged sword that can both put a damper on already weak growth and spread inflation, he said.

OK about time.

Hey Ben, how about posting up some rejected RE trollage for some mid-day laughs….:)

DJIA #’s for today

Last
Dow 12,520.02

Prev Close: 12,638.32
Open: 12,637.67
Day’s Range: 12482.16 - 12553.73

http://finance.yahoo.com/marketupdate/overview?u

this may be a dumb question, but how is it showing a gain today if it opened at 12,637 and it is now at 12,520 ?

Sorry if this article has already been posted. I laughed my bum off when I read the acronyms the Utah fraudsters selected for their companies. They have a pleasing sense of humor. Or simply prefer accuracy.

‘Las Vegas called mortgage fraud ground zero’
http://tinyurl.com/67czpw

• Straw buyers. Last December, federal prosecutors in Utah charged five men and one woman with defrauding two lenders out of $13 million in mortgage loans. Prosecutors allege the defendants inflated the values of homes, buying and selling them through straw buyers and a pair of shell companies, Home Owners Group (H.O.G.) and Paragon Investment Group (P.I.G.).

Feds reduce water to Valley farms

Westlands Water District growers in crisis, to decide which crops to abandon

“Federal officials told hundreds of farmers in the Westlands Water District on Monday that they will get even less irrigation water — just days after the district announced a rationing plan. Farmers in the nation’s largest federal water district will be hit hard — many said they expect to abandon crops or even go out of business for lack of water.”

“Two members of Congress and district officials urged Gov. Schwarzenegger to declare a state of emergency. “Half the people in this room are going to go broke,” Tom Birmingham, Westlands general manger, said at a meeting that drew about 400 to the fairgrounds in Los Banos. “This is a crisis that has to be fixed now.””

http://www.fresnobee.com/263/story/641560.html
_____________________________________________________________

Who’s gonna grow the food, if the breadbasket of the country can’t?

A question for Hoz and others who wish to opine:

Regarding use of CME futures as a hedge against falling prices; what are the major risks associated with this type of hedge?

I’ve identified two, firstly there is the possibilty that inflation might push up real property prices and push the contract price up instead of down. Second, there is a possible counter party risk where even if one is right on the trade the contract isn’t honored.

I understand that inflation of my purchase would offset my first concern, would it do so at a 1:1 ratio? On my second concern is that just paranoia on my part, or is there a risk there?

I love the idea of using this hedge, I just haven’t wrapped my brain around the mechanism yet.

S.F. immune so far from struggling economy
C.W. Nevius
SF Gate
Tuesday, June 3, 2008

There may be plenty of disagreements about the budget Mayor Gavin Newsom announced on Monday. But there was one statement I totally agree with.

“The reality outside our 47 1/2 square miles is very different from the reality within it,” Newsom said.

He’s got that right.

The housing market is crumbling across the country - but not in San Francisco. Travel and tourism is down in many places but not here, where visitor spending, fueled by foreign tourists, reached an all-time high last year.

And despite a huge city deficit, Newsom still managed to sound upbeat Monday when he announced spending increases for the police force and a health care program that covers uninsured residents.

Are you sensing a trend? Reality is a great concept, but only for people who can’t deal with San Francisco. Although dire economic times are hitting the rest of the country, it doesn’t seem to be hitting the City by the Bay. Is it the strength of the local economy? Or just denial?

As Kevin Westlye, executive director of the Golden Gate Restaurant Association, says, residents have two choices. They could sit at home, worrying about a crushing recession.

“Or do we, as we always seem to, just skate through and hope things get better?” he asked.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/06/03/BAHE11206K.DTL&feed=rss.bayarea

I was at DC last week. I had to go shopping for a business shirt. I went to Tyson’s Galleria (upscale) first and it was just empty. It was scary. This was on a Sunday in the middle of the afternoon. So went across the road to the “other” mall which is as big as the Galleria and it was packed. Consumers are still buying but not the higher end stuff.

“Or do we, as we always seem to, just skate through and hope things get better?”

http://www.youtube.com/watch?v=JDosgkws0-c

peter schiff:

http://www.usnews.com/articles/business/your-money/2008/05/30/permabear-peter-schiffs-worst-case-scenario.html

I posted this in the FL thread, then later thought it was more appropriate here:

Here in Minot, ND (population 35-40K, depending on how far into the surrounding area you go), as I have posted before, the economy has been driven by other things, notably:

1. An Air Force Base that is being assigned an increasing mission (1000 more jobs here in the next year),
2. High food prices supporting the agriculture industry,
3. Big oil companies moving here because of the oil boom in this state (the Bakken formation).

So, our housing situation is actually the opposite of most: too little inventory, somewhat increasing prices (though not too bad yet).

I’ve just left the Air Force (in order to stay in the area in order to retain joint custody of my children), and in order to continue paying outrageous child support (yes, believe it or not, even though I have exactly equal custody and equal time, I have to pay child support to their mother, who doesn’t do a thing), I’ve had to leave my line of work, because there’s no work for meteorologists in my town except active duty AF.

I’m actually considering becoming a realtor here (please, no flames, I have a serious question for you). I’m an extremely conservative spender, a hard worker, someone who cares about integrity, helping people make a wise decision (not just manipulating them by emotion, not pushing them to extend themselves beyond their what their income, savings, etc., can realistically support). After a year of reading this blog, I’m concerned that a housing bubble may actually just be BEGINNING here in Minot.

Is there anything I can do as one realtor to hinder a bubble forming? I assume prices will rise sharply because of increased demand and low supply, but I’d like to prevent the insanity that most of the rest of the country has experienced. Anyone have any specific suggestions?

How can I be a realtor that stands out from the awful Realtwhore crowd (aside from the obvious things like NOT saying, “Buy now or be priced out forever,” or “Real Estate always goes up,” etc.)? What are specific ways I can help both buyers and sellers?

A question for Hoz and the the rest of you experienced HBers.

How much creditability should one give to the info concerning the economy on this website:

http://market-ticker.denninger.net/

He is profane, however he sounds like he has legitimate concerns and solutions. I am not interested in his market timing, charts, etc. Do you think that is general observations of market direction and his opinion of the US on track?

I am not the sharpest crayon in the box, as been stated by others. I just have this horrible feeling that he may be on spot.

Should I be worried, as a non-econ and non-financial person?

Thanks in advance.

–
America’s Democratic Collapse
By Chris Hedges, Truthdig
Posted on June 3, 2008, Printed on June 3, 2008
http://www.alternet.org/story/86973/

“The country I live in today uses the same words to describe itself, the same patriotic symbols and iconography, the same national myths, but only the shell remains. America, the country of my birth, the country that formed and shaped me, the country of my father, my father’s father and his father’s father, stretching back to the generations of my family that were here for the country’s founding, is so diminished as to be nearly unrecognizable. I do not know if this America will return, even as I pray and work and strive for its return. The “consent of the governed” has become an empty phrase. Our textbooks on political science are obsolete. Our state, our nation, has been hijacked by oligarchs, corporations and a narrow, selfish political elite, a small and privileged group which governs on behalf of moneyed interests. We are undergoing, as John Ralston Saul wrote, “a coup d’etat in slow motion.” We are being impoverished — legally, economically, spiritually and politically.”

Amen.

Jas

A general revision in 4th quarter earnings from the banking industry from the FDIC

“Industry earnings for the fourth quarter of 2007 were previously reported as $5.8 billion, but sizable restatements by a few institutions caused fourth quarter net income to decline to $646 million.” Oops

Gas station owners testified before Congress following George Soros regarding their belief that they were duped into purchasing excess number 4’s by a conspiracy between Nigerian rebels and sign manufacturers. With prices dropping back into the high three dollar range for gasoline they are stuck with a glut of 4’s that they are unable to obtain refunds for.

New economic stimulus (says so in article). Vince McMahon to give $1million to viewers of WWE.

http://sports.yahoo.com/top/news?slug=ap-wwemilliongiveaway&prov=ap&type=lgns

–
Soros says commodity bubble echoes ‘87 climate
Encourages regulators to tamp down on speculation
By Laura Mandaro, MarketWatch
Last update: 12:03 p.m. EDT June 3, 2008

SAN FRANCISCO (MarketWatch) — The investment flood into commodity indexes bears eerie similarities to the craze for portfolio insurance which led to the stock market crash of 1987, said hedge fund investor George Soros, who warned the rush into commodities has created a “bubble.”

…

http://www.marketwatch.com/news/story/soros-says-commodity-bubble-echoes/story.aspx?guid=%7B13B639CF%2DEDDC%2D42ED%2DA960%2D5882C058DE46%7D

I have had a bad habit of calling bubbles 18-36 months before they burst. Deflation in the US would be felt 6-9 months after the burst of the Commodities Bubble burst.

Jas

mogambo:

http://www.safehaven.com/article-10421.htm

On the currency front:

Rule number 6
“Put a lid on something that smells bad.”

France and Italy are in economic strangle mode. They both wish for lower ECB rates. The smart hedgers bailed yesterday and today. The Euro is getting stinky.

The journal’s market summary page for today, talking about how financial stocks are suffering (I’m glad I have as little exposure as I possibly can to them…I made that decision back in 2005!) mentioned that analysts believe the Fed will finally raise interest rates!

Could that be true? If so, I’m elated. It seems contrary to their strategy of giving away money so freeloaders can borrow more, while grandma earns less and less on her fixed income portfolio.

Filed under: “And then it went dark…” category

“…It’s a disaster, it’s a time bomb,” Ianieri says. “The credit crisis is a lot more severe than it’s being made out to be. I think the government is doing everything it can to keep the severity of this situation under wraps from the general population. I think they’re just trying to bide time for these banks.”

Credit-Card Use Is Surging, Risking Another Debt Crisis

http://biz.yahoo.com/cnbc/080603/24948627.html

Sorry for the entire article, however, I believe that it is important!

This is one opinion as to what the future has to offer- I am not saying this this will be the case, however we all should seriously consider whether its possible and act according-

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Economic depression in America: Evidence of a withering economy is everywhere

by Mike Whitney

Global Research, June 2, 2008
Information Clearing House

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Look around. The evidence of a withering economy is everywhere. In “good times” consumers shun the canned meat aisle altogether, but no more. Today, Spam sales are soaring; grocery stores can’t keep it on the shelves. Everyone is looking for cheaper ways to feed their families. The Labor Dept. assures us that core-inflation is only 4 per cent, but everybody knows it’s load of malarkey. Food prices are going through the roof. White bread is up 13 percent, bacon is up 7 percent and peanut butter is up 9 percent. Inflation is rampant and there’s no end in sight. The dollar is closing in on the peso and working people are struggling just to get by. The bottom line is that more and more people in “the richest country on earth” are now surviving on processed pig-meat. That says it all.

In Santa Barbara parking lots are being converted into hostels so that families that lost their homes in the subprime fiasco can sleep in their cars and not be hassled by the cops. The same is true in LA where tent cities have sprung up around the railroad yards to accommodate the growing number of people who’ve lost their jobs or can’t afford to rent a room on service-industry wages. It’s tragic. Everywhere people are feeling the pinch; that’s why 9 out of 10 Americans now believe the country is now headed in the wrong direction and that’s why consumer confidence is at its lowest ebb since the Great Depression. This is the great triumph of Reagan’s free trade “trickle down” Voodoo economics; whole families living out of their cars waiting for the pawn shop to open.

The economy is on life-support. The rest of the world would be doing us all a favor if they decided to chuck the dollar and boycott US financial products altogether. That would put an end to Wall Street’s chicanery once and for all. Foreign investors should be demanding restitution and impounding American assets to compensate for the trillions of dollars they lost in the subprime/securitization swindle. Litigate, litigate, litigate; that’s the only way to make the guilty parties pay for their crimes. Either that or set up a gallows on Wall Street and get down to business.

The pundits on the business channel are telling us that the “worst is over”; that the Force 5 hurricane in the financial markets has weakened to a squall. Don’t believe it. The corporate bond market is still frozen, housing is in free fall, and the banking system is buckling from the overload of bad investments. The FDIC is even trying to lure former employees out of retirement to deal with the tsunami of bank failures set to touch down later in 2008. Corporate defaults are on the rise and and commercial real estate is crashing.

“Commercial property prices in the US in February saw their sharpest decline since records began nearly 15 years ago as sources of finance for deals has dried up, according to data from Standard & Poor’s out yesterday. Sales of commercial properties were down 71 per cent in the first quarter compared with a year earlier.” (Financial Times) Commercial real estate is following the same downward trajectory as residential housing. They’re both headed for the bottom of the fish-tank. Any slump in CRE will send unemployment skyrocketing while adding to the solvency problems facing the banks.

We’re not out of the woods by a long shot, and won’t be for years to come. According to Bloomberg News, soaring raw material costs have caused a sharp rise in costs to producers that they won’t be able to pass on to cash-strapped consumers. That means that corporate profits will fall and stock values will plunge.

Last week, Oppenheimer analyst Meredith Whitney announced that:

“The real harrowing days of the credit crisis are still ahead of us and will prove more widespread in effect than anything yet seen. Just as strained liquidity pushed so many small and mid-sized specialty finance companies to the brink, we believe it will do the same to the US consumer. We believe losses will only accelerate further and far worse than the most draconian estimates.”

Whitney has been one of the few consistently accurate analysts of the current market meltdown.

The fate of the larger investment banks is just as uncertain as the smaller “depository” banks. Carlyle Group Chairman David Rubenstein summed it up like this last week, “US and European banks and financial institutions have enormous losses from from bad loans they haven’t yet recognized and may have a harder time wooing sovereign fund rescuers. Based on information I see, it will take at least a year before all losses are realized, and some financial institutions may fail. Many financial institutions aren’t going to be able to survive as independent institutions.”

That means there will be greater consolidation and more formidable banking monopolies, all of which is bad for the consumer.

The banks and financial institutions have never been in worse shape. They’ve already written down $344 billion since the credit crisis began last August and they’ll write down another $200 billion next year. By the time the crisis is over, they will have racked up an estimated $1 trillion in losses. That represents a $3 trillion contraction in loans to consumers and businesses. Also, these estimates don’t take into account the losses of revenue from the slowdown in consumer spending, shrinking GDP, and massive business failures; all of which will wreak further havoc on the financial sector.

The amount of stress on the banking system is unprecedented. The Fed is loaning out money hand-over-fist just to keep the scaffolding in place. Take a look at what is going on at the Fed’s so-called “auction facilities” where the Fed is providing loans and US Treasuries for “unsellable” mortgage-backed junk and other toxic bonds. The numbers are staggering.

According to the Seattle Times:

“The Federal Reserve’s emergency loans to banks climbed to the highest level on record even as Wall Street investment companies scaled back their borrowing….Banks stepped up their borrowing, according to the Fed report. They averaged $15.95 billion in daily borrowing for the week ending May 28, compared with $13.5 billion for the previous week, and the total was a record. The previous high of $14.4 billion came in the week ending May 14…In the broadest use of the central bank’s lending power since the 1930s, the Fed in March scrambled to avert a market meltdown by giving investment houses a place to go for emergency overnight loans….The Fed also announced Thursday it will make a fresh batch of short-term cash loans available to banks as part of an effort to ease stressed credit markets…The Fed said it will conduct three auctions in June; each will offer $75 billion in short-term cash loans. It would mark the latest round in a program that the Fed launched in December to help banks overcome credit problems so they will keep lending to customers.” (”Banks step up Fed loans, investment firms scale back”, Seattle Times)

Another $225 billion?!?

The Fed is trashing its balance sheet–to the tune of $225 billion–when the money could be used to provide free college tuition and universal health care. What a waste. Instead, the money is being used to throw a lifeline to dodgy speculators would were trying to snooker foreign investors with garbage securities. At the same time, the Fed’s emergency facilities have done nothing to restore trust between the individual banks who are more reluctant to lend to each other than ever. The ongoing scandal surrounding Libor (the interest rate that banks charge each other and which determines the rates on $3 trillion of financial products including mortgages) strongly suggests that the banks are lying about the true rate they are paying so the public doesn’t find out how battered they really are.

Bloomberg News: “Banks routinely misstated borrowing costs to the British Bankers’ Association to avoid the perception they faced difficulty raising funds as credit markets seized up.”

Consumer spending is sluggish too, since lending standards have tightened and home equity continues to vanish. Subprime problems have migrated from Wall Street to Main Street as credit trends appear to be getting worse. Consumers are maxed-out on their credit cards, student loans, mortgages and car loans. The lack of personal savings is not the result of a profligate lifestyle (as the right wing media likes to opine) but 30 years of stagnant wages and class warfare waged via big business and the federal tax code. None of the baby boomers are counting on Social Security to pay the bills when they retire but, still, that doesn’t justify the money being ripped-off from their paychecks every week and slipped into the general fund where it is used to pave roads and purchase cluster-bombs. Social security is nothing but a flat tax for paupers. (The rich get a free-ride after the first $87,000 income) These are some of the factors that are bearing down on an American economy like a Daisy Cutter. 2009 is looking is looking more and more like a chapter out of Revelation.

An article is this week’s The Economist summarizes the malaise in housing in particularly apocalyptic terms:

“America’s house prices are falling even faster than during the Great Depression. As house prices in America continue their rapid descent, market-watchers are having to cast back ever further for gloomy comparisons. The latest S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year to the first quarter, the worst since the index began 20 years ago. Now Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back over a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, the worst point of the Depression. And things are even worse than they look. In the deflationary 1930s house prices declined less in real terms. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year.” (”The Economist”)

The country is undergoing a collapsing real estate market that surpasses the Great Depression and former Fed-chief Alan Greenspan’s book is still on the New York Times Best Seller list. How’s that for irony?

Regrettably, there’s no sign of a bottom yet in housing. Some markets have already dropped by 30% costing the states (like California and Florida) billions in tax revenue and triggering a steep increase in foreclosures. In California, sales are not only down by roughly 50 per cent, but 40 per cent of new sales are sales of foreclosed homes. The pool of potential buyers has dried up. Now the vultures are circling and picking up homes for $.50 on the dollar. The losses are enormous. If the downward trend continues, (as many now expect) and housing prices drop 30 per cent nationwide; the market will shed $6.5 trillion in aggregate value and lower household spending by $300 billion. That means GDP will shrink at least another full percentage point.

The crisis in the financial markets won’t be resolved until housing prices stabilize, that’s why the Fed and Congress are scrambling to put together a plan (Hope Now) that will slow the rate of foreclosures. Trillions of dollars in complex bonds and mortgage-backed securities will continue to be downgraded until investors see that it is safe to “dip their toes in the water” again and reinvest in a (currently) moribund market. So far, Congress has made little headway in keeping homeowners from defaulting on their mortgages. Credit Suisse predicts that foreclosures will be somewhere north of 6.5 million homeowners over the next few years. It is the equivalent of Hurricane Katrina sweeping from one side of the country to the other.

The next administration—whether it’s McCain or Obama—will be forced to restore the Resolution Trust Corp., which was created in 1989 to dispose of assets of insolvent savings and loan banks. The RTC would create a government-owned management company that would buy distressed MBS from banks and liquidate them via auction. The state would pay less than full-value for the bonds (The Fed currently pays 85 per cent face-value on MBS) and then take a loss on their liquidation. “According to Joseph Stiglitz in his book, Towards a New Paradigm in Monetary Economics, the real reason behind the need of this company was to allow the US government to subsidize the banking sector in a way that wasn’t very transparent and therefore avoid the possible resistance.”

There it is; a taxpayer-funded bailout of Biblical proportions looming on the horizon, possibly as soon as 2009. Ultimately, it is the only sure-fire way to stabilize the crumbling banking system and put a floor under housing prices. The effects on the dollar, however, will be catastrophic. Don’t expect the greenback to survive as the world’s “reserve currency”. Those days are about over.

The troubles in the financial markets will be with us for some time. The massive expansion of credit has created numerous equity bubbles that are unwinding at an unpredictable pace. Author James Howard Kunstler calls the present process “the remorseless algebra of a deflationary death spiral”. That’s about as close to a perfect description as imaginable. There’s bound to be considerable disagreement about the origins of the bubble and who is to blame. Was it the Fed’s “low interest ” policy following the dot.com bust in 2000, or the lack of government regulation in the securitzation process, or was it just the natural corollary of a political system which invariably bows and scrapes to Wall Street?

The real origin of the problem is ideological. It’s rooted in the prevailing “trickle down” orthodoxy which opposes any increases in wages or benefits for working people. Henry Ford realized what today’s captains of industry and finance refuse to accept; that if workers aren’t adequately paid for their labor—and wages do not keep pace with production—then the economy cannot grow because consumers do not have the money to buy the things they make. It’s just that simple. Greenspan and his ilk believed that they could prosecute the class war and make up the difference by relaxing lending standards, changing bankruptcy laws, and by creating a nearly endless array of exotic financial products that expanded credit. But shifting wealth from one class to another has its costs. By crushing the worker the Friedmanites have killed the golden goose. The world’s most prosperous consumer society is in terminal distress and no amount of “free market” gibberish will keep it from crashing.

I am rowing the boat. in stormy seas…

row the boat, or sink in steerage.

and tell me what is so…..I dont waterboard, and I require obfuscation.

jas jain is a janissary.

Definition:

1. Turkish soldier: a member of the Turkish sultan’s elite personal guard from the 14th century until 1826. Janissaries were recruited from Christians in the Balkans and disbanded as part of 19th-century reforms.

2. devoted follower: a loyal follower or supporter

[Early 16th century. Via French ]

I am not long gold, treasuries, or the franc….or short the same. Some might consider his name, no part by me, a play on the above mentioned definition….

sorry, jas….its personal.

Ive already said too much.

night all.

The SUV and the suburban McMansion are the linked symbols of American consumerism. And it turns out that the same folks who cooked up a housing boom out of subprime and “Alt-A” mortgages, also invented a subprime auto loan industry. People swamped with mortgage debt could still pile on loans to equip their four-bedroom/game-room split-levels with the right kind of wagon or two.

Readers can figure out the rest of the story. Subprime auto lending, much like subprime home lending, was another unintended consequence of the gusher of money the U.S. Federal Reserve Bank opened up after the recession of 2001-2002. As banks and auto finance companies ran out of good borrowers, they reduced credit standards and eased payment terms to suck more and more borrowers into the net. Just as in home mortgages, the riskiest loans were packaged into blue-ribbon-rated securities and sold off to investors too greedy or stupid or inexperienced to notice.

Now delinquencies are rising sharply, subprime auto loan investors are in full flight, and a quarter of car owners are “underwater” – they owe more in car loans than their cars’ resale value. The mothballed SUV factories are just another monument to the credit crunch, like the rows of empty condos on Miami Beach.

The wife an I went for a walk the other night. We like to pick up the R/E flyers and compare them to the old ones. One house was 729 last sept, then dropped to 699 (the agent used white-out on the flyers instead of reprinting them) then it went FSBO for 649 now it is listed for 599.

The best part is there is another house in the tract in a less desirable location listed for 759, 160k more than the first. Roughly the same size. The 759 house did not have a flyer so I had to call the number and enter the 6 digit property code to hear the price. Anyway the next morning around 10:00 my cell phone rings…guess who. Conversation went as follows.