Bits Bucket For June 10, 2008
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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As housing markets tumble, pity the UK estate agent
Through the large show windows of his estate agency on a street corner in the once up-and-coming south London neighborhood of Streatham Hill, sales manager James Brooks can look out at what once were five competitors.
“One has shut already in the last month. They closed down,” he says. He points to another on the corner.
http://uk.reuters.com/article/featuresNews/idUKHO95529520080610
Why WaMu is bankrupt :
http://marginalizingmorons.blogspot.com/2008/01/why-wamu-is-bankrupt.html
I remember joking about Article XII Section 12 of the Washington State constitution, where bankers down to cashiers are personally responsible for deposits received after knowledge of insolvancy.
SECTION 12 RECEIVING DEPOSITS BY BANK AFTER INSOLVENCY. Any president, director, manager, cashier, or other officer of any banking institution, who shall receive or assent to the reception of deposits, after he shall have knowledge of the fact that such banking institution is insolvent or in failing circumstances, shall be individually responsible for such deposits so received.
—
Have the big rats already jumped?
This can not be good, folks,
Federal Reserve and ECB are in no mood to save us from the consequences of our debt
By Ambrose Evans-Pritchard
Last Updated: 12:58am BST 10/06/2008
” Fetch your tin helmets once again. The European Central Bank is opting for a monetary purge. So too is the US Federal Reserve, now ruled from Dallas.
Über-hawks and Cromwellians have gained the upper hand at the great fortress banks. Whether or not they admit it, both are embarked on policies that must lead to retrenchment across the Atlantic world.”
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/09/ccview109.xml
I would say this is terribly surprising. The Fed (and the Euro counterpart) is run by and on behalf of the bankers. Once the bankers have the American people saddled with debt why wouldn’t they then undertake a deflationary policy to make that debt more valuable to the bankers?
DUH!!!
This is the essence of 19th century economic history in a nutshell.
A little tidbit from http://www.urbansurvival.com
…”But wait! Me listen to Roger? What about him reading my case for the Second Depression that’s been forming up since 1997, huh? Besides, the 13th reason to blow out of markets is that paper assets have never ‘lasted forever’ and every time there’s a roll-over, there’s a huge opportunity for people who roll out near the top and then remonetize with whatever fiat scam comes next. That’s the overarching reason to to be out of markets and that’s the one which drives the others down at a more fundamental level. The whole ‘interest’ concept requires money creation at its core, which in sense means money creation must occur and that’s the fly in the whole Western Capitalism deal…the ugliest of secrets.
—
Just to make the discussion of unsound money and how the scam works really clear in academic terms, suppose we set up a closed multi-agent system with two players. (Sound’s Ivy League’ish, huh?).
Each has $10 dollars. No more money can be created. None.
Agent 1 has a piece of land, Agent 2 has a shovel.
Now, Agent 1 borrows the shovel from Agent 2 at an agreed value of $5 and an interest rate of 50% per day. Agent 1 then uses the borrowed $5 shovel to put in a garden. He puts in magnificent magic beans that grow overnight. $5 worth of beans, in fact. The next day, he wants to sell the crop to Agent 2 for $5.
Before the sale, Agent 1 has: His original $10, a $5 shovel and $5 worth of beans. ($20 total) But he owes $5 for the shovel and $2.50 of interest.
But here’s where it gets dicey: The banksters would argue that creation of a crop ‘creates value’ and therefore more money should be printed and poured into the system. “What wrong with that?” you wonder?
If we agree to the fiat money scam, the part which none of the banksters ever answer (it’s sleight of hand, you see) is to answer the question where do we ‘inject’ the money?
Do we allow Agent 2 to print it up so he can buy the beans?
That would give Agent 2 “Free money”, right, and the only thing he’s done is printed money!!!
Well, that’s exactly how the global fractional reserve banking scam works. Agent 2 is allowed to (wink wink, nudge nudge) constantly printing up money on the excuse that it’s needed to offset the ‘value created’ by all this magic bean farming.
But, why isn’t the farmer printing up money? I mean, he’s doing the value creation, right? “Oh no!” scream the banksters. “He’s got the value of his beans and besides Agent 2 needs to be able to buy beans for food! It’s a social necessity!”
See how the bankster spin works? In the evnd, all of us (Agent 1-types who produce value) accept the notiong that Agent-2 types (banksters) have some right to print up paper money and thus over time end up in total control of the economic system.
They live in a scared spitless state, hoping no one will wake up to the sleight of hand about where money is ‘injected’ into the system. “We need to inject money to offset the value of the crop” is their argument., Well, horse puckey.
I’ve had lots of economic wizards try to explain why Agent 2 should be allowed to print up money for just lending his shovel and how Agent 2 isn’t engaging in sleight of hand by claming the right to print money!
Here’s the real deal: In a closed economic system the land and shovel have equal value, and Agent 1 borrows the shovel for his whole $10, leaving him with a shovel, land and no cash while Agent 2 has $20 and nothing else. When the crop comes in Agent 1 sells half to Agent 2 for $10 and retains ownership of the shovel. In this way, the producers over time roll into control of the non-producers.
This outlines the threat posed by sound in stark relief. In order for the non-producers to get the upper hand, they must be the sole proprietors of the printing press. By what Right!!???!!!???
Nevertheless, this is exactly what’s going on in the world today. It’s why government must grow, purchasing power must be watered down, and the producers power crushed. We’re all renting shovels and letting the non-producers print money. This has only one inevitable outcome. You lose the house and your job and you get hoodwinked out of all of your life’s work because the Agent-2 types have a grand scam going.
There, don’t you feel better now?
—
Not getting too much play today is an excellent Ambrose Evans-Pritchard article in the Telegraph online editions that explains how the “Federal Reserve and ECB are in no mood to save us from the consequences of our debt”.
—Speaking of yo-yo’s: There’s a good analysis by Chris Ciovacco “The Reverse Wealth Effect” which deserves a read. The point about reverse wealth effects is amplified when you think about how deflation can dig in (later this year or early next) in the banking business as that fractional reserve banking system which allows one saved dollar to turn into 10 (or more lately) loaned out, works the other way. Once deflation sets in, it will be a 24-kt bugger to unseat.”
By what Right!!???!!!???
I think the “right” has two sources.
1. military might
2. status quo cheerleaders (govt knows best, ra ra for my team)
The only reason this has worked for so long - the last 400-500 years or so - is because the energy available to the entire system (the world) has grown every year for that whole time. Which actually does mean that you can “print money” every year, because next year there will be more energy available to produce everything, so you’ll have more of everything, and you’ll get a payback of real value, real material profit on what you lent out.
It’s as if Agent 1’s magical bean plants increased their yield every year with no extra work; both agents will do better every year because there’s more beans.
All the economic growth we’ve enjoyed for the past few centuries is based on the growth in the amount of expendable energy applicable to production. Period. There is no other way to generate more production, which generates more growth.
One guess what happens when there is *less* energy available every year over time…
It’s possible to offset the shrinkage of available energy via efficiency gains, but eventually even that runs into a minimum amount of energy that can run things as they are.
this is terribly
should be:
this isn’t terribly
“Once the bankers have the American people saddled with debt why wouldn’t they then undertake a deflationary policy to make that debt more valuable to the bankers?”
An old saying is something like “a man who owes 10,000 doesn’t sleep at night. A man who owes a million, his banker doesn’t sleep at night”
Banks are happy with a guy making 4K a month paying 3K on his mortgage. Enough deflation and that guy doesn’t make enough to pay his bills, so he moves back in with his parents and the bank gets nothing.
Not only that they will cash in their chips on commodities wait for the crash and then buy back the business and commodities for pennies on the dollar. If you can’t beat them join them. Sell all your stocks and bonds, go short and wait for the bargain hunting.
Note check out insider selling for xom and cheveron and others. Are they cashing in???
I’m cash to the extent possible now (except for my toys I guess). My 401k is what it is, but I’m cash as much as I can be on that.
The hard part is predicting when they are going to zig and when zag. It seems reasonable they might do something like this, but then there are other good reasons for them to continue inflating either permanently (or at least until the whole thing goes boom) or maybe just for a while longer. And history indicates that inflation is more likely…
A man must learn to understand the motives of human beings, their illusions, and their sufferings.
-Albert Einstein quote of the day
Canada has finished lowering interest rates also.
Well - I guess it’s deflation, then. There - that settles the argument.
Playing Politics With The Fed…
http://www.economist.com/displayStory.cfm?source=hptextfeature&story_id=11496881
What a joke
Do we really know his appointees are qualified. I’d say Rumsfeld and Brownie have to make you question his choices.
I loved this line
That alone is dangerous. It is doubly worrying given the Democrats’ seeming insouciance about politicising the Fed.
OK what about Rove/Gonzoles politicising the courts, ask Georgia Thompson and Selligman about that.
Wealth Evaporates… Gas Prices Clobber McMansions… Gas prices are up no doubt, but it would appear a ton of people were already living beyond their means.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aFc9HNAhHrPc&refer=news
Federal Reserve Chairman Ben S. Bernanke said in a June 4 speech at Harvard University that he doesn’t see a return of 1970s-style stagflation, in part because the economy is more flexible and adaptable than it was back then.
___
{o,o}
|)__)
-"-"-
O RLY?
http://biz.yahoo.com/ap/080609/stressing_over_debt.html?v=1&.pf=banking-budgeting
When people are dealing with mountains of debt, they’re much more likely to report health problems, too, according to an Associated Press-AOL Health poll. And not just little stuff; this means ulcers, severe depression, even heart attacks.
Too bad these stupid F$%kers were giving me a heart attack running the price of homes up waaaaaaaaay to high for me to buy one.
RE: McMansions get clobbered
“The 38-year-old Marino, an archeologist for the U.S. Fish and Wildlife Service, is among those feeling the pinch”.
Hmmm…
A federal employee working for a governmental agency which should have nothing to do with the field he’s employed in ; living in a half million dollar McMansion; and commuting 120 miles per day.
But WTF? The US taxpayer is footing this bill.
Speaks volumes.
Ever heard of Section 106? That’s probably why he’s working for that agency.
This can not be good, folks,
Federal Reserve and ECB are in no mood to save us from the consequences of our debt
By Ambrose Evans-Pritchard
Last Updated: 12:58am BST 10/06/2008
” Fetch your tin helmets once again. The European Central Bank is opting for a monetary purge. So too is the US Federal Reserve, now ruled from Dallas.
Über-hawks and Cromwellians have gained the upper hand at the great fortress banks. Whether or not they admit it, both are embarked on policies that must lead to retrenchment across the Atlantic world.
Fortress Fed: The US Federal Reserve building in Washington
Fortress Fed: The US Federal Reserve building in Washington
The City mood turned wicked as the full import of this policy switch sank in last week. On Wall Street, the Dow’s 396-point dive on high volume late Friday had an ugly feel.
“There is now the distinct possibility of a simultaneous sell-off in global bonds, equities and commodities,” said Jonathan Wilmot from Credit Suisse.”
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/09/ccview109.xml
This can not be good, folks
Sounds good to me.
Got cash?
Yeah, what’s so bad about that?
It’s so surreal to read Ambrose Evans-Pritchard while tonado watches and severe t-storm alerts are sounding in the background and CNBC announcers talk in ever urgent tones.
After these storms move through, I gotta go take a walk in the sun.
Unfortunately the comments on that article don’t paint a very good picture of Americans. So many comments reflexively attacking Europe as if this were a Europe vs. America issue. So many comments chalking up our crisis to “the Illuminati” and other conspiracy theories. So many delusional Bush-fanatics. :-/
Does anyone know if this is zero sum game for the banks with regards to the banks, or have fees just been increased?
Social Security debit card due
ASSOCIATED PRESS • June 10, 2008
WASHINGTON — More than 4 million Social Security and Supplemental Security Income recipients who don’t have bank accounts will have the option of getting a prepaid MasterCard debit card with their benefits instead of a paper check starting this summer.
The change means those without bank accounts won’t have to pay charges at check-cashing facilities or carry large amounts of cash, the Treasury Department said Monday.
Each FDIC-insured card will have its own PIN number for use at ATMs and in stores. If lost or stolen, it can be replaced.
Judith Tillman, commissioner of the Treasury Department’s Financial Management Service, said there were 700,000 reports of lost or stolen checks last year.
She said the switch will save the government as much as $42 million.
http://www.freep.com/apps/pbcs.dll/article?AID=/20080610/NEWS07/806100379/1009
The bank gets the money interest-free. They might also be charging transaction fees on the cards, although the article doesn’t say. That’s what’s in it for them.
But doesn’t it strike you as a bit Third World that 4 million people are either unwilling or unable to open a bank account?
Some ridiculous fraction of New Yorkers don’t have checking accounts.
With all the fees, etc. I sympathize with them. Plus, they’re mostly uneducated and they don’t trust the banks who fleece them anyway.
What do you use your checking account for anyway? I treat mine like a glorified clearing agent.
2 words
credit union
fyi credit unions are 501(c) ’s (non-profit). Federally chartered are 501(c) (1), and the others are 501(c)(14). What a racket. I wonder what shape their form of FDIC is in? They did less liar loans, but mine was doing 125% LTV.
We easily forget how many people in this country, even native-born, are functionally illiterate. They may be able to read their monthly statement, but they wouldn’t understand it. And they certainly wouldn’t be able to balance their account each month.
And the ones that don’t fit the definition of “Functionally Illiterate” are mathematically illiterate.
The 1 Million people in this country who are now in foreclosure all believe
- continuously increasing house prices will somehow make homes more affordable
- by borrowing more and more money you are, somehow, increasing your financial fortune (Refinance your original $300K mortgage for $400K, then $500K, and repeat, forever!)
- they’re “victims”
Strong memories of bank failures during the Great depression, maybe.
lots of people just can’t keep a checking acct open .. they too frequently drain it dry… may as well carry cash.
i heard that if you overdraw an account too often you can get black listed.. no bank will give you an account for 5 years.
Working off the books and don’t want an e-trail, maybe.
More like you have to have $3000 in the account at all times to avoid huge monthly fees just for the privalege of having the account and transaction fees on everything from checks to ATM access and higher fees to actually talk to someone in the bank (after waiting in line for 30 minutes and screaming through the bullet proof glass.
Oh, wait, that was 15 years ago. I’m sure it is much much better now.
Yes. The FDIC didn’t exist then, at least during the worst crash. About 9,000 banks failed during the GD. It certainly would make me gun-shy (bank-shy), especially if you saw your parents lose their life savings.
It’s both,
Having heard my grandparents not trusting the federal government or banks, and most banks nickeling and diming you to death, I’m sure that’s some of the reasons.
I’m sure immigrants from countries with shady banking systems don’t trust them either. Sad, but I don’t blame them.
“I’m sure immigrants from countries with shady banking systems don’t trust them either. Sad, but I don’t blame them.”
Well, when this is all said and done there may be many who will be questioning the trustworthiness of our banking system as well. Funny how some here just can’t understand those who may not have a checking account but read the rampant fraud almost daily related to this whole housing debacle of which our banking system played a part and is a part and don’t see any connection tween the two. Not sure exactly who the “ignorant” ones are.
“most banks nickeling and diming you to death”
not nickel and dime; try $29, $39, and $49 you to death for agressive imposing of nsf fees and agressize measures of slowly releasing deposits while quickly deducting debits.
Given the way most banks seek to fee their customers to death, this isn’t that surprising. If you’re on a fixed income and don’t have much in the bank, getting dinged $12/month to have the account, $15 for checks, $2 or more every time you use an ATM, debit card fees, overdraft charges, etc. is a constant, slow bleed that is not worth the hassle.
Reminds me of Louis C.K. bit from a couple of years ago. (Youtube clip that features language that some might find objectionable).
My mother’s bank WF, will charge her a fee if she calls for help.
I hate banks. To get back at them I would like to change the usury law in California to anything over 10% to include fees is considered usury. I am thinking of a Prop. The climate is good for that right now
Maybe that should include taxes…
Amen to that. Even God only asks 10%.
This can not be good, folks,
Federal Reserve and ECB are in no mood to save us from the consequences of our debt
By Ambrose Evans-Pritchard
Last Updated: 12:58am BST 10/06/2008
Fetch your tin helmets once again. The European Central Bank is opting for a monetary purge. So too is the US Federal Reserve, now ruled from Dallas.
Über-hawks and Cromwellians have gained the upper hand at the great fortress banks. Whether or not they admit it, both are embarked on policies that must lead to retrenchment across the Atlantic world.
Fortress Fed: The US Federal Reserve building in Washington
Fortress Fed: The US Federal Reserve building in Washington
The City mood turned wicked as the full import of this policy switch sank in last week. On Wall Street, the Dow’s 396-point dive on high volume late Friday had an ugly feel.
“There is now the distinct possibility of a simultaneous sell-off in global bonds, equities and commodities,” said Jonathan Wilmot from Credit Suisse.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/09/ccview109.xml
Soaring Shipping Costs Fuel Inflation…
http://www.ft.com/cms/s/0/9a8e96b8-3587-11dd-998d-0000779fd2ac.html
US may have more oil than the Saudis?
http://www.bloomberg.com/apps/news?pid=20601170&refer=home&sid=ayj1uo_gdNI4
Once again, the problem is flow rates. To keep the global economy humming requires an ever increasing flow of oil out of the tap on a daily basis. It might matter to our children and grandchildren how much is left in the tank, but not to the current global economy. To the global economy, what matters is how much oil is coming out of the tap, right now, on a consistent and continual basis. A thousand barrels a second.
Energy: The average price for regular gas hit $4 a gallon over the weekend. Gas prices have risen 75% since Nancy Pelosi took over. Where’s the energy independence Democrats promised two years ago?
http://www.ibdeditorials.com/IBDArticles.aspx?id=297904745555169
It’s a problem driven by domestic supply restrictions imposed by the Democratic Congress in the face of growing worldwide demand. The Democrats preach energy independence while they do everything in their power to prevent it. If the American people truly want change, this would be it.
The Western U.S. is estimated to have reserves of a trillion barrels (yes, that’s the real number) trapped in porous shale rock, an amount three times the oil reserves of Saudi Arabia. On May 15, 2008, the Senate Appropriations Committee in a 15-14 party line vote rejected an amendment by Sen. Wayne Allard, R-Colo., to allow oil shale drilling and overturn the Udall moratorium.
The U.S. Congress has voted consistently to keep 85% of America’s offshore oil and gas off-limits, while China and Cuba drill 60 miles from Key West, Fla. The U.S. Minerals Management Service says that the restricted areas contain 86 billion barrels of oil and 420 trillion cubic feet of natural gas.
U.S. energy policy: Do Not Allow Energy Independence.
We are in a global economy don’t you know, so it wouldn’t be “fair” for us not to buy from other countries.
US Energy Policy: Minimize domestic production, send billions to our enemies.
US energy policy
Promote the use of inefficient cars, and the exurbs with cheap oil, then when the sht hits the fan go to Saudi Arabia and beg for more.
Or:
US Energy Policy: preserve domestic resources, burn the resources of our enemies.
Our enemies? Paranoid much?
I very much doubt the magnitude of oil reserves estimated (not real) in the western US and whether much of them can actually be used. Still, it’s worth looking.
Meanwhile, on the political front: “Democratic presidential candidate Barack Obama sought to tap into Americans’ anxiety over high gasoline prices on Monday by saying he would impose a windfall profits tax on US oil companies if elected.” If carried out, that will do wonders for increasing supply. “we’ll use the money to help families pay for their skyrocketing energy costs and other bills” Just subsidize domestic gasoline & diesel sales, Obama, that will definitely cut the price families pay. That’s what China and India do. Who cares where the money comes from?
Windfall taxes are unfair (how about taxing corn too, which is also overpriced and subsidized). However, I don’t think big oil should get tax breaks either in times of record profits. They can afford to pay their fair share.
We should be giving substantial tax breaks and money to research alternative energies instead.
Although, if big oil wants gov’t bailouts during lean times, I imagine it makes a windfall tax fair when they are profitable. Would have been nice if the mortgage industry had done the same.
by saying he would impose a windfall profits tax on US oil companies if elected.”
Yet another thing I need to add to my list of “How Reuven is being pusished for being a responsible American”: The devaluation of shares I own in publicly traded US Oil companies due to “Windfall Profits Tax.”
“Big Oil”, like every other Company in America, doesn’t pay taxes. They pass all their costs, including tax costs and tax increases onto the consumer.
You pay for them, every time you buy their product or use their services.
I’m not surprized that Obama doesn’t know this.
“Big oil” won’t be shy about asking for bailout money to subsidize pipelines and drilling costs because national security depends on it. Obama knows this.
McCain only believes in socializing losses and privatizing profits.
In an effort to counter the ‘windfall’ hyperbole a teensy — food for thought:
Exxon’s 2007 tax payments? $30 Billion.
Exxon’s 2007 tax rate? 41%
“In other words, just one corporation (Exxon Mobil) pays as much in taxes ($27 billion) annually as the entire bottom 50% of individual taxpayers, which is 65,000,000 people! Further, the tax rate for the bottom 50% is only 3% of adjusted gross income ($27.4 billion / $922 billion), and the tax rate for Exxon was 41% in 2006 ($67.4 billion in taxable income, $27.9 billion in taxes).”
http://seekingalpha.com/article/63131-exxon-s-2007-tax-bill-30-billion
RE: the “windfall” hyperbole.
I live in Alaska, a state where 20% of GDP is oil. We are forced to sell our oil only within the USA, and not on the open market, so we get screwed by Big Oil relative to other companies that could do similar work by Washington’s “socialist” national security policy and give the state similar profit sharing arrangements comparable to governments in the rest of the world (40% vs 70%, IIRC).
So a 40% tax on domestic oil is not unreasonable for these pirates. It is a screaming deal!
The oil companies, however, are not required to sell the oil commensurate to the lower costs associated with extraction in a captive market. They sell it to the rest of the country at market rates.
And you call that a free market?
I feel very little pity for them if they pay a windfall profits tax on domestic oil, especially when market prices are being set by transported oil from the Middle East.
And who owns the ground that the oil was pumped from???
Hmmmm….. Gotta love those little details.
Obama only “knows” which side of his bread gets “buttered” on.
The same goes for McCain and Hillary! and any other public “servants” who say they are going to fix or “punish” (fill in the blank with your cause or villian) when they are elected. No individual that takes in huge amounts of cash from the very entity(s) that he/she publically demonizes for voting “points” is ever going to “change” the system.
Check out the chart. If your were (are) running for President you got “oil” money. If not, then you didn’t.
http://www.opensecrets.org/pres08/select.php?ind=E01
“Big Oil”, like every other Company in America, doesn’t pay taxes. They pass all their costs, including tax costs and tax increases onto the consumer.
Wrong, because the price of oil is determined globally and US oil companies are price takers, not price makers. The costs incurred by US oil companies, including taxes, have no effect on the price that it is sold for.
Isn’t that obvious from the changes in oil prices in the last year? Or any year, both up and down, for that matter?
““Big Oil”, like every other Company in America, doesn’t pay taxes. They pass all their costs, including tax costs and tax increases onto the consumer.”
I’ve always wondered the genesis of this lie. Whats worse is people actually believe it.
Drain Arabia First..
nice return on barrels left in the ground, 86billion*$100 or so since 2000
“The Western U.S. is estimated to have reserves of a trillion barrels (yes, that’s the real number) trapped in porous shale rock, an amount three times the oil reserves of Saudi Arabia. ”
If Us really faced a truly catastrophic crisis in oil/gas prices and decreasing worldwide supply(peak oil) it could do a mahatten style project to extract that oil shale. It would basically raze a good portion of utah and foul the environment but in a true energy crisis that oil is there. I’d say if gas hits $6-7.00 a gallon the People would demand US instantly open up all us wildeness to oil exploratiion regardless of environmental consequences . We are not there yet but if gas stays above $4 or 5- a gallon for close to a year then the poli will howl .
Just to prepare for oil shale extration and get it up and running on a large scale will take several years even with a Mahatten project crash program. Most US population, the ordinary joes, will opt for increased drilling over environmental concerns but they have no influence in higher elitiest eco-circles which control the eliteist press and educational institutes which up to this point have successfuly blocked all attempts to open up Us to more drilling in sensitive eco- spots. Eco-elitists don’t care about $5-10 gas prices: they can easily buy costly hybrids and install solar but joe blow has no choice but to suck on high gas prices. And joe blow is usually so functionally illiterate and politically inept that he cannot alter existing eco-friendly environmental energy policy except howl and rage on the streets and at the pumps.
personally i do not care one way or other- my 4 cyn tacoma get 25 +MPG and my future work commute will be 5 and less than 10 miles from work. I live frugally and waste little energy so it matters little iF gas spikes. I do like wilderness but also realize that smart intelligent energy extraction can be achieved which which can minimize environmental damage.
BTW One mid-sized volcanic eruption can spew out more polution in one blow than a 1000 large coal fired plants over a year.
Eco-elitists don’t care about $5-10 gas prices: they can easily buy costly hybrids and install solar but joe blow has no choice but to suck on high gas prices.
Huh, I guess Joe blow can’t downsize out of his SUV to a corolla, focus ect. I guess he can’t drive less by linking trips. I sold some stuff to a guy on Craigslist who does construction. He has given up driving except for work, and does everything else by bike. Joe Blow can’t take public transportation. Joe Blow can’t live in a smaller better insulated house. Cheap oil is over,even if we drill all over the US, US gov says ANWR would dec oil costs by < 1 buck a barrel. Sticking our head in the sand, throwing up confetti, and begging the Saudi’s isn’t going to fix the problem.
And joe blow is usually so functionally illiterate and politically inept that he cannot alter existing eco-friendly environmental energy policy except howl and rage on the streets and at the pumps.
What?? didn’t Joe Blow put GW and gang in office. Didn’t they roll back all sorts of environmental regs, sell off a bunch of our forest land for pennies on the dollar, pass tax breaks for Hummers.
PS I”m all for drilling in ANWR but only if we tax gas to 8 bucks a gallon and use all the money to reduce income tax payroll tax ect.
Well, yes, Joe Blow could sell his house and buy a smaller, better insulated one. Great solution, especially since this is a blog on the housing crisis, and the general subject is the trouble people (including Joe Blow) have selling houses.
Yes, Joe Blow could sell his year old pick up truck - at a substantiaol loss in order to buy something more fuel efficient - except that Joe Blow is tapped out, the SUV or pick-up is nearly worthless on the used car market, the efficient car is bringing top dollar, Joe’s credit cards are about max’d out, and his HELOC got cancelled last week.
Ummmmmmph
What is about environmentally conscious people that makes them “elitist”? Anyone can make everyday decisions that affect their bottom line with respect to energy costs.
Stop living so far away from work.
Get an older model civic/tercel/sprint/corolla/echo/focus. You don’t have to blow tons of cash on a Prius just because it’s fashionable.
Carpool. Take transit.
Maybe if Americans stopped feeling entitled to drive around in gas-guzzlers 90 minutes each way from work then they wouldn’t be in this predicament. Seems to me it’s these people I’m describing who are the true “elitists”.
Amen. How many times have I seen some lard-ass circle a parking lot fifty times in their SUV so they don’t have to park a bit further away and actually (gasp) WALK for a few yards. I’ve ridden my bike (as in pedal-power) to the store to pick up items rather than take the car - OK, so I look like a dork with my basket, but who cares? It wouldn’t bother me in the least to see gas go to $5 a gallon, as it might finally force more responsible consumption habits.
Think long term.
We will still have huge natural resources when everyone else is severely constrained.
They will have lots of devalued debt that is next to worthless because of export restrictions.
Situation is: we have lots of oil, coal, gold, water, uranium exc… long term this will turn out to be a good decision. Though we should probably make China stay 1000 miles from US waters.
You have to put more energy in than you will get out of shale. The problem isn’t that we are running out of oil. The problem is that we are running out of cheap oil.
Same with the Gulf of Mexico. Their are a lot of oil rigs in the Gulf. But they are on the continental shelf where the water is 200 feet deep. There is lots of oil at 9,000 feet. But it costs too much to extract it.
I am not a liberal democrat, nor am I a conservative Republican. I am informed.
I can assure you that if the oil companies thought they could make real money in the arctic, off of shale or in the deep Gulf, they would pay Congress to allow it, instead of paying Congress to not allow it.
Here is my energy policy. Tax excess consumption and reward conservation.
1)increase federal gas tax
1b) use some of gas tax to lower payroll tax (social securty) to make labor more competitive
2) highly graduated excize tax on new vehicle based on their fuel economy. Small cars pay nothing, up to 10,000$ (excess consumption) tax on new escalades. $20,000 tax on new motorhomes.
2b) use some of this tax to susidize buyouts on used large vehicles. Sell the gas guzzlers to foreign countries or use for scrap.
3) Excize tax on all new buildings houses, and used buildings sold. Tax will be at an increasingly higher rate for single family homes over 1500 sf. Tax can be reduced substantially by using good insulating materials, and other low energy designs.
3b) use some tax revenue from 3 to offer assistance in insulation and other energy efficiency improvements.
Make energy conservation america’s priorty #1 with the goal of reducing energy consumption by 50% in 10 years. This would bring the US per capita energy use in line with Europe and Japan. It would also reduce our foreign energy bill by half $600B per year. If we dont reduce our energy consumption significantly; all of our nation’s wealth and assets will be transfered to OPEC, Russia, and Venezuala in the next 10 years.
kckid, when you come up with a way to produce 23 million barrels a day from our oil shale, you’ll have saved the country from its own stupidity.
You might find it’s a bit more difficult than you expect.
Gas prices are not a Democratic Party conspiracy, nor are they caused by the Republicans. There’s a real, physical problem with how fast we can pull oil out of the ground right now; demand is currently exceeding supply worldwide.
Oh and don’t worry - we will go after all that offshore oil. We won’t have any choice. Sit back and relax.
RE: US may have more oil than the Saudis?
The challenge is getting the oil out. Bakken crude is locked 2 miles (3.2 kilometers) underground in a layer of dolomite, a dense mineral that doesn’t surrender oil the way more-porous limestone does. The dolomite band is narrow, too, averaging just 22 feet (7 meters) in North Dakota.
Jeez, do ya think that maybe all these “windfall” profits that Pelosi and company want to steal from Exxon Mobil to re-distribute to the welfare crowd so they can heat their Section 8 apartments @ 85 degrees, just might be needed to get that oil out?
“Jeez, do ya think that maybe all these “windfall” profits that Pelosi and company want to steal from Exxon Mobil to re-distribute to the welfare crowd so they can heat their Section 8 apartments @ 85 degrees, just might be needed to get that oil out?’
Nah! Let’s do it the American (political) way. Take massive sums from oil companies (let’s call it windfall profits tax), dole it out as subsidies to whoever is well connected at the time and be sure that some sort of shale oil futures is involved so that Wall Street can extract their 32# of flesh.
You’re both right! They throw money at J6P with “stimulus checks” and pay off our Underclass so they don’t revolt and they ALSO supply corporate welfare to the well connected!
Very little of their profits are being poured back into exploration and drilling. The oil companies learned their lesson in the 80’s when all of their expensive projects became worthless when oil crashed back to $9 a barrel. If if doesn’t crash to $9 a barrel they can always use next years profits to fund exploration and drilling.
Take a look at insider selling
They are using money to buy back shares and pay dividends, ie the CEO’s know a crash is coming and they are cashing out.
The Day The Slacker Died…
http://www.atimes.com/atimes/Front_Page/JF10Aa02.html
“It is hard to think of a comparable case in social history: a country borrows from foreigners to lend money to its young people to spend four years binge-drinking at a university that pretends to prepare them for the world.”
Great line.
sounds like fun to me
LOL…..it was!!!
“to spend four years”
In this scenario I think the author meant seven years.
“Doh!!!! Seven years of college - DOWN the DRAIN!”.
Bluto.
Perhaps, but four years of it was fun too.
Man, I blew it. Paid for it all myself.Worked too hard. If I’d only known…
Man, some might view that article as depressing, I view it as a ray of hope. We are going to need to work hard, save money, and act responsibly; if you do all these things, we have the potential to get ahead in this world. That’s a very encouraging message, imho. And frankly, the whole slacker thing is going to be gone without any complaint from me. Not that I wasn’t a slacker in my early 20’s (the stereotypical slacker, in fact), the problem that I now see is that entering my 30’s, many of my friends/college classmates are still slackers. They didn’t really “buy in” to the culture of ‘work hard and get ahead’. The housing bubble didn’t make this any better, as we were in our mid 20’s, all the people who were making big bucks were RE agents and MTG brokers (2 careers that are notorious for the lack of real work required).. It’s a shame, many people chased the dream of riding around in there Escalade all day doing; well, basically nothing, for big, big bucks.
That’s just not how it’s done. If you’re not working hard, and you’re making big bucks, guess what? That job is not going to be around for long. People make big bucks for jobs that are hard, unpleasant, or skills that are very rare. That’s pretty much it; nobody gets paid 200K a year to do something that’s “easy and fun”.
That’s pretty much it; nobody gets paid 200K a year to do something that’s “easy and fun”
Paris Hilton does.
Don’t you think that the holding up of such people by the media as role models might have something to do with the current attitude of young people towards work?
“Don’t you think that the holding up of such people by the media as role models might have something to do with the current attitude of young people towards work?”
Of course not Yogurt. The masses weren’t LED to their current predicament…. they all walked into it by their own free will./sarcasm off.
so do I if I have a good year. It’s not “easy” but it’s fun. The day is short and at 3 bells, I get to go ride my bike.
See the “skills that are very rare” comment above. Also, putting your own money at risk.
One of the bits of wisdom that I got from my dad was “You can spend your life trying to do what you love, or love what you do.” There are a tiny number of people who truly enjoy their jobs, there are a larger number of people who desprately try to get the job of their dreams (waiter/actor, taxidriver/musicians) etc. And most of us have jobs that, while we do derive some satisfaction from them, if they weren’t paying us, we wouldn’t be showing up. For the vast majority of people, work is something so awful that they have to PAY us to do it.
http://www.minyanville.com/articles/work-boss-management/index/a/15760
“For the vast majority of people, work ios something so awful that they have to PAY us to do it.”
And because their work is so awful they have to compensate for the pain by buying expensive toys which puts them deep in debt and forces them to work harder to make more money to service the debt.
They get caught up in a loop.
“And because their work is so awful”
I wonder how many Americans work in businesses where the corporate investment strategies became the main driver of the firm instead of the product and growth of a solid customer base.
“Paris Hilton does.
Don’t you think that the holding up of such people by the media as role models might have something to do with the current attitude of young people towards work?”
Did anyone see the South Park episode where she came to town to open one of her signature chain stores and promote her private label, ‘Stupid, Spoiled Whore’? It was classic.
My BIL’s niece is 26, never held a job or college, walks around with a pet dog on her arm, dressed like Paris. Parents are fairly well off and not happy. You can’t tell me that the MSM doesn’t affect our youth or adults for that matter.
If her parents give her money, then they have created the monster.
I blame violent video games.
That’s precisely the kind of woman I avoid. Of course, she avoids me too, as my pockets aren’t deep enough…
Sounds like a “lease” candidate vs. “buy”.
nice gig if you can get it….
RE: People make big bucks for jobs that are hard, unpleasant, or skills that are very rare. That’s pretty much it; nobody gets paid 200K a year to do something that’s “easy and fun”.
What about the shitload of private mortgage originators doin’ mid-six figures for the last 4 years?
Hell, the Beantown Glob reported high school drop-outs in Dorchester, Mazzland were doin’ half a mil large at the top!
No wonder the real estate mortgage lobby wants the game continued with HUD/FHA as the new bagholder.
“People make big bucks for jobs that are hard, unpleasant, or skills that are very rare. That’s pretty much it; nobody gets paid 200K a year to do something that’s “easy and fun”.”
I have to disagree with this. Some of the most unpleasant jobs pay the least. Imagine working for minimum wage, or less, cleaning up nasty motel rooms. Or, how about being a roofer in Phoenix? There’s alway picking fruit for $3 per hour in 100 degree temps all day, everyday.
On the other hand, the highest paid people often work the fewest hours. Most top tier execs cannot be found at the office, but rather at the golf course.
The discrepancy in wages is criminal. While those who have been educated at the Stanford School of Business deserve a decent salary for their effort and intellect, the worker bees who keep the system going should be paid more. Imagine the country without them. There more to be said for the time and effort that is put into a job, not just the skills required to get it done. Is the fact that the hispanic mother of 5 gives 12 hours a day out of her life, everyday, to be overlooked? I say no. Pay people for the time they are giving, as everybody is limited in that regard.
“Is the fact that the hispanic mother of 5 gives 12 hours a day out of her life, everyday, to be overlooked? I say no.”
I agree, but as counterpoint to that, why does she have 5 kids if she can’t support them without killing herself? (That’s regardless of ethnicity, BTW)
I don’t know, that article overgeneralizes the situation a bit too much. Considering the martial arts theme you think the author would have stressed more “balance” in his article.
For example, what really is a “slacker”? During the boom many of those who bought into the mania viewed those who did not as “slackers”. During the boom things got so twisted that ambition equated to one’s willingness to take on more debt.
Sorry, but if one is working harder only to service debt - then that labor is wasted. Hard work only matters if you and yours get something beneficial out of it. There are plenty of folks right now working two and three jobs to hold onto a lost cause - should they really be role models?
Life is about choices and expectations and this author oversimplifies what the boomtimes were about. Besides, there are plenty of young “slackers” throughout the world - the U.S. hardly has that market cornered - as anyone who travels already knows.
Well, look at the titles of the “Readers Picks” articles:
1. What it means when the US goes to war
2. When the nukes start dropping …
3. Time overdue for a world currency
4. It’s not a dollar crisis, it’s a gold crisis
5. Claims on Iraq come back to haunt
6. How the Pentagon shapes the world
7. China takes on the US - in space
Yeah, the AT is hoot…kind of like reading something from LaRouche.
Considering the martial arts theme you think the author would have stressed more “balance” in his article.
The dropout rate in martial arts schools is astronomical , which is why so many offer discounts to students who sign long term contracts. I would say that over 50% drop out while still white belts. Only a few make it to the lowest black belt rank (1st Dan).
Contrary to what many believe, it does not take great athletic skill to become a black belt (I am proof of that), but it takes a great deal of patience. A lot of people sign up thinking that they will be pulling off Jackie Chan or Chuck Norris moves after a few weeks of instruction. Instead they find themselves repeatedly doing forms (katas) week after week, month after month. Many schools won’t even let students spar until they are of an intermediate rank, which takes at least a year to achieve.
Anyway, I can understand why Kung Fu Panda would upset some martial artists. Of course, its just a dumb movie, so who cares?
“Kong Fu” in Chinese means efforts. Learning “Kong Fu” requires patience, hard working, pains-taking. “Kong Fu” masters normally start learning it when they are young, spend years to train and practice. Chinese saying of “Kong fu Bu Fu Ku Xin Ren” literally means “Kong Fu rewards those diligent”; has similar meaning to “No pain, no Gain”.
I think they are picking on the wrong generation.
Perhaps it’s different in Brooklyn, but younger people are working harder for less all while their elders run up the collective credit card. And they are leaving college in debt because their parents didn’t save, not because they didn’t.
Well we have. And it will interesting to see how that affects colleges in two to four years. Happy to have our kids, or desperate to drain one of the few sets of parents with cash?
Huh? Since when it is parents that are supposed to cover the cost of college? Don’t get me wrong, it is nice if your parents can do it for you, but the idea that parents must cover youngster’s school bills while the said youngster is getting drunk daily at parties is utter rubbish.
“but the idea that parents must cover youngster’s school bills while the said youngster is getting drunk daily at parties is utter rubbish.”
I’d wager that is your familial experience but for the vast majority it isn’t.
I know I mentioned several times that my children would probably be mostly paying their own way just the way I had. After several reactions of utter and complete disdain like I was the most incompetent parent that ever walked, I decided to no longer comment on the subject in public.
I would tie the amount of help to their grades, just like mortgage rates to FICO scores. I would not want to subsidize partying or dilletantism.
I think it’s a bad idea for parents to pay for college. At the age kids leave high school they’re ready to start at least trying to be adults. When you force them to go to college, or present a false choice by offering to pay for it, you rob them of this first step towards independence.
When you pay for it, more often than not you just end up funding an extended childhood where they don’t take anything seriously because nothing they do matters.
Trouble is, so many news stories and articles say “and they were saving for their children’s college” and give the impression this is the norm. I think a lot of the FB’s used this as an excuse too, to put themselves in the best possible light.
The idea that parents *should* fund college education has been floating around in the culture a long time, probably trickling down from the upper classes. I had that sense of entitlement too but my father cured me of it.
Ten years ago, while working at the airlines, I remember some old hats who pointedly asked a couple of us newbies how we could possibly even think of buying houses and starting families - given the trends that wages, job security, and benefits were following. They didn’t mince words, to them things were clearly getting worse.
they are leaving college in debt because their parents didn’t save, not because they didn’t.
I think they’re leaving college in debt moreso because the cost of college has risen so astronomically, rather than because their parents failed to save. Very few middle-class families have the resources to save enough to fund 4 years of college tuition/fees/living expenses today, even if they are responsible and frugal. One year of tuition alone at my alma mater today is more than the median household income in this country.
I wonder if tuition would fall if we took away Federally subsidized student loans…
Hater!
I don’t know, do you think the housing market would fail if we stopped giving away money and making equally bad loans…. Oh wait……
I wonder if tuition would fall if we took away Federally subsidized student loans…
I don’t know–they’ve basically gutted the Pell Grant program, and tuition hasn’t fallen, and those don’t have a repayment obligation. I know it’s heresy to point this out here, but sometimes, the problem isn’t the evil gubmint.
From highest productivity in the world to highest productivity in the world is a transition? That article doesn’t make sense.
“Americans have to work harder, save more, and defer gratification. Instead of spending four years in a non-stop party at a taxpayer-subsidized state university, the middling American student will work during the day, go to night school, and save for a dozen years to buy his or her first house (at a much lower price than the present owner paid for it). They will stop complaining about boring jobs and oppressive bosses, and feel grateful to have the work. Their parents won’t bail them out; in fact, their parents will postpone retirement and work and additional 10 or 15 years.
It’s not going to be fun, but there’s no helping it. The sooner Americans reconcile themselves to a tighter belt and a longer day, the better.”
May I add; They really need to stop buying Asian crap, and realize what really counts as a vote in this country…
McStain or Obummer will not save you. How you spend your wages might…
Hey, that sounds just like what my grandpa did. The Great Depression hit when he was just 25 years old; luckily he had a good job with the phone company, but still he and Grandma eked it out for quite a while before they were able to buy a house and have children. Their first was born in 1939, when he was 35 - very late for your average couple in those days.
They actually put off breeding until they were well-situated. Imagine that!
Ben mentioned at our Carlsbad gathering last Saturday that he has noticed a large number of homes in “ownership limbo” status, where the owner has stopped making payments on their mortgage and has left the home vacant, but the lender neither sells the home nor takes possession as REO.
The conventional wisdom says that after a homeowner stops paying the mortgage, it is in the lender’s interest to sell a home as soon as possible. Doing nothing while letting the house in question crumble into desuetude would appear to be the opposite strategy. Can anyone furnish evidence on whether lenders are behaving differently in this respect during this downturn compared to previous real estate busts? How could it possibly be in a lender’s self-interest to hold on to real estate during a free fall in home prices?
Sale creates a realized loss on someone’s watch. That someone knows the realized loss means he/she may be out of a job for losing the money. So it is better not to sell and pray that the market recovers.
That was my thought. It is all about using questionable accounting (i.e., indefinitely delayed recognition of losses) to keep elephants hidden under the rug. If this is not illegal, it should be.
This is why it’s gonna take a while before the python devours this particular pig.
There’s something else weird here: Long abandoned homes in a state of disrepair quickly selling. The sold sign sits out front for months and no one ever moves in. Are realtors hanging sold signs on properties just to help perceptions?
I mean one of these properties has burn marks over the front door from last years fire and its on a main corridor between Syracuse and farm country. I find it hard to believe properties like these are being scooped up.
I find it hard to believe properties like these are being scooped up. They aren’t, they’re being “snapped up.” After the bulldozers get through with them, however, they’ll be scooped up by a front end loader.
LOL…That’s what I expected too. But some were “SOLD” over 6 mos. ago and still, nothing. The burned out house lot is hardly a location worth revamping. I’m in CNY. There’s cheap untouched property everywhere. No need to incur tear-down costs. That’s why you see abandoned homes and barns everywhere.
With so many houses in limbo and so many realtors going out of business, it’s likely that outdated signs are decorating lawns all over. Call the number and I bet you don’t get an answer.
I don’t think its that either. They’re Coldwell Banker signs. I think they’re the largest realtor in the area. And remember Syracuse hasn’t really experienced much of a fall out yet.
I might have to go get the addresses and do some sleuthing.
I have called on a few and the realtors were still waiting on the bank to set the sales price(of course realtors have only 3 days after placing the sign to enter the property in the MLS system).
I don’t think there is any hurry what so ever on the part of the banks to actually move these properties.
Can anyone furnish evidence on whether lenders are behaving differently in this respect during this downturn compared to previous real estate busts?
And: Why are lenders behaving differently in this respect?
Is it a calculated strategic risk?
Deer-in-the-headlights paralysis?
Uncertainty in the face of crisis?
Pure ineptitude?
Foreclosure overload?
Monkeys running the lending operation who are preoccupied with flinging poop at the zoo visitors?
Fear of sparking a fire sale in REO assets (even though one is already underway)?
Coordinated intervention from some silent partner in government?
Hedge funds, institutional investors or lenders waiting for a government bailout to enable them to unload their bad gambling debt on the taxpayer’s tab?
Owners who believe that “real estate always goes up” waiting for it to go up again before they try to unload millions of dilapidated vacant homes on a soft market?
My prediction: When the dust settles on the story of the disposal of a record number of vacant homes in the U.S., there will be a record amount of dust to settle.
“How could it possibly be in a lender’s self-interest to hold on to real estate during a free fall in home prices?”
I don’t think lenders are purposely holding real estate hoping for a recovery - just doesn’t make sense. Nor do I think they are purposely putting off foreclosure to avoid the crap hitting their books. IMO it’s a combination of administrative bottlenecks and lingering questions as to who owns what.
Lenders (commercial banks) are penalized just the same for holding REO property as they are for seriously past due loans - in both cases, they are non-performing assets. True, the bank is an owner in the REO case and only the mortgage holder in the other, but the math still works out the same in the end. By not foreclosing and holding a loan past due, they are only deferring the holding costs of REO, they can’t totally avoid them.
The Lenders that act quickly and decisively in dealing with REOs will be the ones with the least losses. The ones trying to game the system and defer losses to a later date are the ones to look out for. They are simply delusional if they are hoping the market will recover in time to take care of their problems.
This message is brought to you from the same folks who last year said “Subprime is contained”:
Bernanke: Risk to economy fading
But Fed chief remains cautious about inflation
By Jeannine Aversa
ASSOCIATED PRESS
June 10, 2008
Despite a recent spike in the nation’s unemployment rate, the danger that the economy has fallen into a “substantial downturn” appears to have waned, Federal Reserve Chairman Ben Bernanke said last night.
Maybe he only means before November 4th?
Jawboning so he can raise rates later as the economy is getting stronger (not) ,and inflation is the new focus.
Jawboning to prop up the dollar
Deal backed by CalPERS floundering
LandSource venture has filed for Chap. 11
By Alex Veiga
ASSOCIATED PRESS
June 10, 2008
LOS ANGELES – The outlook for housing was still rosy a little more than a year ago when the California Public Employees’ Retirement System invested almost $1 billion in LandSource Communities Development, a real estate project that includes the last major tract of undeveloped land in Los Angeles County.
But falling land values forced that venture into Chapter 11 bankruptcy protection over the weekend, raising questions as to whether investors will ever recoup their money, including CalPERS, a pension fund that provides health care and retirement services for about 1.5 million public employees.
LandSource said late Sunday it was seeking bankruptcy protection in U.S. Bankruptcy Court in Delaware after trying for months to restructure a $1.24 billion debt.
HONG KONG — Chinese stocks plummeted 8.1 percent on Tuesday, their biggest single-day drop in nearly 16 months, leading a broad downturn in Asian stock markets.
The plunge in the Shanghai and Shenzhen markets followed an increase in Chinese bank reserve requirements, increased worries about high food and oil prices, and fears about exports to the United States. The Hong Kong stock market also fell 4.1 percent.
The Nikkei stock market index in Tokyo dipped 1.1 percent, the South Korean market declined 2.1 percent, the Taiwanese market was down 2.5 percent and the Australian stock market fell 2.8 percent.
“…Saturday evening, less than one month after its last hike (May 12), the PBoC surprised everyone (or at least me) by announcing another hike in the minimum reserve requirements. This is one day after the biggest one-day jump in the value of the RMB (0.34%, after two days of decline) in several months, which left the RMB at its all-time high this decade of 6.9230). It is also two days after SAFE announced that it will strengthen its monitoring of capital flows and of foreign currency borrowings by domestic banks.
This is the fifth time the PBoC has raised the minimum reserve requirement in 2008, but unlike the previous 50 bps hikes, this time the PBoC has told banks that the minimum reserve ratio has gone up by 100 bps. The increase will occur in two stages. On June 15 banks will have to increase the minimum amount of reserves they hold against deposits by 0.5% to 17.0%, and on June 25 they will have to raise the minimum reserve again to 17.5%. We are getting very close to the 20% level a lot of economists see as a barrier – beyond which bank profitability begins to suffer greatly….”
Michael Pettis
http://piaohaoreport.sampasite.com/
How will credit tightening in China affect the symbiosis, given the Fed’s preference to tread lightly in the face of the slowdown?
China, Hong Kong Hit By Credit-Tightening Measures
A Wall Street Journal Online NEWS ROUNDUP
Word Count: 737 | Companies Featured in This Article: China Netcom, China Unicom, Advantest, Elpida Memory
Asian markets traded broadly lower Tuesday, led down by Shanghai and Hong Kong, where banking and property shares fronted declines as investors fretted about the impact of the latest round of anti-inflationary measures announced over the weekend.
I wonder if the folks whose lost jobs contributed to the 1/2 pct increase in the unemployment rate would agree with this view?
Bernanke Unshaken by Jobless Rise
By Greg Ip and Sudeep Reddy
Word Count: 770
The surprising jump in the unemployment rate last month — a half-percentage point — hasn’t materially affected the economic outlook, Federal Reserve Chairman Ben Bernanke said in a speech Monday night.
Would this qualify as evidence that downside risks to the economy have subsided along with subprime?
PAGE ONE
Big Loss at Lehman Intensifies Crisis Jitters
By SUSANNE CRAIG and TOM LAURICELLA
June 10, 2008; Page A1
Lehman Brothers Holdings Inc.’s projection Monday of a $2.8 billion quarterly loss deepened anxieties that banks and securities firms will suffer even more than expected as they slog through the credit crisis.
The New York securities firm’s announcement that it expects to report its first net loss since going public in 1994 — along with a flurry of other downbeat market news — caused financial stocks to tumble.
Analysts and investors who had been hoping the worst was over now seem resigned to a different reality — one that likely includes more bad loans, souring securities and much-needed capital infusions in the coming months.
Lehman’s larger-than-expected loss was accompanied, as anticipated, by word that the firm will seek to raise $6 billion in fresh capital. On Wall Street, the loss underscored the challenges Lehman and its rivals must face as they dramatically reduce their reliance on borrowed money. The use of debt, which helped fuel record profits when markets were booming but also led to excessive risk-taking, has come back to haunt them.
As Lehman and other securities firms now curtail their use of borrowed cash, it will be much harder for them to generate the kind of profit growth investors had become accustomed to.
More Pain Ahead for UBS?
By Katharina Bart
Word Count: 574 | Companies Featured in This Article: UBS, Lehman Brothers Holdings, Royal Bank of Scotland Group, Bradford & Bingley
ZURICH — Investors are bracing for more write-downs on mortgage securities from Switzerland’s UBS AG after prices for such holdings have worsened dramatically in recent weeks, and as rival Lehman Brothers Holdings Inc. disclosed a profit warning.
PAGE ONE
Hi, My Name Is Fred, And I’m Addicted to Credit Cards
In the Debt-Soaked Economic Slump,
Americans Find Solace in Support Groups
By JENNIFER LEVITZ
June 10, 2008
This is a “scammer’s” dream. Desperate people all in one room(s).
I like this part of the article:
Then, in early spring, Mr. Wagner started a new romance. The money designated for his credit-card bill began paying for dates instead. Three weeks ago, Mr. Wagner came clean to the breakfast club, confessing that the new relationship was killing his budget. Mr. Pritt suggested Mr. Wagner tell the girlfriend about his financial picture. Mr. Pritt also suggested the girlfriend, who enjoys shopping sprees, could have some spending problems of her own. “I said he should sit down and go over her budget,” Mr. Pritt says. Mr. Wagner decided to talk to his new girlfriend after a St. Louis Cardinals game earlier this month.
She dumped him. She “didn’t even want to hear about budgets or financial responsibility,” Mr. Pritt says. Mr. Wagner says it’s for the best. “She’s too fun loving,” he says, and “I’m too responsible.”
Then, in early spring, Mr. Wagner started a new romance. The money designated for his credit-card bill began paying for dates instead. Three weeks ago, Mr. Wagner came clean to the breakfast club, confessing that the new relationship was killing his budget. Mr. Pritt suggested Mr. Wagner tell the girlfriend about his financial picture.
It’s interesting how many men have been financially ruined by women! If this guy continues his relationship, he’ll end up like the weak-willed husband in the “Suzanne” ad.
I’m just continuously amazed.
I probably buy tons of books, music, movies, etc., and I’m sure I like nice clothes and my martinis more than the next person but what the f*ck?
What on earth are these people buying? I mean, really!!!
“The church keeps fishbowls and scissors up near the stage for anyone inspired to cut up the credit cards on the spot. One who took advantage was Paula Frederick, a cheerful 42-year-old order manager at a phone company, who says her husband ran up to try to stop her from chopping up her Best Buy card. “I about took his finger off,” she says, adding that she eventually succeeded in cutting up the card into pieces.”
I get the convenience of credit cards, but why would someone ever get and use store cards? Doesn’t that automatically signal they can’t afford whatever they were buying at a place like Best Buy?
You often get 10% off when you open a store card.
I used it once when I was buying a very large ticket item. Then I went online, got access to my account, paid it off, and canceled the card.
It’s only worth it for when you’re doing a huge purchase, though, as it knocks your credit rating down a bit.
Of course, they expect you to open the card, buy even MORE than you planned, and then pay for it for the next 3-6 years, giving them more money than the 10% off they gave you.
Even if you bought an item for $1000, that’s $100.
It’s not worth the time and effort for me. Not to mention that when was the last time I bought such a high ticket item in the first place?
The whole thing is nuts. I have a CC. It’s a convenience thing for plane tickets and stuff which is just too annoying otherwise. I also have a spare (you gotta be realistic about these things.)
In practical terms, I don’t think my life would change without it (except possibly the serious hassle factor.)
I’ve used a music store card to buy various music gear, because they offer the “14 months same as cash” deal, where if you pay it off before 14 months go by, you pay zero interest.
Of course, you have to be disciplined enough to figure out how much you need to pay in each month for 14 months, and then do that, without fail.
Online bill paying helps with that - mine lets you set up recurring payments, payment intervals, and how many payments to make. Works great!
Last time when we moved into our first house we used them to soften the expenses. It made sense at the time because there were lots of no-interest-for-a-year furniture deals, etc. on store cards. I think we paid them off early anyway just because it was a pain making the payments each month, and remembering when to finish them off before getting whacked with a couple years of interest.
If the current spate of financial news reports is a sign that downside risks to the economy have abated, then I am sure missing it. My recollection from past recessions is that bad news on Wall Street has a tendency to trickle down to Main Street after a time lag.
Derivatives Trading Is Scrutinized
By MICHAEL M. GRYNBAUM
Published: June 10, 2008
The Federal Reserve moved Monday to overhaul the financial apparatus behind derivatives trading, a regulatory step intended to assure that the failure of a major bank or investment firm would not create the systemic threat seen in March after the collapse of Bear Stearns.
…
An announcement of larger-than-expected quarterly losses at Lehman Brothers contributed to a bleak mood on Wall Street on Monday, where bankers watched financial stocks, which had rallied from five-year lows after the Bear rescue, fall below their March lows.
In another sign of uneasiness, interest rates soared on two-year Treasuries, with yields rising more than a third of a percentage point. It was the largest gain for the two-year rate since 1996.
The leap in the yield meant that investors were selling off their Treasury holdings in anticipation of the Fed raising interest rates in the latter half of the year. Some forecasters predict that inflation will worsen on the back of high oil prices, prompting the Fed to increase rates in an effort to cool off price increases.
How Bernanke’s Banker Rescue Spells Their Demise: Michael Lewis
Commentary by Michael Lewis
June 10 (Bloomberg) — One of the many consequences of the Federal Reserve’s bailout of the subprime-mortgage market is the sudden urge felt by Fed Chairman Ben Bernanke to let everyone know he won’t be making a habit of the practice.
“Once financial conditions become more normal,” he told a Fed conference on May 13, “the extraordinary provision of liquidity by the Federal Reserve will no longer be needed. As (Walter) Bagehot would surely advise, under normal conditions financial institutions should look to private counterparties and not central banks as a source of ongoing funding.’
I don’t know if Bernanke actually believes that his words will make any difference, or if he’s just hoping out loud. But he might as well save his breath because his actions have spoken for him.
This article appears in the June 13, 2008 issue of Executive Intelligence Review.
The Banking Crisis Is Back
by John Hoefle
After more than a month of claims that the worst is behind us, the banking crisis is suddenly back in the headlines. Those who compare the propaganda to the calendar will see a pattern forming, revolving around the fiscal quarters, in which the beginning of the quarter is dominated by the reports of the losses from the previous quarter, followed by a period in which it is claimed that, with all that bad news, the worst must be behind us. Then, as the quarter enters its final month, the propaganda machine begins preparing the population for another round of losses. June is the final month of the second quarter, and right on cue, the bad news reports have begun. The banking crisis itself is not back, because it never went away, and is worse than ever.
Wow, such a great article.
June 11, 2008
Food summit overlooks price-surge ingredient
By Hossein Askari and Noureddine Krichene
…
Recently, in an enlightened analysis in Liberation, Joseph Stiglitz attributed the oil and food crises to the ongoing wars in the Middle East and the subprime meltdown, and to the monetization of their financing. The monetary aspect of explosive energy and food prices can be readily related to the aggressive re-inflationary policy of the US Federal Reserve since August 2007, igniting oil prices from US$65 per barrel to $139 per barrel and food prices to riot levels, causing a sharp depreciation of the dollar, and ominously creating strong inflationary expectations.
The soaring oil and food prices are simply the tax burden imposed by the Fed’s massive bailout of Wall Street investment banks and mortgage lenders. As the Fed creates money to buy bad mortgages and other worthless securities held by banks and brokerage firms, the value of the savings and wages of everyone on Main Street will continue to fall. Moreover, the various housing bills and stimulus packages now passing through Congress will significantly add to the eventual staggering price tag.
PB, that says it all. If I hate taxes now, I will be hating them even more later on. Wow, just wow.
The tax referred to here is not the kind you send to the IRS, but rather the stealth regressive tax of inflation. Those most dependent on savings and wage earnings pay a disproportionate share in order to ensure that asset prices always go up, in the long run.
Let’s keep it simple:
The many… for the few.
“Oh garçon, some 26 year old Single Malt Scotch…and some imported”:
“Neil’s Hot Buttered Derivative Popcorn”
“What’s the ETA for helicopter taxi to Hampton’s?”
Well it is the end of the schoolyear, and my 8 yr old son is bringing more and more home, preparing for last dy of school.
Well going through to sort for trash or to keep i found the economics book they made for the unit. At the end was lyrics to an economics song. i figured I would post some of them and put a smile on some your faces this morning. (Now i just have to get him to sing it to me)
It also occurred to me that many of the FB’s I read about here would have had a better outcome if they had sung it too, hahaha.
When resources are scarce
and you have to choose
you have to make good choices
or you’re gonna lose…
you have to weigh all the pros
you have to weigh all the cons
use your decision tree to help you
it’s a lot of fun
When you have to make a choice
there’s always something that’s tossed
the most important thing to go’s your
opportunity cost
you have to make a choice and give something up
When our income is too scarce
for what we want to consume
then we save that income
til our savings go boom
Please tell me that isn’t from a college level textbook…
Um, no, I mentioned he is 8. 2nd grade.
There have been posts occasionally on this site about children not learning about economics and growing up into the next gen of FBs. Just posted to smile n giggle.
Oh and yeah, reading some of the dumb FB comments and beliefs that have been compiled by benjones for our amusement I think that if some of them had been compelled to listen to a chorus of 8 yr olds sing the outcome may,might, possibly for one or two, been a teensy bit better.
I’ve discovered that 8-year olds like to play with “savings compounding calculators”; another book they might enjoy is “Big Bucks” by Ken Blanchard, but be prepared to spend time helping them to plan and carry out some of the job ideas.
The Emperor’s Dangerous Clothes
Laurence J. Kotlikoff, Boston University
Summary
Laurence Kotlikoff argues that the official United States deficit does not look too terrible, but it is a terrible measure of the government’s economic health: The truth is a $70 trillion long run imbalance that is growing at $2 trillion per year.
Kotlikoff, Laurence J. (2008) “The Emperor’s Dangerous Clothes,” The Economists’ Voice: Vol. 5 : Iss. 2, Article 3.
Available at: http://www.bepress.com/ev/vol5/iss2/art3
“…Bankruptcy is a strong term. But it is apt. Future government receipts don’t cover future expenditures as things stand. Not nearly.
In fact, future U.S. federal expenditures are $70 trillion more than federal receipts,…
what will happen?
Unless we change our path, the nation will default on its creditors—those expecting to receive interest and principal on U.S. Treasuries, those expecting to receive government healthcare, pension, welfare, and other benefits, and those expecting to be
employed by the government. In addition the government is likely to jack up tax rates as well as make money by making money, i.e., by
resorting to the printing press.
Anyone who thinks the U.S. is immune from fiscal meltdown and high inflation, if not hyperinflation, should think again. Too many
countries, big and small, rich and poor, have learned that, sooner or later, fiscal profligacy comes at a very high price. ..”
oops. Unfortunately this is a well written article. Caution it is a 5 pg pdf.
New conundrum:
1) Saying they are more worried about inflation than slowdown risk leads Wall Street traders to conclude FFR rates will be unchanged or go up.
2) Wall Street traders sell stocks in response, leading to lower stock market index levels.
3) Stock market index levels are a leading economic indicator; hence falling stock prices portend a weakening economic outlook, and heightened slowdown risk.
Surprising Conclusion: The stock market will have to keep going up.
June 10, 2008 7:47 A.M.ET
BULLETIN
Futures slide on Ben talk
Comments from Fed Chief Ben Bernanke dampen U.S. stock futures in the early going Tuesday.
As expected, DJIA gains are hanging on by a toenail today.
Gold bugs may as well sell their gold hoard and buy stock, as the stock market always goes up, and gold tends to regularly drop on days when the stock market is hanging on by a toenail (like today).
Mr Stock Bull appears to have developed a lunch time case of indigestion.
Where is the money going when all these asset classes are simultaneously going down?
Perhaps folks are stuffing dollars under their mattresses?
P.S. I am ambivalent on this issue. I only appear to be biased to gold bugs, due to the interference of their religious beliefs with objectivity.
METALS STOCKS
Gold futures fall sharply as dollar rises vs. rivals
By Polya Lesova, MarketWatch
Last update: 12:28 p.m. EDT June 10, 2008
Comments: 60
NEW YORK (MarketWatch) — Gold futures fell 3% Tuesday, coming under heavy selling pressure as the U.S. dollar surged against other major currencies.
Gold for August delivery dropped $28.30 to $869.80 an ounce on the New York Mercantile Exchange.
“I think the issue with gold is the continuation of the rally to the long side into the dollar,” said Zachary Oxman, a senior trader at Wisdom Financial.
“The dollar/gold trade is negatively correlated right now, and with Bernanke’s slew of recent comments related to the dollar and Trichet’s comments about inflation, the trade is strongly propping up the dollar and taking out long side trades in gold and other major market currencies,” Oxman said.
A bunch in gold/silver, a bunch in US treasuries/cash; paid-off mortgage; no car, student, CC debt: Richard Russell’s “balanced portfolio” (apart from absence of the compounding portion of the portfolio - waiting for BP Royalty Trust and Frontline (FRO) to come down - dividends 10-15%).
Great spoof by Britain’s great satirical show “Spitting Image” of the song “Our House” by Madness…
This video first appeared in 1992 and laments the exploding real estate market in Great Britain… Plus ca change…
http://www.youtube.com/watch?v=2t8YTvdYXws
More Wonderful news:
F.H.A. Faces $4.6 Billion in Losses
WASHINGTON — The Federal Housing Administration expects to lose $4.6 billion because of unexpectedly high default rates on home loans, officials said Monday.
Brian D. Montgomery, the F.H.A. commissioner, attributed the unanticipated losses primarily to the agency’s seller-financed down payment mortgage program, which has suffered from high delinquency and foreclosure rates in recent years.
Housing officials said the agency was also hurt by poor performance in its traditional mortgage portfolio. Deteriorating economic conditions led some of its core clients — first-time buyers, minorities and lower-income owners — to default, they said.
link:
http://www.nytimes.com/2008/06/10/business/10housing.html?hp
Unexpected losses? You mean the bailout of the banks by insuring crap loans?
Who’da thunk?
“Deteriorating economic conditions led some of its core clients — first-time buyers, minorities and lower-income owners — to default, they said.”
Glad to hear that it was due to exogenous factors beyond the FHA’s control, and not due to making loans on easy terms to help people buy homes they could not afford. I have noticed that all economic problems which beset the Fed are similarly due to factors beyond their control.
There is carnage in the bond market. Is the committee for real? They just finished lowering rates. Since the rate cutting began back in August, oil went from $80 per barrel to $135. Or, is all this inflation fighting talk just political a$$-covering-hype?
never mind. I Kan Raed. Smirk.
watching the morning news.. People do want more fuel efficient cars these days. Hybrids are a pretty hot commodity. How hot? Given the high demand and low supply, there are instances of people buying them and ‘flipping’ them for a couple thousand dollars profit.
So, instead of the car’s superior gas milage recouping the higher cost of gasoline in around 4 years, it might take 8 years.
There is something peculiar and perhaps even unique regarding the average person’s psyche as it relates to gasoline prices..
It kills me how they are reporting that gas prices are really hurting household budgets. That $1 more per gallon from last year this time is pushing consumers to the brink.
But homes priced 2 - 3 times what they should be aren’t a problem?…
maybe the distinction exists because one is paid for with borrowed money..
Remember the old parable about straws and camels’ backs.
Correct, they aren’t a problem, because nobody has to buy a house.
Also prices must eventually revert to fundamentals anyway.
$1 increase is a 33% increase over a year. Add in the multiplier effect and it is a killer for the weakest members of the pack, as well as people in the transportation industry.
Everyone has their vulnerability point. Since my lifestyle is not heavily oil dependent, a 33% increase isn’t too bad.
For the most vunerable, higher food and gas prices are a killer. Everybody has to eat and most have to drive to or for work, no way of escaping those costs. The Fed is, in my opinion, helpless and can do little to effect those prices and contain that type/form of inflation.
There’s a NY Times article from yesterday about how many people living in rural areas are really hurting with the increase in gas price, because a lot of them drive older pickup trucks and drive 50, 60, 70 miles to work every day. They’re starting to abandon vehicles where they run out of gas, to hopefully go back when they can afford some and put in a few gallons to drive them home. Car pooling is skyrocketing and some people are taking payoffs to leave jobs rather than commute 60+ miles.
We rich city folk aren’t seeing much of this yet, but I have a bunch of friends in rural Maine that are getting punched in the wallet, and they’re pretty upset about it.
Concluding a story about my 55-yo rehab/flipper cousin, whose most recent spec property was a condo in Jupiter FL, in PB County. Have previously reported these facts: after a year of bearish noise from me, he put it on the market a year ago. (He and his wife were actually using it winter 06-07, it wasn’t JUST sitting there eating money.) No offers. Languished on mkt till Nov 07. He took it off to “refresh” listing. On the mkt again Jan 08. Recently, after about 20% cumulative asking price reduction, to $299K, he received an offer of $279K. He told me a likely year-round rent would be $1400, so I told him to take the $279K without countering. Two hundred months’ rent is a high price! Everything was fine till the would-be buyers got appraisals of $250K and $266K. There was a clause in the P&S contract: purchase contingent on getting 80% financing (80% of $279K). The $266K appraisal produced a $212K financing offer from a bank. The buyers claimed a right to get out of the P&S contract, and made a new offer of $263K.
The rest of the story: I told the cousin he could counter if he wanted to, but that if the counter produced no movement, he should just take the $263K. Having dropped out of 10th grade, the cousin was smarter than that! He told the buyers the P&S contract said nothing about an appraisal, only about the 80% mortgage, which would’ve been $224K on the $279K offer. Therefore, the cousin offered to finance the $12K mortgage shortfall himself, charging only the same interest rate as the bank. He told the buyers if they did not take his offer, they would lose their earnest money, as the contingency would’ve been met by his offer. The buyers went for it, and he’s getting the $279K. I apologized to him for (my) having too little faith. He was gracious enough to say that I had helped him anyway — he claimed it was only my lending business that put him in a frame of mind to offer partial seller-financing. Who knows if the loan will perform; but a $12K risk on the 2nd mtg seemed better than an immediate $16K reduction in the price.
Hope he will not build or rehab any more spec properties soon. He lost a little bit of money on this one.
If I do the math right, he came out ahead $4k already…
“He losts a little bit of money on this one.”
Cheap tuition, assuming he got the lesson.
Interesting observation-
MoneyMarket accounts paying yields higher than 3-12 month CD’s. Presumably due to uncertainty over direction of rates?
Yes, lately when I go to the bank (Citi), the tellers always ask if I want to open a CD, but when I check the rates, they are lower than what their money market account is already paying me. It makes no sense.
I’ve been seeing that for the past two months, and I would agree that its due to uncertainty over direction of rates.
Or the tightness of money.
http://finance.yahoo.com/real-estate/article/105215/The-Next-Real-Estate-Crisis
By April, 2009, hundreds of thousands of option ARM mortgages will begin resetting, bringing on a fresh wave of foreclosures
Among the states expected to be worst-hit is already battered California. Today, outstanding option ARM loans in the U.S. total about $500 billion, about 60% of which were sold to California homeowners, according to Credit Suisse. Option ARMs were especially popular in the state, where they were heavily marketed during the boom by such companies as Countrywide Financial in Calabasas, Calif.; Washington Mutual in Seattle; and Wachovia in Charlotte, N.C. Moreover, on top of their ARMs, many homeowners also refinanced their homes, driving themselves even deeper into a debt they thought they could escape by flipping their homes.
I saw on Jim the Realtor’s page an updated Suisse chart that shows the new Option ARM reset schedule taking into account the caps on negative amortization from making the minimum payments. As we all expected, this results in a much accelerated reset schedule, as the above comment insinuates.
This is great news, the faster this stuff happens the less chance there is for anyone to do anything about it but let it equilibrate with much lower home prices.
“…but let it equilibrate with much lower home prices.”
You want fast? 14+ % mortgage rates would make it break the sound barrier: quicker than you can say: “Ooooooooohhhhhhhhhh, mmmmmyyyyyyyyyyy Gooooooooooddddddddddddddddd!
From the, “historical evidence as proof” chapter of the “not so distant past” book of: “Historical repetition, yes, it can happen to you” :
Chapter 5:
How to destroy speculators & lower home prices at the same time, quickly, …very quickly.
here’s a link to that chart:
http://www.bubbleinfo.com/journal/?currentPage=2
it’s Friday June 6 5:50pm
interesting.
Great Stuff. Thanks so much CCC and Chili!
“Deborah Shaw, a 52-year-old systems analyst for Santa Cruz County, Calif. In 2004 she bought a $575,000 two-bedroom house with her boyfriend with a 40-year fixed mortgage. But when she and her boyfriend split, Shaw could no longer make the payments.”
Yikes, if you are still going to be in a series of casual relationships at 52, DON’T BUY ANYTHING.
There is a reason why marriage evolved in every culture over 10,000 years of human history. Darwin would understand what that is.
Note to self: Do not marry the toy boy.
Now, now…maybe they were together for a while. The article doesn’t say she’s in a series of casual relationships. And, believe me, trying to find someone decent to date past the age of 40 is no easy task.
However, I find it amusing that someone at age 52 takes out a 40 year mortgage. Geez, louise, just rent already. Seriously, if I haven’t bought a house by age 50, I think I will resign myself to being a lifelong renter. I’m just over 7 years away from that…
trying to find someone decent to date past the age of 40 is no easy task
For women or for men? There can’t be a shortage of both sexes at the same time.
There can’t be a shortage of both sexes at the same time. No, it’s a shortage of decent people. Or, as Old Lodge Skins said in Little Big Man, “There is an endless supply of white men. There has always been a limited number of human beings.”
“The odds are good, but the goods are odd.”
..
Hey, they were writing $300,000 No Money Down mortgages here in Central FL to unwed Twentysomethings.
I saw it all over the place. There were 24yr olds down here living in empty McMansions, subbing out to roomates to pay the mortgage. Keggers every weekend, hydrobud growing in the closet.
And these were spanking new 4bdr 3ba homes with these tatoo freaks living in them. Many had sheets hanging in the windows.
Of course, the houses are empty now and the kids have mostly moved back in with parents.
I am not kidding. I personally saw this happen probably 5 times already.
..
I saw that too, going door to door in a new crapshack subdivision. Spacey guy with tatts answers the door, I see a big TV screen in the background. Dark living room, never go outside…lawn all dried up, no plants. Meh. Wasn’t sure if they were renters or “owners.”
The future always brings change that one should plan for, but this view of human relationships is way out of whack. Even just a hundred years ago throughout the US and Europe marriage was handled in a far more informal way. Human history extends well beyond 10,000 years, but even though we have information about relationships for only a tiny fraction of that the level of variance is extremely high. Do I even need to mention Utah’s history and reputation?
‘Do I even need to mention Utah’s history and reputation?’
Please don’t. I grew up in Utarrr and know waaaaayyyy more about utterly freakish situations than I’d like to.
“By April, 2009, hundreds of thousands of option ARM mortgages will begin resetting, bringing on a fresh wave of foreclosures
Among the states expected to be worst-hit is already battered California.”
This is like watching one of those slow-moving California land slides heading towards your home, and knowing there is nothing anyone can do to stop it. Some times these earth movements can play out over a period of months, but the ARM reset analogue will continue for a couple of more years.
I predict that five-or-so years from now, the lending industry will see the error of their ways and develop a predilection for fixed-rate mortgage lending (just as they did in the 1930s).
Almost 43 percent of oil and natural gas company shares are owned by mutual funds and asset management companies that have mutual funds. Mutual funds manage accounts for 55 million U.S. households with a median income of $68,700.
Twenty seven percent of shares are owned by other institutional investors like pension funds. In 2004, more than 2,600 pension funds run by federal, state and local governments held almost $64 billion in shares of U.S. oil and natural gas companies. These funds represent the major retirement security for the nation’s current and retired soldiers, teachers, and police and fire personnel at every level of government.
Fourteen percent of shares are held in IRA and other personal retirement accounts. Forty five million U.S. households have IRA and other personal retirement accounts, with an average account value of just over $22,000.
Across the oil and natural gas industry, 1.5 percent of the total outstanding shares of its public companies are owned by the officers and board members of those companies (“insiders”), compared to 29 percent owned by individual investors who manage their own holdings and who are not insiders.
http://www.energytomorrow.org/media_center/Shapiro_Pham_Study.pdf
So…does that mean we are scr*wing ourselves?
or to put it another way, Pogo said, we have met the enemy and they is us!
We are so scr*wed!
Check out insider sales over the last 6 months at xom cheveron and others.
My guess is big oil has lied about their oil reserves to keep the stock price up. They are now using their income to buy shares and hand out dividends rather than invest in oil exploration in order to drive up shares. The insiders are cashing out. Pensions and mutual funds will be the bag holders.
O.k., I need your collective wisdom. I have a friend who inherited a paid for house in Queens. His latest plan is to HELOC $200k or so to fix it up (it was a rental and is basically trashed). He *thinks* the house is worth $700k or so. His plan, or rationale, is that at any point, regardless of the market he could sell for $400k, pay off the house and have $200k cash to buy in a place like Rochester, Syracuse, or Buffalo.
My friend has a notorious history with poor spending, but he has gotten much better. I told him at the onset of all of this (the death of a family member) to auction the house immediately. He was nice enough to hear me out, and agrees that there is a bubble, but still believes every one wants to live in NYC.
I have several friends, family members and acquaintences that will be getting their heads handed to them as a result of the bubble and I don’t feel it necessary to help them out. But this guy is a good guy and is making the fatal mistake of combining grief with financial decisions. At a certain level, he may be able to cash out at some point given the (in my estimation) $200k or so in equity.
Doomed. Save your breath.
My opinion is you’ve probably done enough already.. maybe too much.
Disclaimers notwithstanding, if he follows your advice, whatever the outcome is you’ll be held at least partially responsible.
Don’t give him any advice unless he pays you for it. In cash. Up front. At least, that way, someone will benefit from your consideration.
I often charge beer for my advice. Up front, of course.
It doesnt make any sense Muggy unless he is a professional contractor and will use mainly his own sweat equity. Despite the HGTV lies, except in extremely rare circumstances, you never make profits by renovating. If he wants to live there himself for an indefinite period that may be fine. If his plan is to sell it soon anyway, why not sell it now? Why the misery of doing a renovation for which you will get less than 80 cents on the dollar?
Just think about it. Why would anyone pay you more than 100 cents on the dollar to renovate the house to your taste (or some assumed taste with a limited budget)? Historicially, you get 80 to 70 cents on the dollar for decent renovations if you have contract out. Dumb ppl got lucky in a rapidly appreciation market. In a depreciating market he might get much less than the historical number.
“If he wants to live there himself for an indefinite period that may be fine.”
Yes, that’s his plan. Sorry I left that detail out. And no, he has no useful trade skills.
Thanks. The question is a simple one. Is he willing to go through the hassle and an assumed loss of 20%-30% (assuming 0% appreciation) to have it renovated to his taste for the period he will live there? Only he can make that call. I find that even when I buy property for my personal use, after a few months, my renovation plans get shelved as I learn to live with it as it is. The worst contrary example is replacing good appliances and tile to keep up with the latest trend Home Depot or Lowes is pushing. I will never understand that. How can it be worth several thousands of dollars to ppl to change appliance colors? They will go out of date in a few years anyhow.
I should add that the 20-30% haircut is assuming he sells relatively quickly. If he holds on too long, he is just replacing outdated rooms with outdated rooms and the return should get closer to 0% with each year that passes. In houses with character, updating can lead to negative increased value (e.g., a Victorian or Bungalow with an 80’s kitchen and baths is worth less than one that was left untouched).
“and have $200k cash to buy in a place like Rochester, Syracuse, or Buffalo”
I have a feeling he’s in good company. That’s what’s keeping values up here.
“I have a feeling he’s in good company. That’s what’s keeping values up here.”
Yeah. He’ll be in good company, albeit temporarily. Carrie, the stream of tards has to be dwindling to nothing by now out your way. Aye?
LOL exeter!
Well, since I have at least a year on this lease, I haven’t been out looking at the market as closely. Ya know, husband and kids actually like to see the front side of me and a smile once in a while.
I haven’t seen any trees coming down in the middle of any 10-40 acre expanses lately so that’s positive. And some of those are going into their 2nd vacant year so that’s positive. In my last community some people moved in, did a 1 or 2 year stint and immediately went back to where they came from. Not always the same reasoning reported. Others claimed it was the center of the universe and was a refuge from all that was wrong in the world. Different strokes et al.
As I reported earlier in the week, there is much local discussion of NYS taxes getting to the point of unbearable. It’s been interesting watching the change in sentiment since a sizable proportion of the CNY community enjoys telling people they can move if they don’t like it, I guess in support of higher taxes. (I don’t think they’ll have to wait much longer to notice people are taking their advice.)
What I really expect for this area is a dissolution of the middle class. Like Cape Cod, it will be reduced to the well to do and a support class. I expect most others like all my husbands very successful high school buds to seek calmer waters elsewhere.
Ya know exeter, I have a couple of heat maps I think you’ll enjoy. Scroll down to the median list price vs median sales price for zips in Onondaga and Madison counties.
http://www.trulia.com/home_prices/New_York/Madison_County-heat_map/
http://www.trulia.com/home_prices/New_York/Onondaga_County-heat_map/
Note: Three most popular towns in those counties for Trulia are 13027 Baldwinsville (on) , 13104 Manlius (on), and 13035 Cazenovia (mad)
So the plan is to spend $200K to fix up the house the way HE wants it, in the expectation that someone else will gladly pay extra to have someone else run their life?
This is NYC, not some generic area where “move in condition” is a must. It’s almost the opposite.
Tell him to dump it at market, and get have the option of selling to someone who can’t afford the extra $200K but will put in sweat equity, OR someone who would rather spend that $200K fixing it up as they please.
have the option of selling to someone who can’t afford the extra $200K but will put in sweat equity, OR someone who would rather spend that $200K fixing it up as they please
Very well put! If he renovates it, he automatically knocks out a percentage, perhaps a large percentage, of his potential buyers. And what with mortgage financing problems these days, the lower price you can post, the more likely your buyer can actually get the financing.
Friends of mine just managed to sell a house in Maryland. It was his mom’s house, and like your friend, he (and his realtor) figured it would sell lots better if it were fixed up. Ha! In the time that it took them to spend the $20k on fixes, property prices slumped BADLY in their neighborhood.
They went from ignoring a $325k pre-renovation offer (”Hey, we’re not gonna give it away!”), to a post-renovation listing price of $370k, and it took a full year later before they finally got all the way down to a sale price $275k. Ouch.
Oh wait, add to their losses the $4k in property tax and, $1k in insurance, and $1k in utilities. Double ouch. No, far better to take the first pre-reno offer and run with it.
–
How to Fill America’s Empty Homes?
According to one American international investor Brazil and Mexico have shortage of 12M homes. We have excess of 14-18M homes of which 12M would be nice to be filled. We have a match. Let us allow 12M educated Brazilian and Mexican families in professions where we have a shortage.
Housing problem would be solved in a year or two. The prices will stop falling as soon as the law is passed. Why aren’t Hopebuilders and NAR lobbying for this?
Jas
What on earth makes you believe that educated Brazilian and Mexican professionals would want to come to the US? The lifestyle of the professional in Brazil and Mexico is very pleasant, with beautiful houses and servants to take care them. Would these people give it up to come to someplace where they have to start over, essentially? I don’t think so. The problem is that the Latin American immigrants who come to the US are those who have nothing to lose at home.
This is not a “problem”. This is the natural order of things.
Most people wouldn’t leave home and hearth unless there was a really strong economic motive to do so.
This can’t be a particularly revelatory idea either.
“Most people wouldn’t leave home and hearth unless there was a really strong economic motive to do so.”
Bugs: “eh I don’t think so…”
Pussycat, here meet my Mother…it ain’t always about economics babeeeeeeeeeeeeeeeeeee
http://en.wikipedia.org/wiki/Phyllis_Diller
Oh c’mon!!! You’re pulling out one example against statistics? Gimme a break.
I’m sure there are people who travel the world because they are bored, or in search of adventure, or to escape their stupid relatives, or whatever but the overwhelming trend is one of migration for economic gain.
You really don’t have a sense of humor do you. How old are you anyways… 19? You might want to send a jpg to txchick…she might prove that you’re not a wimp
Exactly, the educated/professional classes in those countries are not the ones in need of houses. It is their poor and unskilled that need housing…and education, and healthcare, etc.
–
In that case let us open it to all countries. I am sure that there are enough educated families in the areas where we have the shortage who are willing to live in America.
In America, growth has been highly correlated to immigration.
Jas
yeah, and if I go out and throw rocks at every window I see, economic activity will skyrocket.
“growth has been highly correlated to immigration.”
Gee, ya think? More immigrants, more population. Like that.
If you had some other correlation in mind, then do be specific.
We don’t have 12 million jobs to fill.
Sure we do if we can pay the new guy less
That’s the cause of some of the millions of empty homes..Illegals pulled out all the equity,and moved back home… Jas, I hoped that was tongue-in-cheek.
–
Yes.
Jas
“Federal Reserve Chairman Ben Bernanke on Monday said the danger of the economy entering a “substantial downturn” had eased in the past month or so despite last week’s unexpected jump in unemployment.”
http://www.usatoday.com/money/economy/2008-06-09-bernanke_N.htm?csp=34
So, there will be no more stimulus or liquidity injections nor will there be any more interest rate cuts. The actual inflation rate is now around 12% depending upon who is talking, and the core rate (2-3%) is toward it’s “upper comfort zone.” Note that with gasoline, housing, crap dollar, higher unemployment, credit tightening, and a consumer pullback, there is no where for the economy to go but down. It seems that the Fed is now in a box and is “damned if it does and damned if it doesn’t.”
“Bernanke’s remarks, prepared for a conference in Massachusetts, underscore the Fed’s growing inflation worry…”
So, the I guess a moderating economy will not reduce reduce or mitigate inflation after all. Darn! It sounded so nice, too!
How about this: We are in uncharted territory. The unprecedented housing run up, the huge debt bubble, the “globalization effect” (which will certainly amplify problems), leaves central banks all over the world in the dark. None of them have the power nor the expertise to really be effective in solving these problems.
Remember when Easy Al Greenspan tried to raise rates and … nothing happened!?! He termed this a “conundrum” didn’t he? What he meant was “I am screwing around with things that I really don’t understand but with the assurance (arrogance?) of an all-knowing expert.” This is far worse than “not knowing what you don’t know.” It also applies to all of the other central banks around the globe. BTW, Al beget Ben so react accordingly.
It’s just too big. This point does not seem to be understood nor appreciated.
Roidy
P.S. This will give globalization a bad rap, and that is not good.
Good points. Every hundred years or so someone gets convinced they have the tiger by the tail - and a major slapdown from nature/reality always followed.
I just got up and made some coffee (came back late from an “event”) It seems the market has some dropping to do (futures down 90).
http://www.bloomberg.com/apps/news?pid=20601087&sid=aHX53vzWvKYA&refer=home
I just had a strange thought after seeing a photo of O putting on a pair of sunglasses. He reminded me of Will Smith in “Men in Black”.
lol
So, if Obama wins, he owes Will big time, as lots of people like Will, and that kind of association (even though subliminal) will help.
CalPers real estate holdings lost 31% last year.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aLQuetPTpRoY&refer=home
They’ve also been shoving a huge chunk of the remaining pie into oil (nothing like chasing hot markets) :
http://www.bloggingstocks.com/2008/02/28/calpers-investments-in-commodities-to-impact-the-u-s-economy/
Just as XOM insiders and cheveron insiders are selling shares.
Things that make you go Hmmm??
Hmm. Seems like electric cars are on their way. GM has the Chevy Volt, and I believe Nissan was talking about introducing something into the USA? Seems like it could be a decent solution for those that live in the suburbs as long as they don’t live more than 20 miles out. It could also put pressure on the oil industry, of course.
All we need is some nuclear power to fire them up, and we’re all set.
Or solar. Fly over the the American deserts and envision thousands of solar panels soaking up sunlight nearly 365 days/year. That, IMO, is the ultimate solution to our energy needs some many years from now.
i was listening to a physicist who had done some calculations about solar.. Due to a few hangups, like nighttime, clouds, four seasons, few suitably sunny areas, and the cost of long distance electrical transmission among other things, solar will never supply more than 25% of our electrical needs.
Thats strange, as I thought only the Sun provided energy to the Earth (excepting Nuclear power). Does he have some sort of “dark” energy theory?
That’s an interesting theory Skip and i’ve heard it before.. Just for fun, lemme ask you this:
Is gravity solar powered? When Earth’s gravity pulls a stray meteor in and it explodes on the earth’s surface, melting rock and releasing lots of energy, can that energy be traced back to the sun?
It would require all the remaining oil in the world to manufacture and install enough solar panels to completely fill the US’s energy needs, according to “Peak Everything”.
The other night at the end of NBC news Brian Williams was tsk-tsking with a reporter babe about the price of oil and said, “maybe we’ll finally get an energy policy…”
I’ve heard that term so often but it means NOTHING to me. What does an “energy policy” do?
Is is supposed to be self-evident?
IIRC the energy policy the U.S. decided upon in the Seventies was to make the U.S. self sufficient for its future energy needs. The Department of Energy was birthed into existence to implement this policy.
Then, IIRC, the price of oil dropped to eight dollars a barrel and all the panic concerning oil was forgotton.
This massive drop in oil prices served to destroy many regions of the country that depended on higher oil prices for their prosperity (such as Houston).
All we need is a sound energy policy and we would be fine.
Solar, wind, nuclear, nat gas, cellulosic ethanol etc. are all fine and well if there is a coordinated policy. We are like a company with half ass policies. A great short.
The NIMBys in MA preventing a wind turbine off cape cod, F’k em, let em go with out electricity. Ditto other NIMBYs nationwide.
Yep, that solar energy will be able to recharge all those electric cars when their owners drive them home and park them overnight!
You use the solar to run things during the day; nuclear, wind, hydro, tidal, and smart use of fossil fuels to run the grid at night. The good thing about it would be that since electrical generation and transmission are way more efficient than internal combustion engines, if everyone has electric cars and charges them overnight, you’re still cutting your total energy use by something like 40% (assuming the power grid is fixed up, which it may not be…).
You still always need base load power from sources like gas, coal, nuclear, and hydro running all the time. But you need less during the daytime if you’ve got solar.
I’m certainly not saying it will be easy, or even that we’ll be successful doing it. We’ve got major adjustments ahead.
“Yep, that solar energy will be able to recharge all those electric cars when their owners drive them home and park them overnight.”
Probably wont get a lot of charging done during the night but there could be a lot of charging done during the day with the cars are sitting in parking lots and driveways soaking up the sun.
Solar power can be stored in batteries that can be redistributed at a later time..even at night..
Preach it hoz!
I’m so sick of the FB mentality that puts their perceived property values above all else.
Then they pretend to be “eco-friendly” by opposing any and all development as they keep us dependent on big oil even longer.
You just described my soon-to-be-former city, Davis, CA.
deflationaryjane,
When is your last day? Do you have a place in St. Louis? Are you driving from CA to MO? Just being nosey.
Speaking of companies with half-assed policies, how about the thousands of work places with unopenable glass windows, such that they heat up like greenhouses when the sun shines, so air conditioning has to be blasted all day despite perfect weather outside? I have to wear a freaking jacket to work every day, despite living in Silicon Valley.
I’m still waiting for a fred flinstone car. Been waiting on that for nearly 30 years now…
I’m still waiting for a fred flinstone car Get an old beater, remove the drive train, cut a hole in the floorboard, and voila! Of course, one must have Fred Flintstone Feet to drive the thing.
Here is a video of a guy that made one in Canada:
http://www.discoverychannel.ca/shows/showdetails.aspx?sid=8102
http://biz.yahoo.com/ap/080610/economy.html
hows that weak dollar policy working ? Still record trade deficits ?
Oil climbing at $137.20, futures at -97, hold on, another bumpy day ahead…
Unless we get an actual emergency rate increase, the economy is going off a cliff. At this point, however, a rate increase might not be enough. It could be interpreted as bullish for oil. The committee blew another one.
Ahhh, the good old “bad” days…
http://www.marketwatch.com/news/story/if-only-were-70s/story.aspx?guid=%7B4D9BD801%2D7274%2D48F3%2DAFE9%2D75DF268CEC6E%7D&dist=TNMostRead
WaMu shares are rising, up 10% - A merger or buyout on the radar?
Ouch.
US trade deficit jumps to $60.9 billion in April, highest level in 13 months
I thought that a much lower dollar was supposed to fix this, by making the X go up and the M go down in
Y = C + I + G + X - M?
How’s that experiment working out?
The deficit through the first four months of this year is running at an annual rate of $707.5 billion, up slightly from last year’s deficit of $700.3 billion, which was a 7 percent drop from 2006.
the worm has turned.. give it time.
Maybe the model was never right in the presence of currency intervention?
A most excellent point.
Would like to help out an *ARM* twisted FB (South Florida) to get help with assessing his situation, and tried to find mortgage counseling services. ( He was promised he could refi, etc etc. I’ll try also to post this question in a Fl thread asap. I do not know any more details nor do I want to. Good guy who wants to face the music, after being a tad naive, it seems.)
Most counseling services seem to be non profits backed by lenders. One is called ‘Clearpoint’, they are national, not sure who is behind them.
Does anyone know where to get a dose of mortgage reality. Is it better to just go to any accountant?
http://www.995hope.org/
Thanks. ‘Hope’ is government, maybe / probably banks. Just imagine: if I have a difficult time finding a phone number to get advice ‘which can be trusted’, what about the various FBs.
PAUL B. FARRELL
‘Lazy Portfolios’ for stagflation 2008-2018!
What’ll you do if this market trades sideways … for 10 years?!
By Paul B. Farrell, MarketWatch
Last update: 10:06 p.m. EDT June 9, 2008
Comments: 49
ARROYO GRANDE, Calif. (MarketWatch) — Stagflation till 2018? I can hear you screaming: “Ten years of no growth? Plus inflation? Plus high volatility in a narrow trading range?” You’re crazy!
…
Even if we don’t get 10 years of bad news we know 2008 is already bad and getting worse. In his latest Insight Newsletter long-time economist and Forbes columnist Gary Shilling reminds us the U.S. recession is unfolding in four phases: “Two Underway, Two Just Starting.” First two: The housing disaster and the Wall Street meltdown will continue at least through 2010. “Phase 3, a massive consumer retrenchment, the worst since the 1930s” is just kicking in. “By year’s end, Phase 4 should start as falling U.S. consumer spending cuts the imports that fuel foreign growth.”
IRWIN KELLNER
If only this were the ’70s
Commentary: Stagflation is back, but the outlook is grimmer this time
By Dr. Irwin Kellner, MarketWatch
Last update: 11:05 p.m. EDT June 9, 2008
You see, it’s very important to use your HELOC money wisely……
http://www.independent.co.uk/news/uk/crime/wife-jailed-for-hiring-hitman-843895.html
This surreal article was the main headline on Yahoo for a while yesterday. Check out the hottest real estate markets in the US, and their projected growth rates for the next year - all lower than the rate of inflation!
http://promo.realestate.yahoo.com/promo/10-fastest-growing-real-estate-markets.html
10 Fastest-Growing Real Estate Markets
By Money Staff, CNNMoney.com
Jun 9th, 2008
The housing implosion is nowhere near over. In 75 of the 100 top U.S.
cities, prices are expected to fall in the next 12 months according to
Fiserv Lending Solutions.
The S&P Case/Shiller Home Price Index, which tracks 20 of the largest
housing markets, showed prices plummeting by 12.7% in the 12 months
ending February. That’s the biggest fall since the index began
tracking prices in 2000.
Meanwhile, foreclosure filings more than doubled in the first three
months of 2008, spiking 112%. So far this year 156,463 families have
lost their homes to repossessions. Many markets won’t hit bottom till
late 2009 or even 2010.
Gallery: 10 Homes for Sale in Hot Markets
Pity the residents of Stockton, Calif., whose homes are likely to lose
more than half of their 2006 value. But if you happen to live in Texas
– or any of the other cities below — congratulations: The housing
tornado passed you by.
1. McAllen, Texas
12-month forecast: 4%
Median home price: $109,000
One year price change: 2.1%
Five year price change: 23.3%
Change in foreclosure rate: 23%
2. Rochester, N.Y.
12-month forecast: 2.7%
Median home price: $121,000
One year price change: 3.4%
Five year price change: 20.1%
Change in foreclosure rate: 5%
3. Birmingham, Alabama
12-month forecast: 2.7%
Median home price: $156,000
One year price change: 2.9%
Five year price change: 29.4%
Change in foreclosure rate: 20%
4. Syracuse, N.Y.
12-month forecast: 2.6%
Median home price: $126,000
One year price change: 0.8%
Five year price change: 29.5%
Change in foreclosure rate: 27%
5. Buffalo/Niagara Falls, N.Y.
12-month forecast: 2.4%
Median home price: $105,000
One year price change: 1.6%
Five year price change: 24.5%
Change in foreclosure rate: 14%
6. New Orleans, La.
12-month forecast: 2.2%
Median home price: $158,000
One year price change: 1%
Five year price change: 43.7%
Change in foreclosure rate: 49%
7. Scranton, P.A.
12-month forecast: 2.2%
Median home price: $128,000
One year price change: 7.2%
Five year price change: 41.1%
Change in foreclosure rate: 8%
8. Grand Rapids, Mich.
12-month forecast: 1.9%
Median home price: $124,000
One year price change: -3%
Five year price change: 8.3%
Change in foreclosure rate: 37%
9. Baton Rouge, La.
12-month forecast: 1.9%
Median home price: $170,000
One year price change: 5.7%
Five year price change: 38.3%
Change in foreclosure rate: 14%
10. El Paso, Texas
12-month forecast: 1.8%
Median home price: $134,000
One year price change: 6.9%
Five year price change: 51.9%
Change in foreclosure rate: 32%
Yeah, whatever. What do all these places have in common? No-one in their right mind would want to actually live there. My wife’s family come from Rochester - trust me, it’s hard to imagine a much worse place to live.
Raised in Rochester. Not a bad place to live if you have special coping skills. As teenagers my friends and I would explore abandoned buildings and take black and white photos of the “landscape.”
I’m a fan of grey, broken and abandoned.
‘I’m a fan of grey, broken and abandoned.’
Me too! I used to go wander around in and photograph the ghost towns and old pioneer cemeteries around where I grew up, down in southern Utarr. I loved those places.
Right here on my desk I’ve got a copy of the book ‘Haunter of Ruins’, by Laughlin. One of my favorites.
I went through the deep south last summer and photographed a bunch of cemeteries. What a trip.
Some people rip on the southeast for various reasons, but damn, the cemeteries are beautiful. If my plans didn’t involve my friends dumping my corpse in the Everglades, I’d gladly be interred in any of the cemeteries I visited.
Olympiagal,
Is your “Utarr” usage somehow related to piracy? I can’t help thinking of you sporting an eyepatch and parrot, peglegging through the Ruins…
Granted, I might have low expectations living around Detroit.
Still, I’ve been to Rochester twice in the last month and will be there again this weekend. As I was trying to make my way downtown last month I recall seeing a couple streets I might not want to drive down, but overall I didn’t think it was so bad, at least the parts I visited. It was better than I had envisioned.
Blano, I think Detroit is reserved as one of those *special* unique places that other rust belt dumps can’t live up to. …laughing>>>>
Leeds
Talking About RAROC: Is “Financial Innovation” Good for Bank Profitability?
June 10, 2008
“…The bottom line is that when investors look at financial stocks and particularly the largest US banks, the question must be asked: Are any of these business models sufficiently robust and stable to warrant a place in any portfolio allocation, especially a portfolio that requires investment-grade assets? Our answer is this: We test bank safety and soundness at 1,000bp of aggregate loss or the low end of a “BB” rating.
The Q1 2008 RAROC and EC results for the top 100 US banks generated by IRA suggest that many of these institutions do not meet that investment grade test, regardless of the nominal external default ratings they may have obtained from conflicted Sell Side ratings agencies. What does such an assertion suggest for the target internal ratings methodologies within Basel II, rules which global regulators claim will enhance bank safety and soundness? ”
Institutional Risk Analytics
RAROC =Risk adjusted return on capital
EC = Economic Capital
The obvious answer is that banks won’t be profitable for years.
Was there supposed to be a link associated with this?
Greenspan called option arm and neg-am loans, CDOs, SIVs, and other Wall Street chicanery “innovative”.
I wouldn’t put my savings into a financial instrument I didn’t understand and which the risks were not completely vetted. Basel II will be great to foster more cross-border transparency, but it still won’t fix level 3 shadow banking, IIRC.
http://us1.institutionalriskanalytics.com/pub/IRAstory.asp?tag=286
well, cr*p….I put a couple of links in my reply, so no idea when it will show up on here. Sorry.
hoz,
The interesting thing about your article is that it doesn’t talk about the effects of leveraging. Clearly, if you are leveraged 30:1, as some of the hedge funds were due to the abuse and underestimation of tail risk (i.e. the now liquidated Carlyle Capital Corp.).
There was a concomitant huge growth in asset backed securitization (Charts here and OTC trades mentioned, and that’s good as long as there is transparency about the risks.
Don’t you think that for at least the past decade that traders got too complacent when credit markets were handing out easy moneyl, external rating agencies were asleep at the wheel, and it was hard to lose anyway with the market (almost) always heading up?
I agree with you, btw…both investment and commercial banks won’t be profitable for years, if they don’t go under in the short term. But they brought this on themselves.
Leveraging is standard operating procedure. I am not sure I would use the term ‘complacent’, most banks used a risk analysis tied to credit. Goldman, PIMCO and a few others use a Value at Risk (VAR) program eg. Sharpe Ratio is a VAR.
The problem is one of bias, as housing buyers were sucked into ‘prices never go down, banks were sucked into herd mentality. I posted this last night. A way to determine real value? maybe, not sure of a back test yet.
Damned lies, statistics and fair value
By Romil Timbadia
Published: June 8 2008
“…They found that as individuals move toward herd behaviour, the probability distribution changes from the normal bell curve, with expectations clustered around the 50/50 level, through a tipping point, where there is an equal likelihood of a balanced or unbalanced market of expectations, to a position where a market is almost certain to be unbalanced in its expectations. At this extreme, the whole market has the same view, so the balance of expectations is polarised one way or the other.
Mr Kelly believes this work shows that market prices can be based not only on fundamentals, but also on the amount of “herding” or correlation in crowd behaviour. The implication is that market prices can, and do, move away from fair value equilibrium when the behaviour of market participants becomes herd-like. …
It breaks free from traditional economics and could be a precursor to the emergence of new methodologies used to produce models that estimate the amount of internal divergence (from fair value mean) in any market subject to human expectations and biases.
Such models could then be used by banks, hedge funds, accountants, regulators and central bankers to calculate more realistic values for institutional risk and associated capital requirements.”
FT
http://www.ft.com/cms/s/0/2005e96a-33f1-11dd-869b-0000779fd2ac,dwp_uuid=b2e7f792-b6a6-11db-8bc2-0000779e2340.html
The math in the original paper looks good, now to figure a way to back test.
Tail risk with 30:1 leveraging was definitely NOT standard operating procedure, but was becoming wildly popular with the hedgers. This was because VAR couldn’t be applied to it, therefore escaping capitalization requirements for various bank spinoffs.
As Prof Bear points out, it has been monotonically increasing.
One bad tail risk bet can wipe out your entire portfolio (i.e. housing), though upside is that the leveraged profits can be enormous. They were, for awhile.
Not for the faint of heart, and another sign of Wall Street excess that we will all answer for.
“As Prof Bear points out, it has been monotonically increasing.”
This is systemic risk at its worst, aided and abetted by free too-big-to-fail insurance from well-meaning financial regulators.
“…as some of the hedge funds were due to the abuse and underestimation of tail risk…”
Tail risk is monotonically increasing in the number of hedge funds.
“Tall Risk” - hey, Hoz, now THERE’S a name for a beer, wanna invest in a brewery with me?
Now that is funny…
you could have
Tail Risk - A heavy Ale
Tail Hook - A Porter (to do your work)
Tall Tail *.*- The quart versions
Tail Wagging - A wimpy Pilsner
Bull Tail - A big butt
Cat Tail - A Lady’s brew
LOL!
OK, you’re VP of Marketing, the talent.
Me, I get to be Head Taster.
OK, HBBers, send investment $$ and we’ll name a brew after you!
Ben gets complimentary brews anytime he wants.
Les sanglots longs des violons de l’automne
Blesse mon coeur d’une langueur monotone.
D-Day? Wasn’t that the message to the French Resistance?
You got it!
Prof Bear likes to bait gold bugs - I myself feel that the gold price should be a monotonic function (sideways or, in the case of gold, up), but it’s just not.
Is it possible that since August when the Fed started cutting rates and opened the discount window, Wall Street took the money they received in exchange for bad mortgage paper and ran oil from $80 to $136 ?
That’s what I have thought all along. Helicopter drops of cash are fungible.
Secretary treasury Paulson said no his bankers pals are not cleaning up on oil using cheap FED money…. plus there is no inflation and the dollar is strong……..
Plus subprime is contained.
Plus,
I have a bridge to sell you. Name the bridge
The Rainbow Bridge.
It would look so pretty in Wisconsin.
http://afe.easia.columbia.edu/song/econ/manufac/manu3.htm
Hoz,
That was fascinating.
Thank you for the link. I’ve forwarded it on to my brother.
click on that link hit explore this scene and point at #5, I think they`re carrying the hedge fund guy away!
Is there a hedge fund guy under that bridge?
–
Federal Reserve and ECB are in no mood to save us from the consequences of our debt
By Ambrose Evans-Pritchard
Last Updated: 12:58am BST 10/06/2008
Fetch your tin helmets once again. The European Central Bank is opting for a monetary purge. So too is the US Federal Reserve, now ruled from Dallas.
Über-hawks and Cromwellians have gained the upper hand at the great fortress banks. Whether or not they admit it, both are embarked on policies that must lead to retrenchment across the Atlantic world.
The City mood turned wicked as the full import of this policy switch sank in last week. On Wall Street, the Dow’s 396-point dive on high volume late Friday had an ugly feel.
“There is now the distinct possibility of a simultaneous sell-off in global bonds, equities and commodities,” said Jonathan Wilmot from Credit Suisse.
ECB chief Jean-Claude Trichet has “signalled” a rate rise in July to combat 3.6pc inflation, much to the fury of Paris, Madrid, Rome, Lisbon and Dublin. It is a perilous path for Europe’s monetary union.
…
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/09/ccview109.xml
Jas
Squatter’s report (whether you want it or not):
Morning from the Squatter’s Inn B&B (beer and breakfast).
My first night here was uneventful, had dogs on their little comfy beds all around my cot in case the badges came - they’d be wondering where their ankles went.
Actually, not worried about that, but I did have a bit of trouble with the cot. It was really really uncomfortable. At 1 a.m., I was lying there thinking, well, this is the squatter’s life (actually, I broke out in song: hey diddley dee, a squatter’s life for me…), when it occurred to me that my landlady had left some bedding upstairs. So I went to see if I could find something to put under me. Sure enough, a big foam pad, which transformed my night into great comfort.
Only thing is, it had the slight smell of cheap wine, which I decided added to the ambiance. I mean, after all, that’s what squatting’s about, gotta do this right.
But from now on, I’m going to sleep in my nice Lance camper out in the back. And like I said yesterday, my next squat’s gonna be nicer than this one, no frige, stove, or washer/dryer (my landlady stole them then locked the door). Hey, did you notice the term “squat”? Starting to get this thing down, gotta talk like that if I wanna be authentic and all.
Actually, I think I’ll leave as soon as this anarchyology project is over. Just no other places here for rent.
So there you have it, Mr. Greespan, the feet on the street report on what effect your economic policy has had on the common man (er, woman). Come on out, Al, bring some beer, I got a spare cot. But Ben has to bring his own if he comes.
Maybe your landlady will come back and strip the copper wiring out of the walls? If this happens I think I would leave.
She probably would if she were smart enough to think of it…
I do have photo evidence of what she took - before and after with date stamps. Might come in handy someday, I don’t know…
It has occurred to me to change the locks, but she lives 100 miles away, so she probably won’t be back.
Something that occurs to me…is there any risk that she could try to pin the missing stuff on you?
No, she’s from a small town I used to live in and we know a lot of the same people, even though she and I had never met. My references are impeccable, I was on Search and Rescue and know all the law enforcement people and I’ve been involved in a lot of service and community work. She knows nobody would believe her, plus, what motive would I have to steal a bunch of junk, especially when I need it to live here? It’s not worth even selling, it truly was sad she even bothered to take it, old appliances. And the bank doesn’t even know I’m here and I’ll probably get this project done and be gone before they realize they own yet another house.
Ahhh, the insanity of trying to blame your problems on someone else. She took out 100k, blew it in two years, and now I think she’s just trying to get back at the bank, who doesn’t even know what’s going on.
Your saga is pretty fascinating, losty.
I’m glad you’re a cheery and ‘authentic’ squatter, but it sucks that you don’t have a stove anymore.
If I was handy I’d come document your story. And of course I’d bring much beer, which might save my ankles from your loyal guards.
Keep us all informed, as I know I for one am deeply interested. Also, best of wishes to you, you squatter you.
Just talked to the neighbors, they saw her taking the stuff, I have witnesses…
Thanks, Oly!!!
But not to worry, I have my handy dandy propane campstove. As an archeologist, I’ve camped out so much that this is actually kind of luxurious in comparison, I mean, hot showers every morn!
My happiness quotient is pretty high - you know, the number of days you camp out over the number of days in the year. Mine’s about 300/360, cause you need a few days here and there for things like a nice luxurious bath with Dead Sea salts and a hot cuppa tea.
archeologist my son loves shows on digging dinosaur bones maybe he will become an Archeologist some day?
Or is that Palentologist ? I told him all the dinosuar bones are in Utah and Montana
Paleontologist. One of the best museums in the country is run by the little College of Eastern Utah in Price. Great paleontology bunch.
Largest One Day Increases in 2-Year Yield
“Yesterday’s 14% increase (33 bps) in the yield of the Two-Year US Treasury Note represents the fifth largest one-day increase since 1977. We looked to see how stocks have historically performed following similar large moves. As shown in the table, returns have generally been positive as investors continue to move out of bonds and into stocks. Even more interesting, however, is that five of the ten largest one-day increases in the yield have all come this year.”
http://bespokeinvest.typepad.com/bespoke/2008/06/largest-one-day.html
5 of the 10 largest one day moves have happened this year is astounding. This is market insecurity at its finest.
Hedge fund swindler vanishes before he could be imprisoned.
WHITE PLAINS — A car abandoned on a bridge over the Hudson River — with the phrase ”Suicide Is Painless” written into the dust on its surface — is registered to a hedge-fund swindler who was supposed to report to federal prison, state police said Tuesday.
One dyin’ and a buryin’
One dyin’ and a buryin’
Some cryin’
Six carryin’ me
I wanna be free.
Sad, even though self-inflicted, still a lost life.
But it could be a ruse.
‘Sad, even though self-inflicted, still a lost life.’
Oh, I don’t know. It seems pretty clear that some humans are simply a waste of good oxygen, is all there is to it. Some are even worse than a waste. I don’t know about this guy, but I imagine he’s probably more productive as a bacteria buffet, if, as you point out, he even is and didn’t just skip.
My guess is that he is Dubai with Ken Lay getting plastic surgery and sipping on umbrella drinks.
If I’m an investor he ain’t dead until I see the body.
“Every institution has the right to lose all the money they want, but no-one has the right to impose their dysfunctionality on others in the system.”
Vikram Pandit (CEO Citigroup)
June 9, 2008
http://www.smartmoney.com/news/ON/index.cfm?story=ON-20080610-000292-0853
Mr. Pandit’s quotes are classics.
“Functional consistency is the key, and capital consistency should follow functional consistency.”
“…but no-one has the right to impose their dysfunctionality on others in the system.”
Actions speak louder than words.
Read the rest. He’s just flappin’ his gums to avoid the spectre of regulation.
Fannie Mae spent nearly $1.4M lobbying in 1Q
Tuesday June 10, 1:11 pm ET
Fannie Mae spent nearly $1.4 million lobbying on federal oversight, mortgage issues
http://biz.yahoo.com/ap/080610/fannie_mae_lobbying.html?.v=1
you would think this money could be put to a better use? after this all unfolds i hope this lobby crap stops! it should have been banned a long time ago!
Another good reason to wait until 2009 to even begin to think about buying a U.S. home. Before this oil price blowout is over, the relative price of homes located any distance away from jobs centers may have dropped by an unexpectedly large amount in response to unaffordable gasoline prices.
Gazprom predicts oil will reach $250
By Carola Hoyos in Deauville and Javier Blas in London
Published: June 10 2008 09:00 | Last updated: June 10 2008 13:22
Gazprom, Russia’s gas monopoly, on Tuesday predicted oil prices would reach $250 a barrel in 2009.
“The foreclosed Northwest Side home next door to Brandi and John Comeau is more than an eyesore.
The couple said it led to their dog’s death.
The property, directly east of their home in the 5100 block of West Albatross Place, has sat vacant for about a year. For about the last month, the home has been infested with two large bee nests, said Brandi Comeau, 27. ”
The dog stuff is sad, but I was amused that the declining value houses in question are on Albatross Place.
http://www.tucsoncitizen.com/daily/local/86634.php
Transcript
Science: Worker Burnout and Taking Risks
Shankar Vedantam
Washington Post Staff Writer
Monday, June 9, 2008; 1:00 PM
Washington Post staff writer Shankar Vedantam, who writes the weekly Department of Human Behavior column was online Monday, June 9 at 1 p.m. ET to discuss this week’s Science Page story about why workers feel burnout.
…
Winston’s work speaks to a term that has come up in the news recently — moral hazard. The term refers to the propensity of people to take on more risk than they ought to when they feel they have a safety net. Potential examples would range from the bailout of Bear Stearns, the big Wall Street firm that was deemed “too big to fail” and the dilemma faced by Democrats on whether to seat delegates from Michigan and Florida in the presidential primary race, when those states violated DNC rules as to when to hold primaries. Penalizing people when they violate the rules strengthens the rules, but makes people upset, as we saw in the political example. Bending the rules, as we saw with Bear Stearns, keeps people happier, but potentially makes it more likely that other people will also break rules because they suspect they will not be penalized … I’ll start us off with some initial questions for Dr Winston.
Hoz,
It looks like you were right about not buying shares for the Ford tender offer. From the WSJ today.
“Investors stampeded to Kirk Kerkorian’s tender offer for 20 million Ford Motor Co. shares, with nearly half of the company’s 2.24 billion shares outstanding being offered for purchase well above current market values.”
It does make Ford attractive to buy on the breakdown around $5.50 (if it gets that low.)
Why 5.50 and not, say, 5 even (which would be a double bottom it looks like)??
At $5 or $5.50 Ford is a cheap option. To try milking the last $0.50 from a position risks missing the position completely. Greed is fine, but being so greedy that you miss the move is never worth it.
Nice evening all!
Thank you!!!
“…but being so greedy that you miss the move is never worth it.”
What the price of watching a “disaster” movie in slow motion?
More or less?
“…assumes interest rate increases and includes low earnings expectations.”
Hey, was Abbey on the same Yale “cheer-leading” squad as Shrub?
“We got the spirit, YES we do, we got the spirit, how about YOU?”
http://www.reuters.com/article/InvestmentOutlookMid08/idUSN1033697920080610?pageNumber=2
This is kind of an old article on squatters and may have been posted here before, but I think it’s kind of interesting, for some reason…
http://tinyurl.com/5rdx74
Here is an excellent reason to buy stocks now. Once the dark clouds of pessimism clear up, stocks will shoot to the moon.
MARKETWATCH FIRST TAKE
Optimism hits new lows
Commentary: It’s not going to be easy to shake the pervasive gloom
By MarketWatch
Last update: 10:01 a.m. EDT June 10, 2008
BOSTON (MarketWatch) — Let’s just call it what it is.
The Investor’s Business Daily Economic Pessimism Index reached a new zenith this month, and every other measure of the consumer’s flagging confidence is likely to follow suit later this month.
The IBD/TIPP Economic Optimism Index (that’s its real name) fell below a reading of 40 in June, dropping almost 10% from May to reach the lowest point in its 89-month history. Index readings below 50 represent pessimism, and this benchmark — which is important because it has a good track record of foreshadowing confidence indicators put out later each month by the University of Michigan and The Conference Board — has been in negative territory so long they should re-name the index.
Yes, but the trick is forecasting the duration of the pessimism. Something tells me this is more than just a case of June gloom.
The only problem is the market has not fallen to reflect this degree of pessimism. I think we have another March in store for the US maybe in the fall but more likely after the election.
“…more likely after the election.”
DING DING DING!!!
But, but, but these guys think all will be fine! And we all know the value and accuracy of a prediction from a group of economists.
U.S. slowdown to be long, but no recession: survey
http://news.yahoo.com/s/nm/20080610/bs_nm/economy_bluechip_dc
“The consensus now suggests the downturn in economic growth will be less steep than earlier feared, but the subsequent recovery in growth to its trend rate will take longer than hoped a few months ago,” the newsletter said.
Inflation and commodities
Published: June 10 2008 14:38 | Last updated: June 10 2008 19:17
The drumbeats have become too loud to ignore.
Ben Bernanke, chairman of the Federal Reserve, now says he will “strongly resist” intensifying inflationary pressures. Gazprom on Tuesday predicted crude oil will reach $250 a barrel next year. Admittedly, that is a bit like Colonel Sanders forecasting a boom in fried chicken futures. But Gazprom is not alone. And in his latest speech, Mr Bernanke effectively said the oil bulls might be right.
In doing so, Mr Bernanke has at least repudiated the Fed’s earlier erroneous stance that futures markets signalled commodities prices had peaked. The bigger question is whether he intends to act. On that, markets are divided. Fed Funds futures now imply a near certainty of two 25 basis point rate increases by November. Meanwhile, crude oil, rising even higher, appears to be calling the Fed’s bluff.
“Fed Funds futures now imply a near certainty of two 25 basis point rate increases by November.”
What is keeping the U.S. stock market from pricing this in?
I’ll explain once I fix this annoying tear that has developed in my tinfoil hat.
test message
Consumating with profits:
We obviously cannot impose windfall profits taxes on big oil, nor can we increase the federal gas tax.
Where does the moneys go?
Aint no profits when I keeps the moneys.
signed,
coverty debt structured oil slave betroved to junk bond market monkey vigilante.
I cant even take a week off….
I’m refinancing my HELOC to save money, get it down to 2.99 from 4.99 on a balance that is 3% debt to loan. Everything is the same as last time, except they want me to fill out an IRS 4506-T form unlike last time. Blank, which googling (and the form’s language itself!)shows me should *not* be done. They say it’s new company policy to do this form.
Other than that, all of the forms I’ve filled out and signed are the same. Assuming they fill in the blanks as the law requires, are there any other reprecussions against me filling out this form? This is not a stated income loan, nor am I working with fake identification and credit ;). My savings would be (5000% savings to debt) on the current debt. I don’t foresee a financial disaster personally, nor am I concerned about them cutting the loan arbitrarily to only the amount of the current debt. There are no guarantees I’m aware of that will keep their end of the line open at the current potential debt amount.
What say you? Thanks!
Painting the yards green. Lol :
http://www.latimes.com/news/local/la-me-outthere6-2008jun06,0,5375138.story
Alright - 2 for 1. Hedge fund manager, while driving himself to prison (!!!), possibly faked suicide :
http://www.cnn.com/2008/CRIME/06/10/suicide.is.painless.ap/index.html
Now the financial situation is getting interesting!
Regulation model has failed, says Merkel
By Lionel Barber, Bertrand Benoit and Hugh Williamson in Berlin
Published: June 10 2008 23:30 | Last updated: June 10 2008 23:30
Continental Europe should take the lead in devising new rules for financial markets because the Anglo-Saxon model of regulation has failed, Angela Merkel has told the Financial Times.
The German chancellor said ahead of next month’s Group of Eight summit, which is expected to discuss new regulation, that the largely “Anglo-Saxon” organisation of financial markets undervalued the growing weight and importance of the eurozone.
Does anyone have the tally handy of how much money Continental European banks lost on subprime?
2nd tuesday june 2007:
Comment by txchick57
2007-06-12 07:25:03
20 dma on the indices is now resistance, was support.
Note the comments about mark to market, my rationale for wanting to have some long dated puts in the brokers.
In the money.
Comment by Hoz
2007-06-12 13:05:53
Yes and pretty soon the money markets will be paying over 6% with US T bonds paying over 6%, when US T-bonds get up to 8+% yield - then I might consider buying. I don’t ride real estate down, I don’t ride stocks down and I don’t ride bonds down. There are many low risk investment opportunities, why gamble with a US T Bond?
going in the money.
What’s another $10 bn in losses to a bunch of investment banks that have already written down $10s of bns in losses?
Banks face $10bn monolines charges
By Aline van Duyn and Francesco Guerrera in New York
Published: June 10 2008 23:32 | Last updated: June 10 2008 23:32
Citigroup, Merrill Lynch and UBS, the banks most exposed to Ambac and MBIA, could face further writedowns of up to $10bn after the bond insurers last week lost their fight to retain their triple A credit ratings.
Wall Street executives said they had been wrong-footed by the timing of the downgrades by Moody’s and Standard & Poor’s, saying they had not expected the rating agencies to take action for several months after affirming the triple A ratings of Ambac and MBIA in February and March.
Citi, Merrill, UBS Face Monoline Losses, Whitney Says (Update1)
By Jeff Kearns and Bradley Keoun
June 9 (Bloomberg) — Citigroup Inc., Merrill Lynch & Co. and UBS AG may post losses of $10 billion on bond insurance after MBIA Inc. and Ambac Financial Group Inc. lost their top credit ratings, Oppenheimer & Co. analyst Meredith Whitney said.
Md. homeowner charged in arson-for-hire
“According to the criminal complaint, McMahon, who had an office in his home, was having financial difficulties and arranged for someone to set fire to the house in exchange for $10,000. On Jan. 28, the house burned and a firefighter was hurt when he fell through the floor to the basement.”
Your Money
Housing Bailout Plan Sparks Anger for Some
by Curt Nickisch
All Things Considered, June 10, 2008 · Congressional leaders hope to wrap up a bill soon that would slow the pace of foreclosures. They’re at their highest level since 1979. The bill has strong support from Democrats and quite a few Republicans. But the government bailout of borrowers and lenders is also meeting resistance — from renters and even other homeowners.
Some angry renters and homeowners who aren’t behind on their payments say there’s a double standard at work in efforts to keep delinquent borrowers in their homes. They argue that by bailing out lenders and borrowers who made foolish decisions, the government is putting taxpayer money at risk.
Curt Nickisch reports from member station WBUR.
In the sidebar of LostControl’s link to the Federal Reserve/EU article was this:
Petrol sales fall 20pc as drivers feel the pinch
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/11/npetrol111.xml&CMP=ILC-mostviewedbox
This was one of the more interesting interviews I have heard Kai Ryssdal conduct. Unfortunately no transcript is available, but the part that grabbed me was that Stumpf expressed his objection to taxpayer funds being used to clean up the mortgage mess, unless there was a risk to the global financial system (e.g., BSC blowup).
My personal take: Wall Street benefits immensely the presence of too-big-to-fail financial firms with shady connections to the derivatives market, as this state of the world legitimizes injections of taxpayer funds to the financial sector during the monsoon season of the business cycle.
Tuesday, June 10, 2008
Keeping above the subprime mess
John Stumpf
Banks have made bad decisions and lost billions in the credit crunch. In this installment of Conversations from the Corner Office, Kai Ryssdal talks with Wells Fargo CEO John Stumpf about how his bank has been riding out the subprime storm.
I would love it if this bill made it to the President’s desk, only to be vetoed because it is patently unfair and flies in the face of conservative values. I might even vote a straight line Republican party vote in the next election if that happened.
US lawmaker targets housing rescue bill by July 4
Mon Jun 9, 2008 7:03pm EDT
WASHINGTON, June 9 (Reuters) - Major legislation to save hundreds of thousands of homeowners from foreclosure remains on track to go to the White House before July 4, a senior U.S. lawmaker said on Monday.
Senate Banking Committee Chairman Christopher Dodd and other lawmakers have said for weeks they want to agree on a final bill and send it to President George W. Bush by July 4.
Market Scan
Moody’s Lowers Homebuilders
Maurna Desmond, 06.09.08, 6:05 PM ET
Homebuilders were taken down a peg by ratings agency Moody’s on Monday. Investors, much like the agency’s ability to gauge risk, were fickle when it came to the downgraded outfits.
Moody’s downgraded six homebuilders citing cashflow problems and bleak earning prospects in the near-term. These firms have been hurt by the falling home prices and a tight lending environment both of which have contributed to a glut of difficut (SIC) to sell, and costly to maintain, inventory of new homes.
Wildfires in U.S. foreclosure capital extinguished
Tue Jun 10, 2008 7:48pm EDT
SAN FRANCISCO, June 10 (Reuters) - Firefighters have put out three wildfires that destroyed nearly 30 homes and an apartment building in Stockton, California, a city reeling from one of the highest U.S. rates of foreclosure, officials said on Tuesday.
…
Cochran said authorities do not have an official count for the number of people displaced by the fires and have yet to determine how they started.
“We still have investigators out there mopping up,” Cochran said.
Foreclosure Trustee Moves To Rescind Auction Sale of Cong. Richardson’s Sac’to Property
(June 10, 2008) — The foreclosure trustee on a Sacramento property on which Washington Mutual Bank (WaMu) was the lender and Cong. Laura Richardson (D., Carson-LB) was the owner has filed a notice to rescind a May 2008 foreclosure auction sale of the property.
The notice of rescission has been recorded in the Sacramento County Recorder’s office and is a matter of public record.
Asked for comment/information on the action, WaMu spokesperson Sara Gaugl told LBReport.com:
“I’m unable to discuss the specifics of Ms. Richardson’s loan situation because she has not provided us with authorization to publicly discuss her loan. We are, however, committed to treating all of our customers with the same level of consideration and fairness.”
State law slashes foreclosure rate, for now
By Jerry Kronenberg
Tuesday, June 10, 2008 - Updated 4h ago
Massachusetts foreclosures have plummeted to a more than two-year low, but experts see the drop as temporary - the result of a new law requiring lenders to wait 90 days before seizing homes.
America’s crisis: foreclosures driven by bad lending practices
Mon, 09 Jun 2008 18:53:26
By Nina Hamedani, Press TV
Mortgage lenders worked out the perfect equation that would yield them profits, but they were counting on a housing market that would exponentially appreciate.
Bailout Backlash
By Curt Nickisch
…
CONGRESSMAN BARNEY FRANK: The economy has to some extent been taken hostage by irresponsible acts by a lot of people. Lenders, borrowers, etcetera. I think to get out of this we have to pay a certain amount of ransom.
NICKISCH: The bill could cost taxpayers almost three billion dollars, and put them on the hook for billions more if the housing market falls further.
DEVIS MYTEVELI: This burns!
From Greenspan’s mentor to you:
Op-Eds
An Open Letter to Borrowers and Lenders: Take Responsibility for Your Decisions
by Alex Epstein
…
“Dear Struggling Borrowers and Lenders,
“Every day, the government is offering a new intervention for your sake: to protect the borrowers among you from foreclosure, to protect banks and investors from ruinous losses, and to protect all of you who bought houses during the boom from declining home values.
“The government is allowing taxpayer-backed, trouble-ridden Fannie Mae and Freddie Mac to add even more risky subprime loans to their trillion-dollar portfolios while holding even less cash in reserve. It is ‘guaranteeing’ more and more risky mortgages with taxpayer money through the Federal Housing Administration (FHA). Through the Federal Reserve, it is continuing to inflate the currency to give cheap money to struggling banks. And it is floating several proposals to allow courts to slash valid mortgage contracts, assaulting the sanctity of contract.
“All of this is profoundly unfair to those of us who will pay the price for your bailout.
We will know which party to blame when this Congressional bailout blows up in the taxpayer’s face.
The Associated Press June 9, 2008, 5:16PM ET
FHA chief warns against broad housing intervention
By ALAN ZIBEL
WASHINGTON
A Bush administration official on Monday warned against overly broad government intervention to stem the housing crisis, arguing that lawmakers’ proposed foreclosure prevention program would saddle taxpayers with too much risk.
The Federal Housing Administration, which guarantees loans made to borrowers with poor credit, could be weakened by a plan for the agency to back as much as $300 billion in new loans to help borrowers refinance into cheaper, fixed-rate mortgages, said commissioner Brian Montgomery.
“We are not designed to become the federal lender of last resort, a mega-agency to subsidize bad loans,” Montgomery said in a speech at the National Press Club.
This is the agency the Democratic Congress wants to turn into the subprime lender of last resort.
F.H.A. Faces $4.6 Billion in Losses
By RACHEL L. SWARNS
Published: June 10, 2008
WASHINGTON — The Federal Housing Administration expects to lose $4.6 billion because of unexpectedly high default rates on home loans, officials said Monday.
Brian D. Montgomery, the F.H.A. commissioner, attributed the unanticipated losses primarily to the agency’s seller-financed down payment mortgage program, which has suffered from high delinquency and foreclosure rates in recent years.
It’s about time someone in power came clean on this issue. I hope the GSEs’ top managers are listening.
Seller help for down payments under fire
By Ruth Mantell, MarketWatch
Last update: 5:36 p.m. EDT June 9, 2008
WASHINGTON (MarketWatch) — Losses from home loans that depend on seller-funded down-payment assistance are hurting the Federal Housing Administration, its chief said Monday in reopening to public comment a proposed rule that would ban the practice on FHA-insured loans.
“Data clearly demonstrates that FHA loans made to borrowers relying on seller-funded down-payment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own down payments,” said Brian Montgomery, FHA commissioner.
Make a public comment on this proposal to further debauch FHA lending standards. The Bush administration is creating a great opening for the people of America to speak their minds on this bad idea.
FHA Opens Public Comment on Seller-Funded Downpayment Assistance
Kerri Panchuk | 06.10.08
The Department of Housing and Urban Development (HUD) said Monday that the Bush Administration is re-opening the public comment period on a proposal that would end “seller-funded downpayment assistance” on loans insured by the Federal Housing Administration (FHA).
HUD’s Assistant Secretary for Housing and Housing Commissioner Brian Montgomery said the subject is one that must be addressed because the FHA has already faced significant losses on loans that were originated with “seller-funded downpayment assistance.”
“This year, as a result of its annual re-estimate, FHA had to book an additional $4.6 billion in unanticipated long-term losses, mostly due to the increased number of certain types of seller-funded loans in the FHA portfolio,” Montgomery said. “Given these concerns, we cannot just stand by. No private mortgage insurance companies back these types of loans. We are concerned about this business because the substantial losses affect FHA’s bottom line and FHA’s ability to serve American citizens who need access to prime-rate home loans.”
The proposed changes can be viewed at the FHA’s Web site.
Does anyone know how to submit a public comment on this harebrained proposal?
REAL ESTATE
FHA Officials Seek to Ban Seller-Assisted Payments
By MICHAEL CORKERY and MICHAEL R. CRITTENDEN
June 10, 2008; Page A13
Federal housing officials are trying again to ban seller-assisted down payments on federally insured mortgages, amid concerns about mounting losses tied to these loans.
The Federal Housing Administration has reopened a public-comment period on a proposed rule on such assistance, which the agency says leads to higher-than-normal foreclosure rates.
Under the seller-funding practice, a third party — typically a charity — provides the down payment for the buyer and is then reimbursed by the home seller, often a home builder. This can help home sellers close deals with buyers who can’t come up with down payments on their own.