Bits Bucket For June 15, 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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Happy Father’s Day, all! I’m out on a Hawaiian vacation, and I’ll write back with my observations in a couple weeks.
Let us know which Island(s) you visit. Be sure to pick up the glossy RE brochures at a supermarket and tell us about some of the ocean view home prices!
Have a great vacation!
I can do that. Last week we picked up a load of “special Panda Bamboo” off the barge and delivered it out to the only point front home in Kaplua. The house sits on 4 acres. The land was the former site of Kapalua lighthouse. Since the house sits out on the point a 200 yard walk is needed to go back to the cove with the beach.
The house has 5 bedrooms and 6 bathrooms. From the outside I guess it is not bigger than 5000 sq ft. And the topper was directly behind the house is the new Kapalua Bay hotel. All eight stories. Looking directly into this guys back yard.
We know the caretaker and we walked out to the point. She asked us what we thought the house was worth. I guessed between 10 to 15 million. She laughed and told us the owner paid 37 million for everything. I laughed and said worth is what another party would pay, not what it would cost to build. It got real quiet after that. Then I asked how the owner likes living in a fishbowl. She did not think that was funny. We got paid and were asked to leave.
Well, Crash, I think it was pretty funny. She needs to work on her sense of humor (lighten up, Francis)!
Hey Crash,
great story. 37 million to live under a hotel. And what does the caretaker care anyways…it’s not her place,or her cash at stake. If she spent a little time reading George Orwell, while hanging out at the beach, she could develop the right attitude..enjoying the bling while her boss’ investment circles the drain.
Stay away from timeshare sales offers!
So my mom is about to put my childhood home in cupertino on the market. Standard late 1960’s ranch, 3/2, with a living room and family room. According to the agents, similar houses are selling for $1 million to $1.1 million, usually within a week. She is planning to use some online firm called Assante. Have yet to look it up. Quite curious to see what happens. She has moved to her childhood home in Mountain View, close to Castro (within walking distance, quite cool.)
In any case, am quite curious how fast it will sell. Holding my comments so far, but I did tell her to look at coms and be ready to cut fast if necessary. But I think maybe my area might ok by her–best public school district around, walk to parks and library…I am bummed she’s selling.
Anyway, I’ll post what it goes for in the future. Hope prices come down after she sells–I would like to move home one day.
She should NOT be cheap, and pay a lawyer and figure out how much taxes she would have to pay for on the capital gains…could be a lot more then she thinks.
I hope her new home is paid in cash,and is CHEAPER then th home she is selling….. don’t want her doing something stupid, and ruining your inheritance.
Cupertino is quite strong and I am not sure of the exact location but based on your discription it will likely sell in 10 days or so with probable multiple offers..I would take your mothers house in Mt. View near Castro in a heartbeat over Cupertino…
Bob,
Homes next door in Los Altos are still moving. I bet it sells pretty quickly.
Mike
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She is doing a very smart thing. No need to worry about taxes on gains. I am assuming that she is moving into her parents’ home. I lived 2 miles from Castro St. (condo on Crestview Drive in Mtn. View), a good area for lunch. Good luck.
Jas
taxes could be considerable depending on what capital gain tax rate she is subject to
–
I do understand that. Would you rather lose $500K in price decline or $150-200K in taxes?
Jas
Top rate for Fed will be 15.3%. Top rate for CA will be 9.3% unless she makes over a million this year in which case the income over one million will be 10.3% in CA. So you are looking at about 25% paid in taxes. (Actually more if she has a good income as this will sit on the bottom of the earnings and push her earned income up into the higher brackets sooner.)
However, she has the $250,000 exemption (assuming she was there 2 years, etc. which it sounds like it was.) You haven’t mentioned your father. If he passed away and the house was in a trust there may be a step up in basis on the entire amount. If it was not in a trust then half the house had a step up in basis to his date of death. If they are divorced and she owns the house then she may be looking at a considerable tax bill, but you are right - if the money is needed and/or you think the house will fall more than the cost of taxes - it might very well make sense to sell.
This was more general information so that people understand that many factors play into taxes on a primary home sale, so please don’t feel like you need to provide any personal information Jas to fill in details. But if she hasn’t already she should see a tax expert before selling. If she is planning to buy another home she may be able to keep her current Prop 13 taxes, but this does require some planning and timing.
Happy Father’s Day to all the daddies out there.
I was stunned to see a house right over the cupertino/sunnyvale border (a small 4/2 about 1650 sq feet) go up for sale for $999,990 last week and sell 7 days later…. So you may sell this quickly for 5% below asking price….
What’s happening in Vientiane? Was in Luang Prabang in the winter. Met folks who are doing social work (christian missionary, without the missionary side of things) & who are verryy in love with pnom penh, or rather: its people.
Phnom Penh is a huge bubble. Bought a townhouse for $32K in early 00’s and supposed to be worth over $80K now.
Vientiane is booming like mad. There is new construction here on what seems like a daily basis–especially high end housing, but also relatively normal people adding on etc. The streets are being improved/stores upgraded–nice to see.
Chinese are moving to Vientiane in a big way, with a “city-within-a-city” project that is generating lots of backlash. 200k Chinese coming to 600k Lao is not a smart thing for the Lao Government (if, in fact, that is what happens). I imagine the right people have received the right payoffs. China is paying for the 2009 SEA Games stadiums, and in return asked for a huge amount of land close to the city center…and received it.
Big splash in the MSM here in (Eastern) Australia about predatory corporate buyers preying on poor little Aussie battlers in “temporary” trouble due to price falls and interest rate rises.
Articles in the Sunday newspapaers and news segments on all 3 commercial FTA TV channels.
All the usual suspects are getting in on the act, but one fact is never mentioned. These ‘victims’ paid way too much money for their houses.
–
“These ‘victims’ paid way too much money for their houses.”
They were victims of propaganda abiut homeownership. That is a common thing these days in the Information Age.
Jas
The Next Big Spending Spree…
Almost without exception, the executives within government (bureaucrats) are unskilled in business. Although many are academically gifted, few have experience, or interest, in balancing investment and financial risk. History has shown time and again that government spending economic development is notoriously wasteful, and leads to enormous taxpayer liabilities and unintended consequences. For example, the vast government spending over decades to reduce U.S. poverty has failed lamentably. Some would argue that has even contributed to the institutionalization of poverty. Similarly, increased government spending on education has led to steady declines in educational quality.
http://www.321gold.com/editorials/browne/browne061208.html
As some one who studied it in graduate school, I sooned realized that “economic development” is something the government should stay out of.
It inevitably involves direct or indirect (tax break) government money for campaign contributors. And businesses that do not exist yet do not contribute money to campaigns, so entreprenuership doesn’t count as “economic development.”
I had the NY State Department of Labor calculate employment gross — job gains and losses as firms open and close, grow and shrink — rather than net. You need new businesses to replace one-third of your private sector jobs every five years and not, it isn’t just the local restaurant that turns over, it’s big firms too (like Bear Stearns).
Compared with that level of change, the jobs “created and retained” claimed (falsely, based on bullshit assumptions) by “economic development” programs are joke.
Before condemning govt’s business skills, we have to remember that government works in a whole different environment than business.
Government cannot fail and go out of business. No matter what it does, it will survive regardless of the bottom line.
—
Lets apply that condition to business: No matter what a business does, it cannot fail.. it survives regardless of whether it loses money or not!
Now, how many dismal business failures would still functioning and losing money out there in the business world… millions at least. How much money would they lose per year? More or less than the money govt pisses away?
JoeyinCalifornia,
Here is a perfect example of a useless company looking for cash infusion. Somewhat like candle making shop, but on a larger scale. Heck, as people get laid off, they will have more time to wash their own cars.
Perfect example how things got out control due to cheap credit. What in the heck is the Carlyle group screwing around with this. Isn’t the US paying them enough money building weapon systems that are not needed sufficient? The greed runs rampant!!!
Carlyle-backed car wash group Imo heads for fight over property
By Louise Armitstead
Last Updated: 1:38am BST 15/06/2008
Carlyle Group is heading for a showdown with debt investors of Imo, the world’s biggest car wash company, as the private equity house revealed plans to dipose of the group’s property assets to raise more money.
Carlyle, which is nick-named the ex-presidents’ club for employing political heavyweights such as James Baker and John Major, has in recent weeks asked the debt investors of Imo to approve of a sale and lease back of car wash sites that would raise £60m. The debt investors are concerned about the proposals since the property is the main collateral for their investment.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/15/cnimo115.xml
, the vast government spending over decades to reduce U.S. poverty has failed lamentably.
Government spending on seniors’ programs, namely Social Security and Medicare, has been extremely effective in reducing poverty for seniors.
Anti-poverty programs must address root causes. For seniors, it’s usually just not enough money. For families, it has a lot more to do with values, as well as the availability of good jobs.
increased government spending on education has led to steady declines in educational quality
Has it now? What’s the true cause and effect? Have the traditionally underfunded schools in places like rural Georgia been outperforming their better funded counterparts? I don’t think so.
IMHO the root cause for low educational achievement in the US is the growing anti-intellectualism of US society, led first and foremost by religious fundamentalists, who are allied with you know which party.
increased government spending on education has led to steady declines in educational quality. TRUE.
Look at California the school systems here are crap. I will contend that rural Georgia kids get a way better “edumication” than California kids. Hell the dam teachers union can not do math, saying a a cut in increase is a cut in services. The government has done its job well an uneducated public is easy to control.
Piss poor education can’t be blamed on govt spending.
Throwing money into a toilet doesn’t affect the toilet one way or another. It’s a toilet. It will gobble up whatever amount you throw into it. Money has nothing to do with how well it functions.
Conversly, would education improve as schools are increasingly impoverished? No. Does money have any direct relationship with the quality of a child’s education? No.
Does money have anything to do with the standard of living of adults who work within and draw benefit from the richly endowed school system? Yes.
California the school systems here are crap ??
Generally speaking you are likely correct but, how would you explain the Cupertino public school system ?? Better teachers or better parents ??
A good friend of mine is a HS teacher in Cupertino. In his opinion, most of his fellow teacher deserve their low pay.
Better community. The parents value education and push very, very hard on the teachers and the kids and anyone else who gets too close. Many of the students are gifted and few lack anything of significance.
You nailed it, Mole Man!
Better educated parents — who tend to have higher IQs and better jobs — seek out schools that are “well-performing” which helps keep up the school’s scores/reputation.
Money IS important to a certain extent, but as long as students have access to books, basic materials, and a safe, clean environment; they can learn.
Over $1.5 trillion of taxpayer dollars was spent on the war on poverty since 1965. If throwing money at the unwilling by the can do’s could cure poverty, it would have been cured in the 1960s. There is still welfare programs, HUD, and so on, last time I checked. This war on poverty has been the key reason why America has been in social decay for over 40 years.
It should not surprise people why most individuals in America, when confronted by a personal problem, wants to socialize the cost to fix it.
American brains have reached the equivalence of sedentary flab long ago. This will get worse before it gets better. The only ones who can save our society are the foreigners who study early U.S. philosophy, politics, the Declaration of Independence, and the U.S. Constitution. I know of some first generation Americans of Vietnamese descent who has the right intent (votes Republican because he thinks they stand for personal responsiblity).
To clarify, I think foreigners who know America better than the flabby-minded U.S. citizens could return us to the principles of the small government if they become U.S. citizens. Many Indians, Vietnamese, Chinese, and so on, are more productive individualists than the flabby potato chip eating Americans.
It helped me and my family out in the 60s out, though I never got anywhere near $1.5 Trillion.
lol
Over $1.5 trillion of taxpayer dollars was spent on the war on poverty since 1965. If throwing money at the unwilling by the can do’s could cure poverty, it would have been cured in the 1960s.
Having interacted directly with impoverished Americans on a number of charity projects, I came to one conclusion:
Giving money to someone with a “money problem” is like giving alcohol to someone with an “alcohol problem”
I suspect that if you took your typical able-bodied person on welfare and handed him/her a check for $1M, they’d be just as impoverished in about a year. In fact, anecdotal evidence with lottery winners tends to confirm this. (Read about the 16.8 million-dollar winner who’s now on food stamps)
http://articles.moneycentral.msn.com/SavingandDebt/SaveMoney/8lotteryWinnersWhoLostTheirMillions.aspx?page=all
I come from a family of bleeding-heart liberals. I remember when I was 16 or so asking my father why the government gives cash handouts to able-bodied adults. After some statements about social justice, he admitted it was to keep the underclass from revolting….
There will always be some people who just won’t work. While I don’t think they should starve to death, I think we may spend too much. Maybe the shelter for a non-working able-bodied adult should resmemble an army barracks more than a luxury townhome (which are available to section-8′ers)….
The whole idea of giving someone a check without reciprocal effort has always astounded me…I am no historian but I still see many examples of how the WPA seemed to work quite well…Why aren’t current recipients of government assistance required to do the same ??
(…votes Republican because he thinks they stand for personal responsiblity)
SO when are Cheney-Shrub gonna take responsibility for:
x1 War in Iraq
x1 War in Afghanistan
x 4000+ flag draped coffins
…next 4th of July at a press conference at Haliburtons headquartes in Dubai?
take responsibility ??
Never….
“IMHO the root cause for low educational achievement in the US is the growing anti-intellectualism of US society, led first and foremost by religious fundamentalists, who are allied with you know which party.”
Yogurt, this is laughable. You think religious fundamentalists are the leading cause of anti-intellectualism? Why, because we think someone/something created this world?
IMO it takes a whole lot of “faith” to think that this big beautiful world is just an accident. Therefore you believe in “fate” while I believe in a “creator”. Let us alone to teach our kids about our faith and we’ll let you teach your kids about your faith.
Regarding the state of our educational system, you cannot mandate from DC that “all children will read in accordance with their grade guidelines by 2012″ and just expect it all to fall in line. Central government control adds layer upon layer of bureacracy, spending money on people working in buildings where no education occurs.
Example: While in Tucson last week I had the opportunity to talk to a charter school administrator regarding public school issues. This person told me that the Tucson Unified School district has about 120 administrators making over $100,000 (maybe its a 100 making $120K). At the same time the district is $17,000,000 in the red the last year. Yet, this school district will not close down and rent any of their extra buildings to any charter school, no way, even though they need to consolidate and cut costs. Instead the people of Tucson are going to be saddled with ever higher taxes.
Once upon a time teachers were allowed to discipline children and that seemed to work well.
Teachers and government today receive most of the blame for the lack of education, however, I think the problem resides squarely on the children who aren’t motivated to learn, but instead allowed to be a nuisance in the class room and who slowly but surely eat away at the teacher’s passion for making a difference and helping others. I’ve had many jobs in corporate America where I had the luxury of avoiding deadwood. The teacher doesn’t necessarily have that luxury.
A little smack via a ruler would do wonders I think.
“A little smack via a ruler would do wonders I think.”
If you require corporal punishment to instill discipline, you understand very little about human behavior.
I never feared getting smacked with a ruler or having an eraser thrown at me (something that occasionally happened in the Catholic schools I attended.) No, I feared coming home to mom and dad with a note saying I had done ANYTHING wrong.
Bad schools are because of bad parents, period. I had a friend who gave up teaching (and he was good) because the parents made the job so hard. Literally would believe little Johnnie could do nothing wrong and would accept his lies at face value.
When parents want to be their kid’s best friend instead of a parent, when they take no time to work with the child on their homework, when television is the kid’s only source of “intellectual stimulation” because parents don’t like/have no time to read, when parents side with the kids and refuse to discipline their brats, yeah really good chance that kid is never going to have a good education.
With the growing inability in our culture for anyone to take responsibility for their action there is no way I would ever be a teacher today. There are some bad teachers, yes. But education begins at home and if there are no consequences to little Johnny for his behavior/lack of achievement there is little the teachers can do. And yes, communities that value education have better school systems than those that do not. Partially (maybe mostly) this is due to the wealth of the community but not entirely. It will not change until parents get involved and expect their children to have a certain behavioral standard.
I have little doubt that the children of posters here are better educated and have better behavior than the average American kid. I would not be surprised to find this group has a much higher percentage of home schooled kids. (As Buffy said, “Home schooling, not just for scary, religious people anymore.”) With the emphasis on personal responsibility which is at the core of this blog, it must translate into every aspect of our lives and those directly affected by our lives.
There is no easy answer to the problem of declining education achievement, but it cannot be solved without parents who make it happen.
RE: If you require corporal punishment to instill discipline, you understand very little about human behavior.
You need to go preach your message to that 62YO female parochial school teacher who got the ever-lovin’ crap beaten’ out of her by that POS 18YO purse snatcher will a violent arrest record as long as his arm.
“You need to go preach your message to that 62YO female parochial school teacher who got the ever-lovin’ crap beaten’ out of her by that POS 18YO purse snatcher will a violent arrest record as long as his arm.”
Yeah, it sounds like the POS would have turned out a whole lot less violent had someone inflicted even more violence on him at an earlier age. That’s a good solid plan, hd74man. Goes entirely against what we know from the research, that kids in violent households become inured to violence through progressively more vicious beatings, but I’m certain you have access to information from your ass that would contradict it.
–
“Yogurt, this is laughable. You think religious fundamentalists are the leading cause of anti-intellectualism?”
There must have been lot of anti-intellectualism in New England states for a very long time. The so-called intellectuals seem like easy dopes to me. Their secular beliefs about economics and politics seem very much like religious beliefs to me.
People have a great need to believe! The question is: In what? Usually, nationalism replaces religion, or God.
Jas
There must have been lot of anti-intellectualism in New England states for a very long time.
Well enough to hang a number of unfortunate women as “witches” in Salem, wasn’t there?
Article Six, US Constitution:
no religious Test shall ever be required as a Qualification to any Office or public Trust under the United States.
That clause was put in there for a reason.
Oh one more thing I should have pointed out - fundamentalism didn’t even exist before the early 20th century. It was a reaction against the intellectual progress that had been made in the previous two centuries.
The founders of the US were rationalists, foremost among them people like Jefferson and Franklin.
http://en.wikipedia.org/wiki/Fundamentalism
“Comment by yogurt
2008-06-15 08:36:34
“There must have been lot of anti-intellectualism in New England states for a very long time.
“Well enough to hang a number of unfortunate women as ‘witches’ in Salem, wasn’t there?”
Nineteen hangings and one pressing (squashing to death) precipitated by lying children seeking attention really does not make for much of an argument. Also, the total number (19) included five men.
Hysteria affects anti-religious people too; witness the French Revolution, the Russian Revolution, the Chinese Communist Revolution, and so on. More people have been killed by “modern” anti-religious movements than by all the religions in history combined.
Fundamentalists are not responsible for the lousy education system, and I say this as someone is not religious. When standards are lowered to avoid embarrassing the ignorant, and when parents refuse to participate in either educating or disciplining their children, what good can possibly result?
Also, I notice that Obama belonged (till a few weeks ago) to a bible-thumping, fundamentalist church. How come that doesn’t offend you?
If one believes himself an intellectual, then he probably is not. This is the ultimate vanity of our age and of many ages before it. Know-it-alls the most obnoxious humans, which possibly explains why “anti-intellectualism” exists in the first place. Today’s scientific truth is tomorrow’s scientific hooey. If someone wants to believe in a god, why does this mean he or she is stupid? Imagining a universe popping into existence out of nothing isn’t logical either.
total number = 20; I typed too fast.
Why, because we think someone/something created this world?
No, all Christians (and Jew and Muslims and almost all other religions) believe this, not just fundamantalists.
My problem with fundamentalists is that they maintain that two accounts that apparently contradict each other are both literally true.
For example:
Genesis 1 says that God created plants, animals, and man and woman in that order.
Genesis 2 says that God created Adam, plants, animals, and Eve in that order.
Both chapters are explicit about this order, it is not an interpretation.
Believing that two contradictory statements are both literally true is to deny any kind of rationality.
The non-literalist interpretation of Genesis is that the chapters are of spiritual value and are not intended to be read literally, and thus there is no contradiction.
“IMHO the root cause for low educational achievement in the US is the growing anti-intellectualism of US society, led first and foremost by religious fundamentalists, who are allied with you know which party.”
Oh yeah, I agree; the Islamic religious fundamentalists who believe that killing an infidel (non-Islamic) guarantees them a place in Islamic Heaven. The Islamic religious fundamentalists who practice honor killings, and regard the USA as the Great Satan.
I think we all know which party they are allied with, fo shnizzle.
As opposed to the Mormon religious fundamentalists who believe that having many wives will make you become a god.
Well that sounds like a lot more fun anyway.
Maybe more fun for the men. But what woman wnats to be constantly pregnant? Certainly not me.
This is a discussion about fundamentalist religion, so the feelings of women are irrelevant to the subject at hand.
the Islamic religious fundamentalists who believe that killing an infidel (non-Islamic) guarantees them a place in Islamic Heaven.
Actually the Koran says that Muslims are not to harm innocent people, and in particular should respect Christians and Jews, so such people are following their own prejudices, not the Koran.
But of course religious hypocrisy is not limited to Muslims, as Jesus was fond of pointing out 600 years before their religion even existed.
Actually the Koran says that Muslims are not to harm innocent people, and in particular should respect Christians and Jews, so such people are following their own prejudices, not the Koran.
Obviously, you have never read the koran. OBL and the Taliban do - and they believe every word.
Qur’an 8:12 “I shall terrorize the infidels. So wound their bodies and incapacitate them because they oppose Allah and His Apostle.”
Qur’an 8:57 “If you gain mastery over them in battle, inflict such a defeat as would terrorize them, so that they would learn a lesson and be warned.”
“Slay them wherever you find them…Idolatry is worse than carnage…Fight against them until idolatry is no more and God’s religion reigns supreme.” (Surah 2:190)
“Fighting is obligatory for you, much as you dislike it.” (Surah 2:216)
“Seek out your enemies relentlessly.” (Surah 4:103)
“The Jews and Christians say: ‘We are the children of God and His loved ones.’ Say: ‘Why then does He punish you for your sins?” (Surah 5:18)
“Believers, take neither Jews nor Christians for your friends.” (Surah 5:51)
Over 100 Koranic verses exhort believers to wage jihad against unbelievers. “When you meet the unbelievers in the battlefield, strike off their heads and, when you have laid them low, bind your captives firmly” (Koran 47:4). This is emphasized repeatedly. Jews and Christians are among those to be fought: “Fight those who believe not in Allah nor the Last Day, nor hold that forbidden which hath been forbidden by Allah and His Messenger, nor acknowledge the religion of Truth, (even if they are) of the People of the Book, until they pay the Jizya with willing submission, and feel themselves subdued” (Koran 9:29). There is no doubt that Muhammad meant such verses literally. Nonetheless, the fact that warfare against unbelievers is not a twisting of Islam, but the Islamic mainstream, and is repeatedly affirmed in the Koran, Hadith, example of Muhammad, and rulings of every school of Islamic jurisprudence.
I just don’t think ANY OF YOU understand how Rap and Hip hop plays into the Dumbing Down Of America
We need people to sweep the streets, so where do we get people just qualified enough for that?
Its Very RARE to find a college grad with a good job who loves the new rap and hip hop.
And to most white people its a fad, there are not many 30 year old Eminem’s walking around, but there are sure plenty of people who look and act like 50 cent in their 30’s and 40’s
———————
IMHO the root cause for low educational achievement in the US is the growing anti-intellectualism of US society, led first and foremost by religious fundamentalists, who are allied with you know which party.
Agree with you 100% about rap music. I didn’t claim that fundamentalism was the only problem.
Ha! Those kids and their stupid music these days! Now, get off my lawn before I call the police!
“IMHO the root cause for low educational achievement in the US is the growing anti-intellectualism of US society, led first and foremost by religious fundamentalists, who are allied with you know which party.”
Evangs want to go back to the future of being afraid of the dark, and be subservient to whomever shouts the loudest from their bully pulpit…
“Any one at all familiar with the writings of the ancient Greeks or Romans, cannot fail to not see how often it is admitted by them that the national religions were the inventions of the legislator and the priest, for the purpose of governing and restraining the common people[aka—dumb sheep]. Hence, all the early lawgivers claim to have had communications with the gods, who aided them in the preparation of their codes’
[From Thayer’s “Doctrine of Eternal Punishment”]
[continued from Thayer's]
“The object of this sacred fraud was to impress the minds of the multitude with religious awe, and command a more ready obedience on their part. Hence Augustine says, in his ‘City of God’, “This seems to have been done on no other account, but as it was the business of princes, out of their wisdom and civil prudence, TO DECEIVE THE PEOPLE IN THEIR RELIGION; princes, under the name of religion, persuaded the people to believe those thins true, which they themselves KNEW TO BE IDE FABLES; by this means, for their own ease in government, tying them the more closely to civil society.” BiV 32.
How many have ever run a business, made a payroll, dealt with the byzantine govt bureaucracy? We truly have a ruling class in this country, and they are clueless about everything except maintaining their own cushy jobs.
cushy jobs ??
Exactly…Could not make it in the private sector for one week…
Since we have a choice between a Democrat Obama and a Democrat disguised as a Republican (McCain) and most of Congress is Democrat, we are in for much more inefficient spending by the bureaucrats and higher taxes.
Just compare conditions of 1980 with 2008. In 1980 the Americans were fed up with big government Democrats. In 2008 people hate GWB, so the “solution” is to replace him with a more severe socialist. This is just revenge, and not logic, but Mencken said no one ever went broke underestimating the intelligence of the American public. We could have had Ron Paul but the Republican Party, already destroyed by George W. Bush, gave us what we got.
Invest accordingly, protect your wealth and principle from the theives calling themselves your government.
The good news is (just kidding) that BHO if elected promises to increase taxes and Gubmint spending to ‘fix’ things up and punish those of you that earn to much. McCain will do the same thing I’m sure. Surely we aren’t taxed enough already.
Accounts Receivable Tax
Building Permit Tax
CDL License Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel Perm it Tax
Gasoline Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
IRS Interest Charges (tax on top of tax),
IRS Penalties (tax on top of tax),
Liquor Tax,
Luxury Tax,
Marriage License Tax,
Medicare Tax,
Property Tax,
Real Estate Tax,
Service charge taxes,
Social Security Tax,
Road Usage Tax (Truckers),
Sales Taxes,
Recreational Vehicle Tax,
School Tax,
State Income Tax,
State Unemployment Tax (SUTA),
Telephone Federal Excise Tax,
Telephone Federal Universal Service Fe e Tax,
Telephone Federal, State and Local Su rcharge Tax,
Telephone Minimum Usage
Surcharge Tax,
Telephone Recurring and
Non-recurring Charges Tax,
Telephone State and Local Tax,
Telephone Usage Charge Tax,
Utility Tax,
Vehicle Lic ense Registration Tax,
Vehicle Sales Tax,
Watercraft Registration Tax,
Well Permit Tax,
Workers Compensation Tax.
You forgot ‘Firearm permit fee’. In massachusetts, to apply for a license to own a firearm you must pay a $100 fee. Also, auto registeration fees and taxes.
You also forgot the extra trillion or so we’re spending on the Rethuglicans’ endless war. Let’s call it the “Endless War Tax.” This alone would have turned our country into from a federal surplus to a federal deficit, even though they try to keep it off the books.
Here is the “Holy Book” that is the foundation of Modern America:
The US IRS Tax code is 20,000+ pages thick & getting thicker.
Now who’s gonna fix that problem?
I propose a National election, as there can only be a “political” solution to solve government spending.
Not this is a book that should be burned!
This is all hyperbole. We were told to believe that the war in Iraq would be cheap, or at least certainly well under one hundred billion dollars. This is what we heard from people with close ties to both business and military leaders. Now taxes will have to be raised just to pay for this foolishness, and you dare to taunt others with the accusation that they would cost society?
Republican Party, already destroyed by George W. Bush, gave us what we got ??
Exactly…Now, the three headed monster needs to be slain so the “true” republican party can rise up…Unfortunately, holding onto your wallet in the mean time is going to be the consequence of the policies of the last eight years…
Telling The Truth…
Our president is not a king or an emperor. He’s a hired public servant working on a temporary basis. It was no accident when the Founding Fathers decided that the only title a president could claim or deserve was “Mr. President.” He is a citizen just like you or me, he puts his pants on just as we do, and he answers the call of nature in the usual manner. As the French essayist Montaigne observed, “No matter how high the throne, the king still sits on his arse.” So do all presidents.
http://www.lewrockwell.com/reese/reese465.html
Nice article.
“The duties of the president are simple to state: He can require reports from department heads; he may grant pardons and reprieves; with the advice and consent of the Senate, he can make treaties and appoint ambassadors, consuls, ministers and judges; he can receive ambassadors and other public ministers; he must take care to faithfully execute the laws; and he commissions all U.S. officers. He is the commander in chief of the armed forces. From “time to time,” he is to report to Congress on the state of the union.”
You forgot one:
He can mislead the Nation into starting… X2 Wars
“I’m the “Decider” & “he tried to kill my daddy”"
Surviving the Squeeze
Sunday, June 15, 2008
Doreen Dennett and her family love the little pleasures in life: trips to Orlando, gym memberships, sporting events shared with friends and family.
But it’s all going by the wayside.
The YMCA membership has ended. So have the annual passes to Disney parks. And those Dolphins season tickets they had for 10 years? “We love tailgating and all that good stuff,” says Dennett, 32, of Boynton Beach. “But with the gas to drive down there, plus the tickets, it’s just not feasible anymore.”
Goodbye, road trips. So long, housekeepers, and hello, home cooking. Eighteen months into the economic downturn, the region’s middle class is hanging on by its collective fingernails. Even if you escaped mortgage problems, you can’t escape the $4 gas, the canceled vacations, the fear of worse to come.
Call it the new middle class austerity.
(bloodcurdling female victim scream)
No, not the Dolphin season tickets. Say it isn’t so.
Deep depression….(victim statement) why do I work so hard and end up w/nothing.
The greater issue is why the middle class was maxed out to begin with. They need to understand that that the only reason a $200k house was able to sell for $500k a few years ago is because they were willing to pay that much for it. I see the new reality where ppl actually have to ask themselves should I be buying this, can I really afford it, as a huge positive that will emerge from this. Nothing negative about it at all. As far as giving up housekeepers and seasons tickets, I know many ppl in the top 5% of wage earners that live such lifestyle voluntarily and it never should have been a middle class expectation.
Our kids and their spouses are in the middle class economically, but doing just fine nonetheless. By some miracle, they have all managed to avoid the trap of borrowing money they don’t have to buy stuff they don’t need to impress people they don’t know. Their second incomes go straight into savings and investments.
On the seasoned citizen side, my wife was talking with a woman she knows who’s worrying about how inflation will result in raises to the fees we pay to enjoy the golf, tennis, club, fitness center and other things we have here. Her lament was, “Don’t they understand we have a mortgage to pay?”
Hello? You’re retired and yet you have a mortgage?
It’s good to hear your kids avoided this. Like Tim said, the real news is not that the middle class now has to carefully budget their finances, as the middle class has always had to do this historically. The real news is why in the hell weren’t they living like this before, and not offering 500k for a 200k home, buying new SUVs, getting $5 coffees, etc. etc. This is great news, and maybe the next generation wont make the same mistakes.
But that’s just it, Bill. Your offspring aren’t living the traditional middle class lifestyle. Both spouses are working.
Why is it that two spouses working to afford a middle class lifestyle and save for retirement is called middle class? They aren’t.
Perhaps the biggest inflator of all things monetary in this country is the advent and continuation of dual-income households.
And, don’t forget the familial/social ramifications of dual income households. People here bemoan the poor behavior of kids today - perhaps a parent should actually stay home and raise the kiddies.
I see the new reality where ppl actually have to ask themselves should I be buying this, can I really afford it, as a huge positive
in my experience there’s a only a small window of opportunity when a person’s brain can be imprinted with some sense of the value of money.. it’s around the time they get their first bicycle.
This is not quite true. I’ve seen ruthless financial @ss-kickings do this later in life too. It’s a hard lesson for many but it does happen.
“The greater issue is why the middle class was maxed out to begin with.”
Smoke and mirrors..Remember the patriotic speech after 9/11, with the president encouraging people to keep shopping? Wages have been stagnant for the past 8 years, and the housing mania and the ability to use your house as an ATM gave folks the ability to keep spending. Meanwhile the federal government was on a spending spree unprecedented in American history. The Iraq war was marketed as a short, cheap effort, which would largely pay for itself with Iraqi oil revenues. The Fed kept cheap money flooding the system. And while jobs, and whole industries were off-shored due to wage arbitrage, the cheap bling and the hopes of instant riches distracted the crowd.
And now all the chickens have come home to roost. I am as nauseated by the housing fools as anyone, but it did not happen in a vacuum.
before condemning the efforts at economic stimulus, lets try and recall the situation .. we were still reeling from the dotcom collapse.. and then..
Dateline
January 17, 2002
9/11 brings economic fallout:
[snip]
Economists have predicted that the Sept. 11 attacks will wipe out more than 1.6 million jobs in 2002 in the U.S. and reverberate through the U.S. and world economy for the next five years. [snip]
Losses will be biggest in cities with large airline and tourism workforces. But a wide range of industries — from dining to financial services — will take a hit, according to the study published by the Milken Institute, a Santa Monica-based think tank.
New York City will lose some 150,000 jobs in 2002. Los Angeles will lose 69,000 jobs, and Chicago about 68,000. Las Vegas was cited as the most vulnerable metro area because that city could see five percent fewer jobs this year.
[snip]
As of January 2002, nearly 250,000 jobs had already been lost because of the attacks.
The good news is that many of those jobs will come back, the study authors added.
But until they do, families that had been making ends meet — both in the U.S. and abroad — may be plunged into poverty.
http://www.disasternews.net/news/article.php?articleid=1008
Nice summary Spike….
Spike
The following is a cogent quote from the great Morman_Tea:
“These days, the ever popular ‘Post hoc, ergo propter hoc’ argument against all things “Bush” is the rage. According to the leftist media, any bad thing happening today, must be because of Bush. The economy sucks because of Bush. The environment sucks because of Bush. The educational system sucks because of Bush. Gasoline is over $4 because of Bush. “Post hoc ergo propter hoc”‘ - “After Bush, therefore BECAUSE of Bush”. I wonder why the installation of the Democratic controlled Congress two years ago isn’t to blame. I wonder why Pelosi, Boxer, Clinton, Gore, Carter, Kennedy and 40 years of Democrat controlled Congresses post WWII aren’t to blame. Could it be, because it patently serves the money men who actually control this country, to perpetuate the two-party system gridlock, to continue to divide and polarize the electorate with hints and promises of “change”?”
Only some decided to purchase the 500K 2/1 60 year old ranch home, and found out a few years later it only worth 300k. The blogger crowd here said NO. A co-worker said YES a few years ago & all he does now is moan about his shortage of MONEY
Hopefully there will be no more YES responses for at least 20 years, and during the next 5 they say NO to 250k.
Paying for stuff you buy can be hard.
My in-laws spent $60K +/- on gardening services last year.
Yeah they can afford it.
Mike
Friends spent that much on geothermal, and are and will be forever independent of the cost of (heating) fuel. That’s in Germany. A few years ago, they invested 30K on solar, and have been feeding back into the grid from day one. That’s as much as some spend on a granite kitchen redoing.
Sounds like LA hills or Menlo….
Dave,
Portola Valley.
Mike
The greater issue is why the middle class was maxed out to begin with. They need to understand that that the only reason a $200k house was able to sell for $500k a few years ago is because they were willing to pay that much for it.
Even that’s not true! They weren’t willing to pay that much for it! Some lender was, because he was able to sell the loan to some people who could sell it to dupes buying hedge funds.
The people spening $500k for a $200k home never had any intention to pay for it! The plan was to keep “refinancing” forever! And when that didn’t work out, they strip the house, walk away, and wait for their check and a big hug from Dodd, Frank and Obama.
“…is because they were willing to pay that much for it.”
“Exactly, exactly”…Jay Leno
“That’s what I’m talking about America!” :-)… Bernie Mac
Also, when were 0% down loans @ 2.3% adjustable in 90 days first invented & offered to the “Public”? ….1984?
“Call it the new midddle class austerity.”
I call it deflation. The cash out money, in the form of home equity, is no longer available. This means our consumer based economy will be left high-and-dry because consumers won’t have the money to spend. An economy 70% dependent on consumer spending is a contracting economy when the consumers are broke.
In addition to the consumers being broke, the banks aren’t doing all that well either. Many of them, maybe most of them, are insolvent; the reserves they are holding in the form of home mortgages have lost value and are subject to be written down. This means the banks desperately need money to replenish their depleted reserves.
One way for banks to get money is to suck it out of the economy. The banks created money and put this money into circulation when they floated loans. Now they are destroying these loans via writedowns and are taking the money they once put into circulation out of circulation in order to rebuild their balance sheets. This removal of money by the banks results in less money to circulate throughout the economy; It results in money being tight, hard to get and hard to hang onto.
Deflation is at hand.
Deflation? DEFLATION?!
Bwahahahahahahahaha! That’s a good one.
Wow, what a sharp argument there Bill. Let me ask you this, when oil went up to 70 bucks in the 80’s and then dropped to 12 for a long time, was that inflation? My understanding of inflation is that it is permanent, as in impossible to go away.
Seeing these ups and downs in prices as inflation is a mistake, IMO. Have you noticed that just about every definition of inflation has quietly been dropped because it failed to measure up? The fact is, nobody knows what has really been going on with the underlying fabric of the global economy in this regard for many years.
Why are interest rates still at almost historic lows? Why have real wages been flat for 30 years? Why has the Fed been so afraid of deflation this decade?
Back to your comic book…
Ben I still am confused by your stance that high inflation is not possible.
The late 70s and early 80s and today’s beasts are very different, if you just look at projected entitlements and our current finances as a nation.
It wouldn’t surprise me if helicopter Ben pushed us over into extremely high (maybe even hyper) inflation.
That doesn’t mean it is inevitable, of course - market forces are pushing for deflation, but printing money is printing money.
Of course, the last thing to pick back up in a highly inflationary environment would be housing.
Perhaps part of your confusion is that you put words in my mouth. I never said high inflation was impossible. I merely point out that it isn’t there. If it were, wages would be much higher, interest rates would be double digits across the board and if gold had even kept up with the minimum of inflation, it should be over $3,000 an ounce.
The biggest mistake I see is the confusion with temporary supply/demand imbalances with true inflation. Lets take oil; are todays prices actual inflation, or an imbalance? Consider that the second largest producer of oil has been off-line for 7 years! I grew up in the oil patch. It takes decades or longer for an areas oil industry to be built up.
But it can be wiped out in just a few years. When was the last time you heard about Texas Wildcatters? The oil is still there, but the industry was nearly wiped out by low prices. And people are hesitant to re-enter that, and rightfully so.
Why is Mexico now a net oil importer? IMO, it’s because prices were so low for so long that the state didn’t have enough incentive to look for new fields. And it takes decades to get that process up and running. In the oil biz, 10-15 years IS short term.
All my life I’ve watched various prices go up and go down. But the basic measures I point to in the first paragraph are what I consider true measures of inflation.
“Why are interest rates still at almost historic lows?
Real interest rates are the rates that companies use to borrow money. Those rates are the highest since 2002. The government has captive buyer for its debt.
“Why has the Fed been so afraid of deflation this decade?”
“…The probability of serious deflation or of events that do the same kind of damage to the economy that deflation does is low, but it is not zero. There is good reason to fear that our social loss function is asymmetric: that deflation does more macroeconomic damage than an equal and opposite amount of inflation.
The root reason to fear deflation is that the nominal interest rate is bounded below at zero. Significant deflation–even completely anticipated deflation–thus generates high real interest rates and large transfers of wealth from debtors to creditors. By contrast, significant anticipated inflation does not generate abnormally low real interest rates (although significant unanticipated inflation is associated with large transfers of wealth from creditors to debtors).
Deflation’s high real interest rates depress investment, lower demand, and raise unemployment. Deflation’s transfers of wealth from debtors to creditors diminish the economy’s ability to keep the web of credit and financial intermediation functioning. Such disruption of the financial system puts additional downward pressure on investment, demand, and unemployment…”
Mr. J.Bradford DeLong 1997
Why have real wages been flat for 30 years?
“…The real origin of the problem is ideological. It’s rooted in the prevailing “trickle down” orthodoxy which opposes any increases in wages or benefits for working people. Henry Ford realized what today’s captains of industry and finance refuse to accept; that if workers aren’t adequately paid for their labor—and wages do not keep pace with production—then the economy cannot grow because consumers do not have the money to buy the things they make. It’s just that simple…..”
Global Research, June 2, 2008
Call rising prices of “stuff” deflation or whatever you wish Ben.
The effect is still a devastating to the economic situation of those of us that buy, even minimal amounts of few things.
Call rising prices of “stuff” deflation or whatever you wish Ben.
Why does this topic invoke such dogmatic responses? Did he say that?
How about putting an inflationary argument in economic terms? because it really doesn’t matter that you personally are paying more for “stuff” since the economy is bigger than you or the prices of “stuff” that you buy.
Look. The US GNP is about $14T. Annual growth rates are like 2-3%, or in the neighborhood of $350B. Banks have already written off nearly that amount. Anyone believe they are done with the writedowns? And housing is deflating by what, $2T? 3T? So there are honest reasons why deflation is happening and needs to be addressed at a macro level. A nondogmatic argument for inflation should tell us why the price of “stuff” going up is greater than the amount of money that is currently evaporating.
There is less money in existence than there was a year ago. That’s deflation. I think that the kind of inflation that can turn into hyper inflation will show up first as wage inflation. We haven’t seen that. Yet.
As long as money supply drops, classical Austrian deflation is occurring.
Fine. I like theory as much as the next fellow.
But simultaneously, the general cost of most goods keeps rising and will do. This has a most corrosive effect on the well being of many people as their wallets lighten. This bears little weight in academic discussion, but is of much more pragmatic import to J6P and Jason Winecooler.
It does not effect most of the select group who post here because they’re well-to-do. The rabble,(me) find this to be immediately harmful. Dollars are flying away into other pockets that can never be replaced. Even those of us who are economically prudent can not avoid rising costs significantly.
During the Great Depression, those with money came out well if they conserved. Not this time.
So have the annual passes to Disney parks. And those Dolphins season tickets they had for 10 years? “We love tailgating and all that good stuff,” says Dennett, 32, of Boynton Beach. “But with the gas to drive down there, plus the tickets, it’s just not feasible anymore.”
People are idiots. Let’s do a little math here.
Boynton Beach to Dolphin Stadium - ~100 miles (round trip).
Let’s assume that these folks, because of their obvious ability to do math, bought a total gas guzzler, which gets 15 miles/gal (which would almost HAVE to be a Hummer, because it’s all highway from BB to Dolphin Stad, but so be it).
100 miles @ 15 mile/gal = ~7 (again, rounding up) gallons of gas to get to, and from the game.
7 gallons of gas @ 5 bucks a gallon = 35 dollars/trip for gas.
10 home games * 35/trip = 350 bucks/YR spent going to the Dolphins games.
BTW, the tickets ~400-800 per year PER SEAT.
So, even if you assume that gas was FREE for them last year, if they cut out 2 beers and a hot dog while at the game, their cost/game is unaltered. I’m just so sick of hearing middle class/upper middle class people whine about gas prices. Yes, it sucks, and I wish it were 1/gal again. But, come on, does it really have ANY impact on the way you live you life? If the difference between 35 dollars per trip, and 25 dollars per trip is “make/break” for the Dolphins game; guess what? You shouldn’t be going at all.
Agree. On the same basis, taking the average miles traveled by an American in a year to be 15000 @ 15 mpg (pushing the 5000 lb monster), the cost increase from $3 gas to $4.5 is $1500/ year. Taking the median salary of $38000 this translates to 3.95% increase. Not much of an increase in the general scheme of things. Groceries is another thing - about 8% increase typically but nothing that a few sacrifices and budgeting can’t overcome!
Now gas price could go to $6 - but that’s a different story. I think the main reasons these “victims living beyond their means” are cyring are:
1. HELOC and MEW stopped completely.
2. Wage increase at 3% less than inflation.
Stating the obvious that so many here have mentioned before: wages are simply not enough to keep up the old lifestyle of “keeping up with the jones”. The money spigot has been turned off.
I sincerely feel that this generation of kids (16 to 24) entering the workforce is in for some life changing lessons. The survivors from this financial rout will give up their GenZ “me, me, me” attitude.
Disagree.
I, for one, have in the past and likely again will behave in much the same way as the woman in the article.
If rising gas/food prices mean that I’m over budget on those line items, I will cut costs elsewhere - namely disposables such as entertainment.
Paramount in my budget is salting money away into investments and retirement caddy. And that’s it. Nothing, save a medical emergency and perhaps a narrow list of education offerings, will ever trump it.
Apparently, numerous posters on this board have high incomes or high inheritances. If so, that’s good. Too, it seems apparent that some wealthy folks here really don’t have a clue what it means to actually scrimp and save…to count pennies and make sacrifices in expenditures such as that extra $10 for a football game or $300 for gas to go on vacation. They seems to have forgotten - or have never known - of what it takes to become wealthy on a shoestring income.
I know firsthand and am doing quite a good job of it, if I do say so myself.
“…guess what? You shouldn’t be going at all.”
I want a HBB blogger vote:
1. Do you support using “taxpayer money” to build a 650 million dollar $$$$$$$$$$$ sports stadium & parking lot for a billionaire owner?
2. Are “star athletes” & CEO’s pay keeping pace with the rest of America’s working class wages?
1. Unless the city would actually generate a profit from it (unlikely), no.
2. Star athletes, probably. They’re rare and valuable, as they can entertain millions of people putting in what amounts to a part time job. Of course, how valuable they are depends on how much the public is willing to spend on entertainment. If we all stopped thinking that guys throwing balls around was interesting, they’d probably all be selling used cars within a few years.
As for CEO’s, I doubt it. Sometimes a guy might be worth a little more because he has connections which are valuable to the business, but I don’t find the skills necessary to be a good CEO to be exceptionally rare. They aren’t abundant, either, but they aren’t rare enough to justify being paid a hundred times the average (or whatever it is now).
Three Little Facts & The End Of The World…
The history of the financial markets, too, is full of great disappointments. In Britain’s commercial property market, for example, developers thought they were in heaven just two years ago. Hammerson’s share price more than tripled in the 3 years from ’03 to ’06, as the City seemed ready to take up every new square foot – at a premium price. Higher prices begat further construction which begat more commercial space, which begat a glut, which begat a bust.
http://www.wrisley.com/bonner.htm
Person-to-Person Loans
http://www.nytimes.com/2008/06/15/realestate/15mort.html?_r=1&ref=business&oref=slogin
The average interest rate in May for a $20,000 loan given to borrowers with excellent credit was about 14 percent, and 9.5 percent for an $8,000 loan. These rates are generally higher than what borrowers would pay with a true home equity loan, but lower than credit card interest rates.
HUH?
Who on earth with “excellent” credit is paying 14 percent on 20K? If you are, let me know, I’ll set you up with tons of CC companies that will fix you at 1-5% for the life of the loan.
If you have excellent credit, and are paying over 5% for unsecured money, you’re getting ripped off. The CC companies are SO desperate to push people into further debt, they don’t even think people like me exist (that borrow their money at 1%, put it in accounts earing 3-4% and then pay them back their own stupid money).
Check out Advanta, they are very willing to open huge credit lines with crazy (2.9% for life, when I opened) terms.
that borrow their money at 1%, put it in accounts earing 3-4% and then pay them back their own stupid money)
I like that. How long has that worked for you.
I’ve been doing it for a few years now. There are some significant downsides that you need to know about. It will hurt your credit (I currently have >100K of unsecured CC loans). That’s not a big deal for most of the people looking at doing this, as you already need excellent credit to do it. Also, you can move your credit score in one month (if need be) back to excellent just by moving the cash from your interest account back to the CCs (pay them all off). For me, that will cause about 150 point pop in one month. Also, you need to be really on top of this to do it. If you mess up just once, you will wipe out your profit for the entire year.
And, frankly, given the current interest rates, it’s not worth it to borrow that kind of money to put into a savings account, that might, max, pay 4%. You will only get 1-2 points on the spread, and even at 100K borrowed, that’s only 1,000 bucks (TAXABLE) a year, not worth the effort.
However, if you’re willing to take the risk to go into more high yield instruments, then it can be worth it. Again, it’s risky (as you may have to hold them for a long period of time, you can’t just liquidate and pay back the CCs), but it may be worth it depending on your financial situation. Anyway you cut this, you need significant resources should you ever need to pay back the money in a hurry.
Honestly, after typing that, I’m not really sure why I go through all the hassle to do this. It might have something to do with the idea that I am f**king the system, which makes me feel good. So, I suppose, if you’re sick like me, and want to do it for personal satisfaction, then it may still pay off!
Also, there are sites that will help you with this. Search for “credit card arbitrage” and you will find lots of good resources (and warnings why NOT to do it).
I could see laddering CDs this way.
Thanks for the idea, Michael. I get blank checks from my CC company every month at 1%. I embarrassed that I didn’t spot this opportunity myself!
Two Bubbles, Two Paths
ttp://www.nytimes.com/2008/06/15/business/15view.html?ref=business
As long as the central bank is also a bank supervisor and a regulator, it is extraordinarily well placed to observe and understand bank lending practices — much better positioned than almost anyone else. Beyond merely knowing more, part of a bank supervisor’s job is to make sure that banks don’t engage in unsafe and unsound lending, and to scowl at or discipline them if they do. We know that America’s bank regulators fell down on the job as the housing-mortgage bubble inflated. But that was a failure of bank supervision, not of monetary policy.
Too bad that the fed didn’t do anything in its role as regulator.
BW, you saw in that horriblest website of all, D&C Rochester, how local foreclosures are up?
Indeed I did, sagesse, as posted below. It was only a matter of time. I have been beating the “it isn’t different here” drum for a number of months, but few have bought my rationale and that of this informative blog. I can’t say I’m glad it’s finally happening here, but facing the consequences through the lens of reality is better than facing it through rose colored glasses.
And yes the D&C site, even with a redo, sucks…
The redo of that site is what is horriblest. Still don’t know where to scroll for the news.
It is my opinion that nothing could have stopped the housing bubble mania, mainly because when prices are rising every J6P-investor is making money along with the whole RE industrial complex. Efforts to prevent so many people from making so much easy money are political suicide and/or bad business, and must necessarily fail if attempted. It was a stampede… lead, follow or get out of the way.
Now we have what some consider to be the expansion of a commodities bubble. Is it really a bubble? We can’t see around the bend. Maybe the bridge is washed out, maybe it’s intact. Are those screams in the distance? or just the howling of a wolf..
A lot of people here and elsewhere complained that government encouraged the housing bubble with low interest rates and lack of oversight, or coerced people into drowning in debt by promoting the ‘ownership society’.. or sat on their hands and did nothing while the bubble formed.
—-
Evidently, the government heard the complaints and is willing to do something to control the skyrocketing prices of grain and energy. It’s proposing a set of bills that will limit speculation in commodities as a pre-emptive strike against the formation of a potentially disasterous bubble.
The bills will do things like limit how large a stake any one person can have in a market, close loopholes regarding pension funds’ speculation amounts, and raising margin requirements for speculators.
Question: Should these bills be supported?
If not, is it justified to blame today’s lack of action for however the future unfolds?
“…Now, many commodities have no futures contracts. On average their prices have increased more than those that have futures contracts recently. That indicates to me that those that have futures contracts are not in a bubble….”
David Merkel
June 14, 2008
This is certainly true in the base metals. If the government enacts dumb legislation (controlling speculation), the markets will move overseas. For every long speculator there is a short speculator, it is a zero sum game.
Many think that because the US is slowing down, the world is slowing down.
“June 13 (Bloomberg) — China’s retail sales rose 21.6 percent in May, close to the fastest pace in nine years, as the strongest earthquake in half a century, a stock-market slump and the scrapping of a week-long holiday failed to cool demand.
Sales soared to 870.4 billion yuan ($126 billion) after gaining 22 percent in April, the statistics bureau said today. Last month’s 7.7 percent inflation rate swelled the numbers.
Automobile sales jumped 32 percent from a year earlier as incomes surged. Retail sales grew seven times faster than in the U.S. and followed a stronger-than-estimated gain in exports, underscoring the strength of the world’s fourth-biggest economy as global growth slows…
The retail sales data came two days after statistics showing exports surged 28 percent in May after a 22 percent gain in April. In a June 3 statement, the central bank played down the threat that overseas shipments will collapse, causing an economic hard landing. A “drastic” export slowdown won’t come soon, it said. …”
It is a world wide party and our government hasn’t the faintest clue how to gate crash.
“Efforts to prevent so many people from making so much easy money are political suicide and/or bad business, and must necessarily fail if attempted.”
Is it “bad business” to act to reduce the inevitable ensuing large
losses and economic distortions? There were states that did try to act to block some of the lending practices that allowed the bubble to grow larger. Unfortunately, these efforts were blocked by the Bush Administration. I don’t think such efforts are necessarily doomed to failure unless one assumes greed and corruption will be able to block most such attempts.
Proposals to increase margin requirements could be potentially helpful.
In Brooklyn, it appears the rent is high enough to keep condo developers who can’t sell from going under, at least for now.
http://www.nytimes.com/2008/06/15/realestate/15cov.html?ref=realestate
“WHILE condominium developers across the country are trying to unload thousands of apartments that they can’t sell, some builders in Brooklyn have found the real estate equivalent of a golden parachute. Having turned their new units into high-priced rentals, they have found a surprising number of eager takers.”
“These renters are a breed of Brooklynite different from many of their predecessors, and they share the same desires. They’re not pining for yards or fantasizing about a brownstone; they want apartments that resemble Manhattan luxury towers. They like 24-hour doormen, skyline views suitable for the likes of Gordon Gekko and the appliance equivalent of Prada or Hermès in their kitchens and bathrooms — all for much less than they would have to pay in Manhattan.”
God, Sex and the City is killing this borough! There isn’t enough room in Manhattan for he wanna-be’s anymore!
“For example, the developer David Walentas converted the last 40 units at his 300-unit building at 110 Livingston Street, in downtown Brooklyn, into rentals and rented them all within three months.”
I see there was great care in this article to supply no numbers which would allow comparison of the cost of renting versus buying, even in this case where the last 40 units were rented in a 300-unit building where all of the other units were sold.
“Asher Abeshera, the vice president for sales and marketing of Two Trees Management, which owns and manages 110 Livingston Street, said he had not received any complaints from owners in the building about having renters there.”
This effectively keeps the comps higher for now. If the builder had sold those remaining units now, at a discount, the current owners would know what their units were now worth and how much they’d overpaid. Other units will eventually sell and the comps will go lower, but the builder won’t look like the party that “caused” values to fall.
“I see there was great care in this article to supply no numbers which would allow comparison of the cost of renting versus buying, even in this case where the last 40 units were rented in a 300-unit building where all of the other units were sold.”
Good observation. Unlike the rest of the country, in NYC the majority of folks are renters, not owners, true even in Manhattan.
But good information on pricing for either buying or renting is hard to find, and here you end up relying on word of mouth, or anecdotal info. It’s kind of shocking when you first move here, that people are pretty bold about asking what you’re paying, if you’re renting, but it’s because real info on the market is so hard to find. Pricing is considered “proprietary” by brokers, whether for renting or buying, and you’re reduced largely to using guesswork.
The developer is taking a huge depreciation on “the make a wish” price because there will be no low priced comps in that property. That’s a great way to lock in future profits when they write off the capital loss against the depreciation recapture. What a bunch of scumbags.
Foreclosures affect Monroe County (Rochester, NY area)
http://democratandchronicle.com/apps/pbcs.dll/article?AID=/20080615/BUSINESS/806150318/1001
Statistics for May showed 369 foreclosure-related actions in Monroe County, a 46 percent increase from May 2007, according to RealtyTrac Inc., a California company that compiles such data across the country.
The Monroe County increase was almost as high as the nationwide 50 percent surge in foreclosure filings between May 2007 and last month, RealtyTrac said Friday.
Where are the quotes from the real estate crowd? I didn’t see any “it’s different here,” or “we are seeing improvement” screed from the kool-aid drinkers at NAR. Finally, maybe a bit of reality is taking hold.
I have two friends who are leaving the area this summer for employment elsewhere and they both have contracts/closing dates for their homes. Good for them. Prices will grind down in Rochester for a long time to come.
I should add that I continue to expect out-of-state “investors” to pile-on as the market drops.
“I can get a house in Rochester for $50 grand… There’s no way that won’t cash flow. Booyah!”
What I find amazing in this area is that home prices are higher this year than last year by about 10k for anything in the 140-170k range. Foreclosures are up, taxes are increasing, sales are down, but prices remain elevated. When the pin fully punctures this bubble, it will pop loudly. I wish I wasn’t going to be here to see it happen. But where will the bubble and its aftereffects be avoided?
“Giving money and power to government is like giving whiskey and the car keys to teen aged boys.” ~P.J. O’Rourke
..According to a 60 Minutes profile, he is also the most quoted living man in The Penguin Dictionary of Modern Humorous Quotations..
http://en.wikipedia.org/wiki/P._J._O%27Rourke
Tim Russert’s legacy—in politics and in life
“Russert’s death is a blessing only in this one sense: we all need to stop and think of what he was aiming for and what he believed in, which was a country capable of governing itself through the practice of intelligent discussion and debate.”
http://www.newsweek.com/id/141415
Russert had a way of respecting those he disagreed with and I think all of us should try to emulate that trait. Happy Father’s Day to all you dads.
Russert was the first proponent of keeping the spotlight on himself during his interviews. He NEVER let his subject get out more than one complete sentence before interrupting the response with his next question. Often, the interruption came after just a couple of words from the interviewee. Extremely rude.
Now most TV talking heads do the same thing.
The hyperventilation over the passing of Tim Russert shows how much the television news “personalities” have come to view themselves AS the news, instead of as individuals reporting it or mediating it. Honest to God, everytime I see some sort of media “roundtable” discussion, I want to drag out a barf bag. These people are so self-congratulatory, all cozy and tickety-boo, “aren’t we special”, talking down to their viewers or listeners.
As to Russert, he was just a guy who interviewed people. The death is, to be sure, tragic for his family and friends and a loss for those who liked his personality and show. I didn’t much care for it, especially after 9/11, when Russert toed the military/government/corporate complex party line just like most in American media. He asked the “softball” questions, IMO and didn’t probe too much, at least not on any show that I saw. He maybe gave the appearance of doing so.
Much of TV media is now self-congratulatory corporate lapdogs, afraid for their jobs and perks. Russert might have been not quite so bad as many. My sympathies go out to his family and friends, that’s it.
“Much of TV media is now self-congratulatory corporate lapdogs, afraid for their jobs and perks. Russert might have been not quite so bad as many. My sympathies go out to his family and friends, that’s it.”
Amen, Palmetto.
Good post Palmy.
Mike
Got way more press than the Taliban freeing 800 to 1,000 prisoners in Afghanistan, Way more.
Russert seemed like an affable fellow, and obviously it’s a terrible and unexpected loss to his colleagues and family. But having watched his show for years, I can’t help but feel that he failed to ask the tough questions when necessary.
RE: you can’t escape the $4 gas,
There was a front page article in the Beantown Glob about how the “poor children” couldn’t afford to go “joy riding” anymore.
One male had to revert to riding his bicycle (gasp) and the female was put in the embarrassing position of asking friends for gas money (OH, THE HUMANITY!)
Boo hoo, cry me a river..I never owned a car until I was outta college and managed just fine.
And if $8.00 a gallon gets all of them off the road, count me for it. Drivin’ after the school’s let out is one PITA.
I went to a party yesterday. I talked to a guy that owns a carpet business here in the Orlando area. He said his business is off 40%. He has had a round of layoffs and is going to have another. He said April and May were just horrible. He said he took out the equity in his commercial properties so he would have some cash in case this get worse. Another friend at the party owns a high end glass company. He said his business is off 40% as well and he made everyone take a pay cut. He said he is not paying himself and is brown bagging it for lunch. There is much fear over the economy.
Here in Columbia, S.C. a local ‘high’ end kitchen cabinet and granite counter top seller/installer, just closed up shop, out of business. It was supposed to be different here, I was told.
Wmbz:
I lived in Columbia many years ago, on covenant st, between belt line and two notch……
I lived at the edge of Columbia for a couple of years one winter…in the exclusive gated neighborhood known as “Tank Hill” :-).
We live right off Saluda Ave. just out of 5 points.
I had some wind damage on a rental roof. I called my usual roofing contractor prepared to leave a message and wait weeks for a return call. Someone answered on the second ring and promised a visit to the property the same afternoon.
I called a home inspector at 10 AM last week and got an appointment at noon. Home sales deflation is helpful if you are holding the money bag.
made everyone take a pay cut ??
What a novel idea…Think we can get govment to do the same ??
When running a business the worst thing you can do is give a pay cut. The morale of the whole company goes down and the workers bees get very angry.
It is best to take away the cell phones, gas card, expect extra work and tell the workers that everyone’s job is on the line and those that work harder will stay, others will be let go. In other words cut expenses (which is like a pay cut) extend hours and the worker bees stay a little happier.
I would like a fair and balanced look at the housing bust. Where were these guys with their suggestions to maintain perspective when home prices were headed off into the stratosphere?
NATION’S HOUSING KENNETH HARNEY
Take Fed’s bombshell report with a dollop of perspective
June 15, 2008
WASHINGTON – As a homeowner, seller or buyer, what should you make of the Federal Reserve’s latest bombshell report on Americans’ home equity positions?
Panic? Mild concern? No big deal?
The dollar losses involved were huge and sobering. On a national basis, they document the personal financial impacts of declining home prices, especially in the frothiest boom markets of California, Florida, the Middle Atlantic states and New England.
But it’s important to keep the Fed’s numbers in perspective.
There are a lot of “if’s” in that article.
If you bought your home before 2000.
If you bought in a non-bubble area.
If you bought a primary residence only.
If you got a regular 15 or 30 yr mortgage.
If you didn’t participate in the MEW binge.
If you were responsible and paid down your mortgage.
Then you probably have some equity in your house.
Bwaahahahahahahahhah!
Yes Mr. Harney, if there were no clouds, the sky would be blue.
Unless you look at it sideways or maybe upside down… then the sky may be red.
These Senators’ denials make them appear pretty damn clueless.
June 15, 2008, 12:04AM
Senator acknowledges special help on loans
Democrat from N. Dakota insists he hadn’t known about the favors from Countrywide
By TOM HAMBURGER
Los Angeles Times
TOOLS
WASHINGTON — Sen. Kent Conrad said Saturday that after reviewing e-mails from Countrywide Financial Corp., he learned that company officials had provided him with preferential treatment: a discount on one loan and a waiver of a company lending rule for another.
Although the favors were unsolicited, the Democrat from North Dakota said he would donate $10,500 to charity to compensate for unsolicited benefits he received.
Conde Nast’s Portfolio magazine reported last week that Conrad and Sen. Christopher Dodd, D-Conn., were part of a special VIP program at Countrywide that provided special terms and discounts to Hollywood luminaries, national politicians and friends of Countrywide executives.
Dodd chairs the Senate Banking Committee, and Conrad sits on the Senate Finance Committee. Both panels consider matters of concern to Countrywide lobbyists.
Both senators said Friday they were not aware they received special favors or that they were part of the “Friend of Angelo” program at Countrywide. The name refers to Angelo Mozilo, the CEO.
I’m going to vomit.
So, you took a bribe, denied you took it, realized we were going to catch you, admitted you took it, and now want to donate some money to make it “all ok”.
Yup, it’s vomit time.
I’d pass you my barf bag, but I’m afraid it is full.
Forget barfing, distribute the torches and pitchforks.
If you’re shopping for a loan and the first person you contact is the CEO of the lender, you’re seeking special favors. If you then get preferential terms and you’re a politician, it’s a bribe. Nothing complicated here. Will charges be pressed, though?
Conrad’s got a Heart of Darkness to contend with, named Mozilo
Gee maybe I will not pay my Federal Taxes next year. I did not know April 15 came every year!
If I am caught, can I just don’t money to a charity?
Sorry
If I am caught, can I just donate money to a charity?
Veepstakes: Dodd off the list?
Posted: Friday, June 13, 2008 9:15 AM by Domenico Montanaro
Filed Under: 2008
DODD: Rut-ro: If Countrywide loans were enough to get Jim Johnson kicked out of the vetting process, doesn’t this mean Chris Dodd is now a total non-starter as a potential running mate?
VIDEO: A Race for the White House panel debates: What does Sen. Barack Obama need most in a vice presidential candidate?
“Two influential US senators got ‘VIP’ loans from a leading subprime mortgage lender that saved them tens of thousands of dollars, it was reported last night. The Democratic pols, Chris Dodd of Connecticut and Kent Conrad of North Dakota, both received the highly favorable loans under the designation ‘Friend of Angelo,’ a reference to embattled Countrywide head Angelo Mozilo, Condé Nast Portfolio reported.” Dodd chairs the Senate Banking Committee.
Dodd as a VP never really made much sense. Coming from CT, he doesn’t help on the electoral math. Although he’s well-known to political junkies, he is relatively unknown to J6P. He’s been in Washington for over half of his adult life (1975-1981 in the House, 1981-present in the Senate), which doesn’t work with Obama’s “time to change” message. And he really isn’t considered an expert on foreign policy. If Obama wants an old liberal warhorse who has been in Congress for longer than some voters have been alive, then Joe Biden is a better choice.
I’ve come to the conclusion that Sam Nunn might be the best VP candidate out there. He’s a Washington insider with foreign policy expertise, but he voluntarily decided not to seek re-election 10 years ago because he was tired of the Washington culture. He’s not the most charismatic figure, but as one of the most conservative Democrats to serve in the last quarter century he’ll help balance the ticket. And he remains quite popular in Georgia and other purple southern states which might be vulnerable if McCain can’t rally the evangelicals.
Fed, ECB Credit-Crunch Markets Into Rate Panic: Mark Gilbert
Commentary by Mark Gilbert
June 12 (Bloomberg) — The global economy is in a funk, the banking industry is in meltdown, house prices are collapsing, and companies are starting to default on their debts — so central banks are threatening to crank interest rates higher. Go figure.
Aint gonna happen
All talk, no action.
The Federal Reserve and the ECB waste words. The fed will not raise rates in a worsening economy. Mr. Bernanke is a student of the Great Depression. The only possible way the deflationist scenario could occur is to raise rates. The Federal Reserve would rather have inflation at 20% than deflation of 1%.
hozzie baby,
opening salvos by the Sovereigns at the treasury auctions have begun. I predict Mr. Fed is gonna do exactly what mr auction buyer tells em to do. Now, with that being said…it does not close the back/side/floorboard doors of opaque paper shuffling with the alpahabet soup lending facilities. Heck, even the discount window may even get opened again.
So, if a headfake higher 25 bps hike spooks the oil specs, and kicks off PLANNED banking failures, coupled with a shotgun wedding of a too big to fail thrift, and multiple regional bank consolidations/mergers..
what happens next? path of pain at this juncture appears to be dollar rally, higher inflation reporting, and higher rates.
I suspect we may be headed for a plaid swan that contains a short end of the curve inversion.
signed,
book judge, covers book?..never.
yes, you can raise rates and prolong inflationary expectations while appearing to do something because a measly 25bps hike aint gonna spook any spec outa the commodities.
yes we can!
stoke inflation with higher rates while shoveling marketable securities out the back door, at a special discount window.
We need change!
coinage to be eliminated, due to aggresive coin shaving.
Hope Now!
Open? How?
Buy petrol today or get priced out forever.
Panic buying sparks queues
Published Date: 14 June 2008
By Julia Bennett and Joe Robinson
PETROL stations were forced to close after panic buying swept across the Fylde coast.
A four-day strike by tanker drivers kicked in yesterday and sparked massive queues at filling station forecourts.
Panic buying – with some drivers labelled “mad” and “behaving like children” – led to “closed” signs as tanks ran dry at some garages including Talbot Road, Blackpool, which still has no fuel today.
What will the RE market and the states do with the damaged goods ?
The midwest has thousands of flood and storm damaged bridges, roads and houses. In Iowa and Wisconsin, many small dams and levies have been weakened or structurally comprimised by the flooding.
One small town in Wisconsin, Gays Mills, is thinking about moving the whole town to higher ground. A 2 minute boat ride down across main street downtown would mean a 2 hour drive by car using dry roads to get to the other side. It has suffered 2 so called “500 year floods” in 10 months.
It looks like the states small dams are ready to go and there’s NO MONEY left to fix them.
The RE agents will cackle and chant:
“Buy Now, Location, Location, Location. “Do I ever HAVE a slightly used POS for you with a stream or view of a lake !”
Hopefully, anyone with 1/2 an ounce of working grey matter will smile and answer:
“Frankly my Dear, I COULDN’T ..give a DAM”
http://www.madison.com/wsj/topstories/291597
Don’t know what they are going to do about the infrastructure shortfall. But, as for the extra/damaged homes, that’s pretty simple. A nice big yellow bulldozer and that problem has been solved. The more I look around in S. FL, the more I realize that there are definitely going to be some homes bulldozed down here; with 4-6 years of inventory there’s almost no way around it. I would like to see it be mostly older, run down areas, but of course, that’s not the way that it works.
So I am sure, at some point, I will get to see several homes under construction get bulldozed down before completion. And the same thing should/will happen to the damaged homes or homes nobody wants, they will bulldoze them and wait for the next bubble to sell that land again.
More Pawning For Gas & Food…
This has been mentioned before, and it looks like some pawn shops will be closing, due to increased pawning and decreased buying. Perhaps a Gubmint bailout is in order! No one should be ‘allowed’ to fail, it’s just not fair.
http://www.newsobserver.com/business/story/1107949.html
To summrize: Pawnbrokers, who trade cash for J6pk’s worldly goods are up to their neck in worldly goods and are short of cash.
Pawnbrokers need to convert worldly goods into cash but they have a tough time doing so because the demand for cash is greater than the demand for these worldly goods. They have lots of neat stuff to sell but nobody to sell it to because potential customers don’t have the cash to buy it with.
So, because pawnbrokers are rich in worldly goods but are out of cash to buy more of J6pk’s worldly goods they are shutting their doors.
Cash. It all comes down to cash. Those who have it or can get it call the shots, even with pawnbrokers. Those without it are screwed.
The should package up all those worldly goods, then slice them up and sell them to hedge funds. That would give the pawn shops more money to give out.
Then j6pk could be patriotic and go out and buy more crap they don’t need.
A short history lesson:
GPM’s, Neg-Am’s, Adjustable-rate, etc.
This was the lingo in the early 80’s when I was in the real estate business. It is the reason I quit the real estate business, as I knew it would end badly.
Graduated-Payment Mortgage was introduced when Paul Volker was FED Chairman and raised rates to 17%. Mortgage rates went as high as 17%. Sales were still strong at 12%. Using simple Supply/Demand analysis, when rates are much higher, you would expect the PRICE to be much lower, as wages were not keeping up with inflation in houses. But here is a simple truth: No one wants to lose money on the sale of their house, and no Realtor(tm) wants to tell them the “investment” they were sold can’t be re-sold for MORE money. Solution: Funny mortgages that depend on you being about to pay 1/3 or more money a few years down the road.
The end result: RESOLUTION TRUST CORPORATION.
Some of you may remember that, if you are old enough to remember the last bust. It was the time the Clintons were involved in the Whitewater development, a deal with “questionable” financing. There was a lot of questionable financing back then, and most of the schemes didn’t work out in the end. When the Mortgage resets started coming, the payments started falling and the banks and credit unions started failing.
There was sooooo much inventory on hand, many with FHA loans, that the FED’s had to make a special agency to “liquidate” the frozen market. Prices fell. Interest rates were brought back down. Two years of poor sales. Today’s market is worse, as the “affordability” spread is even more out of whack.
End of lesson.
Looking around today, I’m seeing more and more BOMs. That was what we called them back in the day: Back-on-Market. It was something every agent dreaded.
Here in the Tampa Area I am seeing more and more houses that were for sale, that I thought had sold a year or two ago, but now the property is being vacated by the tenants. The sale sign came down, people moved in, and the house was occupied by what looked like new owners. They weren’t. They were renters. INCIDENTAL LANDLORDS. They are everywhere here. There have been 2, maybe 3 on my block in the past year. Now the sales signs are back up.
Prices have come down substantially in some areas as the market tries to re-adjust to lack of “free money loans”, and the realization that prices aren’t escalating for some easy cash-out refi’s. We haven’t seen the new Resolution Trust Corporation, but we may yet.
I looked at a house last week. 3/2 2 car gar. double-lot 1500sf in Clearwater. Price $140,000. It was a BOM. Sale fell through. It was also a flip, or “renovated” house.
The interiors look great….new pergo, new cabinets, new decorative front door,new paint. The exterior was made to look as good as possible without putting in any money.
It was a 1940-1950 model with asbestos siding over wood frame. It has new shingles but you could see how ‘irregular’ the plane of the roof was (old joist framing that had deflected from long-term settlement). The original wood, single-hung glass windows were in walls. Gaps at corners due to uneven settling of the foundation were evident. Caulking filled areas in the eaves and exterior framing areas where things didn’t quite fit well. They even painted the front concrete steps and porch area in black paint. That probably hid all the other paint stains that would have been unsightly and given a better perspective of the houses age and condition.
Too many “flip this house” episodes has made contractors out of house-wives. I passed on the house.
Around the corner was a newer house. It was concrete block. The original windows HAD been replaced with newer energy efficient windows. It has a single garage on single lot. It was a much better house, but I need much more yard area for my stuff.
The price: $135,000.
Over on the coast, I found 3 Waterfront house that were bank repossessions. The area is one of the most run-down areas in Pasco county that is on the water. Nonetheless, the houses are being offered at $140,000 to $155,000. I was tempted to go over today and look at them. They were all in disrepair, based on the photos. I am also familiar with the area. During a “no-name” storm back in 1985?, the entire area was under water. It was the first time I went bargain hunting, and after finding sailboats in people’s yards that were being cut up for removal, I decided this was probably not a good investment. I didn’t want my furniture sitting on the lawn to dry out. That was when hurricane insurance was pretty cheap. IF the agencies are familiar with this area, then I suspect buying the house is the cheapest part. Insurance and maintenance will probably make living there less than desireable. I any event, I am not in a hurry. I expect more bank-owned properties to be coming along shortly.
The prices I am seeing are starting to approach levels that I saw back in 2002 when the bid-wars started and the “housing shortage” first became evident. It was the first time I heard a New Yorker exclaim they were buying here because the houses were “Undervalued”, a new word to add to my real-estate lexicon. I didn’t realize that Florida Crackers were living in underpriced houses on $38,000 annual income. It took Yankee ingenuity to show us stupid rednecks just where price discovery needed to be.
I am also seeing more “flip-it-to-someone-else” handy-man specials posted on signs along the roadways. Prices as low as $85,000 or less, but “worth” $180,000. That’s about where we were when all this crap got started in 2001-2002. But a house, paint, pergo, granite, appliances, a few yards plants; Old price: $125,000. New price: $225,000. You couldn’t really afford it, but then you could re-finance your way to a better lifestyle…and, hell, everybody else wanted it. There were lines forming to buy them up, from everywhere in the Nation. People were buying them sight–unseen over the internet.
The market here has changed, and I am started to shop a little. There are some things coming on the market that are within reason now, but I think the best deals are still ahead, when the OPTION_ARMS reset in force next year, and the coming 3 years.
There is nothing new under the sun.
Insolvency is not a new concept. It’s what happens when you buy things you can’t afford, anticipating that you will unload them on someone else when the debt burden gets too high, and your income hasn’t kept pace with the rising costs of debt service.
I’m just a stupid engineer from Florida. I’m not one of the financial geniuses with a degree from Harvard or Wharton, but even I could see this plan could never work long-term. But then, people prefer tall tales to the cold hard truth. It should be obvious, based on the attendance of theme parks that Fantasy, is much preferable to reality. The problem is dreams don’t pay the mortgage.
Happy Father’s Day for all you Dads.
-D.
Good post. Regarding
I’m just a stupid engineer from Florida.
Not enough people are educated in conservation principles (as in: conservation of momentum), which can be as profound in finance as physics.
My eyes opened to the telecom bubble once somebody showed me a calculation: If you assumed the growth rates continued as they were in 1998-2000, then telecom would be something like 120% of the 1999 GNP. Clearly, when an industry goes from 3% to 120% of your GNP, something is a tad broken.
Looking at rates of transactions during the RE bubble as well as rates of growth in the assets had a similar effect on me.
Thanks for the post. I too am eagerly awaiting for the new form of the RTC. When it starts liquidating properties en masse I will enter the market.
“It took Yankee ingenuity to show us stupid rednecks just where price discovery needed to be.”
Great, informative post. Thanks.
Here are a couple of more cases of obvious fraud and greedy mortgage brokers.
One guy got a loan on the day he got out of jail and somebody who earned $35k at McDonald’s got a $500k loan…
http://www.msnbc.msn.com/id/25169510/
The Florida housing market is in rough shape for sure. This upper midwest flooding looks like a widespread Katrina aftermath without all the deaths and displacents and is already affecting crop future speculations.
Neil…HOARD your popcorn supply!”
whoever is ’speculating’ now is getting into the game way late..
The professionals have people watching the weather all over the world, and long before something like this happens are well informed and have plenty of opportunity to assess risks and rewards, and place their bets accordingly.
This is why amateurs can’t win in commodities.
The beat goes on- I appeared on a local TV program about the housing issues. I was asked “are we at the bottom?” I said, “NO”!
The moderator asked me when we would be there. I said, ” I don’t know.” I told the panel that I really believe we have about 100,000 properties on the market in the MSA of Orlando area and that the builders were still building. So long as this occurs we will never dig out.
As a result of the program I have been asked to meet with a local politician next week relative to the housing crisis. I am certain the question will be, “what can we do”?
I am going to tell him that the only thing we can do proactively is to place a moratorium on building permits until we begin to burn off some of the inventory. No doubt they will not like that suggestion because of the loss of the fees and there is a clear constitutional issue. IMHO a case can be made that our infrastructure cannot sustain further development as county income falls off a cliff. This is an emergency.
Frankly, the fees pale into insignificance when compared to the erosion of the tax base due to plummeting values. This past week I appraised a home for $105,000 that is assessed for $150,000, and this is not unique.
On the panel I tried to explain the relationship of rents to value in housing and that this bar is being raised daily as the economy worsens due to job losses, fuel costs and inflation etc. I could see that they had a hard time getting their heads around the concept. But then I realized that they were all debt oriented, save one. If you accept debt as a part of the formula almost anything makes sense.
The liquidity issues have brought even that premise to it’s knees. This is Econ 101 on a mass basis. I love it!
Good for you, dime. You tell it like it is and always have. One of my favorite posters on the Florida scene. I also admire you greatly for rolling with the punches. You are awesome.
Thanks P….ditto.
As a result of the program I have been asked to meet with a local politician next week relative to the housing crisis. I am certain the question will be, “what can we do”?
That would have been a great weekend topic. “What recommendation would you make to your municipal government?”
Mine would be:
1. Start cutting discretionary (and non-discretionary) spending immediately.
2. Prepare for a large elevation in foreclosure rates (eg. sheriffs)
There are about 10 fires raging around california right now.. it’s all over the news. Another one in Santa Cruz mountains.. Evacuations and all that..
Also in the news is this impending budget shortfall. All the cities are wringing their hands and predicting painful cuts.
One city ( i forget which) gets a 15 second TV news-blurb about what part of their budget should first bear the brunt of the proposed cuts.. take a guess..
Firefighters? Ding! Give that man a cigar.
“There are about 10 fires raging around California right now.. it’s all over the news. Another one in Santa Cruz mountains.. Evacuations and all that…”
As you need to use freshwater to fight firefires, and we are on the verge of a drought like no other, tough decisions will have to be made during the fall fire season, when it might boil down to letting fires burn themselves out, just like Mother Nature used to do before white man showed up…
Relax.. all is well .. the Governator’s declaration of a state of emergency allows farmers and other entities to bypass a lot of constricting water usage regulations.
That reminds me of another fire a few years ago.. the drop-planes had to fly several miles to reload the water bucket, even though there was a small lake adjacent to the threatened houses.
It seems some endangered species of bug lived in that lake and the water was off limits..
We can either grow food or use water for our personal needs in California, but not both…
Which would you prefer?
Water rationing forces Westlands growers to abandon crops and lay off workers.
“In 47 years of farming, 65-year-old Jim Diedrich has battled it all — hail that savaged his tomatoes, insects that ate his cotton, sagging prices and searing heat.”
“But now he faces something new.”
“He and his son, Todd, must abandon more than a full square mile of tomatoes in the Firebaugh area — their blooms yellow, leaves still green, drooping a little from the lack of water but otherwise standing firm and stretching in endless rows.”
“Being a farmer, it’s tough to let this go,” Todd Diedrich says”.
“The Diedrichs are letting 725 acres of tomatoes die so they can keep 550 acres of almond trees alive. “If we lose the trees, a 35-year investment is gone,” Diedrich says.”
http://www.fresnobee.com/263/story/668645.html
We can either grow food or use water for our personal needs in California, but not both…
True.. There’s only so much fresh water to go around..
The Clean Water Act prevents any chance of cost-effective desalination of ocean water since it puts all coastal areas which are close to power plants off limts.
And then there’s the Delta which needs a constant supply of precious fresh water drained into it to keep salination levels appropriate for the local wildlife… its’ partly guesswork but it’s better to flush too much fresh water than not enough.
Mother Nature comes first. Human needs come in a distant second, third or in some cases fourth.. we just gotta learn to cope.
Who needs tomatoes anyway? Aren’t the same vitamins and minerals available in some cactus or something?
I think Cal-Fire can afford to be cut. We’re paying $150-250K per year for most mid level personnel in that organization. Compare that to Forest Service fire management, often making between $45-75K per annum. Yep, I think CDF is a bit bloated. But there is way too much political pressure to cut their salaries. But, I’d like to see a firefighter with no education and few work skills get that kind of money anywhere else.
of course i agree.. there’s huge sloppy wasteful spending everywhere.
My point is that government abores cutting any spending, and when it suggests places to cut, they will deliberately pick places that are most painful to the citizens and least painful to themselves.
In the middle of a gang war they will suggest cuttiing police.. if there’s an health epidemic they’ll target hospitals.
WHY should we pay taxes to hire firefighters to fight inevitable fires for homeowners who choose to live there.??I don’t expect ANY assistance (even though I would likely get it) if a earthquake levels my house…That’s the risk & choice I have made in living here…I say (without lose of life please) let it burn…
lose = loss…gee’s !!
“As a result of the program I have been asked to meet with a local politician next week relative to the housing crisis. I am certain the question will be, “what can we do”?”
That would have been a great weekend topic. “What recommendation would you make to your municipal government?”
I wouldn’t outright block any new building. However, any local incentives to encourage building should be dropped until inventories drop to some preset threshold for some period of time.
This would also be an excellent time to close loopholes that allowed for excesses in the recent bubble. Examples might be setting minimum standards for condo conversions, moving assistance for renters displaced by condo conversions, etc.
Also push for lenders to take back properties on which borrowers have defaulted and to maintain them until sold again.
They are going to want to do something so that they appear to be doing something. Keep them away from things that might slow the market correction and instead focus on minimizing the most harmful aspects of the current correction and reducing the likelihood of recurrence of the worst bubble era practices.
“What recommendation would you make to your municipal government?”
x2 the federal poverty income level = base pay
Pension’s are related to how much collective time you spend sitting on your arse …combined with the total hours spent talking on the phone / computer taking care of “personal” problems.
What recommendation would you make to your municipal government?”
Cut 75% and outsource to the private sector….Save 50 cents on every dollar minimum and get better service…
San francisco: send me your OTR photos. I need them on my desk by tuesday!
annmoorman@att dot net
I have three new photos from other states. I need more.
http://s292.photobucket.com/albums/mm1/anngogh/?albumview=slideshow
That page requires me to allow an adobe flash update.
This computer is less than a year old but requires it.. ok, fine.
But for various reasons i generally do not allow auto-installs of any software.
That’s not your problem and it’s not my point.
My point is that the photos can be accessed in the non-slideshow format by shortening the URL.
http://s292.photobucket.com/albums/mm1/anngogh/ will display a page one level nearer to root.
I don’t think this is a potential security flaw.. i suppose it could be.. but in any case, it’s a way for others who share my flash-deficiency to view the photos.
That’s funny, when I made the site I didn’t even know it had a slideshow format. Anyway, yeah let’s use both.
Ah well, it was a good excuse to uninstall and reinstall Adobes monster.
Delusions run deep in palm springs. I must admit these are lovely homes.
http://www.debbietoohey.com/properties/
I’d pay the asking price for almost all of those listings, especially this one
http://www.debbietoohey.com/propertydetail/?pl=15260
Chump change for many running around this valley…
OT but very funny.
http://ca.youtube.com/watch?v=hnb2IrsU1Cg
Could this confidential lending to investment firms help explain certain puzzles, including an oil price bubble and U.S. stock prices that always go up?
P.S. We have been assured that the economic emergency is over, so I guess the Fed can close their emergency lending program then? (Or else make me an emergency loan — I could use a few hundred grand at a below-market rate about now.)
Investment firms borrow at steady pace from Fed
By JEANNINE AVERSA – 2 days ago
WASHINGTON (AP) — Wall Street companies borrowed from the Federal Reserve’s emergency lending program at a fairly steady pace, while banks scaled back.
A Fed report, released Thursday, said the investment firms averaged $8.4 billion in daily borrowing over the past week. That compared with $8.3 billion the previous week.
The investment houses were given similar loan privileges as commercial banks in March after a run on Bear Stearns pushed the nation’s fifth-largest investment bank to the brink of bankruptcy and raised fears that other Wall Street firms might be in jeopardy.
Meanwhile, banks reduced their borrowing, according to the Fed report. They averaged $13.1 billion in daily borrowing for the week ending June 11. That compared with $15.92 billion in the previous week.
The identities of commercial banks and investment houses are not released.
In the broadest use of the central bank’s lending power since the 1930s, the Fed in March scrambled to avert a market meltdown by giving investment houses a place to go for emergency overnight loans. The program will continue for at least six months. Commercial banks and investment companies now pay 2.25 percent in interest for the loans.
As part of efforts to relieve credit strains, the Fed auctioned nearly $25 billion in Treasury securities to investment companies Thursday.
The auction drew requests for $27.2 billion worth of the securities.
I just thought of a way to work this out:
Anybody who gets entitlement money for anything, will also get low cost gas. The rest of the taxpayers get to pay more.
Anybody who gets free health will get an allowance and people who pay for private insurance will get to pay double every year!
If you don’t have car insurance, no problemo, we can just jack up rates for those with it.
Need a new home? No problemo, just tax the renters more every year, I suggest higher cap gains.
Need food, water and electricity? No Problemo.
Fee Hee hee!
Sorry, I haven’t ranted in a year.
Op-Ed Contributor
Think First, Bail Out Later
By ROBERT C. POZEN
Published: June 15, 2008
Boston
WHEN the Federal Reserve bailed out Bear Stearns in March, it effectively guaranteed all of the investment bank’s outstanding bonds and commercial paper, which were held almost exclusively by large investors. The Fed also agreed to absorb the losses on $30 billion worth of Bear Stearns’ weakest assets (after a $1 billion deductible paid by JPMorgan Chase). In the Fed’s view, both steps were needed to protect the financial system from the possible failure of Bear Stearns.
But the Fed’s actions have prompted a new debate about the proper scope of its powers. As Congress now considers legislation to regulate the Fed’s future relationship to broker-dealers, it should ask a few key questions: Were the steps taken by the Federal Reserve the least costly means of preventing Bear Stearns’ failure? In moving so quickly, did the Fed give itself enough time to consider less drastic approaches, like guaranteeing for 30 days the completion of all open trades between Bear Stearns and its customers? And finally, did the Federal Reserve document its rationale so that a government auditing agency could later review it?
Which presidential candidate is more likely to repudiate economic policies which favor too-big-to-fail entities and bust Megabank, Inc into smaller, more efficient operations?
Bail out (finance)
Bail out in economics and finance is a term used to describe a situation where a bankrupt or nearly bankrupt entity, such as a corporation or a bank, is given a fresh injection of liquidity, in order to meet its short term obligations. Often bail outs are by governments, or by consortia of investors who demand control over the entity as the price for injecting funds.
…
According to the Austrian School of Economics the appearance of monopolies can often be blamed on such acts of government intervention that preserve overstretched and badly managed corporations which market forces would have broken into smaller and more specialized companies.
How can someone who just walked away from a foreclosure possibly qualify for a new loan? Something is rotten in the State of California.
Some owners plot walking away from foreclosed home
By Nick Timiraos | The Wall Street Journal
June 15, 2008
Next month, Michelle Augustine plans to walk away from her four-bedroom house in a Sacramento, Calif., subdivision and let the property fall into foreclosure. But before doing so, she hopes to lock in the purchase of another home nearby.
“I can find the same exact house as what I live in right now for half the price,” says Augustine, 44, who runs a child-care service out of her home. She says she soon will be unable to afford her monthly payments, which will jump to $4,000 from $3,300 in August, and she doesn’t want to continue to own a home that is now worth $200,000 less than what she paid for it two years ago.
Maybe she has Congressional contacts?
Ownerous
own-er-ous
adj. Troublesome or oppressive; burdensome
OT, but I bet you guys want to know you can now swim in the Cowboy Waterin’ Hole in Kanab, Utah, wearing a speedo or bikini (but NO thongs or string bikinis, mind you), which are now unbanned after having previously been banned.
This is the same town that I walked into the bookstore (before I knew there were Mormon bookstores - primarily LDS religious books) and asked if they sold any Ed Abbey (Google it if you don’t know who he is). I sensed I’d made some kind of a faux pas, but didn’t know what I’d done THIS time… LOL!!
Ding ding,
quick glance,
“Your Customer!”
that’s great news .. i’d like go to Utah and lay around in a bikini (?) except that I do not like being ogled, whistled at and generally treated like some sex object by rude girls.. as if i were some piece of meat.
Some of us do have a brain, ya know.
Hey, Joey, if you were in a bikini instead of a speedo, you’d get more than ogled, whistled at, and treated like a sex object!
LOL!!
And for those of you uninformed who don’t have a clue where Kanab is, it’s just down the road from the town that made it mandatory to own firearms and also 86′d the United Nations from their soil, made it illegal for the UN to come to town, IIRC.
Oh man, I love this stinkin’ desert.
it does sound better all the time.. i saw your youtube vid and it made me wanna take a long, lazy vacation..
Did you check out my newest one - on Moab? Go to youtube and search on do wacka Moab - I’m thinking about moving back, crazy place. Love it.
OT, but interesting. Lehman is having a series of meetings this weekend, prior to their quarterly results being released on Monday. This after having canned their CFO and COO last week.
And, AIG ’s CEO Sullivan is expected to resign today, according to Reuters, and the WSJ online editions.
Had an absolutely infuriating talk with a smug knpw-it-all family practice resident going into practice this summer. He and fiance bought a house in the town where he will practice. “Real estate only goes up”; his grandmother bought a house in Pasadena for $100,000, now “worth” $900,000. Told him she could have bought in Detroit.
Beauty’s in the eyes of the beholder - whoops, I mean VALUE is in the MIND of the beholder. Nothing much real about it unless you can get others to agree and back up their agreement with cash.
He’s sitting back smugly with his arms akimbo as I made my points, smirking, “real estate has always gone up” and once in a while, “I can accept that” ; knows nothing about TVM, CAPM, relationship of interest rates and bonds, pareto distribution of wealth, fractal prices and time series, jingle mail, upside down - but he can accept that some prices have gone down in a few places - I said, you can go broke trading gold, you can go broke in anything - but “real estate always goes up!”
Hey Halifax, ask him sometime if he knows what schadenfruede means.
I’ll do just that - on the last day I work with him.
China shares sink for ninth day
By Andrew Wood in Hong Kong
Published: June 13 2008 05:01 | Last updated: June 13 2008 15:37
Asia Pacific shares had their worst week in ten months as inflation worries affected China and the rest of the region and the price of oil held above $130 a a barrel. The MSCI Asia Pacific index dropped 6.5 per cent to show its worst performance since August.
Shares in Shanghai lost 14.4 per cent in value during the week, meaning they have more than halved since their peak in October last year.
Does a 50 pct haircut in stock prices signal an incipient slowdown in China, or is it different there?
The Fed, the dollar and wider price concerns
David Hale
Published: June 15 2008 17:34 | Last updated: June 15 2008 17:34
Ben Bernanke, Federal Reserve chairman, produced a brief dollar rally by expressing concern that a falling exchange rate could bolster inflation. Mr Bernanke is correct to be concerned about a weak dollar because it is part of a larger pattern of price developments that may also define his role in US monetary history. He appears likely to be remembered as the first Fed chairman to preside over a recession without any coincident decline in commodity prices. Instead, prices have risen to record levels since the US economy began to slow sharply last year.
The main reason commodity prices have been so resilient is the changing composition of global output. Developing countries have become the world’s dominant growth leaders over the past five years and their share of global resources has risen dramatically. They accounted for more than 59 per cent of global copper consumption in 2007 compared with 36 per cent in 1998. Their share of zinc consumption was 63 per cent, against 43 per cent in 1998. Their share of aluminium consumption was 58 per cent up from 34 per cent in 1998.
The main growth leader in metal consumption is China.
I was speaknig with another doc who wants an instant answer - she goes to the winter Olympics no matter where in the world, buys shoes from Marseilles - but will she take a financial cruise, buy a financial book - ’stop sending me all that stuff’ she cries out - “I’m keeping my China stocks” - what is your trailing stop?, I ask - what’s that? she asks? ask your broker, since you won’t buy me a beer for getting you in gold at $650. he says I don’t pay him enough. well, you’ve got to watch it yourself then.- subscribe to stockcharts! - I’m not selling my china stocks, they’ve doubled!
Housing Starts Probably Declined in May: U.S. Economy Preview
By Courtney Schlisserman
June 15 (Bloomberg) — Builders probably broke ground on fewer homes in May, signaling the residential real-estate market remains the biggest risk to growth, economists said ahead of reports this week.
Housing starts fell to a 980,000 pace last month, from 1.032 million in April, according to the median forecast in a Bloomberg News survey. Building permits, a signal of future construction, fell to a 960,000 rate.
Rising foreclosures, higher mortgage rates and declining property values threaten to keep home sales depressed in coming months, discouraging builders from starting new projects. Declines in construction will limit any rebound in economic growth, even as tax rebates give consumers a temporary boost.
“The first signals of stabilization are going to come from new-homes sales, which we haven’t seen yet,” said Julia Coronado, a senior economist at Barclays Capital in New York. Housing “will be on a downward trend.”
The Commerce Department’s construction report is due June 17. Housing starts dropped to a 17-year low 954,000 annual pace in March.
Happy Father’s Day, all. I’m heading to Belgium today and will be in Paris next week to assess the local market. I am considering selling my place there and wonder if anybody has experience, advice, or input regarding the Central Paris real estate market. If there are any Parisians who are regular readers of this blog I would love to hear your input and will be in town on June 20. Bon chance a tous!
Why is it a problem for those sinking in the new capital if existing investors take a bath? And besides, what is the big deal about a $10bn paper loss after $10bns of financial company writedowns have already occurred?
Investors hit $10bn loss in US financials
By Francesco Guerrera and Ben White in New York
Published: June 15 2008 22:32 | Last updated: June 15 2008 22:32
Investors who backed US financial companies’ drive to raise much-needed capital are sitting on nearly $10bn in paper losses amid a continued slump in the sector’s shares, a Financial Times analysis shows.
The negative returns suffered by investors are likely to make it more difficult and expensive for US financial groups to tap equity markets if, as expected, the credit crunch forces them to raise more capital.
“Raising funds from equity investors is becoming increasingly complicated because the performance of financial stocks during and after the spate of fund-raisings has been so abysmal,” said a Wall Street banker who advises institutions.
Spend less and save more is recipe for retirement
By Rob Arnott
Published: June 14 2008 04:24 | Last updated: June 14 2008 04:24
Oil prices and fears about recession, inflation and falling earnings are suddenly on everyone’s minds. We’ve covered those in past months. But what’s been pushed off the front page that is important to everyone? The Ed McMahon problem.
“If you spend more money than you make, you know what happens,” McMahon said recently on CNN’s Larry King Live, explaining why he’s losing his home. To those of us in the baby boom, McMahon was a fixture of our formative years, as was his ebullient, “Heeeeeeere’s Johnny!” He made millions, back when a million dollars was serious money. How could he run out of money?
History will prove my conjecture correct that this decoupling theory was a steaming pile.
CRAIG STEPHEN’S THIS WEEK IN CHINA
Inflation menace threatens Asia decoupling story
By Craig Stephen
Last update: 3:34 p.m. EDT June 15, 2008
Comments: 21
As China’s stock market completes an eight-day slide, even a muted new margin-lending initiative to deliver a pre-Olympic boost will struggle to turn the tide in the week ahead. Inflation is now the gorilla in the room for investors.
Conventional thinking has said that the subprime crisis was a made-in-America problem and that Asia was the safe haven or even the new institutional “core holding.”
As the City in London slashes jobs, new funds in Hong Kong have opened to target markets, consumers and corporates who are debt-light and seemingly far removed from any housing meltdown.
But have the U.S. Federal Reserve’s interest rate cuts blown open the decoupling scenario?
It’s now becoming increasingly apparent that the Fed’s rate-cut medicine has been a particularly toxic tonic for China and many other Asian economies, as they are hammered by the worsening inflationary side-effects.
And it looks as if these less developed economies and less sophisticated corporations are also not as well positioned to manage profits in such an environment.
Last year, China was viewed as the driver behind rising commodities prices. But blame for the renewed surge in soft commodities and oil is increasingly being laid at the door of Fed Chairman Ben Bernanke for taking the fed funds rate to 2% and unleashing a wave of surplus liquidity looking for a new home.
The fallout is now being seen. Countries such as India, China, the Philippines and Indonesia are hiking their own interest rates to rein in rising prices, and others may follow suit.
It is amusing they mention 2 pct FFR without getting into the various other forms of cash injections the Fed has recently used to get hot money into Wall Street traders’ greedy little hands.
Given the duration of the so-called credit crunch, should it be renamed to reflect its chronic nature? How about “credit sclerosis’ or ‘credit cancer’ instead?
Deja vu: Summer credit worries on Wall Street
By MADLEN READ – 7 hours ago
NEW YORK (AP) — The summer heat has hit Wall Street, and everyone’s nervous about investment banks’ financial results. Sound familiar?
At this point last year, reports were surfacing about investors bailing out of a Bear Stearns Cos. fund that bet heavily on risky mortgages. A few days later, Bear Stearns committed more than $3 billion worth of loans to keep the fund from sinking — a move that revealed to investors how much spiking mortgage defaults could cost the banks exposed to them.
Wall Street at the time called the ensuing turmoil in the debt markets the “summer credit crunch.”
Well, the summer of 2008 is at hand. And the crunch is still here.
REVIEW & OUTLOOK
Stevens v. Bernanke
FROM TODAY’S WALL STREET JOURNAL ASIA
June 16, 2008
The biggest problem in emerging economies isn’t “the credit crunch about which we hear so much . . . but inflation.” So said Glenn Stevens, Australia’s central bank governor, to a business crowd in Melbourne Friday. It’s too bad U.S. Federal Reserve Chairman Ben Bernanke wasn’t in the audience.
Unlike his Fed peer, Mr. Stevens has ruthlessly resisted inflationary pressures. Since taking office in September 2006, he has raised Australia’s benchmark cash interest rate to its current 7.25% from 6%. That’s a 12-year high, and it has elicited yelps from homeowners, most of whom have variable-rate mortgages. It has also ruffled political classes on both sides of the aisle who support easy money policies.
Mr. Stevens pays no heed, explaining that monetary policy’s “proper restraining role” is to seek “to head off further problems” as Australia’s economy expands. “This is why a tight monetary policy setting is essential,” Mr. Stevens noted. “It is why the Reserve Bank [of Australia] has lifted interest rates, even as the Federal Reserve was reducing them.”
EU Official Plans Effort To Regulate Bond Raters
By ALISTAIR MACDONALD
June 16, 2008; Page C1
Europe’s top markets official is set to unveil a plan to regulate bond-rating companies, a move that adds heft to similar efforts by U.S. officials to address causes of the yearlong global credit crunch.
Charlie McCreevy, the European Union commissioner for internal markets and services, plans to say in a speech Monday that he will propose legislation designed to address what he sees as conflicts of interest at credit-ratings companies. In a draft of his speech, he called current voluntary codes of conduct a “toothless wonder.”
Talk of financial system breakdown moves from the fringe to the mainstream
* David Hirst
* June 14, 2008
* Page 1 of 2
THE “systemic risk” and “systemic failure” of the West’s financial system have been concepts hanging around the fringes of economic thought for months. The expressions, suggesting a complete breakdown in the complicated arrangements by which money is channelled around the world, attracting fees and doing little else, were shunned by the bulk of the economic community.
But by late this week, they suddenly seemed to be on the lips of economic pundits. This followed the announcement that big banks and brokerage firms had agreed to policy changes aimed at “easing the risk of a collapse in the $US62 trillion market for credit-default swaps”.
Apart from some of those who have been highlighting systemic risk and/or failure for some time, the fact this was suddenly a topic of conversation for bankers and regulators might explain the extraordinary plunge in financial stocks on Wednesday in New York.
…
Many big deals, including the planned Bank of America purchase of the vast Countrywide mortgage operation in the US, which is in doubt, could also trigger a crisis. The belief that the financial crisis was passing after the collapse of Bear Stearns in March was pure denial and fears we are entering a new, more dangerous phase of the crisis gained traction following Wednesday’s debacle. It also ended the expectancy that the Fed would bring in the plunge protection team to buy shares to prop up the market. The plunge also added weight to the argument that the financial system is merely in the eye of a hurricane, with more havoc to come.
This new crisis is piled on the series Wall Street has delivered since the dotcom bubble, followed by the housing bubble, followed by the oil-food and other commodities bubbles, but with a more alarming twist: a collapse in the market for credit-default swaps.