Bits Bucket For July 6, 2008
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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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Check this genius out: dude leaves a $112k job to flip in the Tampa Bay Area. Now he’s bankrupt.
http://www.tampabay.com/news/business/realestate/article664224.ece
I feel dirty after reading that story.
This is the money shot:
‘I’m the victim’
On Feb, 23, the Lepzinskis filed a Chapter 7 liquidation bankruptcy. Their petition listed nine properties on which the lenders had foreclosed, repossessed or taken the deed in lieu of foreclosure.
Contrary to the image Lepzinski cultivated of successful real estate investor, his petition showed no income for 2007 and negative income of $151,577 in 2006. Even at the peak of the boom in 2005, his income was minus $218,320.
In all, the Lepzinskis owed $1,547,705, including nearly $190,000 in credit card debt to American Express, Target, Home Depot and others. Among their individual creditors was a neighbor who had loaned them $97,800.
“You make me out to be evil and I’m the victim — am I not the one who went into bankruptcy?” Lepzinski asks a reporter.
“You make me out to be evil and I’m the victim — am I not the one who went into bankruptcy?” Lepzinski asks a reporter.
There isn’t enough bad that can happen to this scumbag.
“Contrary to the image ____________ cultivated of successful __________”
Oh, how many images of successful ___________s were “cultivated” using funny money during this boom? Millions?
I saw the negative numbers reported for his income and what was discharged during BK but who is out there checking his assets such as safety deposit boxes, off shore accounts, and how many toys and vacations he has taken during his negative income years. This guy and his wife need new quarters in a small jail cell.
The odds that every loan application was 100% honest was small, too! I’m sure he filled out each one as if here was going to be using it as his primary residence.
Do the judges handling these BK cases have the time and energy to look through all the documentation, including what he told the IRS, and look at all the figures to make sure all the money has been accounted for?
Also, this may be another one of my wacky legal theories, but….Judges need to refuse to apply the PERSONAL BK laws to someone who was clearly running a BUSINESS of buying and selling houses.
They should treat it like a business bankruptcy and not a personal one. Different rules would apply.
I’m with you on that reuven avram.
“We can still be friends,” Dean says, “but I’m not going to loan him any more money.”
Sheesh.
He must be one hell of a party host
98k and they are still friends??
Give me his #.. I want to be his friend, if he is donating 97k
The guy used to work as a yak for Merrill Lynch. It figures; ML stockbrokers are some of the biggest BS artists out there.
It’s karma just doing its thing.
Still, this POS still got to keep his house and pension funds. Hope he gets investigated for the questionable dealings brought up in the article.
O/T Ben, the Spectrum just did another story on our local SoUtah housing market.
Real estate makes adjustment
http://www.thespectrum.com/apps/pbcs.dll/article?AID=/20080706/NEWS01/807060306/1002
It’s the usual everything is OK here “stuff”. However, the article does mention the 35% drop in the median price we have experienced here in the last two years.
The number of homes for sale (for sale signs) increased around here noticeably about two weeks ago. The Summer heat is also making it easier to guess which homes (dead lawns and dying landscape) are on their way back to the Lender.
Nice to see another from southern Utah. I think we are still in the denial stage here.
Good early Sunday reading.
Thanks, Muggy.
What a scumbag. Another shill strung out on credit, pretending to be a big shot, while p*ssing away other peoples money. What’s the Court do? DISCHARGE ALL THE DEBTS. Outrageous.
Bankruptcy should be set up as a payment plan.
His “retirement” funds can be taken on installments for all those people whose money he stole.
That would be justice. There just isn’t any here in America, anymore. Theives are rewarded. The hard-working have their money confiscated by the FED.
Now, I’m depressed.
Please, God, let this useless POS go to jail.
They don’t need to change the BK laws. Judges need to refuse to apply the PERSONAL BK laws to someone who was clearly running a BUSINESS of buying and selling houses.
They should treat it like a business bankruptcy and not a personal one.
I couldn’t agree more. Why this ruling?
We need to impeach some judges, right soon.
Yesterday I delivered a “cash for keys” check to a renter who was getting evicted because the California investor who held the mortgage had stopped paying, and the bank had foreclosed.
She didn’t know it was coming, had paid her rent — and yet, she was calm, gracious and expressed the attitude that things happen and she was moving forward.
Folks, this thing looks a whole lot different when you’re face to face with someone who was truly victimized by inept and corrupt leaders.
That’s because she’s a renter. Had she been a FB, there would have been weeping and wailing. Haha, it just shows the character of the renters vs. the FB homoaners.
I actually think the best government intervention we could have would be to let the renters in properties going into foreclosure stay there until the bank is actually ready to sell the place. They can still pay the rent to the current owners whether that is the bank or the bond holders or whoever. We know the banks aren’t rushing to sell right after they get possesion. Why dislocate the renters until it is actually necessary?
No kidding, not to mention they will continue to maintain the yard, etc.
There’s been a forecosure on our street for almost 3 years. The grass was cut by a neighbor. About a month ago a for sale sign went up. I haven’t seen anyone look at it yet.
imo, they kick the renters out because it’s all they know. It’s the way it’s always been done .. and then they palm the REO off to a agent for resale.
That is the extent of the average bank’s property management knowlegde and capability.
Ironically, the REO might sell better with a renter ready to sign another 2 year lease.
Of course, that alone might set the price…*evil laugh*
yup .. especially when bottom-feeders are scouring the landscape for good deals.
One house is vacant, trashed and will be an immediate cash drain, while another has tenants, is in functional condition and might come close to cash flow..
While that sounds reasonable, how exactly do you do that?
The renter doesn’t have a lease with the lender. Sometimes, and more often, the lender isn’t even a single entity, such as a bank. Thanks to “securitization”, it’s often difficult to even find who is the legal debt holder for the property.
Until foreclosure, the lender doesn’t have a legal claim to any monies received by the current landlord, nor do I believe that they could write a lease with the current tenant, legally.
Then, once the bank or lender gets the property foreclosed, there are problems with property management and liabilities.
Banks are not in the rental business, especially Housing. They need to simply DUMP the property.
Had they received sufficient collateral (down payment), then dumping would be very simple.
Sorry for the tenant.
Let the tenant BUY the property, if it’s such a deal.
In the case of an REO, banks are property managers, like it or not.
They cannot dump the properties, or properties are coming in faster than they can be dumped..
Bank-owners are then free to choose to be in the rental business or not.. although adopting a brand new function in time to do some good will prove to be far beyond the ponderous and extensive bureaucracy of the average bank, imo.
I don’t think there’s some foreclosure law or regulation that requires the foreclosed property be vacant.. the general concept could be relatively unexplored legal territory with many alternatives, once a few lawyers explore the issue in detail and with a specific purpose…
Aside from legal restrictions, anything can be negotiated between the interested parties.
one more thought before i go to WalMart and buy a bunch of stuff..
Exactly who is having trouble discovering the true owners of these vacant properties? The government.
i got a feeling that investors and banks know exactly what they own. But sometimes knowledge of ownership of something is best left delayed.. the stinky pool and weeds are not my problem if nobody can find me..
However, if there’s an advantage to revealing one’s ownership, the govt may not need to search for owners.
If a bank or Trust or investor is offered a way out of a bad situation, or a way to cut losses, or a way to make money, the task of discovering who owns what may be easy..
Will the local govt rescind or reduce whatever fees and penalties have accrued so far if the owner comes forward voluntarily with the intention of cleaning up, renting or leasing the property? As an interested party, I’d say “maybe”.. first gimme the numbers… then we’ll see where it leads.
“Banks are not in the rental business, especially Housing.”
I have to do some research on this. It’s been eating at me that my mil in her Great Depression stories mentions every time that most people (in Syracuse) were writing their rent checks to banks.
She’s a historian and a pretty smart cookie but it could just be that she was a child who took adult claims for their word and isn’t really sure.
Of course securitization still adds that extra nasty twist as you mentioned.
The Bank being the landlord is probably a true story. The time you cite is the GREAT DEPRESSION.
The bank became a landlord by default.
It would mean that SELLING is virtually impossible, because no one is buying, unless it’s a complete loss for the bank.
We haven’t reached this stage, yet. Hopefully, we will not. I so, then I may become an incidental landlord, too, renting out various rooms in my house to provide some kind of income when my job evaporates.
“Of course securitization still adds that extra nasty twist as you mentioned.”
Actually, I have read a few servicing agreements (i.e. the documents filed with the SEC that delineate exactly what the loan servicer has to do. These are really flexible. After all, the ‘owners’ (bondholders) don’t really want to have anything with the nitty-gritty of real estate. The servicing agreements allow the servicer to do almost anything it wishes as long as (1) a reasonable person would agree that they are attempting to maximize money flow into the ‘trust’ (I have seen contracts that were worded almost this bluntly) and (2) they would apply the same approach to property that they owned as they would to property that they were servicing.
(Oddly enough, the servicing bank can even refuse to take a property back if there is good reason to believe that liabilities - say environmental - give the house a negative ‘value’. Again, the servicer has to notify the bondholders, but has lots of leeway in carrying out foreclosure).
If I sell a property where I’m one year into a two year contract to lease it to someone else, doesn’t the new buyer simply assume the responsibility of following the terms of the contract?
When a business gets sold, all existing contractual arrangements don’t get reset. I don’t see why this is any different. The new owner is now a landlord, who must observe the terms of the lease.
One of the many letters I’ve written to my local rep, Anna Eshoo, about the mortgage problem is that there has been no legislation to protect the true victims, among them renters whose landlords aren’t paying the mortgage on the rental property but are still collecting rent.
Any letter I send to Anna Eshoo with the word “mortgage” or “housing” gets the same form letter back that says something like:
“Anna cares about your homes and is doing everything to keep your home prices from falling. Anna will keep people from losing their homes.”
So nobody there reads it, and letters against bailouts and in support of the few TRUE VICTIMS (renters, savers, and Taxpayers) are few and far between.
Fun times for Vegas. Realtor says Vegas is another Tokyo:
http://tinyurl.com/65un4u
“Las Vegas Sands, which controls the Venetian and Palazzo resorts on the famous neon-lit Strip that runs through a “miracle mile,” has dropped below $50 a share, a third of its value last September. MGM is at $28, from over $100 a year ago. Wynn resorts, owned by the ebullient billionaire Steve Wynn – a Texan version of Donald Trump – neared $70, from almost $180 last year.
“This week, in an attempt to prevent financial meltdown, Nevada’s Tourism Alliance convened an “Air Crisis Briefing” in an effort to prevent airline plans to halve the number of flights to the resort. The city’s gut-busting “eat all you can” buffets are also being scaled back to account for the US’s 4 per cent food inflation. Where a long queue of obesity once trailed across The Bellagio hotel restaurant’s ornate carpets, demand for its famous (but now pricey) lunch buffet had on Thursday slowed to a trickle. In what sounds suspiciously like a panic measure, the Golden Gate Hotel this month even said it was doubling the price of its signature 99 cent shrimp cocktail.”
“Wynn Resorts is building a $2.2bn hotel, and Encore and MGM are spending $9.2bn on a 76-acre project called CityCenter. More than 40,000 new rooms will exist in four years, in a city that has 7 per cent of America’shotel beds.”
That’s a ton of rooms to absorb in a good economy. In a bad economy…
“The Association of Greater Las Vegas Realtors, for example, claims the housing market is finally turning the corner after a “correction” to the long-running bull market that had made Vegas America’s hottest location for almost a decade. Rick Shelton, the association’s vice- president, insists that the long-term future is rosy and, to illustrate his point, draws a diagram on a napkin in a local cocktail bar. It consists of a circle with the initials “BLM” written outside it.”
“This is the map of Vegas,” he said. “Inside that circle is the city. Outside it, everything is owned by the Bureau of Land Management. So there’s really nowhere else for the city to expand. And yet, the census bureau has forecast that the population of Vegas will grow from two million now to three million by 2016. There’s nowhere for those people to go. So this town is another Tokyo, with land as a commodity. You fly in here and you see desert and you think, ‘Building, building, building’. But it can’t be built on, so prices must go up. And all those Harvard economists are missing that key component when doing their prognosis of our market. The way I see it, we have been in check, and are now aligned for the next spurt, and I’m talking a power arc that’s got between seven and 10 years to run.”
This guy is delusional to the extreme - next NAR Chief Economist? Anyone want to see a July or August “power arc” strike his @ss down?
Dateline: America, Summer 2008
“We will survive because we own our own premises, we have a good name and location, we don’t buy on credit, and we’ve been around for a long time. But we’re very lucky in that respect.”
The time has arrived when a Vegas strip club is more financially sound and prudent than the entire government and a good deal of its citizens.
Oh yeah, Vegas = Tokyo? That’s one helluva whopper!
It’s actually hilarious that he should pick the island empire of Japan to compare real estate prices.
They used the same logic there during the 80’s boom in real estate prices. “There’s no more land. Prices have to keep rising!”.
Japan real estate prices have fallen for 17 straight years.
I think it’s actually bottomed there, but to think a 6-12 month “correction” is going to turn things around is clearly dillusional.
What’s this guy’s job?
Does this guy really not get that the census predictions were based on the growth numbers from the bubble and that without the bubble the growth numbers are worth less than the paper they were printed on (used paper being less valuable than new paper). Does he think that the population is obliged to conform to census predictions?
Lack of understanding of what statistics really mean is an American tragedy. For the next couple of weeks I am going to spend a significant chunk of my time at work explaining how some statistics that we collected don’t necessarily mean what they seem to mean.
Polly, maybe we can force people to move to LV to conform to the census predictions. In communist china, it was done all the time. After graduating from the university if you should be so lucky you were told when and where to report. If you had a spouse didn’t make a difference to the party. Sort of a “change you can believe in”.
Yep..just like another guy I know..well he laid it out pretty well for the Mortgage Fraud Unit of the FBI, a IRS audit and a go straight to jail card! Another ego freak who thinks getting their name in print..is a good thing!
http://www.nytimes.com/2008/07/06/realestate/06cov.html?ref=realestate
The joys of apartment living with children.
The problems of an Upper West Side mother who did not want her name used, out of fear of reigniting old tensions, began four years ago. Two days after she and her family moved into their $1.8 million prewar unit, they received a hostile missive from the 30-something married couple living below.
“It was a typewritten note in a typewritten envelope with a formal return address. It said something like, ‘We never heard a sound from the older couple who lived in your apartment, and now that you moved in, our peace is being disrupted and we don’t appreciate it.’ It set such the wrong tone, almost like a lawyer had sent it, and we had been in the building less than a week. It would have been better even if it had just been handwritten instead of typed. It was like the punishment didn’t fit the crime.”
There are a whole lot of loud adults, too. Guy who I used to share a wall with worked until about 10pm. Would come home, probably get something to eat, and then settle in for all night viewing of TIVOd shows that he watched with the surround sound BLARING. It was awful. I’d rather have loud kids - at least they go to bed early.
But truthfully, apartment (and condo) living just sucks all around when it comes to noise.
Easty, that neighbor sounds horrible. I’m sure I would have not survived that one. I invented white noise/black noise.
Black noise is a CD of a jack hammer with speakers up against the wall.
One of my old friends had a unique method for dealing with loud tenants beneath him.
He had what he called the “Lease Breaker”.
It was a piece of 3″ sch. 40 PVC pipe about 8′ in length.
He would stand it up and let it fall to the floor.
He said you could hear the vacuum cleaner fire up shortly thereafter. Of course this to cleanup the falling ceiling debris.
Another funny story. A co-worker used to drive long haul. He was on call and slept when he could. His neighbors knew this apparently. He said his next door neighbor was mowing the lawn one day. Terry was trying to sleep. The retalition
was before Terry went to work around 2:00 AM he grabbed his lawnmower, topped off the tank and fired it up outside the neighbors bedroom window.
The next time his neighbor wanted to mow the lawn he called first to see if Terry was sleeping.
Mike
He would stand it up and let it fall to the floor.
We used to use basketballs for this purpose in college. The advantage is that they work for both floor and ceiling.
I remember when my wife and I lived in a small one story apartment compex. Very nice place. We actually had good neighbors and we always had parties but we invited everyone. Kind of a little Melrose Place.
But a new neighbor moved in and she was right next to us. A few night before she moved in, we hear shouting outside and it was her and some due (boyfriend, friend, ex-husband, I don’t know.) it went on for a coupe hours. This happened for weeks every other day. I finally went out there told them to shut the F&^ck up. This guy was big but I was pissed and I could’ve took on a gorilla. She started to talk back and told her to shut up with words I haven’t used for a long time. I still remember that night clearly. Boy she was trailer trash.
I think the other neighbors were glad I did it. It never happened again and she moved like 3 months after that incident.
When faced with loud neighbors, I simply consider it a license to be loud myself. I try to stand near the walls or open windows when I fart, for example. At night I turn on a fan when I go to bed, which drowns out the ambient noise and I sleep soundly. I have been using this simple device for at least the past 15 years of apartment living without any problems.
A dose of midwestern sanity: you paid 1.8 Mil FOR AN APARTMENT! Gee wiz, that getya a top of the line McMansion 5/5.5 (35,283 Sq Ft Lot), in upper crust Lake Forest around here. Hahahaha, what a dope! Ever heard Paul Simon’s One man’s ceiling is another man’s floor?
http://beta.realtor.com/search/listingdetail.aspx?loc=lake+forest%2cil&sby=1&sid=24b2df0bb6944da9877fc2b03e861a3c&pgsz=3&pg=9&lid=1098894544&lsn=414&srcnt=618
BOB:
Even more insanity how about making $175 K a year nand barely passing he co-op boards financial inspection qualifing you to rent a studio aprtment.?
City lights in Long island city of course it has a great view of mnnhattan, and the renter works 2 subway stops away in grand central area….but he had to put up close to $10K just to move in….
and my neighbor who owns the co-op says its a 2year max on rentals….then what?
Are they trying to drive away everyone with any common sense from renting?
I read that yesterday. I am not a fan of listening to other people’s kids make noise, but damn, heard of earplugs?
Before we moved last time, got new neighbors.
Guy would drag his motorcycle engine across the floor above us around 3 am . And I know for sure they had carpeting to muffle sounds, but seriously, it was constant and noisy.
Upstairs even. Sheesh.
Are people that ignorant of others?
Never mindddddddd.
The Noise Children Make
http://www.nytimes.com/2008/07/06/realestate/06cov.html?_r=1&ref=realestate&oref=slogin
If the problem remains, according to Mr. Saft, the lawyer, boards will often have a sound meter installed in the afflicted apartment to determine whether the sound is excessive. “At least half the time it doesn’t show enough noise,” he said. “At that point the board sends a letter saying they looked into the situation and the noise is not excessive and the complainant should be more understanding of their neighbors.”
The other half of the time, parents must address the problem, such as by agreeing to limit their children’s activities to certain types, times and locations. Failure to comply can trigger fines by co-op boards along the lines of $100 per violation. Theoretically, parents who own their apartments could be forced to sell them. Though Mr. Saft said he had never seen a family turned out on the streets, he said co-op boards frequently threaten to cancel proprietary leases.
The bottom line is that you are taking a big chance with keeping your sanity if you have to live with someone above you (or below).
One of my many noise related confrontations: I had the entertaining experience of having a John Denver type live below me who decided to practice his vocals accompanied by his guitar at 11 pm. I went downstairs and politely told him that the kind of noise (it really wasn’t music) he was making was keeping me awake and that the lease demands that kind of noise end at 10 pm. He said it’s his apartment and he can do what he wants to. I told him to read the lease and that I’ll contact the management agency if he needs any help understanding the 10 pm rule. John Denver was quiet in the evening after that.
A lot of people think their noise doesn’t travel past their walls or yard and they have to be reminded by all means possible that it does.
I’m in the process of raising 4 adopted children and one of our own. The youngest is now 15. Of course children must be controlled, but the antikid torture I’ve received points out an intense degree of selfishness pervasive in our culture. If kids are not permitted, then life is not permitted. People need balance.
Selfishness cuts both ways, though. My parents–and many parents still–insisted that we behave in public, and if we did not, we were removed from the situation. A friend at work told a story about her stepkids. She took them out to dinner and they misbehaved horribly, eating like little pigs, making noise, and generally embarrassing her. So, she said, they’re telling me they don’t need to be going out to eat. Every weekend for the next six months, they ate at home. Finally, she relented and took them out to eat, and they behaved themselves so well that she received compliments on their behavior. Those kids know that if they messed up this time, they would never go out to eat with her again.
Some parents today do not know how to parent and let their children run them around. Some parents treat children as extensions of their own egos and can’t bear to rein the little monsters in (and heaven forbid anyone else suggest the same), eg that lady at the library when I worked there whose child was opening up the book-on-tape packages and dumping cassettes everywhere. In desperation, I asked the little brat to please stop (nicely, of course), and she turned around and spat in a tone of high dudgeon, “How dare you speak to my child!” Um… Try that a few more times and I guess you’re both of you asking to get kicked out, but what do I know? I was only 17, and didn’t have enough sass, clearly. I mean, telling her off probably would have been worth getting fired for, but I didn’t have that much in wits back then.
Anyway, I think these anti-child sorts really need to grow up, but so do some parents. It seems to me that some white parents especially don’t know how to or are afraid to discipline their children, and as a result their children are running all over the place, maybe even putting themselves in danger. (For example, on the bus… small children should not be standing on the seats to stare out the windows, unless they want to risk a nasty head injury when the bus goes around a corner.)
And yeah, some people need to get it in their heads that sometimes Mommy needs to make a stand, and sometimes that is in the cereal aisle, and if it makes them nauseous all over to see a tantrum-throwing toddler not get his way, maybe THEY need to start getting their groceries from Peapod.
Misbehaving in public is completely different than a child playing in his or her own home. I agree with what you’re saying, but kids make noise when they play sometimes. Kind of hard (and unfair) to force them to only play quietly all the time.
Having my son is what made me decide to move. I felt like I was disturbing the nice woman downstairs. I can only imagine the nights of hell she endured during the first year when we were having sleeping issues. But she never, ever complained. She was super nice. Still, I decided it was time to move for both the neighbors and for my son (so he could be free to play as he wanted to). We’re in an end unit townhouse now.
“…I decided it was time to move for both the neighbors and for my son (so he could be free to play as he wanted to). We’re in an end unit townhouse now.”
If more parents did this (considered the feelings of their neighbors, not just their kids), maybe there wouldn’t be so many “anti-child sorts”. I’m sorry that you have to pick up on the negativity when you were, obviously, doing the best you could to be a good neighbor.
Maybe the nice lady upstairs who never complained had raised kids of her own. Maybe she realized that we can’t expect children to live silently all the time. Maybe she was just an easygoing, tolerant type of person.
Or, maybe she was just deaf.
This is all solved so easily that it’s rather embarrassing.
Institute a 10 to 10 rule and enforce it. No loud noise what-so-ever from ANY source (kids, teenagers, adults, stereos, leaf blowers, lawn mowers, screaming, etc.) before 10 am and after 10 pm.
PERIOD.
And no making phone calls to friends or each other’s homes before 10 am or after 10 pm. PERIOD.
The neighborhood I grew up in derived and enforced this policy on its own volition and it worked like a charm. No cops, no government, no lawyers.
It was a simple, set-in-stone rule that everyone could remember and be held accountable for. It was The Rule for at least the 26 years my family lived in the neighborhood.
Maybe the nice lady upstairs who never complained had raised kids of her own. Maybe she realized that we can’t expect children to live silently all the time. Maybe she was just an easygoing, tolerant type of person.
She was around mid-to-late 30s. Never married. No kids. But, she worked with kids. Specifically foster children (she wasn’t a foster parent, but helped kids in the system).
For those against flat-out against kids, that’s their right I suppose. But I wonder who they think will be wiping their butts when they’re too old and senile to do it themselves…
And there are places that don’t allow children to live there. They are called 55+.
Sorry, we “anti-child sorts” aren’t the ones pumping out the ill mannered free range hyperconsuming brats.
Concur 100%. Most landlords disallow smoking and pets, with good reason, but they are legally prevented from disallowing children, even though there are MANY tenants who would pay a premium to live in a child-free building. This interference with the free market is to be deplored.
Amen Tx.
Oh what about the children who kick the backs of airplane seats constantly. Parents ignore this.
Gotta say, 20+++ yrs ago, this behavior rarely happened.
Now it is frequent, and usually noisy to boot.
It is the parents.
I love kids when they behave. Just like we all did when we were children.
Flew a biz trip when a “uppermid class family” allowed their child to constantly wiggle, scream, etc behind business class, in the middle of coach and believe me when I tell you that after many times of asking parents to quiet their child, their response, we allow him to be that way. The Cptn sent a message that if they didn’t after all those hours, quiet their child, he would land now.
Guess who got quiet. Parents were just ignoring their child.
Many ill mannered free range hyperconsuming brats nowadays are over 21.
many over 30!!!
Yes, kids need room to be kids. What adult doesn’t realize that? However, conflicts ramp up when the “Leave it to Beaver” neighborhoods these days have often become nothing more than the ubiquitious spec shacks with the perfunctory six feet ‘o space between them with dinky backyards, and nada setbacks. Here in ‘zona we once had a relatively sedate neighborhood and then two families that I call “The Producers” (six kids each) moved in. Every day from eight to eight life is filled with screaming, slamming, tortured yard pets howling and barking, and of course the “I’m just coping” Mrs. Producer’s. Of course most parents of young kids these days live in abject fear of their little love bundles being abused by some deviant child molesting monster because of course most of these people have been weaned on fears instilled through copious TV time which has filled their pea-brains with dreadful paranoia, so much so that mom and dad Producer have verboten the idea of letting their little legacies leave their yard/street out front to play. The street where these “Producer’s” live is crowded with portable basketball posts/toys/etc. and every resident driving by romper land must slow to a crawl to let the little ones clear a path. Naturally both Producer moms bear the results of raising a brood of screaming banshees in spec box suburbia - they’ve become woozy water buffalo who sip jug wine for ten hours till Mr.Producer comes home after his day of loading and unloading gravel for a living till he and Mrs. Producer can plop their broad butts into lawn chairs on their scrawny patch of play land to grill their meats past medium and knock back a six pack of Milwaukee’s Best to a background cacophony of yelps and howls till bedtime. Grips, what a life.
Brilliant graphic writing.
But I’m so glad to be able to leave the Producers and their squalor and return to my quiet spot here.
Do you / they still live in that neighborhood?
Great response and so on point. It doesn’t take many to ruin a nice, quiet neighborhood. When the monkeys at the zoo have better manners than so many of my neighbors, I realize as a society we are devolving.
DEAN CALBREATH
Homeowners suffer while mortgage bill sits in Senate
July 6, 2008
…
Leonard Rosen, who runs the Pit Bull Mortgage School in La Jolla, predicted “very tumultuous times over the next two or three years. We haven’t come close to seeing the effects of the credit crunch.”
Now I know what a number of readers are thinking right now: “Why should we care about deadbeat borrowers? They knew what they were getting into when they took out their loans. Let ‘em suffer for it.”
First, not everyone did know what he or she was getting into. There were some sharks in the lending industry, ready to take advantage of first-time home buyers who wrongly relied on their “expert” opinion.
Second, even if some homeowners knowingly took out risky loans, can you blame them for expecting that a working financial system would be around to offer refinancing if they got into hot water? They merely expected that the same financial system that has existed for most of the past century would be around for at least another two or three years.
That system does not exist anymore. At least not for the time being. It is shattered in more ways than we can imagine. The system is broken because of incredibly stupid actions taken by the lenders, who threw out the rule book on how to extend loans and then threw out an equally important rule book on how to package those loans for resale to investors.
That breakdown means even well-qualified borrowers – people with sterling credit ratings – are finding it nearly impossible to get loans because of the hurdles that gun-shy lenders are belatedly putting in place.
“What we have now for the first time that I’ve seen in my 30 years in the business is that people can have credit scores of 720 or 740 and still not be able to get loans,” Rosen said, referring to the FICO credit-rating system devised by Fair Isaac Corp.
What’s a $4000 or even an $8000 tax credit in a market where prices are in a free fall, with homes losing upwards of $50,000 in resale value per year? Is this the government’s version of “cash back at closing” financing?
NATION’S HOUSING KENNETH HARNEY
Legislation could help gasping market
July 6, 2008
WASHINGTON – Congress left town for the July 4 recess with a half-baked cake in its legislative oven – one that has huge potential significance for the housing and mortgage markets. The unfinished work is a major relief bill designed to rescue hundreds of thousands of homeowners heading for foreclosure, pull new buyers back into the real estate arena, and permanently raise conventional and FHA loan limits in high-cost markets.
The Senate is on the verge of final passage of its bill, and could do so as early as this week. The House has already passed its version. Final legislation could go to the White House later this month. Though President Bush has threatened a veto, Capitol Hill analysts say that strong bipartisan support – plus elections this fall – makes it highly unlikely he’d actually do so.
What’s in the bill and what could it mean to you?
Shesh. Don’t they know. It is a souffle silly.
If the government takes bad loans off the books of lenders, I think it’s unlikely it will foreclose on the houses connected to those loans. The non-IRS side of the government is in the business of handing out money.
So, could the scenario be FB’s now living in their houses for free as long as they claim not to be able to afford their mortgages?
Or perhaps, a sliding scale for mortgages?
This could get interesting.
Second, even if some homeowners knowingly took out risky loans, can you blame them for expecting that a working financial system would be around to offer refinancing if they got into hot water? They merely expected that the same financial system that has existed for most of the past century would be around for at least another two or three years.
That’s insane. The “financial system that has existed for most of the past century” has enabled people to buy houses that they could not afford? Ugh.
Some journalists don’t let the facts get in the way of their polemics.
You almost get the impression from reading this piece that Calbreath is completely oblivious to the rise (and fall) of securitization.
There is a whole chapter on the topic in this book (subtitled The Insecurity of it All). Perhaps Calbreath should invest a bit of time reading up on the subjects on which he writes before penning articles.
Well, if people can’t get loans, to pay for everything from housing to tuition to cars, then I guess prices will have to go…DOWN. Is that so bad?
These Congress critters talk out of both sides of their mouths, with one side talking about the need for “affordable housing” and the other supporting measures to (futilely) attempt to prop up prices against the backdrop of a record crash. Why can’t they see the silver lining in home prices declining at the most rapid rate in history? There is a pot of gold for the lending industry at the end of the price declines, as they will be able to make loans to almost everybody with decent credit with very little risk of falling value collateral.
Yea, but it’s the established people who do the voting, so Congress has to pander to them no matter if its good policy or not.
I think of it more as a matter of pandering to campaign contributors, but a similar political calculus applies (never let higher principles stand in the way of fund-raising or vote-raising activities).
Another advantage of not being able to get loans: It is much harder for households to financially hang themselves without lax underwriting standards to help them.
The president at my son’s college seems to be doing a lot of building. The students are complaining because of how much it is making tuition rise. I’m glad he only has two more years.
If businesses can’t get loans they need to stay in business, they will go away and more will lose their jobs. Is that bad?
You bring up another reason why feeding more bad loans to the housing market is a bad idea. Contrary to some politicians’ views, money actually does not grow on trees, and throwing more money down the housing drain depletes sources of loanable funds which might be put to better use keeping the rest of the economy alive.
This is because FICO doesn’t take income or LTV into account.
The bank was supposed to do that s***, and FICO was just supposed to let them know if Joe Shmoe is a deadbeat or not.
Heck, you pull the whole credit report, not just the score, because you get all that juicy info about repayment history on last mortgage, what’s going on in credit card land, etc.
The problem is that the mortgage brokers used FICO alone. Well, it turns out that FICO alone doesn’t work. So now FICO alone isn’t going to cut it. What they didn’t say about those 720 borrowers is how much they had to put down on the property. That’s the real story.
Agreed. Even in today’s market, no bank would turn away business from a borrower who had a huge wad of cash, a reliable income, and an affordable mortgage proposition, even with a middling FICO.
More disinformation from the MSM.
“What we have now for the first time that I’ve seen in my 30 years in the business is that people can have credit scores of 720 or 740 and still not be able to get loans,” Rosen said, referring to the FICO credit-rating system devised by Fair Isaac Corp.
Sounds like the system is working. 720-740 isn’t all THAT great a credit score, and I bet there are other minor details he’s not mentioning, such as the people being rejected don’t have big enough downpayments or can’t/won’t provide income documentation.
One of my co-workers just paid $950k for a house, including a second mortgage because they didn’t have a 20% downpayment despite selling their previous house for $700k. Both first and second mortgages were issued by Wachovia. So there’s still plenty of stupid money out there for borrowers who want to hang themselves (or hang their lender, more likely).
Retailers practically giving away the store
By Stephanie Rosenbloom
NEW YORK TIMES NEWS SERVICE
July 6, 2008
Anyone who has managed to forget about fuel prices long enough to enjoy a little retail therapy knows some steep discounts are available these days.
“I’ve noticed there is a ton of stuff on sale,” said Barbara Friedman, who was shopping Thursday with friend Evelyn Hatfield at Lord & Taylor in Manhattan. They were marveling at discounts as high as 50 percent at stores they had visited.
I hope those shoppers have the foresight to buy only things that other folks might just be willing to give them cash for at some future point. Because most of the garbage in stores today is about as useful as “socks on a heifer or tits on a bull”.
Yeah, but the competition has gotten fierce at the thrift store. I used to have the run of those places. Got lots of cool stuff. And the prices were lower, too!
Utility bills I think make a significant chunk of thrift stores’ costs, and fuel has been up, up, up. *sigh*
50% off Lord&Taylor is still 10X more than I would pay!
I’ve noticed that thrift stores aren’t mcuh of a bargin recently too. That’s ok though because I don’t need anything anyway.
My buddy sam and I used to go to the DaV every week. I spent 20.00 each time. Now we gasp at the prices and it’s no longer that fun. I like sweater sets and he collects copper pots and pans. He has a booth at an antique mall in Ocean Beach and he says it’s dead and dying and nobody is making money.
OT, I found another recluse brown spider in my house and I took a photo before I sprayed it dead. It took forever to kill it.
A friend of mine is a teacher and found the closet in her room was full of brown recluses (she hates spiders). The exterminator came in, and she asked if he could catch one, so she could show it to the class (she teaches 1st graders). So he caught one in a jar and sprayed the jar full of poison. Then he went on to spray the closet. Of course, she was very satisfied with having all the spiders sprayed dead…
So a week later the spider in the jar was still alive. I don’t think she ever opened the closet again.
My son is terrified of spiders. Fortunately his dog will eat them. This is the first year we’ve had any trouble with them.
“They were marveling at discounts as high as 50 percent at stores they had visited.”
Maybe its different in Manhatten but I don’t consider 50% on July 4th weekend a big deal. It’s always been the summer clearance kick-off before bringing in the back to school items.
It’s time to get serious about summer
by Cathy Lubenski
STAFF WRITER
July 6, 2008
It’s time to get serious about summer – July Fourth is over; the summer solstice, the longest day of the year, has come and gone.
But now that the vacation you scheduled when summer was just a hurry-up dream is here, astronomical gas prices are cutting away at your money tree.
So start taking seriously that new word in the national lexicon – “staycation.”
I can attest to the staycation trend. The beaches and amusement parks here in So. Cal. are so full of riff raff from the inland it’s barely worth it to go.
“The beaches and amusement parks here in So. Cal. are so full of riff raff from the inland it’s barely worth it to go.”
They seemed to have avoided San Diego:
http://tinyurl.com/63smsb
“For the first time in memory, San Diego-area beaches didn’t look like a dump the morning after Independence Day.”
“With alcohol banned at most county beaches this year, Fourth of July festivities were milder, family-friendly affairs up and down the coast. And for the most part, these sober partiers cleaned up after themselves.”
“The typical bounty of booze bottles and beer cans was missing. But so were many other party leftovers. Absent from the beaches was the usual plethora of abandoned furniture, carpets and ice chests.”
Estimates were attendance was down 30 percent and trash down 50 percent. Keep the trash away and you have less trash. Finally a day after a summer holiday where some of the beaches didn’t look like the Miramar landfill.
We were at the beach in Carlsbad yesterday. I cannot say to what degree the dearth of visitors was due to the lingering effects of the weather version or the economic version of the June gloom, but I have never before visited a San Diego beach that was anywhere near this empty in mid-summer. My impression is that tourism is in a fuel-price-driven slowdown.
We were at the Carlsbad beach Thursday and Friday morning, and I was under the impression that the light crowds were due to the unseasonably cool weather? Definitely not a problem for us Rocky Mountain types, and being able to just drive right up to the beach and park was really nice.
Try the Oregon coast…Still quite pleasent…
But what’s the fun of going to the beach if you can’t get into the water (’cuz it’s too cold)?
Looking around at all the naked swimmers as the tide goes out?
The Atlantic in Rehoboth is FREEZING for this time of year. Hardly worth hanging out at the beach.
Of all the author’s suggestions for spending summertime at home I find it amusing that “cleaning the house” and “cutting the grass” are absent.
Here in a city of smaller homes and small lots the use of lawn services and maid services has blossomed in the boom. Maybe if those folks got off their butts and cleaned their condos themselves, or cut their own lawns, they could take a transoceanic vacation like we are later this year.
The “staycation” is a just dessert for the hyper-consumers.
Right on edgewaterjohn! My nextdoor neighbors just peer out the door of their 8000 sq. ft. mansion at me mowing the lawn and trimming the hedges, washing my Ford Ranger, etc. But next march my honey and I are heading to Australia for a month or more
I would like to thank all the taxpayers here for helping to pay for my staycation this weekend.
I went to the dress rehersal for the Capital Fourth concert on Thursday evening after a quick stop off at the Smithsonian Folklife Festival to gauk at a space shuttle engine and hear a set by Mariachi band. Then I went back to the Folklife Festival yesterday and saw the exhibits from Bhutan. The textiles were really beautiful, as was the traditional temple. And the human powered lathe that the wood worker was using was very cool.
I’m sure all these things have sponsors, etc. but I bet they don’t begin to cover all the expenses, especially security from the National Park Police. And I’m guessing they also don’t cover the artillary detatchment that handles the “sound effects” for the 1812 Overture. By the way, getting through the metal detectors and bag inspection to get into the west lawn of the Capitol for the concert was fairly painless.
DC certainly must be one of the premier locations for taxpayer-funded staycations!
GSA security is like a limp handshake.
Looks like you had more fun at Capitol 4th than I ever did. Guess I’m bad with organization. I kind of hopped on the Metro and showed up. I wore a Capitol Pride ‘99 shirt which earned me some approving comments. Bought a rainbow rocket pop, so I was really fabu.
This must have been in 2000. Either that or 2002. I can’t freaking remember.
I just walked over after work (which was a bit of a hike since I am located west of the White House). Remember this was the rehersal so there were lots of people but you didn’t have to get there at 3 to be able to sit. I got to the line to get in at 7:15 and they started at 7:30. Not hard to find a place to put down a stadium cushion. There were pallets of water just inside the entrance and I brought some supper with me. Jerry Lee Lewis is a class act. Taylor Hicks embarrassed himself. Huey Lewis was fine. Brian Stokes Mirchell was cheesey. The operatic singers did their thing. John Williams’ olympic fanfare was nice. I ducked out once the 1812 Overture was over and got to the Union Station Metro just 3 minutes before a train arrived.
The key to these things, I think, is to do it casually. If you expect it to be hugely moving or the highlight of your weekend, you will always be disappointed. I couldn’t really see the performers on the stage, so I was mostly watching the big screens. The sound was better than it would have been on my TV, but I don’t have a sound system set up. Chatting with people near by was fun. Seeing the TV cameras on the booms doing the big pull away shots was fun. People watching was fun. Jimmy Smits joking with audience about clapping for him when he screwed up his lines was fun. Fun. Not a big deal, but fun.
I saw most of A Capitol Fourth on PBS, great fun & I didn’t have to go anywhere. I got repaid for whatever fraction of my tax dollars went to pay for that. And the beer was good, too.
Reading your post was fun.
Arg. gauk = gawk
DC Mall fireworks are da bomb! Just don’t be in a hurry to leave. You may get to your car fairly quickly after walking six or eight blocks but then you’ll just sit there for quite a while as the waves of mostly mellow humanity pass by. Roll the windows down, turn off the engine, and enjoy it.
BTW, don’t try using the Metro if you have small kids with you. When the show is over, the press of the crowd behind you on the platform, with ever more people coming down the escalators, make falling onto the tracks a real risk.
It’s a good time for contrarians. It’s time to go to nice places you never visited because of the crowds.
I want to take my son to the Jersey shore for a long weekend this summer (normally these are weekly rentals). I will have no problem finding something for a few days. It’s crazy how many vacancies there are. Normally this is unheard of.
Staycation for the masses = opportunities for me!
Here in Syracuse they were reporting the area camp sites 90% full before the weekend arrived. I found the roads very busy this weekend where previously after the June graduation parties, things got pretty quiet.
Still, I went to 2 different family/friend reunions and people came from PA, MA, RI, NJ. At one party, they said the crowd hadn’t been that large in years. Maybe there’s no place like family when things get tough. I have to say both were wonderfully relaxed and friendly crowds and no one was talking gloom and doom or worry. It was all good.
The Lepzinski character should be tarred and feathered. I cant believe the judge discharged his credit card debt especially since he probably committed fraud.
On a related point, how did Lepzinski get a job paying $112,000 a year?
John Bogle recently said he wont invest in the financial service industry and now I know why.
Lepzinski was another kind of hustler before he became a RE speculator — since he used to work for Merrill Lynch, we can infer that he was a stock salesman. He’ll probably go into the insurance business next, or whatever the “next big thing” happens to be.
There are so many people in insurance. The numbers are similar to RE. The only difference is that they finger print you and no company will have anything to do with you without errors and omission insurance from a highly rated (financially backed) insurance company monitored by the state’s department of insurance.
However, if things get really bad, this industry will also collapse, just later in time.
I’m seeing a lot of retail stores going out of business, especially furniture, oriental rugs, home decor, etc., but also other types of retail, cosmetics stores, restaurants…there are “for lease” signs everywhere.
I overheard a conversation last night about the residential vacancy rate being way up in Oxnard, CA. Where did all those former home”owning” immigrants go, if they’re not renting?
Went to a fireworks show on the 4th, and the MANAGER of Denny’s was walking up to people handing out 20% off coupons, trying to drum up business.
Times are tough, this is going to be a lot larger than “just” a housing bubble. Add to it the falling dollar and inflationary effects on commodities, it feels like the beginning of a Depression to me, but who knows.
It’s hard to think about picking up cheap properties when the whole economy seems to be falling apart.
“It’s hard to think about picking up cheap properties when the whole economy seems to be falling apart.”
Is there blood in the streets yet? If not, it is probably too early to buy.
It’s easy for me to think about! As the future of others looks increasing bleak, mine looks increasingly bright! These days I can barely contain my optimism!
And it’s not just me — it’s everyone who has been priced out of a house here in LA.
None of the Boomers who own those “furniture, oriental rugs, home decor, retail, cosmetics stores, [and] restaurants” ever gave a filp about me when the bubble was inflating. My family and I have been living in a cramped apartment this whole time, and no one cared.
I don’t think most people really know what it has been like for those of us priced out of the housing market. It’s drained my well of sympathy, that’s for sure.
You’re dead on Joe! During the boom prudence, thrift, and common sense became liabilities.
Just sit back and laugh when thinking about all those warehouses, stores, attics, sheds, and garages that are stuffed with garbage none of us would pay a dirty dime for.
Me too. I’m rolling into this period with the largest amount of cash I have ever had in my life, no debt, a “job” I can do anywhere. Life is good.
We were in good shape in the last bust too having escaped California with a house sold just in the nick of time and working in bankruptcy in Dallas. LOL
I have no sympathy for those who have already enjoyed themselves in the past few years and have used up all of their savings/equity. If anything I find it very annoying now that I have to hear about their ‘hangover’ and someone needs to supply them the aspirin. Can’t a person eat in peace without being panhandled in the restaurant for gas money? How about being turned away from the neighborhood festival due to overcapacity bc everyone has finally figured out that going out of town for the weekend costs more money.
For those of us who have spent our money wisely and held off on instant gratification, now have to deal with people acting cheap (rudely at that) bc they will push and shove to get to their next ‘fix’.
Does it bother anyone else here, when going to parades and festivals, how patches of grass are now staked out ahead of time with lawn chairs and blankets and the owners are nowhere to be found yet? The selfishness never ceases to amaze me!!
“It’s drained my well of sympathy, that’s for sure.” +1
Bingo!
the whole economy seems to be falling apart ??
Play it again Sam…..1974-75…1981-83…1991-94
You left out 1819, 1837, 1857, 1873, 1893, 1907, 1930, 1931, and 1933. The US was on the Gold Standard then.
Paulson in July 2008:
US Treasury Secretary Henry Paulson has dismissed comparisons of today’s economic woes with the Great Depression as “hyperbole”. Speaking to the BBC on a visit to London yesterday, Mr Paulson insisted the US had “strong long-term economic fundamentals”.
Paulson in April 2007:
“We’ve clearly had a big correction in the housing market. Retail housing was growing for some time at a level that was not sustainable,” Paulson said in a speech to The Committee of 100, a business group in New York promoting better Chinese relations. “I don’t see (subprime mortgage market troubles) imposing a serious problem. I think it’s going to be largely contained,” he added.
You figured it out, Lainvestorgirl, and many others will figure it out in the next year. The US is indeed heading into a depression. The era of excess is over because consumers cannot get any more money to spend. The pronouncements of Bush and Paulson sound like what came out of the Hoover administration.
Keep the popcorn popping,
Red Baron
” The era of excess is over because consumers cannot get any more money to spend.”
Don’t bet on it. The Dems will keep proposing additional stimulus packages and housing bailouts to keep the party going as long as possible. Personal debt will be forgiven while those who actually have decent=paying jobs will be paying increasingly more to support extended unemployment benefits, loan modifications for FBs, stimulus checks, free health care for illegals and the unemployed. If you are disgusted with the America you see now, just wait.
“Personal debt will be forgiven…”
I was just explaining to my BIL (who is visiting us) about the roles of personal debt forgiveness and ultra-low Fed interest rates in discouraging personal savings. This was a response to his comment on recently reading an article about how U.S. household savings have plummeted to persistently negative levels — a situation directly attributable to our economic policies IMO (what I have termed a “War on Savers”).
Don’t forget the Republicans will propose egregious tax breaks to numerous favored children…while outspending the Democrats on their own pet projects.
How do you explain that the Bush2 administration has created a bigger fiscal deficit than every previous administration’s deficit combined? This is despite having a Republican majority in both chambers for 6/8 years.
Are you really that gullible?
Only an idiot would pretend that either party has a monopoly on fiscal responsibility.
Did I pretend that either party has a monopoly on fiscal responsibility? I know both parties will spend their ways out of this mess. However, it is the Democrats which continually propose housing bailouts. It is also interesting that California’s own Laura Richardson (D) is a FB who has defaulted on several home loans but manages to pay for her campaign.
It is business as usual. The Dems will propose additional housing “rescue” measures, the Repubs will ask for some modification of them, but in the end, both parties will support them and vote for them. And, you and I, as responsible citizens, will finance them whether we like it or not.
That’s true, but all the partisan pandering is getting tiring and you should at least acknowledge it. Vote for the candidates that will actually look out for your own best interests (whatever they may be), and then focus on your own community.
Life would be simple if the only issue we had to worry about was housing, but things are so screwed up in so many ways that it will take more than just pulling levers on a ballot box to fix it.
“this is going to be a lot larger than “just” a housing bubble”
Nah! This is still the housing bubble. Retailers build based on household units. What’s more, specuflation is the result of some investors losing faith in our capital markets and their regulators. Apart from the ethanol boondoggle, it’s not real economy demand driving commodities. It’s fear and greed.
REAL ESTATE NOTEBOOK ROBERT J. BRUSS
Demand unacceptable broker’s rate be lowered or go elsewhere
July 6, 2008
QUESTION: I had my home priced under the market price and recently took it away from the brokers so I could lower the price even more. Why? I have a beautiful, wonderfully priced home and did not get any offers.
Why is it entirely on the homeowners to take a hit when this whole mess was not their fault? Homeowners would be less resistant to lowering the price if the real estate brokers would also lower their commission rates. Is it a state law that they cannot lower their fees?
ANSWER: Perhaps your house is not worth what you think it is.
HOUSING SCENE LEW SICHELMAN
U.S.-style financing is spreading to other countries
July 6, 2008
WASHINGTON – Much has been made about the increasing number of foreigners who are buying real estate in the states, and with good reason.
No one knows exactly who is buying what or how much. But nearly one in three American realty agents report working with customers from other countries, and almost half of those worked with three or more international clients – some with more than 10, according to the National Association of Realtors (NAR).
And that was before the housing bust. So it’s probably safe to say that with the value of the sinking dollar, the trend has only become stronger as foreigners try to take advantage of sagging prices, especially in Florida and California, the states they find most desirable and the states that just happen to be the hardest hit by the current housing recession.
““Right now, most international activity is from foreigners buying in America, but soon it will begin going the other way,” says Michonski, NAR’s go-to guy on international matters. “All the infrastructure is in place for (buying real estate overseas) to be a huge mega-trend. The world is getting flatter.” ”
Another NAR goon with a half-baked theory. Just who is going to loan Americans even more money to buy anything anywhere? The world is not getting “flatter” any longer. Globalism is dying, killed by rising energy prices.
“So it’s probably safe to say that…”
Any sentence from a REIC mouthpiece beginning thusly instantly sets off flashing red lights in my brain.
“Warning Will Robinson”
It’s becoming increasingly obvious that all the financing schemes are not for the buyer’s benefit, they’re for the benefit of the realtors and mortgage brokers.
If you look at it that way, you’re safe.
Well, the quarterly statements from the 401K’s at work got a hard look. Since I have been right about a few things money-wise (thanks to: HBB, CR, itulip, ect.), management has invited me to a meeting with the 401K managers. The fund offerings are doing pretty miserably.
Given the ongoing themes discussed here (and know many of you here despise mutual funds–but it is what it is), are there any candidate funds that anyone is aware of that may do well in the expected mid-long term?
Instead of just pointing out how badly things are going, it may look better if I can offer some examples of what we may be looking for to be evaluated by all the parties involved.
I have been thinking of some, such as MERKX, Hussman Total Return (lately), I am ambivalent of his Strategic Growth Fund.
While it may not be the time buy hard assets right now, there will be opportunities during corrections–what kinds of mutual funds exist that would work for this? Is MERKX the best dollar hedge available?
Thanks for input–I know this site is not about investement advice directly–but I would like to offer some candidate funds for evaluation by my management.
To give everyone a feel for the climate–I had to argue bitterly for a treasury only backed MM fund last summer–they could not figure out what I was on about. Well, after some unpleasantness in the other MMF–I looked liked a guru.
Thank You in advance.
PS–you should see the performance of the “RE” funds, it makes cliff diving look gradual.
Vanguard index funds.
Find a fund that is as close to secured cash as you can get and stick all your money there and wait. When things have truly gone to hell and there is absolutely no hope left anywhere move your money into a blue chip stock fund or a S&P500 index fund.
Ummm … Quarterly 401K statements should be hitting the mostly oblivious investors mailboxes next week. What might that forebode?
Panic among the flocks?
Our problem at work is not the funds so much as the middleman trustee outfit that manages it for us. I wish we didn’t have to go through one of those. I called them on charging over 1% for vanguard index funds with normally < .2 fee rate. It was “I’ll get back to you on that…” I guess they have to make their money somehow but it’s especially aggravating when you know what Vanguard usually charges. That’s where I keep my IRA.
(Vanguard execution is slow, however. At Wells fargo (Strong) I used to be able to buy on dips etc as long as I entered the order before market close. Vanguard lags a day or two behind, and when I complained got the lecture about how I shouldn’t try to time the market.)
TxChick is right - for most people in 401Ks, Vanguard funds are probably the best bet.
But you say: “Our problem at work is not the funds so much as the middleman trustee outfit that manages it for us.”
Just have Vanguard provide the trustee services. Have a look over here at Vanguard Institutional Services.
Vanguard will not typically recordkeep a plan with fewer than $15 million in assets. That would be a company with about 200+ employees.
ljaycox: send me your e-mail address and I’ll send you a listing of funds that my County Deferred Comp plan allows us to use. Over the years it’s been quite good and is always review for changes annually.
Thank you!
ljaycox at h o t m a i l d o t c o m
I like MERKX but also have some PSAFX.
“Since I have been right about a few things money-wise (thanks to: HBB, CR, itulip, ect.), management has invited me to a meeting with the 401K managers.”
Good for you, ljay.
You should push your management to allow self directed options. My company has Hewitt financial services to give us this feature. By default it allows trades in all individual MFs, stocks (apart from our own companies) and Bonds.
IMO, the rise of ETFs are making MFs redundant.
Mind explaining your opinion, Houston? I don’t know much about ETFs.
The other side of the pond.
http://news.bbc.co.uk/2/hi/business/7491354.stm
Why do financial journalists insist on continuing to call the insolvency crisis a “credit crunch”?
Leaders
The credit crunch
Britain’s sinking economy
Jul 3rd 2008
From The Economist print edition
It is going to get nasty; exactly how bad depends on the Bank of England and, especially, Gordon Brown
THE portents are increasingly gloomy. More and more signs are pointing to a punishing slowdown—with a recession looking likelier by the day. After 16 years in which Britain’s GDP has grown without halt, a downturn will come as a painful shock. Yet what may matter more is how Gordon Brown’s enfeebled government responds to the bad times ahead.
In a rising market banks are prepared to lend 100% mortgages as there is little risk of them not getting their money back.
wow.. a set of aces..
“I’m all in.”
How is the stock market looking for the second half of 2008?
Markets succumb to economic gravity
Published: July 4 2008 19:29 | Last updated: July 4 2008 19:29
Even by their usual standards of unpredictability, asset markets have had a funny 12 months. Since the credit squeeze began shares have fallen and then rallied, fallen and then rallied, even as economic shocks have rocked the world. But now the cracks are showing. Asset price falls this week suggest that the chance of a global economic slowdown has risen.
US and European stock markets have had a bad week and so have indices that measure the risk of corporations defaulting on their debt. There were several striking items of corporate news: not least a dramatic fall in sales at UK retailer Marks and Spencer, a bell-wether stock.
Even more striking, however, are falls in assets that were supposed to be insulated. Once high-flying Chinese and Indian shares have all but halved from their highs of last year. The price of chartering a cargo ship has fallen – a lot. The share prices of many mining companies, which have done well out of the commodities boom, are well off their peaks.
The markets are no longer just reflecting trouble in the US housing market and financial instruments relating to it. These falls are consistent with a global slowdown broad enough to reduce demand for energy and for Chinese exports. Two forces may bring that about: the credit squeeze, which has not abated, and the soaring price of oil.
Down another 15 - 25 pct with short bursts of giddy hope.
If for no other reason, it is worth clicking on the link to this article to see bears caricatured as the four horsemen of the apocalypse.
Finance & Economics
Global markets
Bearish battalions
Jul 3rd 2008
From The Economist print edition
Almost everything that could is going wrong for world stockmarkets
Illustration by Satoshi Kambayashi
THEY rarely ring a bell at the bottom of bear markets. Investors who thought they had heard a tinkling sound when Bear Stearns, a failing American investment bank, was bundled into JPMorgan Chase in March have been disappointed. The Dow Jones Industrial Average is now weaker than it was in the spring (see chart).
The American stockmarket had its worst month since 2002 in June and is now down more than 20% from its peak, the definition of a bear market. It is not alone. According to Standard & Poor’s, a rating agency, the value of global stockmarkets fell by $3 trillion during the month, thanks in particular to a 10% decline in emerging markets.
Share prices are suffering because of the outlook for four forces that impel stockmarkets: economic growth, profits growth, interest rates and inflation (see article). At the moment, the first two seem to be slowing while the last two are rising. That is the worst possible combination.
Finance & Economics
The Bank for International Settlements
Settling scores
Jul 3rd 2008
From The Economist print edition
If the BIS is right, inflation is a more immediate threat than deflation
IT IS always satisfying to be proved right, even when your prediction was that things would go horribly wrong. For years the Bank for International Settlements (BIS), the Basel-based bank for central banks, warned policymakers that they were not paying enough heed to the rapid growth in borrowing. The bursting of credit and house-price bubbles in America bears out the analysis of William White, the BIS’s sadly retiring chief economist, who has long argued that interest rates were being held too low. In its annual report, published on June 30th, the BIS leaves readers pondering what the penalty for lax policy will be: inflation or deflation.
Credit busts often beget recessions. During the last big recession in the rich world, in the early 1990s, the economies that fell hardest were those whose household debt had risen most. The BIS reckons debt burdens and falling home values will again combine to push down GDP growth. As consumers cut back on spending to pay off their debts, there could even be deflation. But, as its report notes, the long period of low global interest rates that lifted house prices and borrowing has also fuelled inflation. Central banks that rely on the credit crunch to tame rising prices may regret it.
Will central banks treat high commodity prices as a blip, and leave real interest rates low, penalising savers? Or will they raise interest rates and risk pushing the economy into recession?
The last 100 point cut put the econmy into recession. All the meddling has really done a job on the real economy and economic thought. They have to raise rates about 50 -100 points to burst the commodities bubble and get the economy growing again. Fuel prices are crushing profit margins. After they do, we’ll see deflation.
“The bursting of credit and house-price bubbles in America bears out the analysis of William White, the BIS’s sadly retiring chief economist, who has long argued that interest rates were being held too low.”
‘Sadly’ because the counter-arguments prevailed?
Now then, what’s all this talk about declines in emerging markets? You mean to tell me that the Great Decoupling is not complete?
“If for no other reason, it is worth clicking on the link to this article to see bears caricatured as the four horsemen of the apocalypse.”
I’m the one on the right, with the scythe.
Chicago HBB Meetup!
When: This Thursday, July 10, 2008. 5pm - ???
Where: Relax Lounge, 1450 W Chicago Ave, Chicago, IL
Who: Anyone 21+
What: Cocktails, BEST burgers in Chicago
Why: Kicking off my book editor’s first week waitressing so she can start saving some cashola. She’s learning about bubble mania, so she got herself two more jobs that weren’t “needed.”
Relax is one of my favorite pubs now, plus it doesn’t get to busy.
There’s a VERY convenient bus stop RIGHT OUTSIDE of the pub, and there’s usually quite a bit of parking on Chicago.
Email me at adam.dada@gmail.com if you’re coming or post here.
I emailed you an RSVP. I am home at that time and will be there.
Finance & Economics
Regulating Wall Street
A window to a new world
Jul 3rd 2008 | NEW YORK
From The Economist print edition
The price of the Fed’s lifeline is yet to be determined
FOR an industry that has seen many a defenestration over the past year, you might expect America’s investment banks to be wary of open windows. But the move in March to allow primary dealers as well as commercial banks to borrow overnight from the Federal Reserve’s discount window has calmed fears of further Bear Stearns-like death spirals. Lehman Brothers, the weakest of the remaining big investment banks, may have seen its share price pummelled as questions swirl over its business model. But no one thinks it is about to run out of cash.
What will this lifeline cost in terms of regulation? That may be clearer after Congress holds hearings on the issue, scheduled to begin on July 10th. Wall Street executives are not optimistic. “The favourite game on Capitol Hill these days is Hunt the Investment Banker,” sighs one.
Initially opened for six months, the window will almost certainly be kept ajar when that period ends in mid-September, given the continued market instability.
Defenestration? I’ll be there with my scythe.
I found myself thinking along similar lines, musing on how soon investment bankers will be reported literally jumping out of open windows.
They’re all welded shut now. Lesson learned from the last crash.
Self-defenestration? I’ll be there with my scythe and my JUMP! sign.
I’ll bring the Pilsener Urguell if Neil and Red B bring the popcorn.
Business
America’s carmakers
That shrinking feeling
Jul 3rd 2008 | DETROIT AND LONDON
From The Economist print edition
High petrol prices land Detroit’s Big Three in even deeper trouble
THIS week shares in General Motors (GM), America’s biggest carmaker, fell below $10, valuing the giant firm at little more than $5.6 billion. The last time GM’s share price was this low, the Cadillac Eldorado had yet to grow fins and Volkswagen’s Beetle was a funny-looking novelty on American roads. That was in 1954.
Things are just as gloomy elsewhere in Detroit. Ford has abandoned all hope of returning to profit, as promised, in 2009 and appears to be bracing itself for a loss in 2008 even bigger than last year’s $2.7 billion. And on June 26th Chrysler was led to deny rumours that it was preparing to file for bankruptcy, after drawing down a $2 billion credit line from its owners, Cerberus Capital Management, a private-equity firm (see article), and Daimler.
It was not meant to be like this.
While I may be an anarcho-capitalist, my main path of reason to reaching this apolitical view was NOT hatred of the State, but hatred of group-think and group-bias.
Whether it’s grouping people together to use force, a la government, or grouping people together to try to create a retirement program, I always find that people are weaker in groups than they are individually. The only area where I find this to be false is in family structures that are focused on making the family better (see the Kennedys, etc). Even that’s rare.
The auto makers took on the group think: unionization, heavy pensions without regard to who would rely on it, lack of progression for what the market wants, and pushing a “group agenda” on the consumers for what they think they want. I abhor advertising (although it does pay about 15% of my income, thanks AdSense, etc!) because it does the same thing to individuals.
I’m glad the automakers are in ruin in these united States. It couldn’t have happened to a better crowd, a lowlier run of individuals who really thought they were “safe” earning $29.75+ an hour (2003 average) putting screws into metal.
I haven’t bought American since my 1991 Thunderbird, which I did love. I prefer my Subarus (never break) and my Land Rovers (always break). None of my family buys American either. The quality just doesn’t justify the price.
I’ve never really understood WHY auto manufacturers have to be such large multi-billion dollar outfits. I’m thinking it is that way because of government intervention (crash testing, EPA regulations, etc) rather than the “quantity discount savings” theory. The management roles in the automakers are huge burdens on the bottom line, but not as much as the group-welfare that the automakers must dole out forever.
Is it even possible for a small car manufacturer to exist? If not, why?
“If not, why?”
(Dis)economies of scale.
Is it even possible for a small car manufacturer to exist? It was possible once. Early in the history of the industry, there were a great many small manufacturers. One by one, they were either combined into huge companies, or disappeared altogether. Also notice there are no small vertically integrated oil companies any more.
Wrong!
The big three automakers, up until the Reagan era, were the backbone of the US. Reagan, by busting the air traffic controllers union..busted the strength of all unions. If the unions were back in place, as strong as they were in the 60’s, there wouldn’t be any non unionized auto makers here in the US. We wouldn’t be competeing with foreign companies on our own turf. Trade restrictions and tarriffs would be in place.
Without the big three, what will happen if we have another major war, where every company switches to weapons and
war machinery. We have lost our manufacturing ability, by the union busting. Lets see, I give you a credit card, knowing damn well you can’ control yourself…you go into debt, I give you another one, then an equity loan to pay the credit cards, then I sucker you into a sub prime loan…now I got ya! You will work and do as I say, or I’ll outsource your job! You have know options. If ATT workers were unionized, do you think you would be talking to someone in Asia about your account? No, you just sit in your cubicle, quietly as your next door neighbor just got let go do to outsourcing. Individuals, without leadership and without being organized are just serfs. Suckers for the rich…who fed you the credit to bury yourself.
Wake up America…UNIONIZE….shut um down and take away their living standard. Quit buying Chinese crap, Japanese and Korean crap! Demand American made! Quit being the wimps, you have been brainwashed to be! Pay cash or don’t buy. AND last but not least…ORGANIZE…get a pair!
Burns’ Grandfather: Aha - atoms! One, two, three, four… SIX of them! Take him away!
Waif: You can’t treat the working man this way! One of these days we’ll form a union, and get the fair and equitable treatment we deserve! Then we’ll go too far, and become corrupt and shiftless, and the Japanese will eat us alive!
An excerpt from an episode of the Simpsons pretty much sums up my view on unions. Here’s a fantastic quote that also could describe American unions:
“Every great cause starts out as a movement, degenerates into a business, and ends up a racket.”
I have to deal with unions in my business. Some locals are good, but most of them encourage laziness and a bad attitude. No thanks.
For practicing affirmative action discrimination, I hope all US auto makers go BK. I’ll never buy another of their heaps again.
They should not have lobbied so hard against Kyoto. Their product mix might be a bit more palatable today. Honda made great strides during the last fuel crisis.
It’s not entirely their fault, however. Many business make decsions assuming stable prices. From August to present oil went from $70 to $145. That kills a lot of assumptions.
I knew as soon as they pooh-poohed expanding their hybrid offerings that you could stick a fork in them. You had to be blind even in 2005 not to see what was coming.
On the upside, Detroit will have a lot of housing bargains in the near future.
Business
Starbucks
Grounds zero
Jul 3rd 2008 | NEW YORK
From The Economist print edition
The troubled company wakes up and smells the coffee
FOR years it seemed that American consumers’ demand for liquid fuel was price inelastic—whether it was to drive their cars or get their brains going in the morning. Yet $4 seems to have been the price at which demand becomes elastic, for both petrol and a frothy latte. As a result, baristas at Starbucks coffee shops around America are starting to get a taste of what it feels like to be a carworker in Detroit. On July 1st the coffee retailer, based in Seattle, said it would close a further 500 stores in America (in addition to the 100 closures it announced earlier this year), and reduce its workforce of roughly 172,000 by around 7%.
Went in a Barnes and Noble this afternoon. The Starbucks had what little business there was.
Is anyone else having problems with their CNBC Matrix machine? My machine is broken. I turn it own and can see the BS from a mile away.
Capitalstool.com has a auto correct spelling where if you type in CNBC it will change it to crapvision.
Iraq: Mission Accomplished
“…’If bin Laden takes over and becomes king of Saudi Arabia, he’d turn off the tap,” said Roger Diwan, a managing director of the Petroleum Finance Company, a consulting firm in Washington. ”He said at one point that he wants oil to be $144 a barrel” — about six times what it sells for now…”
October 14, 2001
NYT
http://query.nytimes.com/gst/fullpage.html?res=9401E2DC123FF937A25753C1A9679C8B63
I’ve been wondering about what set this whole housing bubble and credit crises in motion and I think this is what happened.
1) 9/11 attacks on the World Trade Center, which were apparently done in an effort to damage the US economy.
2) The Feds reaction to avoid economic disaster is to open the spigots, pouring easy money into a severely damaged economy.
3) The financial institutions reaction was to lend out the easy money to anyone that had a pulse.
4) Resulting in the housing bubble which finally got the point where the prices couldn’t go any higher no matter how favorable the finacing got ($0 down, interest only, etc)
5) When the housing prices started falling, people couldn’t unload their mansions and started defaulting.
6) Yada yada yada
So yes, Bin Laden is getting what he wanted, but I don’t think he thought that we’d ever come looking for him, and I don’t think he planned on living in a cave.
You really underestimate Bin Laden. He is an educated man, with strong financial backing. He understands that greed prevails all in the US. He’s hiding in plain sight. Remember, this guy was on our payroll in Afganistan. He knows us well.In the end, if we stay on this greed frenzy, without fail, he will win. Financially, the US is doomed…he knows it!
He is doing the same thing that US did to USSR. Bankrupt it by engaging in expensive conflicts all over the world.
I think you don’t understand the Jihad in which Bin Laden plays a bit part. Traditional Islam can’t survive the modern world. This wouldn’t have been a problem for anyone had Muslims been confined to Dar al-Islam by their relative poverty & the traditionally high costs of travel. But after hundreds of billions of oil wealth sent into Muslim territory, many are now wealthy and the oil economy of the last century has vastly increased population movements.
Oil has triggered a worldwide revolution similar to that triggered by the settling of the New World. Some cultures play well with others, some don’t. Without the transfer of vast wealth to the Dar al-Islam, 9/11 & the terrorism/Jihad that preceded & followed it would never have happened. The scale of conflict would have been on the order of sending the Marines on punitive expeditions to the shores of Tripoli (First Barbary War) rather than the current situation.
Smells like a small red fish.
“So yes, Bin Laden is getting what he wanted, but I don’t he thought we’d ever coming looking for him, and I don’t think he planned on living in a cave.”
My bet, instead of living in a cave, he is enjoying a life of luxury. In his circle he’s considered the man who brought the Great Satan to its knees. He’s a guy that inspires thousands of devotees to willingly trade their lives for his cause. This is one very powerful man, and as such could enjoy all the trappings such power offers.
In the Seventies the boogyman everyone was looking for and never could find was Carlos the Jackal. Big rewards were offered for his capture but nobody could find him.
It turns out he was “hiding” in europe on the celebrity “A” list. A party in those days wasn’t a success unless Carlos attended. The authorities knew how to find him but apparantly he was of more use to them being on the run than being captured, for a while, at least.
In the world of intrigue few things are as they seem.
Good point, combo. I don’t know if Bin Laden is alive or dead, but whatever the case, as a boogeyman he sure has value to TPTB. They trot him out Weekend at Bernie’s style each time it seems people are getting the least bit more cheerful or feeling a tad bit safer.
Think of how useful it would be to know where Bin Laden is. You get to learn where he goes, who he talks to, maybe even what they talk about. This can be vital information and it may be foolish to shut down such a source by killing the guy.
Plus, killing Bin Laden wont stop his cause, it’ll just make a martyr out of the guy and drive his cause underground and thus out of sight.
And we may be better off with the devil we know rather than his replacement.
Which means he is probably located in a place where if the US tried fly over and violate country borders and bomb him, it would start the 3rd world war……
————————————————-
This is one very powerful man, and as such could enjoy all the trappings such power offers.
BL is dead. Find another boogieman.
Out of the closet:
Last night I was at beach party and I told everybody I talked to that I rent a house and I was bragging! What a switch. Of course the whole two income household eludes me so I will alway rent.
Beam me up Ben!
NY Times had an article today about a new product from Visa that’s unbelievable stupid:
(Full article here: http://www.nytimes.com/2008/07/05/business/yourmoney/05money.html)
You can keep your 401K even if you declare bankruptcy. To tap it when you’re low on money is the dumbest idea ever. You’re far better off leaving some bills unpaid.
Equally stupid are people who take money from their 401Ks to prolong their stay in an underwater house with rising mortgage payments.
Normally, I’d just laugh at these people, but the fact is, us Taxpayers will end up supporting these folks one way or another. It also shows that any privatization of SS simply won’t work. People are too stupid.
SS privatization wouldn’t work anyways. Doing so would only serve to further enrich the liars, cheats and thieves who have been robbing the US Treasury for the last 27 years.
On July 1st Starbucks said it would close a further 500 stores in America…
There’s a new “Bikini Barista” sign at a coffee hut in the ABC News parking lot on Tudor and Folker just west of Great Northern Guns (Anchorage AK)…haven’t been there myself though.
From Wall Street, UBS is being told by Swiss regulators that they need to raise billions more in capital, again. However,this could be tough, according to the Financial Times…
“Raising the money in the US might be hard since an entire division of UBS, the private client group, has been advised by the company not to travel to the US for fear of arrest.”
http://www.ft.com/cms/s/0/ 060c5c…0077b07658.html
UBS Chairman is Phil Gramm, none other than McCain’s “financial” advisor.
And his lovely wife Wendy, of Enron board of directors fame. So a whole division of the bank he’s running is under fed investigation.
Such nice, responsible folks. I’m sure they’ll be so helpful to McCain.
Perhaps they could strike a deal with wealthy U.S. tax cheats who are looking for an offshore location to park some money?
Bear, I think I wasn’t clear enough…
“Under pressure from the authorities, UBS is considering whether to divulge the names of 20,000 of its well-heeled U.S. clients, according to people close to the probe, a step that would have once been unthinkable to Swiss bankers, whose practice of secrecy dates back to the Middle Ages.
U.S. investigators believe some of these clients may have used offshore accounts at UBS to illegally hide as much as $20 billion from the Internal Revenue Service. Doing so may have enabled these people to dodge $300 million or more in U.S. taxes, according to a government official connected with the investigation.”
The IRS is already looking for 20k US possible tax cheats at UBS.
In addition, Swiss authorities have notified UBS that it must raise 30+ billion more, to offset mortgage losses. Old Phil is the chairman of this fine institution and chief financial advisor to McCain. He’s also the chief lobbyist for UBS in Congress.
AUCTION RATE SECURITIES MESS
Auction-rate securities mess hits Austin investors, companies
By Robert Elder
AMERICAN-STATESMAN STAFF
Sunday, July 06, 2008
Main Street Homes co-founder David LeBoeuf has about $2 million in his personal account at Banc of America Investment Services. If only he could get to it.
LeBoeuf’s money is tied up in auction-rate securities, a once-obscure investment that is becoming a symbol of how financial instruments that were thought to be as safe as cash have turned out to be anything but.
In a lawsuit filed in May — initially in the state District Court in Travis County, now pending in U.S. District Court in Austin — LeBoeuf alleges that Banc of America should have warned him that auction-rate securities weren’t a safe, liquid investment and that his financial advisers at the firm missed opportunities to move his money out of those securities when they could.
LeBoeuf’s lawyer, James George of George & Bros. LLP in Austin, said LeBoeuf has been “actively trying to sell them” but has not found a market for his auction securities.
The suit contends that the brokerage firm’s advisers steered him to auction-rate securities, which they said provided a slightly higher yield than the certificates of deposit LeBoeuf had considered.
“For David, the essence is, he takes all his risk building houses,” George said. “He’s not into taking risk in the overall market.”
Mortgage Reform for the Future
Posted on: Sunday, 6 July 2008, 15:00 CDT
By FROMA HARROP
…an unfortunate truth lies at the core of the housing crisis: There’s no golden age to go back to. The real-estate fueled economy was based on a speculative bubble, fed by low interest rates. There are few reasonable alternatives to just letting house prices fall to levels that ordinary folks can afford. (Industries that rely on Americans’ taking on ever more debt ought to rethink their business model.)
On public policy, the best ideas focus on ensuring that this doesn’t happen again. This requires a two-pronged approach: Make the creeps who fooled or scammed borrowers with their abusive loans pay for their sins. And regulate the industry to behave better in the future.
(www.boston.com/business/articles/2008/07/06/investors_anxiety_builds_as_retirement_nest_eggs_show_cracks/)
“Investor dread in this slowdown has been compounded by a slump in housing values and increases in gas and food prices. Then there’s the Dow Jones Industrial Average, which closed in bear market territory last week, meaning it’s down 20 percent from October’s peak.”
“I’ll take a quick look at it and put it right down,” Chris Neri, 57, a Plymouth realtor, said of his quarterly statement. “Right now I’m just treading water. I try to think long term. I’ve probably got another eight to 10 years before retirement, so hopefully I’ll catch an upswing and get out alive.”
“I open it when I get the statement and weep,” said Joyce Kauffman, 58, a lawyer from Roslindale. “I keep putting money in, and I’m not getting anywhere. I look at it, I grimace, and I file it away.”
Lillian Gonzalez, 51, an accountant from Stoughton, said she gets “sweaty palms” when statements arrive. “The closer you are to retirement, the more anxiety it’s going to provoke,” she said.
Recession is not the worst possible outcome
By Wolfgang Münchau
Published: July 6 2008 17:53 | Last updated: July 6 2008 17:53
If this had been a mere financial crisis, it would be over by now. The fact that we are suffering its fourth wave tells us there might be something at work other than merely financial euphoria and bad regulation.
…
We do not have a full understanding yet of what happened but the BIS suggested that fast expansion of money and credit must have played a role. I would go further and say this is not primarily a crisis of financial speculation, but one of economic policy. Its principal villains are therefore not bankers, but economists – not in their role as teachers and researchers, but as policy advisers and policymakers.
…
The worst is for economists to try out their own theories themselves. This happened to several highly respected academics who have since become central bankers or finance ministers. If, or rather when, they turn out to be wrong, they risk a double reputational blow – as policymakers and as academics. So do not count on them to change their mind when the facts change.
Several of them have been leading proponents of an economic theory known as New Keynesianism. It is, in fact, probably the most influential macroeconomic theory of our time. At the heart of the New Keynesian doctrine stands the so-called dynamic stochastic general equilibrium model, nowadays the main analytical tool of central banks all over the world. In this model, money and credit play no direct role. Nor does a financial market. The model’s technical features ensure that financial markets have no economic consequences in the long run.
How long can a national slump last? Pretty long, apparently. Japan’s market peaked with the Nikkei around 39,000, almost twenty years ago. Now the Nikkei is still off by 67 percent from the peak, and approaching a record string of consecutive days with lower index levels, which is not exactly a sign of near-term bottoming out.
July 6, 2008 8:57 P.M.ET
BULLETIN
Japan’s slump nears record
Oil prices hit airline, automaker stocks as Nikkei appears headed for 13th consecutive losing session, nearing record of 15 set in 1954 and tying string of 13 in 1949. Australia, South Korea also down.
Ready for $6/gallon gas prices?
Oil’s Rapid Rise Stirs Talk of $200 A Barrel This Year
By Neil King Jr.
Word Count: 1,160
Oil’s historic ascent from $100 to nearly $150 a barrel in just six months is lending weight to a far grimmer prediction: Crude could reach $200 a barrel by the end of the year.
Oil at that price would wreak deeper havoc on the world’s airlines and automobile industries.
In the U.S., $200 crude would push the price of gasoline to well over $6 a gallon, causing commuters to alter their driving habits more sharply than they have already, while putting extreme strains on large sectors of the U.S. economy.
Do any of you investment whizzes here know of any downside to these Vanguard low-cost no-load Inflation-Protected securities funds? Like VIPSX?
Can I lose my shirt if yields go up, and the share price for existing lower-yield bonds go down? I figure there will be protection against this because the “inflation portion” of the TIPS they invest in will rise….
In the past, I used to “max out” on I-Bonds every year. But our government lowered the limit of the amount of I-bonds you can buy to $5000! (That indicates they’re afraid of runaway inflation.) You get some tax advantages with US Savings bonds, which is why I liked the I-Bonds.