Bits Bucket For July 10, 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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PandemoniuMeltdown
During the crash of ‘87, my father (quite the stock player, in the biz since the 1950’s) was in Hong Kong and called me back in the states quite frantically, trying to pick my brain for information, what did I know, what could I tell him?
Back then, breaking information came from newspapers (in depth as it got), or radio or tv.
Honestly, I knew barely more than he did, 10,000 miles away…
Negative reinforcement information flow thanks to the internet, is going to push the coming crash down, quicker than most anybody would believe.
How’d you like like the idea that The Axis Of See No Evil (until it’s too late) had no plan, should Fannie & Freddie go tits up?
The dynamic duo counts for around $5 Trillion…
this is exactly what i have been thinking, the internet is a doomsday device. too much information can panic the sheeple.
Too much information can also numb the sheeple, especially when many of them would rather tune in to American Idol than mull over the possible implications for American taxpayers of GSE failures.
My take is that it’s more a case that too much information is a good thing. Back in ‘87 CNN was the [b]only[/b] news source for up to date information during the day. Thus CNN had the power to easily provoke a mid-day panic.
At night and the next morning, the papers and the limited TV channels were the only source of information.
Now that we have the web, as well as tons more TV news sources - at least *some* conflicting information, and viewpoints, will always be presented. I think this will serve to balance and smooth out crashes, rather than to exacerbate them.
Or more likely… the cable news networks will enter into a scare-off. It’s more likely that they will actually crank up the doomsday rhetoric to draw more eyes. Honestly, which version do you think people will watch? Doomsday or Polyanna?
Personal experience today.
All “they” have to do is have a massive or “unusually high volume of calls today” because the internet is down.
Time Warner was experiencing “unusually high volume of calls today” because no one could get connected.
Gee, the FISA bill passage came just in time.
The MSm and the Powers that be and Rove can manipulate anything if the internet goes down just temporarily and only tv or radio exists. Just an hour could create a smoke screen of huge proportions.
Is is the GSE failures or the failure of their product that we really need to be concerned about? Think about it… Long after Freddy Mac and Fanny .. have been auctioned off, the loans they packaged up and represented as AAA paper will be a serious issue to retirement funds etc …
Indeed… and once the retirement funds have them, the value will go to zero. Oops - guess you’re stuck working until you fall over dead! That’s one way to fix the Medicare problem!
It would have been nice to have the level of detail in 1999 when the Tech boom was cranking away (little did I know how awful it would get) vs NOW. Tons of info can be very helpful, if you have a brain to sort through it. I knew something was amiss in ‘05 when we sold our parent’s place to a rehabber, but without the internet, I would have never known the depth of the mess.
Agree. I’ve found that you find out fairly quickly who is credible and who is isn’t. The Major media outlets always seem to be “behind the power curve” when it comes to their reporting……problems don’t get their attention until it starts to become a full blown crisis.
This site, and Fleckenstein’s on MSN among others, did a good job of explaining the causes of what I had been seeing with my own eyes, stuff that didn’t make any sense at the time.
Thanks to this site and others, I started giving priority to battening down my hatches (financially) two years ago.
Without the instant-anity (newword?)(brain fart)of the internet, we wouldn’t find out how the Popcorn from cell phones was just pre popped popcorn thrown into picture, and kernels were digitalized out.
Or who is stealing from whom..etc.Wall street-wise.
I am highly concerned about my pension being there at all. Expect to continue working long long past 80
In 1999 the level of information available on the Tech bubble was sufficient to predict the outcome, IMHO.
Paper losses by a relatively few back then, in no way compares in size to what’s coming down the road, gathering speed…
I guess you never read F***edCompany.com, because all the info was there pretty early in the game. It was the equivalent of this blog, for the dot-com bust.
Saved me a bunch o’ cash, that site did. And I was working at a dot-com which not only survived the crash, but grew while most others imploded. (*whew*)
Nice to see that the most accomplished porcine beauticians (aka MarketWatch) made the late decision to not throw in the towel and therefore changed the headline on their foreclosure number story to lead with the 3% MoM decrease in filings. 53% YoY increase is sub-titled (the YoY number was the main headline when the story was first posted). Guess they haven’t quite yet given up on the compulsive heel clicking.
Which kind of heel clicking?
The jackbooted, “Ja Voll” kind…or the
red sequined slipper, “I wish I was home” kind?
While I was aiming for the latter, I cannot discount the possibility of the former.
Keep in mind the goal of these news websites is to get you to click on the link to view the whole article, so they can sell more advertising. My guess is that headlines changing throughout the day is more a result of trying to get more pageviews than trying to spin a story.
When financial panic ensues, driving people to dump their holdings for pennies on the dollar, at some point Smart Money emerges to buy up the offered bargains. Happens every time.
Wall Street: The Great Wealth Distributor.
I don’t believe the internet pushing crashes down faster is a bad thing. I think its a good thing. The longer it takes for a price to fall, the more lost money is sunk into endeavors. That’s why the housing bubble was so protracted. It was so hard to see the potential price changes because buying and selling a home is a long process… takes 1Q or more. The internet is keeping businesses honest because there’s an independent type of journalism on it, and its lightning fast.
One thing we’ve failed to learn as a country (as judging by the market manipulation/inflation by the fed on interest rates) is that we should take our lumps and allow capital to flow to productive investments rather than try and paper our way over things. Yes, businesses fail and people lose their jobs, and that’s a good thing to purge the system of those who shouldn’t be there.
HAL: I’ve just picked up a fault in the AE35 unit. It’s going to go 100% failure in 72 hours.
More information will mean nothing. There was ample info available about real estate being overpriced for anyone who cared to look, but that didn’t stop the mania from running its course.
People will believe what they want.
More information combined with a society that has be in touch with one-another 24/7 electronically, means a lot of word of mouth & mouse.
Yes, but the vast majority aren’t discussing these problems or looking under rocks for nuggets of information on the “interwebs”. They’re out there looking at the latest videos on You Tube, and posting information about their oh so important lives on facebook.
More information means nothing if you cannot parse the data correctly. The American public has always had difficulty separating the wheat from the chaff so to speak.
You are right, most people are still clueless. And the median level of financial knowledge decreases with each generation, making it ever easier to fleece them repeatedly.
My mom was a denialist, but after she watched Fannie get whacked down from around 60 to 16, she got religion.
Ditto for her banking stocks
And she told 2 friends, and they told 2 friends, and so on…
I think it was alad that pointed this out last night about the FDIC……people assume everybody would get their money back if all the banks failed, but if some of them actually ran the numbers, they’d learn otherwise. I doubt 1 in 1,000 would ever even look into it.
I don’t believe the internet pushing crashes down faster is a bad thing.
I agree it would have benefit, but I don’t see much evidence that things are working like that. In my country (Netherlands) people still believe that homeprices will go up forever (they have gone up for nearly 30 years here) despite ample proof of the contrary from the US and lately the UK. Thanks to the internet there is plenty of data to support any point of view, and people simply read and believe what fits their current mindset.
I have mentioned it here before: the Dutch tulip bubble popped (about 90% down) within a week; that was in 1635, long before the internet, the telephone and the telegraph. If anything, the internet seems to slow information exchange instead of speeding it up.
And as to the internet keeping business honest I don’t agree either. Just like before the internet, some (often very big) companies thrive by luring new customers every day with empty promises and the lowest prices, despite bad (internet) reviews. I guess people trust the low prices more than the stories about bad service …
the internet seems to slow information exchange instead of speeding it up.
Well, it probably makes for a lot of noise. While information exchange is certainly faster, its likely the noise/reliable information ratio is different than in the 1600’s, and pertinent to your point, it’s possible that ratio is higher.
I agree, there is a lot of conflicting and irrelevent information to wade through online. Of course those of us frequenting Bens watering hole probably agree with what is said here by and large, but being a “math and numbers” kind of person, I am and have been bearish about real estate world wide and the financial outlook for the future, given hard facts and indebtness levels at all levels.
yes, that is what I’m suggesting, bad signal to noise ratio because of hugely lower cost of data transport. When people had to send a pigeon for the latest news they had to select their data wisely, and signal to noise ratio of these messages was generally far higher than in our current multimedia world.
And the problem is that such a large content of the noise isn’t random, but agenda driven.
The random stuff follows standard distributions and is easier to filter out. The agenda-driven noise takes more time to pick through.
Not sure either as there is so much info out there..I have been reading this blog for years and have learned so much. It is interesting to watch this unfold compared to how I thought it would. The market started falling a year later than I thought it would…this is a slow moving wreck (although really starting to pick up ). Seems there are many more Wile E Coyotes on their rocket sled ,and still unaware of the cliff ahead.
Might be today, ge the final nail tomorrow. fnm and fre hammered in pre-market. ruh-roh, reorge.
Negative reinforcement information flow thanks to the internet, is going to push the coming crash down, quicker than most anybody would believe.
Amen to that. Greed and fear move the markets, and in the era of real-time news and commentary, the American sheeple will stampede in whatever direction the financial oligarchy’s media border collies herd them in. Prior to herding them into serfdom on the incorporated global plantation, the rapacious Wall Street sharks will first separate the fools from their money, aided and abetted by their bought-and-paid-for Republicrat accomplices in high places.
Knowledge is power. Those too lazy or stupid to turn aside from the MSM propagandists and seek out real information, real news, real truth, and real wisdom will be herded straight into the oligarchy’s slaughterhouses and rendering plants. Only those guided by true convictions and principles, united and networking with others of like mind to seek out the truth and reject the false and unsustainable, will get through the coming hard times in relatively good shape.
BoE holds interest rates steady
The Bank of England has kept its benchmark interest rate unchanged at 5 percent.
The decision Thursday confirms expectations by economists that policymakers are now more concerned about surging inflation than the slowing domestic economy.
It is the third consecutive month the bank has held rates steady. It had made two quarter-point cuts earlier in the year amid signs that the economy is heading for a significant downturn as the housing market stalls and consumer confidence falls.
However, further cuts could spur inflation, which is already well above the bank’s 2 percent target rate, higher and many economists now expect the next move from the bank to be a rise in interest rates.
http://biz.yahoo.com/ap/080710/britain_interest_rates.html
The decision Thursday confirms expectations by economists that policymakers are now more concerned about surging inflation than the slowing domestic economy.
what a nonsense, it simply confirms that policymakers are too scared to pull the plug from the housing market, and don’t dare to raise rates like they should with inflation raging in Europe.
Say It Ain’t So Mr. Poole… Now who would have thought it possible that the lowly taxpayer may be getting closer to ankle grabbing time.
Chances are increasing that the U.S. may need to bail out Fannie Mae and the smaller Freddie Mac, former St. Louis Federal Reserve President William Poole said in an interview. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair value accounting rules, he said. The fair value of Fannie Mae’s assets fell 66 percent to $12.2 billion, data provided by the Washington-based company show, and may be negative next quarter, Poole said.
“Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,” Poole, 71, who left the Fed in March, said in the interview yesterday.
http://www.bloomberg.com/apps/news?pid=20601103&sid=a7NPAG.LEjHQ&refer=us
I donno. It might not be so bad. Tell me, will I be kissed?
Roidy
Yes, but don’t expect breakfast.
In: Insolvent
Out: Foreclosure
Poole also recently confessed that the inner circle of the Fed had little idea about how bad the housing crisis would turn out, which makes BB’s contention that a more powerful Fed is the proper remedy seem just a bit suspect. The collective wisdom of decentralized markets is and always has been superior to the perceptions of a small group of central planners, no matter how impressively credentialed. A move to concentrate more power to pull control levers in the housing market into the hands of a myopic few seems ill-conceived.
This is no time for conventional wisdom.
Absolutely agree, with the exception of the motive. Power grabs typically aren’t motivated by concern for the greater good - especially in this case.
Watching Bernanke and Paulson dance is amazing. More regulation etc and not one reality based “mea culpa”. These guys are sweating bullets. The end is near.
I am not sure a mea culpa is in order, as the problems at hand were set in place long before these guys were on the job, but certainly a little bit of careful retrospective analysis before a seat-o-the-pants power shift into the Board’s hands would seem warranted.
On top of this exposed position of FNM and FRE, Congress wants to load them up with more BS loans, just in time for taxpayer bailout! I know we are not supposed to talk bailout on this blog, but this thing is slowly morphing in to the worst case scenario as far as debt load to my grandchildren and beyond. Debt for money that went to people who neither earned nor deserved it.
Jim,
I don’t care what you talk about. But with hundreds of comments a day on bail-outs, it is more than a little off-topic. This is thehousingbubbleblog, not a ‘oh we’re so screwed’ blog. I personally have little regard for people that just whine and complain and do nothing. Doing nothing has a risk too, especially in times like these.
People didn’t earn it? Life’s not fair Jim. The worst case scenario was the housing bubble. This is just the inevitable correction.
As far as debt load, it will never be paid by you, me or anyone else, IMO. At $500k for every man, woman and child in this country, and a negative savings rate, how in the hell is that ever getting paid back?
Now, you have this information at your disposal; what you chose to do for your future and your families future is in your hands. Stop feeling so helpless and do something about it.
“Now, you have this information at your disposal; what you chose to do for your future and your families future is in your hands.”
Ben, what are you doing to prepare for your future?
Maybe that would make a good weekend topic, btw… I’m curious about the range of answers across the readership.
“I’m curious about the range of answers across the readership.”
i think what ben is trying to say here is everyone needs to think for themselves on what needs to be done to secure their own future. if he puts his plans on this blog, then everyone and their dog would follow his plan. he does not want to see another bubble occur especially one that he had a hand in creating. he does a great job by providing us this site to distribute the data, and it is up to us to use it to our advantage. sorry if i stepped on your toes ben!
“if he puts his plans on this blog, then everyone and their dog would follow his plan.”
Buffett effect:
- Buffett buys lots of stock in company X.
- Buffett announces purchase of lots of stock in company X.
- Price of stock in company X goes up.
Doesn’t work with gold, though, so far as I can tell…
I agree, what is a good defensive, moving forward plan?
Roubini and Jim Jubek talk about “cash is king” but what does that mean given the state of banks and the US$?
I am not feeling helpless!
I am angry at the asses who got our country in to this mess! While I am not as knowledgable as most who post here regularly, I am conservative by nature and this mess was fairly easy to see coming; the magnitude and speed were the only variables. In response to your chide, I have taken appropriate steps to protect my family and my company as much as possible in this historical screwup.
- Since mid-2007 my personal cash assets (tax paid) are in multiple banks and a credit union with all accounts under FDIC and NCUA (credit union FDIC twin) limits. I have a jumbo CDAR account at a bank that spreads the account over multiple member accounts to keep the assets under FDIC. I have sufficient cash on hand for 2 months normal expenditure.
- My home and multiple acreage parcels are owned free and clear.
- No debts
- I maintain fully funded college investment accounts for five grandchildren and one teenage daughter.
- I began transferring the maximum allowed under gift tax restrictions to my adult children and their wives beginning year 2006 as I could see the estate tax making a comeback under the coming Democratic rule.
- As administrator of my company’s Profit Sharing/401k plan, I added a US Treasury fund to the available mix in October 2007 when it became clear that stable asset funds were not necesssaarily stable. I moved my entire portfolio in to this fund at that time and tacitly hinted (hinted only, as my administrator liability was in my mind) to the employees it might be a good idea to hide this way for a while.
- Began in year 2007 to put my company in a more stable footing by paying down debt, accelerating upkeep items such as building reburbishing, vehicle replacement, tool and computer upgrades on a pay as you go basis so that the company could weather a turbulent time as best we can.
- I updated and secured the company LOC terms with a firm commitment for 2008-2009.
- Finally, being the pessimistic knee-jerk person I am, I stocked up on non-perishable foods and supplies (sufficient for me and family), and increased my firearm assortment and ammunition supply.
In spite of all these preparations (silly as they may be), I still feel the urge to cry out at the insanity of immature Ivy League college boys being allowed to ruin this great country while the senile, stupid politicians not only sit back and let them, they actively help the train-wreck along while basking in the ass-kissing aura of the 35,000 washington based lobbyists.
Truthfully, your blog seems to be one of the few places where I feel I can express an opinion to some people who actually are viewing this historical moment with intelligence. Note I didn’t say all the opinions were like mine, just knowledgable and intelligent (mostly).
Wow, I don’t look at anything you have done as silly. Wise and defensive planning I’d call it. I wonder about any US Treasuries though……
I maintain fully funded college investment accounts for five grandchildren and one teenage daughter.
Really, Cracker Jim, you need to have a talk with your teenage daughter about birth control.
Sorry to waste more bandwidth on this issue, but some rather high muckamucks never got the memo that $5t is too much bail to dump on Uncle Sam’s balance sheet.
Fannie, Freddie Are Too Big to Fail, Lawmakers Say
By Dawn Kopecki
July 10 (Bloomberg) — Fannie Mae and Freddie Mac, the largest buyers of U.S. home loans, are too big for the government to let them fail, leading Republican and Democratic lawmakers said.
The government-chartered companies, which own or guarantee about half the $12 trillion of U.S. mortgages, can count on a federal lifeline, said Republican Senator John McCain, of Arizona, and Democratic Senator Charles Schumer, of New York.
The remarks by the presumptive Republican presidential candidate and the head of the congressional Joint Economic Committee followed a slide in the firms’ shares to the lowest level since 1991. They indicate Congress would push the administration to use government funds to prevent the companies from failing and threatening a deeper housing recession.
“They must not fail,” McCain said today during a campaign stop in Belleville, Michigan. Fannie Mae and Freddie Mac “are vital to Americans’ ability to own their own homes,” he said at an earlier stop in the state, one of the worst affected by the surge in foreclosures.
Central banks, pension funds and other investors hold $5.2 trillion in debt sold by the companies.
Thursday, July 10, 2008
Fannie & Freddie fears hit market
…
James Barth: We know the Congress has been trying to shift a greater burden onto Freddie Mac and Fannie Mae to deal with the housing problems. The marketplace knows that and becomes wary of that sort of push.
Peter Wallison: To me, it is unimaginable that the government will not bail them out if they get into difficulty.
Peter Wallison follows Fannie and Freddie for the American Enterprise Institute. He says they’ve become so integral to the mortgage market, the government has no choice but to backstop them.
Wallison: If now the federal government steps away from these obligations, it would reduce substantially the capital of all commercial banks and have a huge adverse impact on lending in the United States at a time when that’s not what we need for our economy.
But the bill will go to taxpayers, who’ll be underwriting Fannie and Freddie’s capital and that would let them to continue buying out bank mortgages.
Mortgage industry analyst Tom Lamalfa says it’s Fannie and Freddie’s dominance of the mortgage market that caused the problem in the first place.
Tom Lamalfa: Because of their center stage position if you will, they began to push more and more private sector lenders into niche markets. Ultimately, that led to the bubble we’ve been experiencing.
Lamalfa says he and other analysts have been warning regulators for years that Fannie and Freddie had become the problem and not the solution for the mortgage industry.
RE: the U.S. may need to bail out Fannie Mae and the smaller Freddie Mac,
Howard Raines should be immediately arrested under RICO statutes and stripped of his $100k per month pension.
Fannie, Freddie insolvent, Poole tells Bloomberg
Mortgage lenders Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) are “insolvent” and may need a U.S. government bailout, former St. Louis Federal Reserve President William Poole was quoted as saying in an interview with Bloomberg.
Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,” Poole was quoted as saying in an interview held on Wednesday.
Chances are increasing that the government may need to bail out the two mortgage companies, Poole was quoted as saying.
http://biz.yahoo.com/rb/080710/fanniemae_freediemac_poole.html?.v=2
This is the same guy I found saying how stupid the Fed was. Wow, sure we are going to take on trillions that we aren’t obligated to because some retired desk pusher says so.
Have you guys ever written or studied contracts? When was the last time you agreed to pay for something outside of one? And would you do that if you had no way of paying it? Am I the only one who thinks a cat can’t drink a swimming pool?
(cheshire grin)
“Am I the only one who thinks a cat can’t drink a swimming pool?”
I have a cat. Will conduct test tonight, report tomorrow.
“Am I the only one who thinks a cat can’t drink a swimming pool?”
This is a question for Snaith to answer.
Here we are in the biggest RE bust in history and I still have posters wasting bandwidth on bail-out rumors. Wake up people! If you are ever going to make lemon-aid out of lemons, you won’t find a better time. How many weekend threads did we do on how to get ahead out of this mess? Yet I have posters discussing grabbing their ankles? Well go ahead, I think that says a lot about where you WANT to be.
The only bail-outs i’m aware of, are reserved for those with Golden Parachutes…
“How many weekend threads did we do on how to get ahead out of this mess?”
I am trying to remember whether any useful solutions came out of these discussions? (Not being flippant — I am seriously interested…)
Early in the crisis you are throwing out life preservers to the people in the water.
Later you pull out the AK47 and shoot them so they don’t drag the boat down.
Could be that FNM will not need a massive bail out but might need some capital injections.
Let the stockholders take their lumps.
Useful solutions? Try this: Determine the fundamental value of a liquid tradeable item. Become a buyer when the price is well below this fundamental value, become a seller when the price is well above this value. Else stand aside and remain in cash.
“Try this:”
Oh yeah…
‘I am trying to remember whether any useful solutions came out of these discussions? ‘
This is sort of like ‘did we cover this in class?’
As someone who posted almost every day for years on a foreclosure blog, all I can say is that while many were focused on government this and that, I have stayed focused on the housing bubble and what things will look like after the bust.
In 10 or 20 years, I don’t think anyone will care what happened to the GSEs. But some will make a killing shortly. Some already have, like Jim Rogers, who stuck to his guns and took the risk.
“Oh yeah…”
(Whatever that means?)
Buffett: “Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that causes the stock to be misappraised.”
I think the issue is that many, if not most, on here dont see a bottom in real estate for at least another year or two, and have their savings set aside to buy. In the meantime they need to decide what to do to protect their 401ks and other retirement accounts. Many plans only allow for market investment. The stock market and the housing market are in a related downturn, but will recover at different points. I think the stock market will be the first to recover so while my house money sits, a little good retirement planning is not a bad thing. One of the benefits of market discussions is that for those that listened, they would have switched to principal protection prior to a 20% or more drop and made sure they dont have more than 100k of risk with respect to any FDIC insured bank. When to stick it back in is part of a smart overall financial plan as to how to maximize lemonade production. Also banking failure is the biggest threat to the American economy. Even the strongest RE bulls have admitted that if we go into a severe recession or depression the foreclosure numbers will skyrocket and the real estate bottom will be much lower. We all admit that housing prices should be correlated to incomes in the area, take those incomes away and . . .
“I think the issue is that many, if not most, on here dont see a bottom in real estate for at least another year or two, and have their savings set aside to buy.”
yea thats me and I don’t ned the government inflating away my savings.
Ben,
A good number of us can’t afford to take the risks in the commodities markets or in ultrashorts.
Yeah, it might work out but China/Saudi (2T+$)might come in on a buying binge for banks and whipe you out.
The Fed might have raised rates.
The risk is too high for a lot of us and the tiny amount of emergency savings we have.
We are looking at jobs and staying off the streets.
The housing part of the bubble has attached itself to the credit part, which has attached itself to the bonds part, which has attached itself to the stock part, all of which are attached to the Dollar part.
In the meantime they need to decide what to do to protect their 401ks and other retirement accounts. Many plans only allow for market investment
I asked for precious metals in 2003 and was told these were “too risky” for a 401k. So I dumped my 401k, paid the fine and purchased Gold. Boy am I glad I did!!!!
I believe there will be a strong market in the down sizing end of real estate in the future. With so many baby boomers rolling into retirement age, many did not plan very well for their ‘golden’ years. They will be looking for alternatives to the monster size houses so many live in now. To many appear to be counting on a big upswing in RE to finance their future.
“They will be looking for alternatives to the monster size houses so many live in now.”
And I think you are spot on. As someone mentioned here yesterday, the current trend of frugality is a forced one and I believe that trend will be sustained. Personally, nothing is more appealing to me than a neat as a tack, well maintained 900 sq ft bungalow on a 3/4 acre lot. You can’t get beaten up by the utilities or the tax man.
“I am trying to remember whether any useful solutions came out of these discussions?”
That should be pretty obvious. An asset price correction in housing is underway. Those assets will be picked up at fire-sale prices by investors who have the capital/credit, patience, and timing.
This price correction is also happening in the stock market, so there will be opportunity to move money into stocks as well. For investors with deep pockets, whole businesses/business units will be up for sale. Basically, when there is blood in the streets, be ready to buy whatever is being sold… this has been done throughout history. Today is no different.
Based on Ben’s previous posts, my guess is he’s building relationships/partnerships with people with money to invest in real estate when the timing is right. Cash-flow is the key. Appreciation may take years, hence the long-term view. Short-term, be well capitalized and have a strong cash-flow on the properties you purchase.
Cash is key… having it at the right time(s) will improve your odds of achieving a high rate of return. While struggling businesses, investors, and consumers are liquidating because of cash-flow issues, the savy investors will be buying…
Tim, I couldn’t have said it better. For a lot of us, the time to act in any big way is still out there a couple years.
I expect a serious short term retrenchment in energy prices at some point. Not a crash, but an opportunity to buy a really nice dip and go long with part of my portfolio for a few years. I participated some in the run-up but got out too early.
Beyond that, I’m just waitin’ and watchin’ to see how the big names react, both government and private. And yes, I care what actions the government proposes to take, right, wrong, or indifferent. (Mostly the latter two.) So sue me.
“We are looking at jobs and staying off the streets.”
“The risk is too high for a lot of us and the tiny amount of emergency savings we have.”
Then you are at the whims and the mercy of capitalists who take the risks you won’t with their (or other’s) money. That is the system in which you exist. That is the reality.
I don’t need the government inflating away my savings.
Then buy foreign currencies/stocks, gold, or real estate if you’re worried about a dollar crisis or inflation. Risk is everywhere. There are over 6 billion people on this planet, all trying to do the same thing: survive and thrive. Nobody said it would be easy.
Buffett: “Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that causes the stock to be misappraised.”
I have always been troubled by this use of the term “investment”.
To me, an investment is an application of capital to create or expand a business, and hence to create or increase a revenue stream generated by said business.
The more common definition is more akin to “speculation”.
IMHO the first definition creates wealth, while the second one merely redistributes wealth.
“This is sort of like ‘did we cover this in class?’”
Sorry. I have always been a bad student. I quite honestly probably could not even pass the courses I teach.
“Then buy foreign currencies/stocks, gold, or real estate if you’re worried about a dollar crisis or inflation. Risk is everywhere. There are over 6 billion people on this planet, all trying to do the same thing: survive and thrive. Nobody said it would be easy.”
I did
thanks KGC PAAS DBA and a foriegn bond fund with T rowe price
I also stayed away from Indymac CD’s thanks to this blog and my own caution about CA banks. So see I do listen in “Class”
I still have a cash position and will buy stock market S&P at around 1150 and a house when they bottom in price. Like when rents = mortgage payment.
Question whats hillsboro OR like ? Anybody know or have an opinion ?
Cactus,
Hillsboro Or is just outside of Portland. Genentech is building a manufacturing facility in Hillsboro.
If you are ever going to make lemon-aid out of lemons, you won’t find a better time.
Au contraire, Ben. I would respectfully suggest that 12-18 months down the road will be a much better time to “make lemonade” and lowball desperate, defeated greedheads.
But on the larger point I concur: It’s assinine to suggest any meaningful bailout is possible for a housing bubble implosion of this magnitude, given the simultaneous black hole called Iraq and the global financial debt and credit meltdown.
Ben, could we just pretend it is a Review before the test??
haha
I suppose that every once in awhile, the history/exposed information can get overwhelming, but if you either
breathe deeply, or take a drink with Johnny W, you can
get back to basics and keeping eye on ball. 401ks, IMHO are not the tool Americans were lead to believe they were.
That with “promised” pensions, “promised” SS and savings we have set aside.. I see 2 legs and one is short.
Learning from the posters/you is very helpful.
Financially right now…
2 legs good, 4 legs bad.
The return of your capital is much more important than a return on your capital…
Alad,
I remember from a previous discussion you cashed out your 401K and took the hit for taxes. Is my memory correct?
Correct-a-mundo
I’m giving it some serious thought. The tax hit is giving me pause.
Thanks.
Why don’t you move the money around? If you think the market has bottomed (equities etc) then you might want to stay in. If you think it is going to get worse… well…. Does your 401k allow you to be in cash? Mine does
By the way, how have you been? Long time no hear…
what about moving it inside your 401k to short term cash account? That is what I am considering. At least that should be more stable right? You would avoid the tax penalty.
Tom,
Doing great. Thanks for asking.
I was celebrating my sisters (twins) birthday at Disneyland during the 4th.
Right now (you probably guessed it) I’m looking out my window and can see that beautiful natural air conditioning hovering over the Pacifica hills. So glad to see the fog rolling in.
Yep… That is what I figured. Are you drinking Coffee?
maybe Poole suggests a bailout so the foreign investors (big pension funds etc.) hold on a little longer. How much of this agency debt is in foreign hands, I guess it is far more than 50% now?
“For the debt, much depends on the continued support of foreign central banks that have been loading up on the companies’ $1.6 trillion in outstanding debt, a Deutsche Bank trader said.”
http://www.nytimes.com/reuters/business/business-fanniemae-freddiemac.html
NHZ,
How are the big lenders holding up over there?
Has there stock prices held up?
I’m looking for some major short trades.
Mike
I think the big lenders over here are banks and pension funds (or hedgefunds owned by pension funds). Some internationally oriented Dutch banks are down to 50 or even 30% of their value last summer as a result of the credit crunch; in other EU countries it is not much different I guess. I’m not aware of big players like Countrywide in Europe (probably a few like that in the UK?). Difficult to say how much shorting opportunity there is with these banks.
Some other banks like Dutch Rabobank are private entities so I don’t think you can short them; they are still doing good because most of their capital is in the Dutch housing/land bubble that still refuses to pop - but when it does, I think Rabobank will follow the other banks on the way down.
The pension funds still deny their RE losses, although it is clear that they are heavily invested in real estate (mostly foreign RE like Fannie and Freddie paper) and their ROI for last year was down strongly. Probably we will learn more about their financial situation at the end of 2008 or maybe even 2009.
NHZ,
Thank you.
Mike
Am I the only one who thinks a cat can’t drink a swimming pool?
My fear isn’t whether the cat will actually be able to drink the pool. I’m concerned he will die trying.
Good analogy IMO.
The question isn’t whether the Fed, the government, or whoever will be able to prop up the markets (stock, housing, or otherwise). As Ben says - they will not be able to.
The question is - to what extent should they attempt? Attempts to prop up the markets (call them bailouts or whatever), while doomed to failure, can also be very damaging in the long run via policy changes, power shifts and consolidations, etc. They are worth discussing. We have to keep them in the proper context though - the long run implications.
The thing is, the baby boomers are less than 10 years from retirement. Most have been swallowing the ‘dollar cost average’ method in their retirement. If there’s a crash that takes ten years to reach equilibrium (probably started by FNM and FRE), then they see that as unacceptable. They’d rather wipe us all out to a lower rung on the ladder than risk the political fallout of millions of disenfranchised boomers.
the fed will attempt to drink the pool. If they’re going to step in and save Bear Stearns, then they will save FNM and FRE. What does this mean for housing prices? I think its bad news. The government essentially will become the only mortgage lender effectively. And in that situation, politics will game the system to get more unsuited people into homeownership, which means rising prices and a volitaile, subsidised housing market. America will turn into a giant housing project.
*ducks*
… a giant housing project just like the Netherlands. I’m sure the FED is watching what happens over there.
It’s like all of these state initiatives to halt foreclosures. TERRIBLE, TERRIBLE policy because it is not letting dead wood get cleared out.
“The thing is, the baby boomers are less than 10 years from retirement. Most have been swallowing the ‘dollar cost average’ method in their retirement. If there’s a crash that takes ten years to reach equilibrium (probably started by FNM and FRE), then they see that as unacceptable. They’d rather wipe us all out to a lower rung on the ladder than risk the political fallout of millions of disenfranchised boomers.”
Is it just chance that this is the Very First Year that Boomers can collect Social Security?
If we went broke, would angry Boomers do something like this?
http://en.wikipedia.org/wiki/Bonus_Army
Ed,
As far as I can tell, the baby boom retirement tidal wave will be a bust. Most of those who were liquid enough already took retirement and made their housing transaction 2001-2006. IIRC, you’re in New England and know that many are able to retire as early as 52 years old. I personally believe we’re past the peak.
“As far as I can tell, the baby boom retirement tidal wave will be a bust.”
That’s my view. Seventy will become the new sixty-five. Working ’till seventy will put more money in the social security fund and help alleviate its funding problems.
Those too sick or worn out will be forced into retirement before seventy and, because they are sick and worn out, will die soon after and thus will not greatly drawdown the social security funds. This will not be true in all cases but probably in most, or at least in enough to make a difference.
This conclusion may be heartless and cold, but nevertheless there it is.
“Those too sick or worn out will be forced into retirement before seventy and, because they are sick and worn out, will die soon after”
i think i’ll start-up a cemetary to cash in on this. i will have to see how the credit card situation turns out before i jump in!
Combo-”to sick/old and will die shortly?”
I see old people everywhere. Just played Skipbo with 4 86 yr olds that were perkier than me. One has macular degen, the other serious cancer, the other recovering from broken back from slip… I don’t see “die shortly” anytime soon out here. One old dude, recovering from stroke, walks 2 miles am/pm.79 yr old looking to get healthier.
And
” retire as early as 52 years old. I personally believe we’re past the peak.”
Currently working with men and women well past 60 looking at going till 68. Also working with men /women who are my mothers age. Not retiring.
“Past the peak” I don’t think that is going to happen, especially now in US.
“I see old people everywhere.”
So do I. But the old people I see are the healthy ones, the ones able to get up and about. That’s why I see them.
The ones I don’t see are the ones I am talking about. These are the ones that can’t get up and about. These are the ones that generate the statistics that say those who retire from a job and from life will soon die.
Bismark didn’t fix the retirement age at 70 so that people could live off the state for 30 years. He fixed it at 70 because average life expectancy then was about 45.
Of course, he first mandated universal health insurance - in 1883.
Attempts to prop up the markets (call them bailouts or whatever), while doomed to failure, can also be very damaging in the long run via policy changes, power shifts and consolidations, etc. They are worth discussing.
I agree wholeheartedly! Not only do these ridiculous market interventions erode our pocketbooks, but they can result in policies that erode our safety, or worse, our freedom. I think that raising the issue, loudly, is a worthy cause.
Oh, the humanity! Didn’t see that one coming. Whowouldathunk!
WSJ editorial is also fanning the GSE bailout prospect rumor, and include their own suggested fix.
REVIEW & OUTLOOK
The Price of Fannie Mae
July 10, 2008; Page A14
…
Our own proposal, made months ago, is to require a more honest form of socialism by injecting taxpayer money now into both companies (say, in the form of subordinated debt or preferred stock) to recapitalize them enough to weather the current storm. This would help prevent a U.S. balance sheet debacle, and it would force the politicians to acknowledge the mess they have created. Then as the crisis passed, the taxpayers would at least get something for their money, while regulators could work to unwind Fan and Fred’s liabilities and shrink these monsters to a less dangerous size.
This would be real “change” in Washington. Instead, the political class continues to promote the status quo illusion that Fannie and Freddie are risk-free purveyors of the American housing dream. It is one of the great political scandals of our age, and it has unfolded in broad daylight. As usual, the American taxpayer will get stuck with the bill.
Maybe the post office will buy them and pass off the costs in stamps.
“As usual, the American taxpayer will get stuck with the bill.”
a weaker dollar and 4 dollar gasoline
Nice to see the WSJ finally explicitly advocating socialism, rather than implicitly.
That wouldn’t be such a horrible plan….. IF we were given a choice in the matter. What if I don’t want to own FNM? What if I LIKE renting?
Anybody catch Ted Koppel’s China documentary last night?
China looks very young and energetic & is cool with making almost nothing, and we look like a nation of potential Wal*Mart greeters.
Speaking of WMT, looks like it’s time to do the WMT shuffle again as the boyz rejoice in J6P picking up more vittles and toliet paper.
Eh, we’ve heard all that stuff before. In the 70’s and 80’s the Japanese supermen were the ones poised to dethrone the fat, lazy, beer-swilling Americans. In the 90’s it was unified Germany, followed by the EU. Today it’s China.
I agree that there are a lot of problems with the American economic system, but IMO there is a lot of unjustified hysteria with regard to China. There is a ceiling on its ability to grow; 90% of the country is still very poor, and a corrupt government bureaucracy exercises way too much control over the other 10%. Ultimately China will be hobbled by the same thing that cripples all of the other Asian economies — an inability to innovate.
You’ve got to admire the progress the Chinese have made, and you’ve got to be happy for the improvement in people’s standard of living. But it’s important not to be overly critical of the US while wearing rose-colored glasses with respect to the Chinese.
We will never compete with Asian rates of pay. Period.
“We will never compete with Asian rates of pay. Period.”
Lad, why do you think pay raises have been far less than inflation in recent decades? That is the goal- achieve pay parity with Chindia workers. Then there will be no benefit to outsourcing. It must be done slowly to prevent a total meltdown of the economy, but it is proceeding apace.
After watching grown men busting apart concrete with hammers, to get at the rebar within, for $3 a day…
The gap between them and us is insurmountable in our lifetime.
Wage parity is happening. India is already unattractive as an outsourcing nation, given the high level of inflation there (and the weak US dollar). Now companies are looking to the Phillipines and Panama. We may certainly see wage parity in our lifetimes.
Wage parity, or close enough, will happen.
IIRC, I mentioned two or three years ago on this blog a conversation in the previous year or two with a Big Pharma research leader/exec. He said that the Research part of R&D (whether in-house or conducted by biotechs) would not be outsourced because by the time the operations could be running over there… the salary differential would not make it worthwhile.
In other words, a Pharma guy said in 2004 or so that by 2011 or 2012 the salaries they, or anyone else, would have to pay in China, or in other Asian countries, would be high enough to discourage companies from stopping Americans or Europeans from doing the same work. As I said, the wages may not reach parity by then, but they will be “close enough” - which, actually, may not be very close at all when considering many factors.
So, especially with the performance of the dollar since that time, I have to think he may be proven right.
There is a huge gap between China & its big trading partners — distance. It costs money to ship their stuff to their customers and to ship raw materials to China to make that stuff. That cost is starting to eat into the cheap labor advantage China currently has. At some point transport costs can change their position relative to the rest of the world.
It will take awhile to reach wage parity in the Philippines too. My daily salary pays 51 carpenters at current exchange rates and at the wage we paid back in January…
Chinese infanticide of female babies means you’ve got a huge pool of men who will go through life without a hope in hell of finding a mate, much less one they actually want to be with. How much extremism is bred by “not getting any” and lack of opportunity to have a meaningful future or purpose in life? Add that to the floating population of 100 million rural unemployed and the growing popular hatred for the deeply corrupt and venal Communist Party and New Rich (often one and the same), throw in ethnic separatists (the Uighurs & Tibetans) and you’ve got the makings of massive societal problems, if not a full-scale societal breakdown and civil war. China’s future is a grim one.
“But it’s important not to be overly critical of the US while wearing rose-colored glasses with respect to the Chinese.”
Very well said, Joe. It’s also important to remember that as a country with a heavily communist background, much of what people see and hear about China is heavily controlled, to the degree that it can be.
I gotta say, the only thing that said communism to me on the program last night, was the red scarves the boys and girls wore @ school.
Everything else looked like raging capitalism…
You’re not paying attention.
e.g.:
http://www.washingtonpost.com/wp-dyn/content/article/2008/07/08/AR2008070802695.html
Around the World, Activists Assemble to Press China on Rights
This is not some small band of wackos decrying China’s lack of human rights - it’s a very large multinational effort, led by the “liberal” press no less.
http://query.nytimes.com/gst/fullpage.html?res=950DE1DE153EF93BA15756C0A96F948260
etc. etc.
China is only “capitalist” in a few select regions, and only to the extent where it can make money.
It is raging capitalism… been here for four and a half years now.
Raging capitalism in combination with low taxes (half of America) and a much smaller central government than most people imagine China to be… (gov’t expenditures in China are only half, in percentage terms, of gov’t expenditures in America).
And once the dollar plummets, China’s relative standing? Up, again.
It’s funny how many people have blinders on to the fact that China is among the most capitalist countries in the world these days… and the US is not.
The US can pull itself out of this, but to do government must shrink in size significantly.
Jeremy,
Isn’t it crazy how the hard right crowd in our country always has to include COMMUNIST with any mention of China?
Despite all evidence to the contrary…
Sorry but I call BS. I beg to differ. If things were so great, then why quotes like this?:
I think Jeremy you see what China wants to see. Yes there are capitalist parts to China, but I’ll reiterate that only in areas that benefit the powers that be, without applying true economic freedom.
Here is some good - very detailed - information about economic freedoms in every country in the world. Note that China is ranked 126 out of 157 countries. (U.S. is 5th)
http://www.heritage.org/research/features/index/countries.cfm
Yes I know that that is a conservative web site - but IMO it does a very good thorough analysis of these areas.
Also if China is so capitalist - how do you explain the fact that their “stock market” is 90% state-controlled? Anyone who follows the SSE index knows it’s a sham. For instance they banned IPOs for a year two years ago.
I’m not saying the U.S. exercises pure capitalism, or even close to it. But to try to present China as being more capitalist overall than the U.S. is ludicrous.
P.S. Apologies to Ben and readers - I know this is a housing blog and we’re way off topic. So that’s all I’ll say on the subject - it’s something that could be discussed ad nauseum.
China is in fact going full bore American-style capitalist, in the way that they’re subsidizing gasoline prices to stimulate fossil-based economic growth.
What’s not to like?
My brother was doing business with China a few years ago. Met with quite a few business people. He was quite impressed with how gung ho they were about capitalism and the U.S. They did pass on a word of advice. “China likes the U.S. and capitalism, just don’t tell us how to run our country.”
Yes, did you see where he asked this chinese man if he thought US/China would be partners/ then competitors?
would that strain our relationship? No was the answer, but looking at their history, unless they seriously get past their following lock step with their military demands, then we would see a fierce competitor from China for business etc.
It could not be pretty. I think the chinese guy was just excited for having a little more pay. He will do whatever he is told to do. As they all will.
What about China’s ability to instantly kill the US dollar by dumping it’s massive holding of US treasuries?
We’ve sold the US soul for a pile of plastic.
Nah, we also got some clothes and socks and shoes. Not just plastic.
China is not suicidal, the US and China are in Mutually Assured Economic Destruction (MADE). China is moving closer to Europe’s thinking. The Chinese won’t dump dollars, they will buy real items of value (Oil, Iron ore etc.)
“they will buy real items of value (Oil, Iron ore etc.)”
yes thats what I would do, forget about treasuries
How quickly we forget the little things like…lead.
And some of you still think Oil is overpriced?
yep
So given that we buy so much cheap junk we don’t need from China, and that has driven an enormous of their recent growth, what are the likely effects to the Chinese economy from a severe economic contraction in the US? I’ve yet to find any discussions of this anywhere that I normally look.
Also, with a dollar collapse and high energy prices, the competetive advantage of manufacturing in China becomes much less for a season. A lot of that China based manufacturing is easy-come, easy-go.
Everyone remember the phrase “Japan, Inc.”? In the mid 1980’s they were going to own us. How did that turn out? Yeah, a lot is different this time, but how much, no one really knows. I’m just saying that there are a lot of corrective forces yet to come into play.
China’s pollution is wretched. I’d rather breathe CA wildfire smoke for a few weeks than their toxic junk.
And some of you still think Oil is overpriced?
Yep.
_____________________________________
1947 US (silver) quarter -> 1 gallon of gas in US
2008 1/4 oz spot silver -> $4 cotton/linen (or electronic) FRN -> 1 gallon of gas in US
I got package of tube socks. hehe
Don’t forget to factor in the amount of damage China has done to its own environmental “infrastructure” in the past two decades — contaminated soil, polluted air, fouled waterways, depleted resources, carcinogens everywhere.
In the short-term, the bet has (mostly) paid off in favor of progress. Will it continue to do so? Neither China nor India can continue to grow via slash-and-burn tactics indefinitely.
And what will 1.5 billion people who have so destroyed their environment they can no longer live there do? Where will they go? Doesn’t bode well for China’s neighbors. Can they all fit on Taiwan? Doubtful…
And they can’t vote for their leadership.
The environment is going to be their biggest issue going forward if the economy does not become a disaster before then…
I’ve seen co-workers, Chinese tech guys in their mid-30’s (in this country for a couple years), who didn’t feel well at work one day and about a month later they were dead.
Why?
Likely because they grew up near Shanghai drinking the local water.
“And what will 1.5 billion people who have so destroyed their environment they can no longer live there do? Where will they go? Doesn’t bode well for China’s neighbors. Can they all fit on Taiwan? Doubtful…”
use their bernakes and move to CA
A huge, bloody war is the typical way to clean out “excess population.”
Don’t think they don’t have that idea in mind as a “solution.” They also have far too many males vs. the number of females. Again, a huge, bloody war would “fix” that problem as well…
No one has so far mentioned the falling population of Russia and the low population density of its eastern zones. The Chinese would not have to walk far to take over the whole area with its resources.
Winter….Siberian Winter… Germans learned in the warmer western regions of Russia in 1942-43.
You realize that we manufacture 3x what China does? Or that China lost more jobs in manufacturing than any other nation over the last decade. This nation of “Wal-mart greeters” still has some fight in it yet!
Was it over when the German bombed Pearl Harbor?
Hell no!
While we won’t be down and out, change is a comin’. We import 70% of our oil, up from 40% 15 years ago? You also have how many billions of BRICs’ moving up the consumer ladder?. The definition of evolution is ‘ change over time’ ,and we will evolve, adapt, or die.
let him go…he’s on a roll
Too effin funny!!!!!
I work for a US based company whose share price went up by high double digits within the last year.
(Manufacturing and servicing products required worldwide -industrial applications).
My neck of the woods is pretty diverse as far as jobs go, manufacturing included. There’s two or three Walmarts in the Philadelphia area but most of the employed population works elsewhere.
RE: China looks very young and energetic & is cool with making almost nothing, and we look like a nation of potential Wal*Mart greeters.
With no welfare structure all the little Chinese rural peasant girls head into the cities where they are given a job and a shared dorm room with 4 other gals to produce a tangible product thereby contributing to the country’s escalating standard of living.
The US on the otherhand freely doles out Section 8 housing vouchers to legions of female lay-abouts who proceed to collect a goody-grab bag of taxpayer funded hand-outs for producing nothing but illegitimate children.
And anybody wonders why we’re totally fooked.
hd74man,
Have you ever tried to go one day without posting about your hatred of women? Give it a try, it might do wonders for your blood pressure and help break your addiction.
Hahaha, I thought it was funny.
And sad.
Cause it’s true.
Imagine how much better off as a country we’d be if all the parasites and lowlifes were offered a six-month supply of booze, cigarettes, drugs, cigarettes, and food with one simple pre-condition: voluntary sterilization first. Our nation’s march to Idiocracy dwarfs our other societal problems.
Question for aladinsane, hoz or Tim:
Any thoughts on FXA, FXF (currency ETFS for the Aussie Dollar and Swiss Franc)? FXA yields 5% and the Swiss seem to like the idea of protecting the purchasing power of their currency…
(you didn’t ask me but) I have argued again and again that AUD is basically an interest-paying gold proxy. I made huge money on it last year, but lost some on ISK (yawn!) — consult your favorite Gold model to time purchase of any AUD vehicle.
You didn’t ask me either but - I’ve had FXF since last year and it’s done *very* well. It’s up about 14% not including dividends. Not sure about FXA, though it appears to be doing well as well.
In general though it depends on how well you thing the US$ will do vs. other currencies in the coming months/years.
I recently unloaded my FXF and FXY and GLD due to just how far their movement has been and how uncertain I am relative to the US dollar. Something akin to a Resolution Trust Corp for Fannie/Freddie could drive dollar demand and also I’m not certain at least Japan will continue to have as robust an economy due to US -> China -> Japan economic relationships (US being huge China export destination, China being Japan huge export destination).
why are you asking alad? he only likes gold and oil.
I know nothing, nothing.
US foreclosure filings surge 53 percent in June
The number of homeowners stung by the rout in the U.S. housing market jumped last month as foreclosure filings grew by more than 50 percent compared with June a year ago, according to data released Thursday.
Nationwide, 252,363 homes received at least one foreclosure-related notice in June, up 53 percent from the same month last year, but down 3 percent from May, RealtyTrac Inc. said. One in every 501 U.S. households received a foreclosure filing last month.
http://biz.yahoo.com/ap/080710/foreclosure_rates.html
Watching the Suzzane Wong “International House Hunters” last night.
Older Bahston guy in Aruba with a local trophy wife, two young kids with piles of toys taking up room, and his wife’s sister sharing a three bed house. “Not big enough” they’re crying…so the obvious solution is kick out the sister (which later appear to be given housekeeper duties in exchange for free room until she finds herself an old guy to pay her way) and toss some of the toys.
Nope. Ended up with a $500,000 budget. Start looking at homes - one at $1.2 million, one at $1.7 million, and one at $2.1 million.
The $1.2million was too small. The $1.7 million didn’t have enough room in the back yard for the kids toys. The $2.1 million had four bedrooms, each with their own bathroom (but no baths, only showers - obviously intended as a vacation/rental home). When viewing the home, the wifey said that her sister’s favorite portion would be the dishwasher (hahahaha!).
So the old guy is saying about the $2.1million house “I think this is more house than we need” while you could see the strain on his face but didn’t have the ability to say in front of his trophy wife “I can’t afford this!”.
So of course, they end up with a $2.1million house. Four times their budget.
Ouch. I really wish they’d follow up on these stories a few years later to see what happened to the people!!!!
Viagara Daddies - gotta luv ‘em!
I would never, ever own in Aruba. That place has dark, dark corners.
I would never, never buy in Aruba because I got so tired of flipping on the TV and seeing Gretta van Susteren going on and on and on with Natalee Holloway’s relatives lawyers etc etc etc for years and years and years
my cousin went on honeymoon to Aruba. She said there were goats on the beach.
“I would never, ever own in Aruba. That place has dark, dark corners.”
Should try a night of partying in Colon, Panama.
I used to party in Colon, R.P. as a teenager. That s*** hole is even worse than it’s name.
“Viagra Daddies - gotta luv ‘em!”
there but before the grace of god go i………
Viagara Daddies - gotta luv ‘em!
Gah — the Satanic Brains that formulated that #$@! “Viva Viagra” ad campaign deserve extra-special torment in the Great Inferno.
I’ve always had a “thing” for Sally Fields.
Got real excited when I saw her on the TV commercial advertising “Boniva”…….but what a bummer when I found out it was a drug for osteoperosis, not erectile dysfunction.
Viagra daddy went asian.
MY favorite show from a few years back(during the boom years) was a episode on HGTV I think called Before and After..where they followed a home owner as they built their dream home..well one guy had his turn into a nightmare..the house they had lived in was perfectly fine but wifey wanted it remodeled into some grand McMansion(older couple with teenage kids)…well after going through the remodel for 1 year.. they had to sell the house..they couldn’t afford it! Everything went over budget and once he saw the actual payment he said they had to sell…
Was that the one where the couple had won the lotto (like $700,000) and used ALL the money to upgrade a house, and before the end they ran out of money and the house wasn’t even close to finish?
Love it. Best show on TV if they’d just do that time and time again.
LOL! AB Dada - That was the show “Movin Up!” where they follow three families as they buy two houses from each other (eg cheaper -> more expensive).
Some family in Pennsylvania won $6-700k and ran out of money “fixing up” their house. I was at my dad’s watching this show with my mother. He missed the first 30 minutes and I had to explained to my dad this family had just run out of money after buying this house. It was almost incomprehensible to him that someone could blow that much money.
The show after took place in Dallas where a mother bought her 18 year old son a starter house for $250k for him and his girlfriend to live in. LOL
This reminds me of another question: can anyone explain to me the whole Bostonian-skipping-over-Florida thing?
Midwesterners go to the central Gulf Coast, New Yawkurz to southern Atlantic Coast and Bostonians to Central & South America?
because it isn’t special enough for them, obviously! (also, too many people from New Jersey in FL)
Stocks head for higher open on Wal-Mart sales
Wal-Mart said it got a boost from the government’s stimulus package, and it raised its outlook for the current quarter.
Wal-Mart’s report and the dealmaking injected Wall Street with some welcome optimism following several volatile sessions. Buyout activity is often regarded as a sign of confidence in the marketplace and the economy.
http://biz.yahoo.com/ap/080710/wall_street.html
Wallly World’s only doing better, because it’s the lowest denominator place to shop.
Middle & Upper-Middles that used to pooh pooh it, shop there now.
Martha Stewart crafts line to expand to Wal-Mart
http://biz.yahoo.com/ap/080709/martha_stewart_wal_mart.html?.v=2
looks like old martha is now trying to hitch her wagon to walmart. i wonder how that KB home design deal she made is going?
Martha used to have several lines at Kmart, which is nearly kaput now. I bought one of her branded sauce pans there years ago, it is built like a tank & should last 50 years.
A: Last I looked, Wal Mart had Starbucked itself - no real room for growth (at prev. pace), hence stock valuation stagnation (or deflation, if we’re talking coffee.)
But I agree… aisles will be more filled with shopppers who used to look down on the place. Even customers who thot Target was for the great unwashed.
Nah, it isn’t that ‘it is looked down upon’, it is because it is a symbol of outsourcing, the bastardization of an original good idea from Sam. And the loss of American jobs/globalization …
But the wealthy have always shopped there, and then bitched about paying americans decent wages, while they are lining their pockets.Guess according to the wealthy etc, you must all be paid tuesday for a hamburger today.. and then put off again.
Then again when my mothers friend who speaks 7 languages fluently gets told she won’t be hired because she doesn’t speak spanish… well, and then there is the issue that they make their employees work after clocking out. Hmmmmm.
And the morning Cheerleading session?
Should be left to a cheerleading camp and a HS sports game.
I agree. I see it is a very negative sign that WalMart sales are up because ppl that used to shop at higher end stores no longer have the luxury to do so.
We shop for groceries at Walmart.
Cheaper, fresh (turns over several times a day likely due to the business), and they actually have competant human check out people.
Compared to your normal chain grocery store, there is no contest. OK, Krogers here has a sushi bar - not my thing though. We buy loss leaders only at the grocery chains. I wonder how long until they melt my Krogers card: Freeloader! Freeloader!
At the rate the futures are dropping after the initial bounces in the wake of the jobless report and WMT earnings, green at the open does not look like a foregone conclusion with a half-hour to go.
Weird. Even a month ago we’d be looking at an automatic 10-15 point S&P 500 gap up on this kind of news. Is it possible that ominous reality is finally setting in…? Have they run out of lipstick for the pig?
Dow up 48 at a little before 10 am. (bfd)
I agree with the posters who expect a protracted decline with little hiccups.
I wish no evil on my brother — among other things, he is older and I am his principal heir — nevertheless, his argument that “people have to put their money somewhere” doesn’t imply, as he seems to think, that stocks are the only Somewhere when USD-denominated bonds and RE are both unattractive.
Who needs terrorists when we have copper thieves.
You’ll never take me alive, copper.
At Walmart yesterday there was a notice in the window.. “Application filed to sell alcoholic beverages on these premises”.
It slipped my mind to inquire about it, but even if it’s just beer and wine, i think it’s very cool..
I believe Wal*Mart even owns their own wine label.
IIRC, Chateau La Merde.
it could be a hoax..
Is Walmart really soon going to be offering its own brand of cheap wine? It will if you believe this email that’s been circulating around for over a year:
[snip] blah blah blah.. team up with Gallo winery.. more blah blah.. $2-$5 price range.. [snip]
So, here we go: The top 12 suggested names for Walmart
Wine:
12. Chateau Traileur Parc
11. White Trashfindel
10. Big Red Gulp
9. Grape Expectations
8. Domaine Wal-Mart “Merde du Pays” [Kruse, Keith M] (Translated “Shit of the Land”)
7. NASCARbernet
6. Chef Boyardeaux
5. Peanut Noir
4. Chateau des Moines
3. I Can’t Believe It’s Not Vinegar!
2. World Championship Riesling
And the number 1 name for Wal-Mart Wine ..
1. Nasti Spumante
http://www.museumofhoaxes.com/hoax/weblog/permalink/walmart_wine/
News from Canada.
A couple of years ago, CMHC (basically Freddie or Fannie equivalent) were allowed to accept amortizations of up to 40 years with 0 down, which became far to popular. As of Oct 08, it will be reduced to 35 years with 5% down. They’re also setting a limit of 45% debt ration, which is probably the most important change.
A decent step, however, they claimed that this change was to prevent a bubble. Necessary spin I suppose.
http://www.reportonbusiness.com/servlet/story/RTGAM.20080709.wmortgagestaff0709/BNStory/Business/home
CMHC (basically Freddie or Fannie equivalent)
No. CMHC is a business operation of the federal government, not shareholder owned, so it’s the equivalent of FHA in corporate terms. Obligations of CMHC are expressly guaranteed by the federal government.
But it’s comparable to Fannie/Freddie in terms of its size (proportional to Canada’s economy).
The saving grace is that the bubble in Canada is much more limited in scope than in the US. British Columbia is as bad as any US state and is headed for a major bust, and Alberta is still overvalued though already down 10%, but in the populous East only Toronto has clearly excessive valuations. Still it probably has no more than 20% nominal downside to SFH, although it does have some ridiculously priced condos.
Oh, there’s been little bubbles all over the West: the Alberta bubble spread to Saskatchewan, and there’s a run-up going on now in the ‘Peg.
This isn’t just CMHC, though: it’s the Government — the Finance dept — who’s regulating this. Don’t know if it means that these will be the regulations for all mortgage companies?
GOC backgrounder
Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc.
“It’s a bit like closing the barn door after the horse has already run down the road.”
it’s like it but not it. It is proactive forward-thinking that protects the Canadian economy. The major brains at CMHC read this blog and thought that they needed to be diligent. A bit like buying a snow shovel.
Copper stripper blows house up:
http://blogs.tampabay.com/breakingnews/2008/07/explosion-repor.html
Gui ????
House self-detonations due to copper theft have been happening all over the country for many months now.
I am so sick of the Great Smoky Mountains of California…
Visibility still sucks, under beige skies~
Get higher up
Lad, it’s pretty down here in carlsbad. come on down!
Lunch of pussywillows and acorns on me!
I’m sure PB et al would love to meet up too.
One of these years i’ll get down your way…
Feel your pain/soot.
Just wrote “113 degrees” on today’s kitchen calendar.
For you Canadian or Vermonters, that is actual degrees. Not some swelter index.
This has been the worst summer for air quality in a long time.
Kind of reminds me of the fires around missoula a few years back. That smoke was much worse though.
Mike
Today in Los Angeles it feels like New Jersey. Muggy as hell.
“Middle & Upper-Middles that used to pooh pooh it, shop there now.”
Furtively I might add around here since so much of “old money” (or lack of it) refused to shop Wallyworld since it was an interloper who led to the closing of Daddy’s outrageously overpriced -insert type here - store. They see me coming and scoot down another aisle hoping I won’t have seen them and tell someone I saw them in there…
“an interloper who led to the closing of Daddy’s outrageously overpriced -insert type here - store.”
While it seems to be that way, it’s important to note what happens when behemoths like WalMart, Home Depot, etc. decide to shut down stores in certain areas. It’s then that Daddy’s seemingly outrageously overpriced hardware or stationery store is sorely missed. There’s still a place for small retail business in the US. Besides, I haven’t notices WalMart causing the shutdown of outrageously priced convenience stores.
palmy…
You got that right.
Mom & Pop stores lately, had to be ‘different’ (pirate shop, christian clothing store, candle shop, etc) to survive against Godzilla.
Otherwise, anything in direct competition meant you were lizard food…
christian clothing store
Is that supposed to mean clothing made by Christians? Nothing made by those heathens in China or Muslims in Indonesia or Bangladesh?
Or do they sell nuns’ habits and Amish wear?
christian clothing store
” Is that supposed to mean clothing made by Christians? Nothing made by those heathens in China or Muslims in Indonesia or Bangladesh?
Or do they sell nuns’ habits and Amish wear?”
NO. They “dress up” and then make merchandise of men —
“There’s still a place for small retail business in the US.”
I totally agree, However, here in the Middle of Nowhere, the combination of a captive consumer base (60 miles from the next large population center), a concerted and successful effort for years by 5-6 families who owned everything to keep out anything that smacked of competition (even restaurants) led to an abusive retail environment that fleeced their (often poor) customers of double the average for anything.
The refrain is still “buy local”, but local prices in some of the old stores are still 75 -80% higher any good that isn’t sold at WM. Example - small pool pump - Here in town - $195, drive to Tuscaloosa, same pool pump from same manufacturer - $89. Oh, by the way, the local store sources it from the same place the T-Town chain does.
I don’t feel sorry for them…
They may have to pay a much higher wholesale price.
I remember when Home Depot would negotiate deals with vendors and tell them that they could not sell wholesale to anyone at a lower price then Home Depot’s planned retail price for said item.
If you visit Lowe’s/Home Depot you might notice that there are a lot of brands that are available only at one or the other, but not both stores.
You might also notice that Wal*Mart prices on Apple products are not any cheaper than other retailers.
Price of their staples is cheaper than Costco, but I can’t convince the hubby of it. At Costco you can get 8 cans of refried beans conveniently hooked together, big deal.
Could price of gas lead to resurgence of smaller local stores? Trip to Wallyworld requires significant drive for many.
Probably, the one here in town is the only one in 45 miles, but people still flock here to shop because they save so much.
I’m seeing people make major buying trips to Trader Joe’s and Winco (cheaper than Albertson’s, Safeway, etc. but you don’t need a Costco-type membership)….they walk out with full carts and then start loading up the coolers in their cars.
A consumer trend forecaster our company pays attention to says shopping habits are changing to 1) major stock up trips and then 2) smaller closer convenience trips.
The browsing and impulse shopping trips become fewer as people mentally calculate the fuel costs for the trip. This has a lot of negative downside for fashion items.
You’ll make less trips to W-World. So you’ll need a bigger car so you can buy two months’ worth of goods. And a bigger house to store them in.
“I haven’t notices WalMart causing the shutdown of outrageously priced convenience stores”.
Theat because you cant sell food stamps at wallmart you can at Habebes liquor though. 60cents to the dollor.
i shop at walmart when i pass one on the wya to whereever i may be going to visit a friend or family in jersey or long island usually-if not it is Target 1 mile from my home
my stimulus check stimulated my savings not some retailer
ain’t no shame in my game….
my co-worker hates them because they put his Dad’s (insert business type here) out of business (he likes to fancy himself an elitist) although he spouse works for faux news
spot on Jwhite-
better lace up those shoes and get walking or is Jim Cramer at your door with a shotgun?
sorry for terrible spelling i need coffee
I am heavily fortifying myself with dark roast…
After yesterday’s debacle, ouro slept nine hours straight.
But I did hear the marine choppers flying all night long.
That could only mean one thing, war!
Any pretty black ones?
Lad, stealth or loud like vietnam helicoptors?
We have both.
I’d like to go heli-skiing, but not in the Central Alborz mountain ranges, if you know what I mean, nudge nudge, wink wink, say no more.
(this message will self-destruct in 5 seconds)
Darn, mgnyc, was going to send in medics for your spelling. thought you needed oxygen or circulation or something.
Glad you are okay. Better check it out.
Student loans gone haywire.
http://bloomberg.com/apps/news?pid=20601213&sid=aSgOHQxe6YgU&refer=home
“The former corporate turnaround executive delayed buying a new home in Dallas because he can’t access the $4.85 million he has in student loan auction-rate bonds without selling them at a loss of at least 20 percent. ”
Did anyone tell this sucka to diversify?
No. They told him that the auction rate debt was safe as cash in the bank, but with a higher yield than all the other conundrumishly low yielding assets.
“To have worked for 50 years and not be able to access my money is devastating” [said a semi-retired person who put all his eggs in the student-loan basket]
Reach for yield, miss the trapeze, fall flat on your a$$
“To have worked for 50 years and” put all my money into one basket is either stupid or a tragedy.
I coulda loaned him an additional basket. Sheesh.
Garage sales have lots of baskets.
Jobless claims dip but labor market still weak
Fewer people signed up for unemployment benefits last week, but not enough to obscure continuing weakness in the country’s labor market.
The Labor Department reported Thursday that new applications filed for unemployment insurance fell by a seasonally adjusted 58,000 to 346,000 for the week ending July 5. A year ago, the figure was lower, at 304,000, showing a deterioration in employment conditions.
A government analyst cautioned that last week’s drop did not suggest a sudden improvement in the country’s overall economic health. The decline was exaggerated because of adjustment problems related to temporary shutdowns at auto plants for retooling new assembly lines. The unadjusted, or actual raw figures, showed an increase of 30,000 claims for last week.
The number of people continuing to draw unemployment benefits jumped by 91,000 to 3.2 million for the week ending June 28, the most recent period for which that information is available. That increase left such filings at the highest level since late December 2003. A year ago, the figure stood at 2.5 million.
http://biz.yahoo.com/ap/080710/economy.html?.v=8
Brooklyn homes sales drop 44%
http://bloomberg.com/apps/news?pid=20601213&sid=a9aZXkvf.GqM&refer=home
This can’t be true, because everyone knows it’s different here. Aren’t all the foreigners buying?
“Aren’t all the foreigners buying?”
No! It’s the hipsters, all the monied digerati.
LOL, ain’t that the truth!
From each according to his ability to each according to his hipness.
If I had a dollar for every Brooklynite that morphed from hipster to RE pro…
brooklyn prices only went up %500 or more the ;ast 5 years
alot more to go
i have noticed rents in manhattan are getting lower (though still high)
the wife and i are moving into the city in may 09 just in time
she is in the i do not care if we ever buy a place camp
USA for sale:
The hunt for the great American trophy asset is on.
The global commodities boom and the dollar’s decline have unleashed a wave of big money buys of prized American assets by newly flush foreign investors.
http://www.nytimes.com/2008/07/10/business/worldbusiness/10wealth.html?_r=2&adxnnl=1&oref=slogin&ref=business&adxnnlx=1215694908-Q5Mn74IoTmgVLLYp4wWqLw
chrylser bldg 75% owned by foreeign interests
is the white house current on it’s mortgage?
This Chrylser buidling news is great. Stories like those are absolutely requisite for having a big bust. We’ll be chuckling about this one for decades.
Right on Edge. Japan/Rockefeller Center circa 1988.
In the late Seventies there was a rumor circulating that said Japan was going to buy the Liberty Bell, which greatly pissed of a lot of gullible people.
chrylser bldg 75% owned by foreeign interests
These people are way early, given that NYC commercial real estate only recently hit its peak. Still, the deal won’t be a total loss. Like the Mitsubishi Group’s purchase of Rockefeller Center in the 80’s, this deal will probably break even long term - a much better proposition than property deals in far more inflated real estate outside of the US. Mitsubishi Group more or less broke even on Rockefeller Center, while losing 50% of its money in Japanese real estate over the same time interval. Investors in the Chrysler building might be buying now because they see the potential loss from a drop in real estate being offset by the dollar’s rise over the same period.
I will bid when Yellowstone Park goes up for sale. :>)
You’d buy a supervolcano that is roughly due to erupt?
That’s quite a liability hit if it goes… will State Farm cover you for “widespread continental devastation?”
While the Chrysler Building and other assets like art may bring a form of prestige, they also appear to be holding their value better than financial institutions and the broader stock market.
Hah.
In the art market, this relative strength has been tied to foreign buying.
The Russian nouveau riche in particular have been on a modern / contemporary art binge for a few years now. They’re propping up the high-end market, according to many. Similarly, there are lots of Europeans and Asians bargain-hunting through our decorative arts.
Huge FDIC Hit Seen If IndyMac Collapses
American Banker | Thursday, July 10, 2008
“WASHINGTON — A collapse of IndyMac Bancorp could be one of the costliest failures in recent memory because of poor market conditions and high reliance on Federal Home Loan bank advances, observers said Wednesday.
Though the $32 billion-asset Pasadena, Calif., thrift company is still struggling to right itself, there are growing concerns that it will soon become the second-largest bank failure in the United States.
If that happens, the cost of its resolution is expected to be very high — in part because of its $10 billion in advances. That means a sizable chunk of IndyMac’s quality assets that remained after its collapse would be pledged to the Federal Home Loan Bank of San Francisco, which, as a secured lender, would trump the Federal Deposit Insurance Corp.’s rights to assume the assets to offset resolution costs.
“If the Federal Home Loan bank grabs the collateral first, then they in all likelihood would be grabbing the best collateral at IndyMac,” said Frederick Cannon, an analyst at KBW Inc.’s Keefe, Bruyette & Woods Inc. “It could be a real issue for the FDIC…..”
If?
Château d’If ?
“Though the $32 billion-asset Pasadena, Calif., thrift company is still struggling to right itself, there are growing concerns that it will soon become the second-largest bank failure in the United States.”
Data from MarketWatch.com:
Shares Out: 100.89M
Market Cap: $38.37M
Current share price: $0.38
My back of the envelope calculation of company’s value:
$0.38*100.89M = $38.3M (closely matches MarketWatch.com’s Market Cap).
What does it mean when a company with $32 bn in assets has a market cap of $38.37M? Is this a good time to buy this stock?
Current share price .38 cents? This is an OUTSTANDING buy opportunity! JW hops on the net to invest lifesavings in sure thing. “Hmmmm, I always like the SOUND of IndyMac!” Now where’s that “buy” button….?
38 Cents for an IndyMac serving?
Is it microwaveable?
But it’s an extra $0.30 if you want cheese.
Why dont we do a pump and dump. HBB couldpump it up to $1.20 and dump it.
Or a free Indymac share in every bowl of Ramen noodles.
Actually, it is down another 25 pct already early in the day. (A dime decrease in share price matters a lot for penny stocks.)
Uh, the market capitalization of a company is defined as its share price multiplied by the number of shares outstanding.
This value does not determine the value of its balance sheet assets.
“This value does not determine the value of its balance sheet assets.”
But certainly there must be a connection? I am guessing that, in equilibrium,
Market Cap = NPV(Corporate worth) = PV(Assets) - PV(Liabilities)?
And that the values can change in a heartbeat if the valuation method changes from “ongoing concern” to “liquidation value”?
Price does not equal value. The market capitalization is a function of price. Value is a function of fundamentals.
If the fundamentals suck then eventually this suckiness will reflect itself in the price and thus the market capitalization.
These financials didn’t all of a sudden lose value. They lost fundamental value months ago, years even, when their real estate holdings became overvalued.
It’s only recently that this lost fundamental value has been reflected as declining share price.
A declining fundamental value, when it becomes recognized by Mr. Market, translates into a declining share price.
If the fundamentals suck then eventually this suckiness will reflect itself in the price and thus the market capitalization.
Eventually is the operative word where Wall Street is concerned — it’s clear that fundamental suckiness does not always matter to the “gurus” in the short- or medium-term.
This is very true. That’s why patience is so necessary.
Net - its not just for fishes.
Does this mean I can buy a home in my hometown anytime soon?
I will be the little old lady from plasmadowner soon enough.
http://s292.photobucket.com/albums/mm1/anngogh/
new photos and please send me your area photos.
annmoorman@att.net
This does make me wonder how desperate Indymac is to unload their REOs.
Not desperate enough to lower the prices, I bet.
After all, this is just a small downturn and by 2009, we’ll be back to the good-old-days of toxic loans and people buying houses at 10x their incomes! Right…
“An unintentionally hilarious interview with Gramm on the Wall Street Journal editorial page last week asserted that Gramm has “been a key instigator of some of the biggest money-making UBS deals of recent years.
The interview was noteworthy not just for first-class butt-kissing, but for deliberately gliding over the avalanche of disasters in the past year that has turned UBS from a respected Swiss titan of discretion and risk management into a laughing stock. As this one-year chart shows, UBS’s stock lost nearly 70 percent of its value and now stands at levels not seen since 2002, when Gramm signed up. ”
Slate
I thought Mr. Henry Paulson was bad, at least he made money at GS. Mr. Gramm, future Secretary of the Treasury, I hope not.
Kay Bailey-Hutchinson—>Wendy Gramm—->Centex—->Phil Gramm—->now reverse it and follow the money.
Phil Gramm, alleged Economic Sage, architect of the infamous Gramm-Leach-Bliley Act — and a top advisor to a certain guy who’s attempting to upgrade his status from Very Important Guy to Very Powerful Important Guy.
An unintentionally hilarious guy with a face only a mother could love.
Former Sen. Phil Gramm, a top economic adviser to presumptive GOP nominee John McCain, referred to the economic slowdown as “a mental recession” and called the United States “a nation of whiners.”
http://news.yahoo.com/s/politico/11658;_ylt=Aryh_.TH58MXTVkzUoKWI7Zhr7sF
“United States “a nation of whiners.”
Whaaaaaaaaaaaa don’t outsource me bro
And, the media spews more “victim” stories … oh, these poor morons who didn’t read or understand their mortgages lost “their” house after an “unexpected” jump in her monthly mortgage bill.
Life After Losing Your Home
http://money.cnn.com/2008/07/10/news/economy/rios/index.htm?postversion=2008071008
Where are the stories of the renters losing homes and having to relocate because they rented from flippers who pocketed the rent payments and didn’t pay the mortgage? They are true victims.
Oh, the horror these people in the story have to “squeeze into rental apartments”. This is disgusting. What about all of the people who didn’t take out a loan that they couldn’t afford to “buy” an overpriced house during the mania who are squeezing into apartments that actually could afford these houses if there wasn’t a run up. I guess they just have to keep squeezing and pay their hard-earned money in taxes so people who face “unexpected” monthly increases in their rent can stay in “their” homes.
Dow futures now negative…
Good morning, all. I have a question.
My octagenerian parents have over $200k in a “premium money market” account with SunTrust. I am strongly suggesting that they get down to $100k exposure in any given bank - and especially in one that has been tanking like SunTrust in recent weeks.
My question - are money market accounts FDIC insured? I plan on inquiring at their SunTrust bank tomorrow - but I thought I’d look for an interim answer here.
They’re very financially secure and diversified, otherwise. Still - after someone tried to sell them a very inappropriate annuity a couple years ago, and given their stock brokers (they each have one, of course) have occasionally tried to get them to buy some real dogs - I really feel I need to get more involved with their finances. I think seniors with money are going to be targeted even more than usual in difficult economic times ahead.
Thanks for any help. I just don’t want to see them get a big chunk of their savings peeled away.
seniors and brokers is a bad combination most of the time
my in-laws have pretty significant assets and luckily are very conservative (except for those trips to atlantic city)
i asked the same question to Fidelity regarding the money market and they told it is fdic insured
My understanding is that Money Market *Accounts* are FDIC insured. Money Market *Funds* are not. When in doubt, call the bank and ask. But I’ve been concerned about this in the past, and the few banks I’ve had money in have always said “yes”.
Someone please correct me if I’m wrong.
What drumminj says sounds right to me, but by all means check with the bank (I don’t know what SunTrust is).
For a regular bank FDIC insured money market account, they are okay for $200,000 if both their names are on the account. Adding a POD could put it to $300,000. FDIC has a little brochure explaining how it works available at banks.
I agree 100% with zero: “I think seniors with money are going to be targeted even more than usual in difficult economic times ahead.”
That’s not to say that it might be more comfortable not to have more than $100,000 in any single bank.
My wife and I had the same concern. We asked the manager at our local bank. He gave us the completely wrong answer. So please be careful. We were lucky in that while he was talking, anyone could tell he had no idea what he was talking about.
After investigating, we found that it’s based on social security #s. You are insured up to 100k per SSN. So a husband and wife with 125k are OK, so long as both names are on the account.
What we still have not gotten a clear answer on is whether that is product based or Institution based. Meaning, if I have a money market account and a checking account, both with 100k, does the FDIC see that as two separate insurance policies for 100k? Or does it just view the lump sum of the two, 200k?
Because of that we’ve gone to some different institutions.
It is $100K per person (SS#) per institution.
Get the Printed copy that states Insured.
I really feel I need to get more involved with their finances.
i’d be very careful about that.. you are after all, their ‘child’ and always will be in their eyes. And anyway, do you really want them to take the advice of an amateur, whether related to them or not? Hopefully, you don’t.
As for brokers offering crap stocks and insurance co’s trying to sell them annuities, there’s nothing unusual about that.
Do your research first.. and if you find something truely dangerous, you might call one of their banks. Banks take senior-citizen scam warnings very seriously, and will follow up on it.
I’m not looking to direct/manage their finances - they’ve done an amazing job of it over several decades. But they are losing some of the judgment, healthy skepticism and attention to detail that perhaps many of us will lose in our 80s - and I think they are only barely aware of what’s going on in the financial markets.
I’m just trying to shine a light on things they need to be careful about, that’s all. Such as making sure their money that is in a bank - SunTrust - that has lost about 2/3 of it’s stock value in the past year - (and almost 50% in the last two months) is safe in the event things continue down this path for financial institutions. Until I asked them about it last night, the thought had not crossed their minds.
They’ve done a lot for me over the years - I’m just trying to return the favor to some degree. But I understand and appreciate your caveats.
Well, (almost?) all the bank stocks have been hit, regardless of their participation in the mortgage/housing bubble. A bank’s stock price doesn’t necessarily reflect it’s solvency. Some, like Wells Fargo, hardly got into CDOs, CLOs, SIVs, subprime mortgages etc, but their stock has still fallen.
People like to pound on the FDIC and how it might not do this or that, but it’s record remains that, within the approved limits, no depositor has never lost a penny.
In the 11 years from 1983 to 1993 inclusive there were 2,732 bank failures in the 50 states.. so they must be doing something right.
It mostly depends on how they react to your intervention.. you might be able to guide them or they might take offense.
As for their eventual demise or inability to handle their own affairs, things can change fast and some things need to be taken care of before that. Talk with an estate attorney, preferably theirs. One missing word or line in a Living Trust or Will can result years of trouble and unnecessary costs.
I know what you’re going though.. you do what you can.. good luck.
Since the whole banking industry is looking shakier by the month, it would be wise for your parents to have accounts at 3-4 banks rather than the bulk of their funds in a single bank. The FDIC has been able to guarantee continuous access to its insured funds when the occasional FDIC-insured bank has failed. However, there is nothing in FDIC regulations that guarantee WHEN insured depositors can access their funds. Should multiple banks fail in a short period, or a huge bank fails, expect a delay in account access.
Holy crap the Dow is bouncing like a jumping bean. What’s going on? First it was up 44, then down 190 five minutes later, now back up 60 fiver minutes later again!
(Got some shorts covered though in the process - woo hoo!)
Guess it was Yahoo glitch to some extent (going to have to stop using them) - apparently it never really went down 190. Still though very volatile.
Lately, the markets have been reminding me of the scene from Airplane in which the air traffic controller gives running commentary as Stryker brings the plane in for a landing at ORD:
“Getting below 700 now, still going down. 675, 650, 625,
he’s holding. . .no, no he’s down, he’s down. . . He’s all over the place, 900 feet, up to 1300 feet . . .what an a__hole.”
Oh man, no one will ever believe me - but I was thinking of the very same scene when I first packman’s post - good on you for posting it!
I believe you. Of course, I like to believe that everyone I talk to picks up on the amusing (at least to me) snippets of movie (Airplane, Caddyshack, Fletch, Animal House, Good Will Hunting, A Few Good Men etc.) and TV (mostly Seinfeld) dialogue that I’ll more than occasional drop into conversation. So I might not be a completely unbiased observer.
Jwhite keeps forgetting something before his walk.
Out the door in the door out the door in the door. Go for a walk Jwhite so this market decides what to do.
actually, I think Jwhite has taken up dancing. That would explain everything.
posting the entire article cuz its on LEX and it is subscription only:
Banks and rumours
Published: July 9 2008 14:48 | Last updated: July 9 2008 19:11
Banks’ highly leveraged business models make them particularly vulnerable to any crisis of confidence – hence their predilection for cathedral-like headquarters.
Hence, too, the special hatred reserved for “rumour-mongers”. Jamie Dimon, chief executive of JPMorgan, is the latest to weigh in on this subject. But his use of the vague phrase “where there is smoke, there is fire” in relation to the role false rumours may or may not have played in bringing down Bear Stearns is telling. Undoubtedly, malicious gossip can move markets but proving it is a wholly different matter. Mr Dimon concedes he has no evidence of it.
Rumours are, by and large, legitimate sources of information used in setting asset prices. Wall Street is curiously reticent on the role merger rumours played in boosting stock prices in recent years. The banks are vulnerable to tittle-tattle precisely because of the bad decisions they took during that period.
The market remains bearish on US financial stocks, with short interest representing 6.2 per cent of the sector’s float compared with 3.6 per cent for the S&P 500 overall, according to JPMorgan. Deleveraging has barely begun. Loans and investments in the US banking system are contracting at the fastest rate since the Federal Reserve began reporting weekly data in 1973. Importantly, this tightening really kicked in after the Bear bail-out, indicating that the Federal Reserve’s extraordinary measures did not restore enough confidence. In that context, the Fed’s possible extension of “temporary” lending facilities beyond year-end smacks of necessity rather than cause for celebration.
Meanwhile, for all Treasury secretary Hank Paulson’s hopeful talk of curing the housing market hangover, the inventory of completed homes remains at more than 10 months’ worth of sales. Short-sellers have good reasons to remain negative on banking stocks, without resorting to fabrication. ”
The conclusion is telling: “Short-sellers have good reasons to remain negative on banking stocks, without resorting to fabrication.”
I am literally amazed when I read on this blog about individuals wanting to get long a bank stock. The odds are that you will be able to buy any bank stock at current price or lower in 3 years. the current odds are 1.5:1 - “just sitting on the ground with the gun of mine shooting the birds on the telephone line.”
The bank stocks are dead ducks trading.
“rumour-mongers”
I personally doubt that false rumors could inflict any harm on a sound financial institution.
Banks that aren’t insolvent don’t sell themselves for pennies on the dollar. (Well, maybe they do if their Chairmen are rattled by being interrupted in the middle of a tiddlywinks convention…)
FYI, my local bank Astoria Financial [AF] is reporting earnings next Wednesday. I’ve made a couple bucks shorting them. They were one of the banks mentioned in the WSJ article about massaging their delinquency data by changing the reporting rules [ie., a loan is marked late when it is 3 months late, instead of 2].
Link.
Well folks, off to “The Walk”, I’ve got class later today too. I’m visiting Arlington VA in a couple of weeks, anyone know how the Double Tree there is? Wife’s got a conference there.
I’ve never stayed there so I can’t comment on the quality of the hotel. It looks like you’re going to be stuck in office tower hell near the airport though. There are a couple of chain restaurants and a Target nearby. Don’t be fooled by the Crystal City Restaurant down the street. It’s a strip club (or what qualifies for one in Virginia).
It’s at the very north end of Crystal City in Arlington - very close to the pentagon, and also National Airport.
It’s home to DC’s only rotating roof-top restaurant/bar. I’ve never known anyone who’s actually been to it - but some of the views might be good. I’m guessing the food is either forgettable. (or perhaps memorably awful)
Bunch of lackuster upscale-chain restaurants back along Crystal Drive (Mortons, Ted’s Montana Grill) - best of the bunch is probably Jaleo - a tapas place with other locations in DC and Bethesda - these are a 10-15 minute walk away for you.
You’re a 5-10 minute walk away from the Metro - which can take you into DC. You can also easily take metro the the Nationals new ballpark - and they do sell $5 seats there. (and, of course, $7.50 beers)
Overall - I’d say the Doubletree may be short on charm on it’s own - but it is really well-located in terms of access to the airport (if you’re flying into National), and very quick to get into DC by metro or cab, as well.
The Washington Post website has a good restaurant finder in it’s dining section, as well.
View is OK, but it’s seriously overpriced. (Once upon a time, years ago, some friends and I noted that, if you drink too much, the room spins… so maybe, if the room is _already_ spinning, you can drink enough to make the room stand still. Doesn’t work like that, as it turns out.)
Personal fave for dining in the area: Crystal City Sports Pub.
The Bebo Tratoria (next to Jaleo) can be awesome, but the service is (very!) hit-and-miss.
Thanks Everyone! I really appreciate the advice! We’re going to be there for a couple of days and I’m going to have to find something for the kid and I to do (besides the DC tour). Arlington is really noted for it’s excess of things to do…
I need some help. I’m not sure if I read it from a link posted here, or from a link posted somewhere else. There was an article which speculated
that financial institutions are offsetting losses/writedowns with money made in commodities trading(largely crude oil). More specifically, they are somehow playing the difference between the spot and the futures prices. Additionally, the article estimated that oil would need to rise $5 per barrel per month until it hit $900 per barrel to fully offset all losses/writedowns.
Does this ring a bell with anyone?
Did Lost in Utah provide a link to something like that for Joey in Calif - maybe Fri July 4?
yeah.. but she posted the “article” itself.. It was actually a response by a reader.
lemme see if i can find it in the archives..
If someone else wants to look, search the word “potatoes” .. the guy had a weird sign-off message about seed packets including planting directions but a potato doesn’t..
Thanks!!!!!!!!!!!
found it.. July 4th as hip remembered..
http://thehousingbubbleblog.com/?p=4710#comments
I’m talking to a professional at work. He says the numbers don’t add up, if for no other reason, the monthly open interest is too small on the Nymex.
i couldn’t make sense of it..
Maybe there is no return, but it doesn’t necessarily follow that it’s not happening. Banks have been screwing up a lot lately and this may be another example.
Dutch housing bubble update:
Dutch homes keep getting more unaffordable because of higher prices, slightly higher mortgages rates and banks that are less eager to loan at high loan to income ratios. Compared to previous year, home sales numbers are down and inventory is up significantly, but prices keep rising on a yoy basis. Realtors are now predicting that home prices will rise 2% this year (a little below inflation). The first quarter of 2008 had a huge drop in sales, but realtors say the second quarter was much better.
Many worker groups are seeing their wages rise more than official inflation, which could boost homeprices even further in the near future. But it is difficult to say how much of the pay rise is left after government has taken its share with higher energy taxes etc. The Dutch are still partying on easy money like nothing happened on the other sides of the pond, but I guess most of the fun is over by now.
How do Dutch companies remain “Competitive” while giving their employees good raises? All we ever hear in the US (from our captains of industry) is that we are overpaid and that we should forget about cost of living raises.
big companies remain competitive because taxes are going down; of course this means more taxes for their employees but the tax system is so complicated that most of the sheeple don’t notice. And of course, credit is still very cheap over here which postpones the day of reckoning.
Do they all have ‘dutch’ doors on dutch bldgs?
Listening to Benanke and Paulson, Bernanke says he and Paulson are working closely together, translation IMO is I`ll do what ever Paulson says cause he scares the sh..t out of me.
maybe its me, but their voices seem to keep quivering quite a bit.
and whats wrong with paulsson’s pinkey finger? did it get broken while try to shut the barn door after the horses got loose?
Wierd, I just noticed the same ‘pinky malfunction’ myself.
Maybe he stuck it in Bernakes eye when Bernanke suggested raising interest rates.
Paulson looks like a three stooges man to me.
I’ve been noticing the quiver in their voices for about a year now. Bernanke has a chronic case of stage fright anyway, always has, but is getting worse. Paulson looks & sounds increasingly scared month by month.
did anyone see the veins buldging out of their necks over this article?
Accounting Plan Would Allow Use of Foreign Rules
http://www.nytimes.com/2008/07/05/business/05sec.html?em&ex=1215489600&en=4f50468dd20244b5&ei=5087%0A
Filed under:
We don’t want competition…or…Where the hell are going to store all this goo after the Olympics?
OPEC sees lower oil demand, warns on investment
http://www.reuters.com/article/ousiv/idUSWLB192420080710
They are talking about “hope now ” does anyone remember the Sienfeld episode “Serenity now ” I wonder if it will end the same way, as I remeber serenity now ended with Kramer smashing a bunch of computers that George had bought on credit and had planned to return.
Ron Paul is giving it to BB on Business channel right now .
and did you see barney frank cut off paulson’s answer to ron pauls question about the dollar? that makes me so mad that they wont allow ron paul to put the screws to him!!!!
Need that YouTube, someone?
It really is quite enjoyable watching the fenders come off FNM FRE. How delightful.
“We cannot allow them to fail,” McCain told reporters at a diner in Livonia, Michigan. “They are vital to Americans’ ability to own their own homes, and we will do what’s necessary to make sure that they continue that function.”
He really is a complete idiot detached from reality.
that’s why he’ll make a fine President.
truth…just like his buddy obama
I have a very stupid idea with regard to education!
Future students, should order textbooks over the internet or their local college that they intend to attend. They should review the text and work out the problems so that when they sign up for the classes, education can take place. A test of the required subject, at least at a prerequisite level.
Like I said, it will accomplish a number of objectives for the time and money spent-
1. Shows a commitment to the subject, so that the instructor not having to cover info needed-prerequisites.
2. Shows are a desire to learn the subject.
3. Guarantees a higher success rate and greater learning of the subject.
Just one person’s stupid idea to improve education. Lets stop wasting tax payer’s funds to fill classes that end up at a lower student number by the time of the final.
“…should order textbooks over the internet”
Why not just post the textbook? This is what China would do.
Oh, no profit $$$$$$$$$$$$$$$ in that idea,…better not let the distribution of knowledge become to freely accessible…I mean can you imagine America’s children creating new ideas with “tools” they get for free?
Hey, at my alma mater, half the professors assigned their own books as required texts… no conflict of interest there!
(disclaimer: could be dating myself here - I have no idea what current policies are)
hwy50ina49dodge,
Look it,
If you come totally unprepared, then you wasting your tax dollars. It really doesn’t make any difference where the text books comes from.
You pick the school, and have to satisfy their requirements. All I am saying is that you must be prepared to have the background to learn hitting the ground from the first day of class.
Personal experience- You can not rely on prerequisite courses from 40 years ago to prepare you to walk into day’s classes and be up to speed with 18 year olds with current experience or someone who has never taken courses closely related to the subject(unless intro course in the social sciences or other soft courses.)
rant/off
Example # 234: How the Republican party is “Fiscally Conservative”
McCain says U.S. cannot let Fannie and Freddie fail
http://www.reuters.com/article/politicsNews/idUSWBT00936520080710
“I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers. Government assistance to the banking system should be based solely on preventing systemic risk that
would endanger the entire financial system and the economy.”
He’s living up to your posted link PB
Comment by Professor Bear
2008-06-28 04:28:34
I will let you click on this link for the answer after you guess whom I am quoting below.
http://www.cnn.com/2008/POLITICS/06/27/mccain.housing.crisis/
It sounds to me like John McCain is serious about fixing the housing mess. Can Obama match him on this front?
“Policies should move toward ensuring that homeowners provide a responsible down payment of equity at the initial purchase of a home. I therefore oppose reducing the down payment requirement for FHA mortgages and believe that, as conditions allow, the down payment requirement should be raised. So many homeowners have found themselves owing more than their home is worth, because many never had much equity in the house to begin with. When conditions return to normal, GSEs (Government Sponsored Enterprises) should never insure loans when the homeowner clearly does not have skin in the game.
In financial institutions, there is no substitute for adequate capital to serve as a buffer against losses. Our financial market approach should include encouraging increased capital in financial institutions by removing regulatory, accounting and tax impediments to raising capital.”
‘”They are vital to Americans’ ability to own their own homes, and we will do what’s necessary to make sure that they continue that function,” McCain told reporters at a diner in Livonia, Michigan.’
How did Americans own homes before there were GSEs? How do people living in countries without GSEs own their own homes?
Ok all you whiners, $4/gallon gas is all in your head, it’s your imagination.
STOP WHINING! says McCain’s “economic adviser” Philbert Gramm.
http://firedoglake.com/2008/07/10/mccains-economic-brain-tells-americans-to-stop-whining-things-have-been-awesome-for-him/
I suppose Enron was a mirage too. Ask him and his wife Wendy how many millions they robbed from Enron shareholders and 401k participants. Yeah… those crime victims are really just whiners.
“…in a country the West views as a vital transit route for oil and gas exports from the Caspian Sea.”
The “future” doesn’t look good in America for Hummer’s or Land Rovers
http://www.reuters.com/article/worldNews/idUSL1027316820080710?pageNumber=2&virtualBrandChannel=10216
Do Hurricane’s only happen in the Atlantic…or are they possible in the Pacific as well?
Fidel letting India & China Drill off-shore, Chavez Oil Czar for South American’s poor, Nigeria pipline distruptions…
And we thought cigarettes where the only toxic industry doing damage.
Remember txchick jokingly suggesting long ago that “Broke is the new black”…
MSM now says its so:
http://www.msnbc.msn.com/id/25575073/
I seem to recall the last time the MSM went on popularizing frugality was during the recession of ‘91.
US housing bill clears Senate procedural hurdle
A bill to save hundreds of thousands of homeowners from foreclosure cleared a procedural hurdle in the U.S. Senate on Thursday and moved a step closer to being sent to the House of Representatives for needed agreement.
On a vote of 84-12, more than the required 60, the Senate agreed to proceed with the legislation, and could send it later in the day to the House, where it faced a number of potential amendments.
http://www.reuters.com/article/marketsNews/idINN1034711420080710?rpc=44
A question for the audience,
Whats the difference between the Govt., mobsters and drug dealers?
ding, ding, ding
ding, ding
ding
Answer, no difference whatever!!!
They are all necessary, but parasitic. They, if they are smart, suck the blood out of their host (ie., money), hopefully with out killing them.
Well, our financial institutions with Govt. involvement are on the verge of killing the host!
rant/off
Whats the difference between the Govt., mobsters and drug dealers?
The mobsters and drug dealers don’t get to throw the govt in jail, thereby giving govt a competitive advantage?
Some of the houses that I commented about last week on my block now have signs. Apparantly, they may have been available for a while, but the signs only appeared in the last few days.
I have to admit, I am tempted to look at them. I assume at this point they will need a great deal of rehab. I know this one had the outside AC unit taken (I know the previous “owner” did it, found out from a neighbor after the fact).
http://www.zillow.com/HomeDetails.htm?zprop=24407188
Check out the previous sales. The last “owner” left the house 6 months (almost to the day) after moving in.
My thought is to have my own little “ghetto” of renters that I choose.
Do you all think that I have lost it? I’m just thinking about it for now.
Ben is beyond a shadow of a doubt right! Bubbles in Michigan abound.
Jim
Totally totally OT - wife’s biopsy - no cancer woohoo (but ‘atypical hyperplasia’).
Back to more mundane stuff:
1. Lawyer reviewed $400K contract offer- “My overall impression regarding the agreement is that it is very unbalanced - with the weight of favor on the employer’s side. There are lengthy lists of requirements and duties for you and nothing comparable for the employer.” Oh well. Anything too good to be true…
2. Why do I still keep my position in these stupid TIPS?
3. Can 117 million cats (total estimated US taxpayers) drink up a (very very large) swimming pool (vide supra)?
Lawyer reviewed $400K contract offer- “My overall impression regarding the agreement is that it is very unbalanced - with the weight of favor on the employer’s side. There are lengthy lists of requirements and duties for you and nothing comparable for the employer.”
At 400k, I would think the lists of requirements would be lengthy.
Yes, that’s true, but from my POV, it’s time for contract hardball - but luckily no debt - whew! - so am able to walk away.
‘atypical hyperplasia’
I got that too. Took tamoxifen for it a year or so but couldn’t handle it and stopped.
Meeting with doc next week. Biz manager has two friends who had to stop b/c of side effects. Good luck to you!
Congrats on the good news (no cancer)!!!!
http://www.washingtonpost.com/wp-dyn/content/article/2008/07/07/AR2008070702215.html?sub=AR
“The worst part of Reaganism was its political success. It left behind a coterie of panting acolytes who learned from Reagan himself that optimism, cheerfulness, an embrace of magical thinking and the avoidance of the painful truth was the formula for victory at the polls.”
Denial, goldilocks, everything is great, let the good times roll, etc…..
Sound familiar?
Sound familiar?
No. Could you enlighten me?
I’m sick and tired of all the bitter hand-wringing. I’m happy here — sold our house in ‘05 (thanks, Ben), going to buy in a little while for 40% off or more.
I’m looking forward (with hope) for more nuclear power plants and a good old “two fingered salute” to the likes of Richard Cohen. Doesn’t Jimmy Carter think that’s a good idea? No? Send the old dear another sweater. And in exchange, ask him for his passport.
Have you been to Northern “red state” Pennsylvania lately? No? I hope you don’t tell Jimmy about how happy the landowners there are about drilling for gas and piping it downstream. Some happy farmers there with their new tractors and houses. It might make him sick. I hear there’s a sweater sale at (oh, where do you people shop for organic pesticide- and nit-free wool . . .) never mind. Just buy one for him — he’ll feel warmer and maybe a little happier inside.
We have some homemade meade ready, and we bought a big ‘ole firecracker on July 5th (1/2 off, of course) and are saving it for our new housewarming.
I know. That horrible President Carter. He was such a heathen and really fell asleep at the switch by not warning us of $4/gal fuel. Such a heathen!
From Politico today:
“In the stages of grief, denial gives way to anger and then to bargaining.
It may be an apt metaphor this week, as Democrats’ long-held opposition to expanded offshore oil drilling succumbs to the political realities of $4-per-gallon gasoline”.
“Sen. Jim Webb (D-Va.), fresh from his GI Bill victory, said that he is now making energy a major priority. “We need to look at all our assets,” he said, suggesting a large package including expanded offshore drilling, alternative energy, nuclear power and technology to make coal cleaner”.
Which has what to do with the stupid juice (r) voters seem to drink blinding them from reality?
If Warren keeps repeating this sort of reckless behavior, he’ll have to go to BB & Paulson and ask for some kind of financial assistance.
The guy just can’t quit himself…
“By buying $3 billion of convertible preferred securities, Buffett is helping to fund the deal and making a low-risk investment in a high-quality company, Altucher explains, much as he did with Mars-Wrigley recently and Gillette back in the 1990s.
The big picture, Altucher says, is that “the Oracle” finding value in Rohm & Haas and Dow Chemical is offering such a huge premium means “the whole market is in play.”
Plus, Altucher reveals the cheapest stock Buffett owns today.”
http://finance.yahoo.com/tech-ticker/article/38249/The-Buffett-Way-Revealed-Dow-Chemical-Rohm-&-Haas-Deal?tickers=DOW,ROH,BRK-A,WPO,USB,WFC,WWY
latest news
Bernanke opposes stopping lending to investment firms now
Dodd Mortgage Bill Raids Billions More from Fannie Mae, Freddie Mac Capital Base
Levy Would Divert an Estimated $8 Billion over Next Ten Years, According to FreedomWorks
Last update: 12:05 p.m. EDT July 10, 2008
WASHINGTON, Jul 10, 2008 (BUSINESS WIRE) — As the stocks of Freddie Mac and Fannie Mae fall dramatically downward this week, the U.S. Senate is resuming votes on a bill that contains a direct raid on the GSEs’ shrinking capital base.
…
FreedomWorks President Matt Kibbe commented, “Rome is burning, and the Senate is adding lighter fluid. The GSEs represent a profound systemic risk, and investors are clearly concerned, yet Congress is moving to pass a bill that may make matters worse. This bill is advertised as strengthening regulation of the GSEs, yet it imposes a permanent new levy that will materially undermine Fannie Mae and Freddie Mac.”
Are these companies really sufficiently fit to do the heavy lifting that Dodd and Frank have in mind?
Freddie and Fannie in turmoil
By James Politi in Washington and Ben White in New York
Published: July 10 2008 16:05 | Last updated: July 10 2008 21:03
Shares in Freddie Mac and Fannie Mae plunged in frantic trading on Thursday in spite of attempts by US regulators to provide reassurance that the two government-sponsored mortgage financiers remained on a solid footing.
Shares in Freddie were down 17.7 per cent and Fannie’s were off 10 per cent by mid-afternoon in New York, their lowest levels since 1991. Other participants in the mortgage market, including Lehman Brothers, also suffered steep falls, although the overall stock market climbed higher.
latest news
Bernanke: Financial markets remain ‘quite strained’
MARKETWATCH FIRST TAKE
Kiss of death for Fannie, Freddie?
Commentary: Bush administration’s faith is a contrary indicator
By MarketWatch
Last update: 9:54 a.m. EDT July 10, 2008
Why wouldn’t bailout rumors help the GSE share prices? (Maybe folks are confusing the BSC fire sale with a bailout?)
Thursday, July 10, 2008
Fannie & Freddie fears hit market
Frannie Mae and Freddie Mac’s stocks plunged after rumors the government might be prepping a bail-out for the struggling mortgage companies. John Dimsdale reports.
When’s the next “terrorist attack” gonna happen? Or are we gonna go ahead and attack Iran with the current platform of “War on Terror” in place?
Anybody remember what happened in the world the last time there was financial turmoil on a large scale (The “Great Depression”)?
Anyone that thinks this thing isn’t gonna end with a whole lotta violence is deluding themselves. I just hope I (and my freedoms) survive.
Rinny;
The choppers are running non stop over here by Pendleton. Evey twenty minutes I hear the chopper’s rumble.
Bombs, guns and random shots are happening constantly since last evening. Choppers transport men to ships and the big transport planes at miramar. Here weeee go.
It is just possible …
…that all this noise from Pendleton is a form of sabre rattling, lots of noisy activity designed to send a message to potential foes.
Well, if today’s Photoshopped missile launch pic is any indication, maybe 1/3 of Iran’s weapons were created with the “Image Clone” tool.
However, this is now what, 3 weeks of continuous live-fire training ops at Pendleton, Ouro?
Someone’s going to get attacked somewhere. That’s way longer than a “saber rattle” exercise would usually run, IIRC. The Marines are upping their combat readiness big time.
A large fraction (50%) of the aerospace grad students in the early 80s at my school were Iranians who couldn’t go home after the revolution. If they eventually made it back, they are probably the ones directing missile making today.
When the darkness falls and we wander through the dust of our civilization if we should meet barrel to barrel let us know one another as “friends of Ben”, reply “Jones”. Only then may we safe our weapons and rest in each others company.
There is so little that makes sense in our world today. So little truth to be found. This blog is a point of sanity in a storm of madness. Thank you one and all and thank you Ben. Now back to the madness. Ouro Verde, keep us posted on Pendelton.
On Bloomberg today there was a discussion of Freddie and Fannie. One analyst expected a slow train wreck with the Banks buying up paper through each day and the Fed buying it from the banks at the end of the day. I am not clear on the machanics of this, but felt it was noteworthy.
Did BB or HP sneeze funny or something today? Because these housing bubble stock market darlings are collectively getting their arses handed to them this afternoon.
Oil up 5, AU at 946. Commodity crash crowd goes back to the drawing board.
The usual suspects suspect somethings wrong, but they don’t know what it is, do they? Mr. Jones
Look at my post above to see how that oil price spike is affecting share prices for an industry (homebuilding) which is a heavy user of petroleum as an input.
“…High commodity prices could be here to stay, he says, although he points out that there have been corrections. Since the current oil boom began in 1999, the prices have gone down 40% to 50% three times. “Everything can go down and correct, but that’s not going to be the end of the bull market,” Rogers says….
However… “The recession will probably last longer because the Central Bank is making big mistakes. I can’t believe how stupid they are.”
“I’m not terribly optimistic that it’s going to end anytime soon. We’ll have problems for awhile.”
http://www.etftrends.com/2008/07/jim-rogers-creates-commodities-index-for-etf-sounds-off-on-economy.html
“Beware the Jabberwock, my son!
The jaws that bite, the claws that catch!
Beware the Jubjub bird, and shun
The frumious Bandersnatch!”
Alice doesn’t live here anymore.
July 3 2008
September price action
Dear valued customer:
As presented in our April Pricing Communication, cost pressures have continued to escalate worldwide. The impact of these cost increases along with the weakness in the US dollar has nessesitated price changes not seen in our industry for nearly THREE DECADES…
yours in price changes,
FEDERAL MOGUL CORPORATION
this is the snail mailed version of the recent pricing updates from CAT, CUMMINS, DETROIT DIESEL (if you can even get parts), Filtration, and Exhaust products relating to OTR shipments in the US.
Transportation is driving prices higher….even on the backs of lowered aggregate consumption. Tough call….
Im going with higher oil and gas and lowered expectations.
Despite a boatland (the Titanic?) of bad business news…
The PPT will not be stopped from it’s A/P’pointed rounds
“Despite all the rumors, Wall Street somehow ended higher today.”
Kai Ryssdal, Marketplace
President “Bobby”: Mr. Gardner, do you agree with Ben, or do you think that we can stimulate growth through temporary incentives?
[Long pause]
Chance the Gardener: As long as the roots are not severed, all is well. And all will be well in the garden.
http://www.youtube.com/watch?v=BCWpC1OT81g
Inflation: Ron Paul Explains How We Got Into This Mess
http://www.321gold.com/editorials/bonner/bonner071008.html
_______________________________________________________________
Ron Paul’s reasoning is without question…
He’s the right person in the right place @ the right time for the job of V.P./Economic Czar, with President Obama.
“Too much consistency is as bad for the mind as it is for the body. Consistency is contrary to nature, contrary to life. The only completely consistent people are the dead.”
Aldous Huxley
http://www.youtube.com/watch?v=2xocvGX0S6s&feature=related
Glad to learn that, conversely, I am fully alive and kicking.
A foolish consistency is the hobgoblin of little minds.
- Ralph Waldo Emerson -
McCain forcefully rebukes Gramm
John McCain strongly disavowed the comments today of his campaign co-chair and economic adviser, saying Phil Gramm “does not speak for me — I speak for me.”
“I think Sen. Gramm would be in serious consideration for ambassador to Belarus,” McCain said with a broad smile. “Though I’m not sure the citizens of Minsk would welcome that.”
http://www.politico.com/blogs/jonathanmartin/0708/McCain_forcefully_rebukes_Gramm.html
_______________________________________________________________
Geritol Johnny better get himself a new economic advisor, STAT!
‘The U.S. economy has experienced several consecutive years of uninterrupted growth, yet most Americans believe the country is in a recession (which, by definition, it is not). Yes, gas prices are high (though not compared to other powerful nations) and some mortgage borrowers who should have thought twice about buying that $700,000 bungalow are having trouble making payments. Yeah, there are major problems, but a recession? Not even close.
So for once, I have to say Phil Gramm has a point. The former senator from the Lone Star State, who is now a top economic adviser to McCain, wasn’t far off when he referred to the nation’s “mental recession” and frustratingly (if a little sophomorically) dubbed us a “nation of whiners.”‘
I personally believe that history will show that Gramm is a fool (along with this writer) and that we have already been in a recession since January. And the investment bank Gramm works for ain’t doing so well, neither.
And he`d better speak spanish or Obama will run him down for that.
Mortgage Giants Face Pressure Over Capital
By James R. Hagerty, Gregory Zuckerman and Craig Karmin
Word Count: 1,740 | Companies Featured in This Article: Fannie Mae, Freddie Mac, Goldman Sachs, Piper Jaffray, Friedman Billings Ramsey
Even as federal officials sought to reassure investors about the financial health of Fannie Mae and Freddie Mac, pressure mounted on the giant mortgage companies to raise fresh capital to offset the tumbling values of home loans they hold.
Shares in the two stockholder-owned, government-sponsored companies declined sharply yet again Thursday. Freddie shares dropped 22% to $8 in 4 p.m. composite trading on the New York Stock Exchange. Fannie fell 14% to $13.20. Both stocks are down more than 80% from a year ago and at their lowest closing levels in more than 16 years.
June Is Cruel to Big Names As Prentice, Tosca Get Hit
By Jenny Strasburg and Gregory Zuckerman
Word Count: 645 | Companies Featured in This Article: Goody’s Family Clothing
The June stock-market rout has battered two high-profile hedge funds.
Prentice Capital Management LP, the New York firm started in May 2005 with about $400 million in start-up money from the huge hedge-fund firm SAC Capital Advisors LLC, has plunged 46% this year. Almost half of that drop happened during June as the value of the firm’s stock and debt investments in retailers plummeted, according to investors.
Last month, Prentice barred clients from withdrawing money, resorting to a defensive step hedge funds can take to avoid selling assets in desperation when clients ask to pull significant amounts.
Maybe this is why the Bank of America bailout bill budgets $600,000 in guarantees per household that would be helped?
OPINION
The Flaws in the FHA Housing Bill
BY ADAM J. LEVITIN
July 11, 2008; Page A15
One year and one million foreclosures into the mortgage crisis, Congress will finally produce a major piece of legislation aimed at alleviating the problem. The Dodd-Frank FHA Bill will authorize the Federal Housing Administration to insure refinanced mortgages, en masse. FHA-guaranteed mortgage terms will supposedly be more manageable for homeowners than their current ones.
Lawmakers can say they’ve “done something” about the crisis. The only problem is the bill won’t work. Contractual and incentive problems in securitized mortgages will defeat the legislation’s attempt to provide a significant amount of relief.
…
To the extent that lenders are willing and able to do the write-down necessary for the FHA refinancing, they will only do so for loans that they think are worth less than 85 cents on the dollar. Lenders will retain loans with a higher expected recovery rate. This means there is an adverse selection problem for the FHA refinancing. Lenders will only sell the FHA their worst lemons, so the FHA will be overpaying for bum loans.
Lenders’ contributions to an FHA loss reserve fund, and a special tax on Fannie Mae and Freddie Mac, are supposed to protect against FHA losses. But no one has a firm idea of how many loans will be refinanced or just what the losses will be on those loans. It’s all guesswork, and there’s no reason to think that Congress’s real estate gamble is going to pan out any better than that of so many investors.
Let’s hope Congress gets it right. If not, the taxpayers will be holding the bag, mortgage markets will continue to suffer, and many more families will lose their homes.
This could be a reverse arse-losing movement from Russia to the U.S. I recall one of my professors bought some Russian real estate in the early 1990s never to make a dime off his infestment.
REAL ESTATE
From Russia — With Cash
Oligarchs Buy Homes
In Chic U.S. Enclaves;
Rock Star’s Two Condos
By CHRISTINA S.N. LEWIS
July 11, 2008; Page W1
The Russians are coming.
As many of America’s wealthy are roiled by the credit crisis and general financial gloom, a growing number of rich Russians are house-shopping — and buying — in costly U.S. enclaves.
As I mentioned earlier this week, too much grease on the wheels can wind up on the road, increasing the risk of crashes.
A Trickle That Turned Into a Torrent
By CHARLES DUHIGG
Published: July 11, 2008
The word began spreading across Wall Street trading desks on Monday morning: Fannie Mae and Freddie Mac, the giant companies at the heart of the nation’s housing market, might be in trouble.
The tumult, which continued on Thursday, started with a cautionary analyst’s report, one that might have caused few ripples in normal times. But these are not normal times. Within minutes, the price of the companies’ shares was plunging, sending shock waves through the financial markets, the economy and Washington.
Fannie Mae and Freddie Mac are so big — they own or guarantee roughly half of the nation’s $12 trillion mortgage market — that the thought that they might falter once seemed unimaginable. But now a trickle of worries about the companies, which has been slowly building for years, has suddenly become a torrent.
Virtually every home mortgage lender, from giants like Citigroup to the smallest local banks, relies on Fannie Mae and Freddie Mac to grease the wheels of the mortgage market. Virtually every Wall Street bank does business with them. And investors around the world own $5.2 trillion of the debt securities backed by the companies.
NY Congressman Charles Rangel, a vocal supporter of confiscating more of my money to help specu-vestors and to keep house prices high, has been renting 4 rent-stabilized apartments at bargain rates, including one he uses for his campaign office.
http://www.nytimes.com/2008/07/11/nyregion/11rangel.html
According to the Times article, he’s doing this“despite state and city regulations that require rent-stabilized apartments to be used as a primary residence.
It really sickens me when these holier-than-thou elitist Democrats who want to kill the tiny percentage of Americans who are actually productive are actually dishonest wheeler-dealers themselves.
More on Charlie Rangel in today’s Times:
Mr. Rangel, who earns $169,300 base pay as a congressman, owns a villa in the Dominican Republic that is worth $250,000 to $500,000, his disclosure form states. He has also bought and sold properties in recent years; he bought a condominium in 2004 in Sunny Isles, Fla., for $50,000 to $100,000 and sold it last year for $100,000 to $250,000. In 2004 he also sold a building on 132nd Street, around the corner from Lenox Terrace, for $250,000 to $500,000. He owns mutual funds with a combined value between $266,000 and $765,000
So *that’s* why he wants to keep house prices propped up! For his own self interest as a real estate specu-vestor. And he wants people like me to drop dead.