Bits Bucket For July 16, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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Record Store Closings
July 16, 2008
Some 144,000 stores will close this year, up 7% from last year. That is the largest one-year increase in the 14 years that the International Council of Shopping Centers has tracked the figures.
The number is even more sobering considering that the ICSC up until now has been projecting 6,500 store closures this year. Why the big difference? The smaller number represents how many closings the trade group predicts will be announced, mostly by national retailers that are publicly held. The government data at the core of the new projection give a broader view of all store closings, including those by independent and privately held retailers that make up the majority of the U.S. store base.
http://online.wsj.com/article/SB121615960074456109.html?mod=todays_us_stock_market_quarterly_review
So rents will fall and shops will be able to lower prices; score 1 for deflation.
Wishful thinking but that won’t happen.
The dollar will be worth less = everything
will become much more expensive and apparel
is next on list. Also, to ship the stuff to stores
has doubled in price… and will continue to go
up.
I was @ a Sports Chalet (sporting goods store) a few weeks ago, and was blown away that they can still sell fold-up cloth and metal China-made chairs for $7.99
“The dollar will be worth less = everything
will become much more expensive and apparel
is next on list.”
We already pay way too much for apparel anyway! Common, $100 for a shirt made in China or India or pretty much anywhere else in Asia? Nope, it’s called over-mark-up!
Everything made in China and India is over over marked up. Take 2 items off the self, 1 made in the US and 1 made in China and they are the same price. Where is this cost savings that China low cost goes…Upper management pockets. Not lower prices, not shareholder dividends.
test
Take 2 items off the self, 1 made in the US and 1 made in China and they are the same price.
What items were these - and at what store did you find them? Just curious.
We bought some “Fiesta” dishes a month or so ago. Lead-free, made in the USA and cheaper than the junk made in China (the Fiesta was on sale).
The myth that outsourcing benefits US citizens is beginning to unravel. The goal of outsourcing is to increase margins…for the corporations. If they throw us a breadcrumb or two, we’re supposed to rejoice. Hope they rot.
Zhang:
For me it was at Ace Hardware -
thermometers Made In USA (Taylor) were the same price as those made in China (Good Cook brand) or those made in Mexico (also Taylor).
Offshoring is a joke; calex and CA renter summed it up well.
~Misstrial
CRE has gotta be getting slammed nationwide. When does that story emerge from the shadows?
There’s simply too much shadow-fraud for the system to handle @ one time.
Danger! Will Robinson
“There’s simply too much shadow-fraud for the system to handle @ one time.”
That is a very important component of all of this. From housing & the whole mortgage industry to stocks, banks and even the government. All the traditional barometers about how deep it is or when we turn upward are greatly diminished or even useless.
‘Buyer beware’ has never been a more appropriate caveat.
We are headed into a “Possession is 9/10’s of the law” economy.
Blind faith economics worked far longer than anybody could have ever anticipated…
SRS has been coming to life again lately…
Yeap, I am long SRS in my portfolio and it has been a great hedge to the overall market declines. My energy / precious metal portfolios hasn’t done all that well in the last month so this really helps.
“My energy / precious metal portfolios hasn’t done all that well in the last month so this really helps.”
How is this possible, with oil & the pm’s up bigtime?
The PM stocks are down, particularly juniors, even with the run-up in spot price. go figure?
Why would anybody buy stock in a company hoping to extract something out of the ground, when you can buy the finished product so easily, instead?
Having the underlying hard assets creates different problems: where you gonna put them? Not in a bank vault since bank will be burned down during a financial doomsday scenario… put it in your home safe / under the mattress? Can’t do that either due to the looters/rioters who will be robbing you at home. You can try sending it outside of the country but other than a big Swiss bank account, where can you go?
What is SRS?
yeah what’s SRS ?
Ultra Short Real Estate. Its an ETF from ProShares. Go to either their website, Yahoo Finance or Google Finance for more information. This one trades twice the market, so the swings are more dramatic.
I buy it off and on. Would have sold it last week and then bought back in on the next market upswing.
Sold SKF waaaayyyyy to soon. Damn.
“what’s an srs”
UltraShort Real Estate ProShares
It’s already emerged from the shadows, especially if you own stock in the following banks:
Corus
PFF
Vineyard
Temecula Valley
Security Pacific
etc.
Most regional and community banks got caught up in the “construction” hype during the last 5-7 yrs. Granted a lot of the bad paper is related to large residential projects gone bad, but some is tied to CRE projects gone/going bad. It only takes a few non-performing loans to sink a small community bank.
Lets see > sub prime, alt A, prime, CRE in that order. It’s going to get much uglier before it gets better. Smart money is on the sidelines. I keep hearing many small/med banks are trying to liquidate their CRE portfolio to raise cash, especially in the mid-west. 40-50 cents on the dollar just around the corner.
See the July 21st cover of Forbes…
Most of the “slamming” thusfar has been in terms of cap rate rising. Some downward rental pressure, and some higher vacancies (especially in places where subprime lenders imploded).
But if you go from a 6% cap rate value to a 7% cap rate value you are down 16.7% on paper, all else equal. 6% to 7.5%, and it’s a 25% fall in value.
IMHO, this will be where most of the fall will occur–cap rate decompression.
RE: Record store closings
Recent MISH commentary says the economic model for exurbia shopping malls is dead.
The Unsaid As Important As The Said
Bernanke did not mention a thing about the impending commercial real estate bust.
The expansion of commercial real estate (Wal-Mart (WMT) , Target (TGT), Home Depot (HD), Lowes (LOW), Starbucks (SBUX), Pizza Hut (YUM), etc., etc., was the last economic driver for jobs). Every one of those corporations and more are cutting back. The Shopping Center Economic Model Is History.
The next great shorting op.
I took a bus ride across Tucson yesterday afternoon. I was amazed at the number of empty storefronts. More than a few of them had been occupied by longtime local businesses.
Shortly after I got off the bus, I met a friend for a carpool to an event in the Foothills. That’s the uber-rich part of town.
We were both amazed at the lack of traffic on the road. Yes, a lot of the Foothillers, being the second homeowners we’ve heard so much about, leave for the summer. But the Foothills don’t empty out until fall comes. Plenty of people live up there year ’round.
My friend and I surmised that the high price of gas was the reason. Friend also noticed a lack of tourist traffic during a recent trip to San Diego.
Word is that the record store’s time is passed anyway, so it doesn’t surprise me that they’re all closing. CD’s and MP3, y’know.
LOL, oh gosh, packman, my brain did a whole Emily Litella impersonation response to that headline after initially reading that the same way.
Right down to the, “oh….never mind!”
http://en.wikipedia.org/wiki/Emily_Litella
Ha - forgot about Emily. Those were great!
it’s record as in history record, not vinyl record
Hah!
Tell that to the husband. I live my life not only with him, but about 3,000 pieces of flat, circular vinyl….never marry a DJ…..
Ha ha - yeah I know several people who won’t give up the vinyl. We have friends in fact who have their own band:
http://en.wikipedia.org/wiki/Moggs
who cut a bunch of vinyl copies of their first album.
There’s a lot to be said for it - it’s one of the the last true analog mediums, with better sound quality than CD’s. I still have my old record collection, though I haven’t dug into it for years. Despite the reduced quality, CD’s and MP3 are just so much more convenient. It’s hard to find a car these days with an in-dash 33 1/3 player.
Just for the record, records are making a comeback:
http://www.thestreet.com/story/10417089/1/own-a-great-turntable-for-under-1000.html
They may take up more space, but vinyl sounds better.
You can get a convert-to-digital turntable for just a bit over $100. I am pretty attached to my scratches, so I’m not into replacing vinyl. College buds bumping the stereo! Crackles from being your most overplayed disc!
My “Captain Fantastic and the Brown Dirt Cowboy” was almost white after playing it to death in 8th grade! Took it out the other day and still really enjoy it. Probably because w/songs like Tower of Babel and Meal Ticket the lyrics are amazingly timely.
(Please excuse lack of proper title punctuation. I know nothing of HTML.
3,000 is that all?
i used to have 5000+ and my vinyl dj friends still have 10,000 plus in their apartments floor to ceiling records……
ok i’m down to 1000 or so….sold almost all to other beginner dj’s….and they were so glad too….
I wonder why people are still pushing so hard for Destiny USA to be completed. (an addition to the Carousel Mall in Syracuse that was to create a megamall to rival the Mall of America in size)
Does anyone have any insights to that industry as to why people would still think this is a viable investment in the current environment? Are they counting on Canadians?
They were talking about that when I left Syracuse 4 years ago. they even had a ‘official’ ground breaking for the project, but then everything stopped. That was 4 years ago!!
Construction people and developers need new work to keep going. Appart from renovating the Hotel Syracuse, has any commercial or major infrastructre projects been undertaken in Syracuse in the past 10 years? OK, the new train/bus station. And a couple of smaller strip malls up on SR32 (?) north of the city near the Oswego county border. But no new roads & bridges. They even sold off the development rights to the land where 690 was supposed to be expanded eastward. That sealed the fate of any new road expansion in the area. I have not heard about any new office buildings in the area. What else to the large construction companies have to look forward to to feed their families? Residential construction only helps the smaller construction people.
Destiny USA represents the only hope for the area large construction companies, imo. And we all know that Destiny will not get built. But what else do these companies have but …. hope.
Everyone’s all hyper about the new O’Brien and Gere building. LOL Sometimes I feel like I’ve landed in Mayberry RFD.
Oh…I probably should have mentioned the reason Destiny has any momentum right now is that a much smaller supposedly intermediate expansion is happening. I think it was Macy’s that moved over to the other side of the mall (all sorts of legal wrangling on lost mall location that needed to be remedied while their and other store locations were juggled) and the girders are up. It started before Christmas ‘07 cuz people were concerned about the lost parking area the expansion cut into. The steel was laying on the ground for quite a while (spring or summer ‘07 but there is some movement on that baby.
I’ve read more than once though that Congel is having problems with funding. (Surprise, surprise, huh?)
I think they were trying to be a stop on the Thruway for Candians going from Toronto to New York, or some such nonsense.
At the moment it looks like a badly run city park to me. And don’t get me started on the “environmentally friendly” mall. The very idea of a mall — that is, making unnecessary clothes and knick-knacks and shipping then from China is as environmentally unfriendly as it gets. Solar panels on the roof aren’t going to save you.
Gawd, oxide, you’re singing my song. And all my most PhD’d friends are behind it like it’s the 2nd coming. (Sigh)
Last I heard, they are going ahead because the loans are all in place. The lakefront hotel though, no loan, so that’s dead. I haven’t been in since last winter to see how the vacancies are, have you?
I don’t get over to Carousel much. Shoppingtown was dead, dead, dead last few times I was in there though. I think everyone’s over at Kohl’s and TJ Maxx in Fayetteville!
..yet they’re still tinkling the ivories in Nordstrom’s where mall patron’s Beemer’s, Benz’s, and Prius’s await their drivers return from shoveling Wolfgang Puck Cafe and California Pizza Kitchen lunches down their gullets. Meanwhile in trailer home America..
Ms. Bair says the banks are “absolutely safe”, yet the SEC has moved to prohibit short selling of a “who’s who list” of banks from July 21 until the 29th. (extendable for 30 days)
Why can’t “absolutely safe” banks withstand the normal rigors of an established trading practice?
http://biz.yahoo.com/rb/080715/sec_shortselling.html?.v=8
What gives? Fleck ain’t happy, and he’s right - the hunt for excuses and scapegoats my soon reach feverpitch in the hot summer sun.
Could the epidemic of rumor mongerers and “manipulative” short sellers be the result of the SEC’s own repeal of the uptick rule in July 2007?
The uptick rule didn’t matter anymore since they went to decimalization. Naked shorting needs to be reigned in, they should have announced a market wide crackdown vs. a targeted ban.
RE: Naked shorting needs to be reigned in, they should have announced a market wide crackdown vs. a targeted ban.
Yeah, along with a whole lotta other things-
It’s interesting how the “call for reforms” comes after the store has been thoroughly looted.
I’m not sure that naked shorting is any more (or less) subject to market manipulation than simple selling. While “reverse pump-and-dump,” schemes can and do exist, so do other forms of stock manipulation.
Doesn’t “naked” mean a loan?
“birthday suit shortlng lawsuit”?
Naked shorting means you promised to sell before your borrowed the shares. It is no different than counterfeiting shares. You dilute the value of everyone elses’ shares by “increasing the supply” of shares. When you borrow first, then short the supply stays constant and the lender of shares is the one who takes the risk.
When you naked short, it forces the risk of “default” onto the greater community AND you pay no “interest” on your borrowed shares.
This is IDENTICAL to fractional reserve banking where the bank “naked shorts” the dollars they lend to you. We all know how that system works out in the long run.
http://www.sec.gov/rules/other/2008/34-58166.pdf
I guess any other bank that doesn’t have direct ties to the PTB financial structure is fair game for naked shorting. I think we are in the middle of nothing short (pun intended) of financial warfare.
Isn’t it amazing how a “false” rumor can have so much power? If the rumor was so outrageous then, why oh why, could the people in charge not diffuse it? Could it be that nobody has any confidence in what the king of the hill says anymore? The emperor has lost more than his clothes…..
The “people in charge” are too busy putting out their own “positive” rumors. GWB: “The economy is basically sound. I am not an economist; I am an optimist.”
“The emperor has lost more than his clothes…..”
The emperor has no close (no liquidity)
The problem with “false” rumors is that the companies can’t respond to them. Once a company responds to a “false” rumor, they have to respond to them all. Then, if a “true” rumor emerges they are required to respond to that as well.
If a company responds to a “false” rumor, then doesn’t respond to a “true” rumor, then it is assumed the true rumor is true, and they can be charged with leaking information.
It’s a catch-22.
I’d hate to be put on the spot trying to define “false” nowadays?
“It all depends upon what your definition of “is”, is…”
I agree that rumors should not be spread at all. Also I agree that declarations of “all is well” when situations are truly not, should not be stated.
“If a company responds to a “false” rumor, then doesn’t respond to a “true” rumor, then it is assumed the true rumor is true, and they can be charged with leaking information.”
Aren’t analysts and “street” predictions about company performance nothing more than thinly guised rumors as well? Should an analyst that predicts poor company performance correctly always be charged with having inside knowledge?
False accusations are always an evil that people and corporations have to deal with. Whether you make it through or not depends upon the level of trust you have garnered.
Bear Stearns had lost investors trust, therefore whether true or false, the rumor was STILL more believable than the company.
It goes without saying that we are in a Bair Market.
Short selling where the seller has borrowed the shares to sell is a legitimate practice. I don’t see why the PTB would want that outlawed?
Naked short selling, whereby the seller sells something that he doesn’t own (but gets the money) and the buyer does not recieve the stock (and the buyer doesn’t know he didn’t get the stock) which results in a FTD (failure to deliver) is blatant fraud.
There is a long story behind efforts to get the SEC to enforce the law against naked short selling, which they do not do. I highly recommend listening to last weekend’s interview with a Bud Burrell on http://www.financialsense.com. Go to the “broadcast” link and the second hour lists the show. He gives an excellent overview of this fraud that is now rampant here in the US.
You might also take a look at these web sites and start reading the numerous articles on this fraud.
http://www.deepcapture.com
http://www.thesanitycheck.com
This is the sec’s fault, they have had a hands off approach until this became a real problem.
Rumors apparently can only be false if they suggest a company’s shares are overvalued.
That’s why I don’t understand why they have necessitated this rule ONLY for these particular entities. Why not make it for all banking stocks? Why not enforce this rule for EVERY stock? Why do the fattest sows get exempted from slaughter?
2 legs smart, 4 legs abattoir
Simple - it’s the golden rule - he who has the gold makes the rules.
Big bankers (generally only the big ones - not the smaller regional banks) have been in bed with the politicians since about the early 1900s, even the late 1800s to some extent (in the U.S. at least - in Europe it goes back much farther).
What I’m saying is:
Politicians = Puppets
When the competition gets too much for the big bankers - they find ways to eliminate the competition. The easiest way to do that is to create a crisis, and then find ways to survive the crisis while your competitors can’t.
Naked short selling, whereby the seller sells something that he doesn’t own (but gets the money) and the buyer does not recieve the stock ..
i thought naked shorting is where the stock is sold short without even borrowing any of it’s shares.. a trade where the borrowing part of the trade never happened for whatever reason.
Isn’t that what I said? Sorry if I used confusing language. You are correct though, the shares aren’t borrowed and thus are not conveyed to the new buyer. It is a total sham transaction because the buyer does not actually receive issued shares, his are made up out of thin air and added to the float.
Small cap companies are the most exposed to this fraud. Go to the http://www.financialsense.com broadcast link and listen for several minutes. The guy does a good job on describing how hedgies and the like can take over a small company or trash it for nothing.
Also, one thing I did not know. There is no tax on earnings by selling a naked short if you don’t cover. In other words, if a hedge fund sells a small cap company into oblivion where they go BK because the naked selling outstrips the available buyers to such an extent that the shares drop to pennies and the company can no longer raise capital, then the shares expire worthless due to BK and the money earned by selling naked short is not taxed. Just fracking swell.
you used proper language.. it was confusing to only to me.. thanks for clearing it up and adding the bonus info.
When Bernanke killed the short sellers with his early news this and last year did he offer to make the short sellers full? I remember how “emergency rate cuts” before the bell killed the short sellers.
Can I get my money back?
P.S. Not a short seller, but I recall many discussions on shorts sellers getting burned.
So why are they able to implement this rule in a week? But the fed’s new rules tightening lending standards are delayed for 15 monthws.
So why are they able to implement this rule in a week? But the fed’s new rules tightening lending standards are delayed for 15 monthws.
————————————————————————–
IMO, it all depends on who is making and who is losing money.
Wall Street losing bad…..main street losing good.
Uk govt so desperate for new supply of FB’s that they’re subsidising
the buying costs of £60k ($120k) earners.
Rent now buy later housing plan
That nothing, the 729K limit for FRE/FNM is subsidizing the purchase of homes for people in this country that make 250K+ (which is really what it takes to afford a 700K home).
As for subsidies, I think that ours has to take the cake. Frankly, 400K (old limit) was too much; should people making 100K+ (or 2.5X the median income) ever be subsidized by the govt?
It does strike me as amusing that a person with a $250K income cannot save moneys for a down payment.
As we have learned from the government actions regarding Fannie/Freddie, “Protect the bond holders at all cost!”
Hey, those BMWs and Hawaiin vacations aren’t cheap!
same story in Netherlands, about 75% of the 30 billion a year in homeowner subsidies (including HMD) ends up with people with the highest incomes. We have no limit at all for mortgage deductions and subsidies, and many millionaires take out the maximum mortgage so they don’t have to pay income taxes (the Netherlands has a 100% deduction for mortgage and many other costs associated with buying/owning a home; the income tax is by far the biggest tax over here). Even people making 1 million a year could use HMD to the max, if they can find a home that is expensive enough to fully deduct the cost.
it is going to be a sparkling day
I have a friend who has *always* downplayed reasons to worry on any front (economic, political, cultural, etc.) Yesterday was the first time he has changed his tune.
That means the worst IS over. When the simpletons of the world realize things are bad, things will only get better.
If only it were that simple.
You aren’t one of those economists who think that the only factor that matters is psychology, are you?
Are you saying that you don’t believe in inflation expectations?
Commie!!!
I totally believe in inflation expectations. But there is a contingent of the economics profession which seems quite happy to ignore budget and resource constraints under the false hope that market outcomes are decided solely by sentiment. This group will be surprised again and again going forward by how low (real) housing prices fall before the market bottoms out.
I must admit, I enjoy watching us squirming around like fish out of water, as of late.
Psychology is Job # 1, as far as figuring out things right now.
Like anybody believes figments of imagination, otherwise known as figures, anymore.
Ever heard of mental depression? Well this is a mental recession…
/sarcasm
90% half mental.
Last summer about this time, I made my first and only overt financial recommendations in my life, to my family.
My mom and brother-in-law each endured around a half a dozen one hour phone calls, and I spilled my guts about what nastiness was coming our way, and explained in intricate detail what is occurring now.
I’d like to say they took my advice and acted, but they didn’t.
To give you an idea of the opportunity they missed by simply turning financial/real estate stocks into Gold, here’s the score from last summer, to this summer.
$1000 in their financial/real estate stocks is now worth $291
$1000 in Gold is now worth $1587
Mom finally figured it out a couple of weeks ago and is sorry she didn’t understand, but my brother-in-law (a devout neo-con) is still in deep denial. In our last conversation about 4 months ago, he was upset that I used the word “fraud” so loosely, when I talked of goings on on Wall Street.
I heard this same type of comment by housing speculators from 2003-2006. I’m not saying you’re wrong, just that it gives me a bad feeling.
There’s a bunch of big differences between housing/stocks and gold:
1. Houses/stocks can be easily borrowed against, and easy credit is almost always the path to bubbles. Gold, on the other hand, is not something banks like to loan against to buy. I do know people who made the idiotic decision to borrow on a balance transfer check (1.9% or 3.9% for life) to buy gold, but they’re rare at the moment.
2. Houses/stocks are not anonymously transportable in bad times as gold is.
3. Housing supply/stock supply is very high, and in some cases almost seems “infinite” whereas gold supply is finite, and not readily available if desired in high quantities.
4. Gold is off the map of the vast majority of the population in the U.S.
5. Gold is hated by the government in every situation.
I personally go against the grain 4 out of 5 times in everything I do (you should see how I interpret the Bible, as a Christian myself, ha!). When government says something is bad, I look deeper. While I don’t do pot, I openly advocate it for those going through cancer treatments. I also go against increases in police salary (more radar guns, less protection against real crimes), landscape referenda, and school budget increases.
So if government says “gold bad, gold bad!” it’s only gotta be slightly good for me to jump. Lately, though I’ve restricted my gold purchases and started to purchase business assets at deep discounts, because they generate a profit for me very quickly. My gold, in my opinion, has never changed in value once. I value it the same way I have always valued it, and only the dollar has fallen against my true money value.
Of course there are huge differences in the way gold and real estate are bought and sold. But this can work both ways.
1. Real estate isn’t subject to 20% swings in either direction in a week.
2. Real estate isn’t immediately impacted by a single decision by the Fed or overseas banks.
3. You can’t rent out gold.
Let me explain one KEY difference…
Until just over a year ago:
You could buy a $500k house, with nothing down, lie about your income, do whatever it takes, in essence.
Now let’s compare buying a 1 oz Gold coin, anytime in the past 40 years…
You have to pay in entirety to receive your Gold. No down payments, no loans, no lies.
Payment by cash or cashier’s check.
Credit cards? forget about it.
One thing aladinsane:
I buy gold and silver with my credit card almost every day. By using Auction Sniper, I can quickly grab a bunch of gold and silver auctions (from people with ultra high positive feedback and zero negative) and bid up to 5% over spot including shipping. I tend to bid on auctions that expire on Saturday or Sunday evenings, if possible.
I win around 1% of these auctions, and it costs me nothing to bid. I can set up 100+ bids in under 10 minutes. When I win, I use my credit card (getting rewards, too, which I factor into my spot cost) and get the delivery in a matter of days. I’ve been screwed on about 3% of orders, which I also factor into my spot price. Over the life of winning auctions on eBay, factoring in rewards points and loss, I have bought gold and silver online for around 0.8% over spot. Not too shabby, plus I get access to GREAT coins that usually carry a very high markup locally, such as 1/10th ounce coins, 1 gram bars, 1/20th ounce coins, etc. The smaller the denomination, the greater my chance of losing the auction.
One thing I’ve added recently to my spreadsheet that tracks my bullion purchases: buy price and delivery settlement price. If I bit $960 an ounce, win it on a day the spot price is $972, and I receive it on a day that the spot price is $948, I put both prices in. This gives me a realistic figure over the long haul of buying online versus buying locally, considering locally I get instant delivery or at worst 1 day delivery if the dealer needs to transfer bullion from another location or dealer.
Word of advice: if you publicly discuss holding gold, don’t store it at home or at work
A.B. Dada
ALL of my Gold is safely overseas in the hands of life-long friends, so worry not…
I keep nothing here, and just a tiny bit in a safe-deposit box.
Of course you can buy the odd bit of bullion on eBay, but I was talking more about traditional purchasing, which in our country means dealing with a coin dealer.
Do you think they want to take the 3% hit ($29 per coin), if you want to buy 100 CML’s with a credit card?
“a devout neo-con”
Or worse, a born again neo-con!
What we need are less neo-cons and more alt-cons.
“Yesterday was the first time he has changed his tune.”
A new member of the baritone choir?
While out and about yesterday, it seemed that **everyone** was talking about banks and the FDIC. Lot’s of worried people out there…finally.
For some reason my web traffic to my obscure and dead Housing Bubble blog started an uptick. Lots of upticks. Also some ad income was popping. Out of nowhere.
Did a little research and realized that I’m #1 for the Google search term “Bank Bankruptcy” and a bunch of other variations of it. And boy is that term popping. So I tossed some rants and raves for that term on my site, just to make people’s skin crawl a bit more.
Love the power of the Internet. Plus I’m getting paid to spew my “honest” opinion to J6P.
“Lot’s of worried people out there…finally.”
Looks as if the Goldilocks Economy is turning into the Endtime Economy. Goldilocks buyers will soon become Endtime sellers.
The beat goes on.
I think IndyMac was the warning shot across the bow for many people…
I talked to a bunch of friends in L.A. on the phone yesterday, and these are people that view following economics, as one might enjoy being on the receiving end of a root canal.
All they could talk about was the bank runs…
Anecdotal story. I live in upstate New Hampshire. Small town, regular joes of average sophistication.
Yesterday while helping the daughter of a neighbor get her new computer running the boyfriend of the mom (construction guy) starts asking me about the banking crisis. Not sure why he thought I’d know anything about it but nonetheless I casually mention that I thought it’d be getting worse. He goes on to tell me that most of his friends have started pulling their money out of the local banks, which btw are not in any way affiliated with Indymac, et al.
We could be witnessing a slow run on the banking system, which if true, will most certainly bring down the economy.
I would recommend folks stash a couple of months of food & gas money under the floor boards or someplace “just in case”.
RE: I live in upstate New Hampshire
Hey A-I~
Got your 5 cords of split & seasoned firewood?
All my wood-burning friends are real worried about their
projected October deliveries.
One is out in the bugs and heat scavanging green slash, he’s so concerned.
The break-up all the former paper company lands, thanks to rabid EPA regs, and subsequent sale to speculators like Plumb Creek is creating incredible havoc.
Auger,
My friend who consistently tells me I’m wrong about an “upcoming” slow-down is camping in Conway, NH as we blog. I’d give money if you could only get that piece of info to her as she and her husband have been politely treating me like a complete loon. Oh and you have my permission to deliver the news w/TxChick’s trout.
I’m curious if the construction worker shared w/you what info got he and his friends to that point. Is it possible they’re blogging?
Hey Carrie, I think they got shaken by watching folks stand in line out west for their funds. If we continually see banks failing in the news then this will become a trend. Otherwise I suspect folks will revert to their old ways.
I rent here so I don’t have the ability to use wood to heat. I bought some electric heaters to offset oil fired boiler heat in the rental house. I also put in an electric water heater so that I didn’t have to use oil for hot water (off boiler system). That lowered my mid-winter bills by about half and completely eliminates my oil usage in the summer. I figure I’m saving about $70 to $300/month depending on outside temp and whether I have to fire the boiler at all. During really cold weather (sub zero) I have to augment my electric heat with the boiler. All the other times I can get by with just electric.
I called on a wood fired boiler outfit just to get some info on them and was told by the guy that they are backed up on installations and deliveries all the way into winter. I noticed that wood is up over $200/cord around here (up into the $240/cord range at some places) where it was advertised as low as $150/cord last fall (most were in the $170 range though).
Crazy times.
“All they could talk about was the bank runs …”
Where da cash?
I went into a Wamu branch in San Diego yesterday and took out $2000 cash.
#1: The branch was empty besides me.
#2: The teller didn’t bat an eye.
it goes back to the thread from the other day. who has saved money in the bank anymore?
Needed cash for a trip abroad and went into WaMu branch a month back. The entire place did not have $8000 in it. Had to go to a second branch on the next day to withdraw the difference. What would happen in case of a bank run on WaMu?
I have a dumb question. Who are all these people who are afraid to lose their money when the bank fails? I thought they didn’t have any savings in the bank because they were all in debt?
If they are living paycheck to paycheck, they can’t possibly be keeping more than $1K or so in the checking account.
???
Do you ever wonder why people were so stony broke in the aftermath of 4 years of bank runs from 1930 to 1933, that culminated in around 10,000 banks going out of business?
For many people nowadays, money in the bank is like money in the bank.
They’ll learn…
Not everyone is broke. There are people who still save money (this blog is proof of that).
What is different today is that I meet plenty of people driving leased $50K BMWs, who live in a pretty nice house and take expensive vacations, and who live paycheck to paycheck, with no savings in the bank or the 401(k),
“Not everyone is broke. There are people who still save money”
And most of that money tends to be in a bank, somewhere.
Up until now, I didn’t realize that the FDIC had used 10% of thier funds for Indy.
That doesn’t leave too much in the next 35 banks.
I posted yesterday that the FDIC had used 18bps and were left with 101 bps. source American banker, a tad more than 10%- closer to 15%.
Thanks Hoz, good intel.
I heard Sheila Bair on American Public Media’s Marketplace show yesterday evening stating that the rate of bank failures is expected to remain much lower at the end of this cycle than, say, in the late 1980s, so no worries!
The rate, yes, the the dollar amount of losses?
FDIC charges bank insurance premiums on deposits so in case they run out they can increase the rate in which they charge the premiums to replenish the reserve. It’s not as if they have $X now they will still and always have only $X going forward. Having said that if that were to happen it will make the credit crisis worse than it is now as more deposit money is used up for premiums and not for lending.
Yesterday, my wife told me she had some “insider information:” an acquaintance of hers, whose husband works for Wachovia, told her that her husband is very worried about the bank’s situation. I thought it interesting that such national news is finding its way to the general population from the inside out. It suggests to me that the people who do not pay attention to or give much weight to what is reported in the major media outlets are finally getting informed from what they deem to be credible sources.
Since I live in Florida, can anyone recommend a bank to where I can move my money from Wachovia? I’m shocked, I tell you, shocked about Wachovia. I’ve been happy there for years now, but I don’t want to end up outside waiting for my money, like an IndyMac customer.
I have money in Wachovia, just opened an account there a few months ago. Strange experience. Very tense. So I go in and say I’d like to open a deposit. “What’s you social security number?” was the first words out of his mouth. “I don’t have any account here.” “What’s your social security number?” he repeated. So what the heck I told him. “Are you still living at ?” Yes, I am, I told him. Apparently they had that information from managing a student loan some time back.
Anyways, my money is staying in Wachovia. I got a pretty moderately reasonable interest rate from them all things considered. The first round of bank failures will be covered by FDIC. It is later bank failures I am worried about.
Wait a minute. Isn’t that a rumor? The SEC is watching.
AP has a story about Wachovia from yesterday.
I applied for a position with the SEC dream police, but didn’t get the job…
http://www.youtube.com/watch?v=pWt-zxKqK3U
“Yesterday, my wife told me she had some “insider information:” an acquaintance of hers, whose husband works for Wachovia, told her that her husband is very worried about the bank’s situation.”
Yup. My wife’s best friend recently got sacked from Wachovia and says that it’s a nightmare there. She got her 8 months severance and couldn’t be more happy that she’s out of there.
Gonna be hard times in Charlotte soon.
Wachovia on the Rhine?
Dear fatherland, put your mind at rest,
dear fatherland, put your mind at rest,
solid stands, and staunch, the Watch, the Watch at the Rhine!
Solid stands, and staunch, the Watch, the Watch at the Rhine!
WSJ: Wells Fargo’s Net Declines 21%,
Lender Boosts Dividend by 10%
I asked about WF yesterday and if I should consider changing banks. Iwas told that they have a lot of toxic mortgage products on their portfolio (they do, but were more active in HELOCs than in subprime loans).
However, I don’t think a bank would be planning to increase its dividend and make vulture acquisitions if it was imminently risking failure. But until they mark to market (they postpone posting mortgage losses for 6 months as a “new accounting rule”), I certainly wouldn’t buy their stock.
Wells Fargo is one bank that seems to be relatively on top of things. They sold their subprime unit last July before things really melted down, and also cut out their Alt-A loans. I think they’re one bank that will come out of this mess OK. Just a surface view though.
yeah, even in Europe ordinary people are taking notice; we had the 20% nosedive for Fortis bank as a warning shot yesterday.
Fortunately for the Dutch TV, there was some political trouble in Belgium (nothing new, this trouble has been going on for more than a year …) that they could use to fill most of the evening news. There was only a minute or so left for the banking crisis, and most of that was ‘no need at all for Dutch savers to worry about anything’. Can’t scare the sheeple …
Investors: ‘Dare to Dream’ real-estate deal became a nightmare
http://origin.sltrib.com/realestate/ci_9873414
He didn’t have to lift another finger. Dare to Dream would do it all for him: Find the lot, hire the contractor, sell the house. He would get 55 percent of the profit right off the top. No muss, no fuss.
Denison liked the program so much, he signed up for two houses.
Now he’s left holding the bag on two $300,000 mortgages beyond the one he owes on his actual home. And with the mortgage-credit crunch, not to mention the spiraling cost of gasoline, houses in Grantsville aren’t selling to Wasatch Front commuters like they once were.
I dare to scream after reading this ponzi scheme dream.
There’s an old adage about service: you can do it cheaply, quickly, in high quality, pick two.
I have my own adage about work: you can make money, do it quickly, and with little work. Pick two. That’s Dada’s Law of Income.
If it’s quick and easy, expect to lose money in the long run. See: quick and easy women.
Amusing, and with some truth.
Reminded me of an engineering/design saying:
“You can have it right or you can have it now, but you can’t have it right now.”
very true Ab Dada
i am working very hard right now (2nd job) and it is not easy but i have a goal in mind so i do it for my family. (i have not spent one dime fo the money i have made just in case i want to stop doing it i will not miss except for the extra cash i save now)
last night i was talking to the doorman at the Trump building near the Un- on 1st ave (apartments go for well over $20m in some case in this place) lots of famous people coming and going
anyway this guy is telling me he made tons of money in real estate and he lives in the poconos in pa and he takes a bus for 1.5 or 2 hours to work as a doorman (for the benefits)
if he made the money he said (2 million) he could work at the local home depot for $10 an hour and save the 4 hrs a day on the bus or invest wisely and sit home on his arse
point is he made it sound like it was so easy-
people are so full of crap sometimes and he is going to call me at my job looking for a deal on high end building materials for his palace in the poconos (ghetto in the woods from what i hear)
if you work hard and are smart with your money you can get ahead but for the get rich quick crowd that is not good enough
“anyway this guy is telling me he made tons of money in real estate and he lives in the poconos in pa”
this guy is most likely pulling your leg. most of the people that really have money do not brag about it.
We were in SLC area for vacation over the 4th. The kool-aid is powerful there. They are running about 1 year behind California. The fall will be mighty there.
Wile E. Coyote has run off the end of the cliff, but has yet to look down…
And unlike most states, Utah has more than it’s share of cliffy heights for the Wile E’s to jump off.
Yeah, I finally caught on that the cliffs were the reason everyone was moving out there:
The article says this has caught on in Britain after becoming popular in the US mid-west.
http://www.telegraph.co.uk/news/newstopics/howaboutthat/2300313/Nude-climber-craze-tipped-to-take-over-Britain.html
I’ve been without a stitch on, on many summits in the Sierra Nevada…
Same with Oregon prices are still high
Yep. Oregon JUST recently started to go negative, and all of the industry shills there are shouting “this place is different” as loud as they can. They’re pretty much exactly two years behind California.
I was in Utarr after the 4th, too. Building had REALLY slowed down south where my mom lives. I was thrilled to see it. Maybe some orchards will survive the Saints’ greed fest.
Were you the girl I saw staggering down State street in Orem with a bottle of Jim Beam?
Credit crunch hits Hollywood:
http://tinyurl.com/65bmoe
“By investing in a slate of likely hit movies being made by one of the six major Hollywood studios, Wall Street’s oversize brains calculated that they could suffer the odd turkey and still make money. By channeling their investment through a specially created company given a funny name and loaded up with debt, they could multiply the profits. Even after paying the studios a fee for distributing the movies they were getting help to fund, and paying interest to the debt-holders, the vehicle could turn a decent profit – at least according to the complex mathematical algorithms with names such as the Monte Carlo model.”
“The studios loved it too. Guaranteed bankers such as sequels and the finales to trilogies, for example Superman 3, were kept entirely on the studios’ own books, but they have used these private equity deals to reduce their financial exposure to risky new films, and help defray the spiralling costs of bagging big-name stars. Increasingly, even mid-budget films were being added to the slates alongside the likely blockbusters, and Hollywood appeared to have found a sustainable source of new funds.”
“But there is gathering anecdotal evidence on both coasts that the first wave of investment vehicles have suffered decidedly miserable returns, and some gossip that the equity holders in a handful of those vehicles may have been entirely wiped out.”
“And yesterday, the bombshell news that Deutsche Bank is closing its film financing unit entirely and walking away from plans for a $450m investment in a slate of up to 30 new films being made by Paramount, the giant studio controlled by media conglomerate Viacom.”
“Sources said Deutsche had simply found it impossible to find buyers for the debt portion of the proposed financing vehicle, now that the credit crisis has made investors suspicious of exotic debt instruments and effectively shut down the markets for all but the most gold-plated bonds. The terms that bondholders demand this July are a world away from the covenant-light, low-interest terms that prevailed before the credit crisis hit a year ago.”
Hollywood can’t make films for less than $100 Million, and now they can’t get financing to make bloated computer graphic nothingburger epics…
Maybe it’s high time Hollywood discovered “Talkies”, as in films with meaningful dialogue, and not so much whiz-bangery
RE: bloated computer graphic nothingburger epics…
Movies & contemporary music-both right down the crapper.
Whoo Hoo…..and i will be right there with real music made by real musicians and make a mint…Zydeco will be the next big thing…..
Psssst! Take a look at NYCdj’s video collection. Some good stuff there.
“Maybe it’s high time Hollywood discovered “Talkies”, as in films with meaningful dialogue, and not so much whiz-bangery”
That’s another victim of globalization, aladinsane. Talkies are a tougher sell to foreign markets. Much easier to sell big actioners with minimal talking to be dubbed or translated.
PS - my two (meager) paydays this year were from 1) an RE investor who wanted to get into the movie biz and 2) a company in New Zealand. As private equity dries up, Hollywood (which everyone blankly claims to be recession-proof) will get hit hard.
Maybe it’s high time Hollywood discovered “Talkies”
I watched Marty (with Ernest Borgnine) the other day. It must have cost a pittance to produce. And yet it is the only film to win both the Golden Palm at Cannes and the Oscar for best movie. Proof that good movies don’t need CGI or to be stories about psychopaths, which seems to be the only thing Hollywood produces these days.
Hollywood’s product is so weak these days that there is talk of Pixar’s Wall-E being a contender for best film. Not best animated film, best film.
That happened last year with Ratatouille as well.
Not best animated film, best film. Beauty and the Beast should have won in 1992 (1993?), but Silence of the Lambs was too good.
“12 Angry Men” is worth a visit.
“Hollywood can’t make films for less than $100 Million, and now they can’t get financing to make bloated computer graphic nothingburger epics…
Maybe it’s high time Hollywood discovered “Talkies”, as in films with meaningful dialogue, and not so much whiz-bangery”
I braced myself for a snooze fest when Grandma suggested we take my 10 year old to “Kit Kittredge: An American Girl”. I thought it was going to be one step above a My Little Pony cartoon. Well the Kit character is a 10 year old reporter who lives through the Depression. It was such a relief to have a real story with a real plot. I thought it was so well done I’d like to take my husband and son as the emotional situations are compelling and perhaps something we or someone we know/love may face.
it’s most interesting that this is the 1st American Girl doll story to hit the big screen, don’t you think? a tiny reality check for lots of spoiled-to-the-gills kiddos…
I was thinking the same thing: of all the dolls in the American Girl line they felt they wanted to do a movie w/the Depression era character.
Movies are one of the last products “Made in America”. I really don’t want to see them go somewhere else.
Guess you haven’t heard of “runaway production”?
It’s the Province of Alberta offering up perks a’plenty, or New Zealand lending it’s great natural beauty, all w/o pesky unions.
Maybe the exchange rate will save the movies.
If you’re referring to New Zealand offering up for Lord of the Rings, that’s a bit of an exception. The director of LotR was a New Zealander himself. If anything, it was LotR that kick-started the industry there.
I can think of a dozen films produced in NZ, without breathing hard.
Post can be done any where in the world, on your laptop.
NZ has more production than Lord, Power Rangers comes to mind.
The Wall Street types went to California thinking that they were the big sharks, but they are NOTHING compared to Hollywood accountants. Really no surprise that they were pwned.
does this mean we will get something beside made for retarded teenagers sequels?
lol. i went to see hellboy2 last night, big mistake. i think there were a total of 7 people in the theatre.
Nothing new here.
Google Cliff Robertson, James Garner, Sean Connery, etc. about Hollywood and the mysterious financing that occurs with movies. Cliff Robertson was black listed for sometime, because he was one of the few that spoke out about the shenanigans of Hollywood’s creative financing.
First post. Wohoo!
I’m a witness. It *was* first.
John:
There’s plenty of other economic-related blogs that cater to people that are quick with their fingers, but have nothing to say…
We are a little different here.
Why all the excitement about first posts? If you have something to add to the discussion and it happens to be the first post, go ahead and throw the “Woohoo!” in there if you feel the need. Otherwise, WTF?
Actually, getting the first post, or fr1st p0st, is an old game from the slashdot boom days, I believe. Rules of first post include that you don’t have to do anything positive in terms of discussion, you only have to declare the first post.
His post was the first to be auto-approved, but not the first submitted. Judges? No first post.
Since it wasn’t a first post, we can now mock and make fun of John. In Nelson’s voice: “Ha ha!”
Because it’s fun to be first poster. I was once, even though I live in the PNW, ’cause I had to get up to pee at 3 in the morning and passed the computer and habit/addiction dictated that I sit down and look at the HBB. My brain wasn’t even on, so at that time I had no thoughts at all in my groggy little noggin, besides peeing, and was forced to resort to blathering about a dream I had just had. And it wasn’t even a good dream, it was a ‘Julie Dream’. (In my family any stupid dream is called a ‘Julie Dream’ because my sister Julia insists on telling all about her dreams in minute detail, and they are frequently very stupid dreams, with ducks walking along looking at leaves and other assorted stupid stuff like that.)
I think my dream was about a bunny holding a spatula or something. I can’t recall, thankfully.
My point is, that John’s exultation is reasonable and should get some patience, instead of a bossy demand that he make sense.
Thanks for backing me up guys! I’ve been reading Ben’s blog for years and this is the first time I was able to get a first post! Heck yeah I was excited!
A question concerning FDIC coverage for bank takeovers.
Is their any guarantee or protection for employers who have payrolls for their employees in a bank account? How would this work out? As I understand, a special account is setup for each payroll period upon which the employee’s checks are drawn out of.
Anyone, any comments?
Sorry, if previously asked and answered.
The FDIC does not provide for pass-through coverage of payroll accounts. They are not co-owned by employees, so they are insured to a maximum of $100,000. This means that employers with accounts of more than $100,000 will likely lose some or all of their uninsured amounts.
This bankruptcy will kick people to the curb over and over and over. It’s time to remind your friends and family to withdraw their money more often, not less often. Shift it around, put a little in many banks, and deal with the hassle we call Fractional Reserve Banking.
Morning from Ridgefield, CT
Let me throw out a question to the Brain Trust here: I keep a fair amount of cash in the Vanguard Prime Money Market Fund making a whopping 2.2%. Am I nuts to keep money in an account that is not FDIC insured? I have nothing but great things to say about Vanguard and I think Jack Bogle is the only voice of reason on Wall St., but is there any risk here? Any thoughts would be appreciated. Maybe I just need to get a king size mattress and start filling it up.
Anyhoo, a few local observations. Prices down maybe 10% here from peak wishing prices, but nothing to get too excited about. We have a massive WCI development just up the road in Danbury (Rivington) that must be in trouble. Construction has completely stopped and is just a big ugly, unfinished work site. Did WCI go bankrupt and not tell anybody?
“Vanguard Prime Money Market Fund making a whopping 2.2%. Am I nuts to keep money in an account that is not FDIC insured?”
I am superstitious, so we use Vanguard’s ST-Treasury Fund for a similar purpose. (Don’t bother jumping in here to provide reasons why this strategy may also fail, and I should go to gold… I already know all the reasons.)
Another Vanguard customer. I have the savings I (rather than 401K and 529 intermediaries) control in the U.S. Treasury money market. I trust Vanguard, but only so far — or course my trust in the U.S. Treasury is limited to the short term.
Yes, our savings are declining in value by 2.2% a year, and no I don’t have a better idea. Anything with more reward has vastly more risk, more than offsetting it. Just waiting and hoping for reasonable asset prices.
Vanguard treasury for most of my cash. Some gold stocks just for fun.
Safe right now is also gold
I think you need to know more about what the money market fund is invested in to get a view of the risk. The MM in my 401K is about 80% invested in GSE short term bonds.
“The MM in my 401K is about 80% invested in GSE short term bonds.”
Nice for you that the implicit guarantee is beginning to look more explicit now.
CT-Renter How is Greenwich doing ? I grew up there and mom and some family are still there.
I am a Vanguard customer. I have recently exceeded the SIPC insurance level, but given that Vanguard didn’t hand out loans to NINJAs, give huge bonuses to fraudsters, take on loads of SIVs, CDOs, etc; I think they will weather this storm unscathed.
Innocent babies might get thrown out with the bathwater, in a pell-mell economic environment such as ours…
Oh they’ll do fine, and their customers will suffer fewer surprise hidden losses than those of other investment companies. But no one is going to be unscathed.
No one weathers a storm of this size unscathed. Even the best swimmers in the world will die in a 100 foot tidal wave.
This credit collapse is the 100 foot tidal wave. Vanguard may certainly survive, but plan on some scathing. To the positive though, you will be much richer if you retain your money even without interest. If everyone else loses his money, then you, by default, become rich.
Another Vanguard customer here. Have been quite impressed with the way they handle my sometimes off-the-wall inquiries.
I hear from the inside that WCI is working on a “skeleton staff” here in Northern Virginia (NoVA to us locals)
WCI the homebuilder?
“I keep a fair amount of cash in the Vanguard Prime Money Market Fund making a whopping 2.2%. Am I nuts to keep money in an account that is not FDIC insured?”
No, its not nuts.
I’m getting 2.55% on a short-term CD in a highly rated local bank, but the trade off is that its time consuming to move this money around every few months.
I’m right there with you in the Vanguard MM funds. Making 1-2% is better than losing 10, 20, or more percent.
Another winner from someone new at the Boston Globe
====================================================
Activists Help Condo Owner Fight Eviction
http://www.boston.com/news/local/massachusetts/articles/2008/07/16/activists_help_condo_owner_fight_eviction/
And my reply to Ms. Woolhouse
mwoolhouse@globe.com
Dear Ms. Woolhouse:
In the July 16, 2008, Boston Globe story “Activists Help Condo Owner Fight Eviction”; you discuss at length Paula Taylor (aka, Paula J. Taylor), a condo owner who is fighting her eviction from her condo by Countrywide Mortgage.
While her story as written is heartwarming, a number of crucial facts are omitted. I suggest that the article as published be revised to include these facts.
You mention that Ms. Taylor did not disclose her current mortgage payments. These can easily be determined from the Massachusetts Land Records site (masslandrecords.com) as these are public information.
To assist you, Ms. Taylor purchased the condo on July 3, 2006 for $259,900, financing the entire amount through two mortgages: one an adjustable rate mortgage at 8.625% $194,925 scheduled to reset on July 1, 2008; the second of unknown terms for a total of $64,975. Assuming that Ms. Taylor pays no taxes or condo fees, and that the terms of the second mortgage are similar to the first, her monthly payment is slightly more than $2000 a month – again, with no taxes or fees.
This is substantially more than what she proposes to pay Countrywide in rent ($1,500). If should could afford over $2,000 last year, what changed this year that she can no longer afford the payment? Could Ms. Taylor ever afford her payment? The ARM portion of her mortgage was nearly a year away from reset when the initial order to foreclose was filed (October 18, 2007). Or is she just trying to lower the amount she owns through threatening to foreclose and getting her name in the papers?
This is not a heartwarming story about a woman fighting a nasty corporation; this is a story about greed and theft; of a woman who wants to in essence rob a bank by tugging at your heartstrings. It is shameful, and Ms. Taylor should be viewed with contempt - just like any bank robber.
Very nice….well done.
Excellent.
Her article is boring and trite. Idiot “homeowners” are yesterday’s victims. Today, every taxpayer is a victim. Even those who tried to steer clear of the debacle.
I really don’t even think that article qualifies as news.
Way to go Bad Chile !
These “victims” have kept me from buying a home for my family for years. So who`s the victim ?
Bravo, bravo. The “victim” said “Why single me out”? Eh, because you didn’t pay your mortgage when you said you would by signing the loan documents? On wait, you didn’t understand the loan doc, so you are definitely excused. Other people are smarter so they get to paid while you are excused.
Real-Estate Financier’s Death
Hints At Trouble for Lenders
http://online.wsj.com/article/SB121617220846656637.html?mod=googlenews_wsj
To keep growing and outrun the problems, Mr. Coles leaned increasingly on loans — totaling roughly $200 million — from an obscure company, Radical Bunny LLC, run by his accountant. He also sought to raise new money on terms that undermined his existing investors. These moves triggered the departure of several senior managers at the firm in recent months.
Retired plastic surgeon Ted Dodenhoff and his wife sued Mortgages Ltd. in late May in Superior Court for access to company records. The couple, who had invested more than $500,000, alleged the firm misrepresented protections it would afford investors and breached its fiduciary duty with “an evil heart guided by an evil mind,” the complaint says. Mr. Coles “was throwing the old investors under the bus to get new investors,” says Christopher LaVoy, their lawyer.
Quite the tale and there are likely to be many more of these stories as this mess unfolds. Radical Bunny? Run away!!
I posted on here over the past few months about how I’ve started to put asking prices on my services and items in gold dollars as well as paper dollars. Since the U.S. Gold Eagle has a face value of $50 but a fiat value of $970 (19.4:1) as of today, and the U.S. Silver Eagle has a face value of $1 but a fiat value of $19 as of today (19:1), and both are made by the U.S. Mint so their tax value should be no different than a zinc/nickel quarter, dime, nickle or penny (i.e., face value, not spot value), I believe that it makes sense to accept gold currency at face value for a significant discount. If I sell an item, say a poster, for $200 fiat dollars, and it costs me around $80 to print and ship, I can sell it for $7 silver dollars ($133 fiat value), declare a $73 loss on the item against other profits, and still make a profit of $53.
Here’s a great article about a businessman who beat the IRS (sort of) when they went against him.
http://www.liberty-watch.com/volume03/issue08/coverstory.php
One of the amazing things about our government, is the fact that they’ve never ever cheated on the fineness or weight of any Gold or Silver Coin they’ve ever struck. 1794 to present day.
Want to know a dirty secret about the jewelery business?
Most of the 14k Gold new jewelry you buy nowadays is 12 to 13 karat, at best.
LOL, well at least it isn’t like the International Gold Bullion Exchange, where the gold was 99% wood, 1% gold paint. Wonder who the next IGBE will be?
What’s your source? I’m in the industry and that’s the first time I have heard that being a common problem. The color for yellow gold would be too different to pass. For cheap lightweight mass produced jewelry I could see that happening, but the cost of 2 karats for quality jewelry, wouldn’t be worth it. The savings would be too small.
I’m not talking about quality jewelry(something w/ diamonds, etc), just run of the mill stuff.
The average person would have no idea that their debased 14k (58.5% pure) is really 12k or 13k based upon the color.
I’m sympathetic to your efforts but I wouldn’t personally sign up to go through what that guy had to endure to win that case.
The legal system is stacked against the defendant in this type case. I know of IRS cases where the judge wouldn’t even allow the defendants to introduce the specific tax laws they were accused of violating. I’m not an attorney but this seemed pretty crazy to me. I’d be careful with how you handle these types of transactions, IMO, but good luck!
Of course I’m disconcerted by what the guy had to go through. I’ve written the IRS, my Congresscritters, the Treasury, the Federal Reserve, and about 15 other organizations within the shadow government requesting information on the proper way to value income paid in U.S. mint coinage of any type. I’ve never said “gold or silver” but just U.S. mint coinage.
I do get letters back, and they’re extremely hilarious such as “They should be valued as dictated by the IRS” (from the IRS themselves) or “We do not offer tax advice” (from CPAs!) and the best was from my Congresscritter who said “Thank you for your input. I want to let you know that I am against terrorism and money laundering and will work hard to protect you and your family.” Idiot.
Many will have to fall in order to bring clarity to the situation held here: are U.S. Minted coins tax valued at face value or spot value? If the latter, every coin you get at your business should be valued independently, at the market rate, including quarters, pennies, dimes and Susan B. Anthony dollars. Once in a blue moon I’d get pre-64 quarters and dimes at my retail store: how should I value those?
It’s a conundrum, but one that we must fight against. To do otherwise is to accept the system as it is.
I keep churning out my letters to my Representatives and to those who are unelected in the shadow government offices. And I just build my pile of responses, proving that I’ve always been asking the right questions, and getting the wrong answers.
“They should be valued as dictated by the IRS”
There are many cases were the IRS makes law. In general, the legislature passes a law and then the IRS interprets what it means. If a taxpayer chooses to challenge that, he can and then go to court for a decision.
In some cases, the legislature passes a law so vague that it can’t reasonably be said they really did much of anything. Like “All revenue will be taxed”, well, what is “revenue”? The IRS decides. In those types of cases, it is reasonably said that the IRS is effectively creating law. It’s unfortunate but that’s the world we operate in.
“We do not offer tax advice” (from CPAs!)
There are good reasons for this. The IRS has rules about how tax advice by CPAs (and some others) is supposed to be handed out.
The thing is, there are two sources of ultimate information for this whole issue, the government (legislature and judicial cases) or the IRS. If you ask the IRS (which you can do) and if they decide to respond (which they don’t have to do) they will answer according to their interpretation. From that point you can choose to challenge based on what you think the underlying legislation means and end up in a tax court (with regard to the tax issue itself). And if the IRS thinks you made a frivolous decision, you might even wind up in criminal court for evasion charges, as did the guy in the article.
Adam, after that last post I looked into this myself. One of the issues (and it is mentioned in the article) is that the coin needs to be “in circulation.” Silver dollars easily qualify as “in circulation”, and the article you linked to mentions some gold coins that were outlawed and at that point are no longer in circulation.
One think I was not able to find, was an example of gold coins that are in circulation. The article mentions that RP was able to get a law passed forcing the mint to put some out there, but what are they?
bluprint: Are you any relation to the bluprint from my old G.U.N. forum?
As for “in circulation,” the coins that were taken out of circulation, the same coins the near-criminal judge used in his ruling to ban the defense from properly valuing the coins to the jury, have been gone for decades since the confiscation.
My gold coins ARE in circulation, as I use them to purchase items at farmer’s markets, local restaurants and pubs, and other local stores. I recently used two 1/10th ounce coins (face value $10, spot value $194, market value $246) to cover a $300 restaurant/bar tab just 2 weeks ago. Tossed the two coins (unprotected, loose in bag) onto the bar with the owner present and walked out. Tipped in fiat dollars, though. The owner even gave me a receipt for $10 for the dinner and drinks that said “Promotional Coupon $-290″ on it. Legal? Who knows. Moral? If the U.S. Mint says my coins are worth $5 a piece, it’s as moral as I can get it. Theoretically I probably could have screwed the restauranteur by giving him a bunch of worthless 2008 quarters, but I like the deal he gives me, and he likes the way I pay.
How did you get your change? looks like you gave him 400 worth of gold for a 300 bill.
You made a good point about the value of your gold not really changing but everything else changing for the worse around it. In the long term gold is priceless in terms of dollars. We are in the sunset years for the lifeline of the dollar.
yeah that’s me. I was fairly active on GUN until everything just went quite. Somehow I ended up over here…I don’t even remember what led me here exactly.
I’m not interested in the “moral” issue, this is about law. I love this idea, just am interested in how the IRS is going to treat it.
The thing is, in the article, it appears this guy beat a tax evasion rap, which doesn’t address the validity of the tax treatment of the coins. Rather, it’s an issue of intent. His argument is that based on several factors he made a good faith determination that how he chose to treat the coins had a reasonable chance of being acceptable. The IRS is saying the opposite, that this is blatantly against code and frivolous.
The difference is what happens as an aside from the taxes. If you don’t pay taxes according to how the IRS interprets the code, they let you know. If you maintain that your interpretation is the correct one, you all go to court, usually a tax court. That is not usually a criminal matter. If you win (by proving that the IRS misinterpretted the code), you don’t have to pay the taxes if you lose you have to pay the taxes.
Crinimal charges (like in the link you cite) come when the IRS thinks you blatantly violated code for which all reasonable people agree is interpretted another way. That’s what happened in the article. Even if the IRS loses that criminal case, it doesn’t mean the IRS loses on the tax issue. It still may be the case that the guy has to pay the taxes, and depending on how he made his determination of what taxes to pay (was it frivolous or based on sound judgement?) he may or may not have to pay additional penalties.
Ok, so the point of all this, is that after your last post on this topic, I did some research, and my conclusion (and I’m not a CPA and my conclusion means squat…aside from it’s value for a conversation piece) is that the coins would be counted at face value if they are commonly in circulation (as determined by the U.S. Mint) and counted as property (metal value) if they are not. For example, the mint has coins they issue as “proofs” or “bullion”, these are not considered to be “in circulation” as far as I could determine.
So my question is, what gold coins are, according to the U.S. mint, in circulation? If there are any (and the article implies there are when referring to the 1985 act pushed by Ron Paul) you should be able to freely trade them at a bank at face value for federal reserve notes, no?
By the way, here is a chart I found last time, indicating the coins mentioned in the article are not in circulation. You can see that the various gold/bullion coins aren’t on the list.
coins
And don’t forget that an employer may be running afoul of minimum wage laws if a day’s work gets you only $50.00
Well, in the case of the article, part of the way the guy had his business structured is that he was paying contract workers, not regular employees.
I’ve heard of this story before, but I have never seen any reference to the actual case. I’d really like to look it up before believing the story in its entirety (come on, it’s on a pretty biased website).
I want to believe
He beat criminal evasion charges. I haven’t seen any evidence he won the tax issue, and I have looked for it. I’m not the best tax researcher by a far measure so just because I couldn’t find it (I was using RIA) doesn’t mean it’s not there. Although everything I did find indicated to me (as I explain above) that the coins are counted at face if they were released “in circulation” generally and counted for their metal or collectible value otherwise.
2008 is starting to look like 1929? Bernake and Bush reassure me everything is fine, but the TV news, shows long lines of depositors fighting for their money back. Crammer says “Don’t believe your lying eyes.”
How many more days till Jan 20, 2009 and then Ohio and Florida will vote to give us four more years of this legacy. Maybe this really is the “End of Days”.
Like all great countries without leadership, we will muddle our way through the problems.
Nothing to worry about. Falling dollar, rising inflation - all normal.
Great leadership is not necessarily popular leadership.
Think about it this way: In order for the US to get rid of its overweight problem, it institutes a mandatory 30 minute per day workout regimen, to be done in your office, school, whatever…. How many people would moan and groan, and even avoid it? How many consititutional challenges would be brought in front of federal, state and supreme court judges?
If we want to ever get back on our feet, we better start producing and making the stuff that we need to survive, and forget about the stuff that we want. Secure our provisions, food, water, energy, and jobs, bring back manufacturing, limit the WS wizardry that got us into this mess, and make people proud not only of their country, but for what they do, no matter what they do.
I’d have no problem with a 30-minute per day regimen. I’m already doing that. And, when I can, I try to stretch into a one-hour workout.
Walk away, USA.
in 1930 they raised marginal tax rates- sound familiar
TAX THE RICH !
“TAX THE RICH !”
Considering they currently pay little to nothing, what a great idea!
Considering they don’t pay any taxes, what a great idea…
Who Pays the Most Income Tax?
In 2002 the latest year of available data, the top 5 percent of taxpayers paid more than one-half (53.8 percent) of all individual income taxes..
The top 1 percent of taxpayers paid 33.7 percent of all individual income taxes in 2002…
Taxpayers who rank in the top 50 percent of taxpayers by income pay virtually all individual income taxes. In all years since 1990, taxpayers in this group have paid over 94 percent of all individual income taxes. In 2000, 2001, and 2002, this group paid over 96 percent of the total…
http://usgovinfo.about.com/od/incometaxandtheirs/a/whopaysmost.htm
And of course you failed to mention the wealthy elite who pay no taxes.
Nice try.
One can only suppose you think they have not already paid taxes on the money and wealth they’ve collected.. or that they should be taxed over and over on the same money.. or that their wealth should be redistributed to you simply because you have less than they do..
Why are you defending the wealthy? Even they don’t think they pay enough taxes!
http://www.washingtonpost.com/wp-dyn/content/article/2007/06/27/AR2007062700097.html
In 2004 the top 1% owned 33% of all assetts in the US.
Note that almost all of the wealth held by the bottom 50% was in their home which was usually purchased with borrowed money. Hard to really call that an assett. The bottom 50% owned < 1% of all business assets, stocks and mutual funds.
Now forward to 2008. Taxes have been slashed for the elite thus increasing their take. Housing has collapsed destroying any equity the bottom 50% have managed to accumulate. Since the bottom 50% can’t really hedge their salary against inflation they have seen their purchasing power slashed. My guess is the top 1% now own 50% or more of the real assetts in the US when you subtract liabilities.
If anyone thinks this is the way to create a strong democracy or economy their crazy. As the elite consolidate wealth they will accumulate more and more power which will be used to strip the remaining wealth and political power from the middle class, and by middle class I mean anything less than 0.1% and greater than 50%. Everyone else is broke or untouchable.
“Why are you defending the wealthy?”
1) Because that is what he’s told to say
2) Because he was promised “he too will be rich someday….. if he works just a *little* harder.
3) Because he just hasn’t figured out that he and the rest of us wage slaves will have to pay what the wealthy elite don’t or won’t. <—– Kinda stupid donchya think?
wittbelle .. where am i defending the wealthy?
All i said was top earners paid more than anyone else.. and after accumulating wealth in spite of that heavy tax burden, it would not be fair to re-tax that same money/wealth.
Of course this should apply to everyone..
Now, if marxists like Hugo Chávez or despots like Robert Mugabe or even if America’s marxists attempted to take their wealth, i certainly would defend them, because defending them is defending everyone.
exeter .. do the right thing.
Look up and record a total of all your bank balances and assets.. i’m sure that someone, somewhere in the world would consider you to be a bit too wealthy.
Next, fill out a 1040 with that number as gross income, cut a check for what is due and repay your taxes. Be the first in line to take advantage of your proposed wealth-tax.
“All i said was top earners paid more than anyone else..”
The truth is the wealthy pay a smaller percentage of their income than a middle class wage earner so why lie? Why the deception? Does not your ideology pride itself on “honor” “integrity” and “morals”? lmao..
So lets stop the ducking, weaving and subterfuge, stick with the facts and stop the distortions.
The people at the top have benefited most from the system. Shouldn’t they be required to support the system. Why is it that I pay an effective federal tax of around 35% while those who make their living with stocks might pay 15-20% even if they make 10x what I do. Even more unfair is the observation Buffett made that his effective tax rate was much lower than his secretaries. It amazes me that they can find people to defend this and things like trickle down economics. I say all of the above despite the fact that I’m in the top few % of earners in this country. The problem is I get a paycheck and I don’t get paid in stock options, life insurance, and free use of company jets buildings hookers ect. The wealth differential is the fastest way to destroy free markets, and democracy.
Just take a look at how the bailouts have been structured, how regulation was rolled back for some, look at the posts above about Naked shorting. How is this legal. It’s legal if you pay off the right people. When a congressman earns a 180k a year, and a Hedge Fund manager makes a couple billion you can see that it’s easy to buy influence. No one wants communism we are not all equal, but rewarding manipulation over hard work to the degree we see this in the US is bad for democracy and the markets.
So lets stop the ducking, weaving and subterfuge, stick with the facts and stop the distortions.
You first:
Do you want to tax people’s accumulated wealth or not?
No at all. New $ gets taxed. Are you done ducking and weaving yet?
new dollars?
Not the old-money.. “the wealthy elite who pay no taxes.”
Ahh.. we agree, finally. Whew. That was like pulling teeth.
joeyinCalif,
are you saying you think the wealthy elite have only old money and don’t make any new money? i think exeter was saying that wealthy elite should pay the same % of yearly income in taxes as the middle class does.
From what I read on this blog, the wealthy elite really rake it in, with lots of new money coming in each year.
“the wealthy elite really rake it in, with lots of new money coming in each year.”
That is correct and they don’t get paid on a W2 like the rest of us. Very easy to hide and not subject to the marginal rates the rest of us are.
“we agree, finally.”
Is that really all that matters to you ideologues? Getting people to agree with you? You can make excuses and pander the plight of the wealthy elite by distorting the truth until you talk your way to the extreme fringe but it won’t change the fact that the wealthy pay a far smaller percentage of their total income than the rest of us.
“The truth is the wealthy pay a smaller percentage of their income.”
Bingo Exeter! That’s the rub, folks…PROPORTION of their income.
Let’s not forget these elites are so tax attourney rich, the IRS prefers to go after little fish (sorry no link, but remember reading this).
DOC
i posted statistics a few comments above here… The top 50% income earners pay 95% of the taxes.
I know of no legal way to earn money without paying taxes. The more you make, the higher percentage goes to taxes.
I think/thought exeter was speaking of wealthy people who don’t even need to invest, work, or in any way make money. They have wealth. Those people don’t need to make “new” money and do not pay tax, except for things like sales tax, property tax, etc..
Hey.. As long as nobody’s promoting the confiscation of wealth for redistribution, i dont care what the tax rate on income is, or who pays it. (well i do care in the sense i hope it doesn’t hit me too hard.)
Form a coalition. Call your congressperson and demand the tax rates be raised on whomever you like. Change the laws if they don’t suit you. That’s what this country ‘of the people’ is all about.
Those people don’t need to make “new” money and do not pay tax, except for things like sales tax, property tax, etc..
———————-
They certainly don’t **need** to make new money, but they do it anyway. It’s rather easy to do if you have a lot of money…interest, capital gains, rents, dividends, etc. It just comes rolling in, no matter what you do. This is the income that needs to be taxed at least as much as “earned income”, and it needs to be progressive.
Measton and exeter, very good posts!
“Maybe this really is the “End of Days”.
No not the end, just one big damn bump in the road. No matter how hard the politicos try and screw things up we’ll survive just fine. Here’s a another ‘bright’ idea from the dem-wits. Nothing different from their brethren. I have never heard of any politician being accused of being smart.
Democrats Are Weighing More Tax Rebates, Pelosi Says (Update3)
By Laura Litvan
July 15 (Bloomberg) — Congressional Democrats are considering a second round of rebates to taxpayers, saying the benefits of the first checks sent to more than 100 million households this year are being eroded by rising energy prices.
“We will be proceeding with another stimulus package, and we once again hope we will work in a bipartisan way,” House Speaker Nancy Pelosi said after House Democratic leaders met with a group of economists to discuss the spreading housing crisis and rising gas prices.
Stimulus checks by Bush=OK
Stimulus checks by someone else=bad
Moral Hazard much?
did you cash yours?
Good one!
I ask a similar question to the limousine liberals here in the Alt-A Bay.
They’re always talking about how “we all need to pay more taxes”… so naturally I ask them if they’ve paid any “extra” to the IRS recently.
Silence.
Every single time.
The rules of the game are set by our government. You play by those rules to improve your lot. There is nothing hypocritical about advocating for a new set of rules. If they did pay extra taxes all they would be doing is supporting a system they don’t care for.
It’s a fine line between stupid and clever. I think you crossed it.
Maybe one stimulus was okay, but if the government can’t afford the next one, that one is not okay no matter who issues it. I guess Bush got there first (with approval of Dem Congress).
(trying to be non-political here)
No, a ’stimulus’ check by either party is a waste of time, but stick with your line. The only good thing about it is that some folks get a tiny bit of their own money back.
“The only good thing about it is that some folks get a tiny bit of their own money back.”
An implicit assertion that nobody…. no one owes for services provided.
Are all ideologues just plain dead beats? Why do they expect something for nothing? It’s seems they all want a freebie but always crying poverty and unwilling to pay.
Who doesn’t pay taxes? Outside of income tax there are 100’s of taxes and fee’s (just another name for a tax). Street bums pay some tax at some point if they walk into a store and make a purchase. I watched a wino at the liquor store last week pay State and Federal tax on his bottle of bumpy.
That wasn’t the point WMBZ. You said “some folks get a tiny bit of ‘their own’ money back”. You’re implying that they owe nothing because it is “their” money. It isn’t “their” money when they recieved services and haven’t paid for them.
Gas, grass or ass…… there are no free rides brother.
It’s not an unpaid service when it’s delivered against one’s will.
“Hey man, I brought your mail in, that’ll be $55″
“Um..but I never asked you to bring in my mail.”
“But you received a service…”
lol
But nevermind you’re drinking from a publicly funded water supply, driving on public roads and interstates and police patrol your neighborhood, You demand a free ride!!!! Waaaaaaaaah!
You’re right of course, because in the make believe world of “I-just-pay-my-ever-increasing-taxes-and-don’t-ask-no-questions land”, that’s the only thing taxes go toward.
People like you are why things are going to continue to get worse. Just keep waving that blue flag. That’s the important thing. They promise to make everything alright.
Go team!
It’s clear you haven’t the wisdom to understand that everytime taxes are slashed for top income earners, the burden falls on you.
When you get older you’ll understand.
Would everybody stop the F*cking bickering.
It’s OK to disagree but having to get the last
word in gets tiring.
I declare an “Internet TIGER truce”.
Mike
“saying the benefits of the first checks sent to more than 100 million households this year are being eroded by rising energy prices.”
Heres a novel idea, how about a plan to help or encourage americans to use less energy. Insulating 10 million homes would create lots of jobs that can’t be done overseas.
Tax credits for energy conservation? Too sensible.
This period is probably no different overall than the mid to late 70’s. We’ll get through somehow.
Yeah… except for the $60 trillion in unfunded social security & medicare promises over the next decades that didn’t exist back then…
Promises? Can you point me to any promises made to me, or you, or anyone anywhere that says they’re getting anything specific in the future, guaranteed, at a certain value?
I don’t see any promises. From my research, there are no promises, except those created in our own heads. Any money taken out of my paycheck is a tax, not an investment for a future return. It’s all tax. Don’t think otherwise.
I kissed my future Social Security payments goodbye years ago, and made other plans.
For everyone like me, there’s probably 10,000 people that are counting on it being there.
And those 10,000 will vote your “other plans” into their pockets when the time comes. Social Security will be here as long as the old vote and the young don’t.
Want to purchase my future proceeds for a pittance?
ABDada -
Alan Greenspan was very clear back in 1983.
“We can guarantee cash, but we cannot guarantee purchasing power!”
Soc Sec is solvent until 2075. It is not in “crisis”. Medicare needs to be addressed. But it is part of the crisis we do have with all medical costs. And Yes, I do think we need universal healthcare.
“Soc Sec is solvent until 2075.”
Assuming the rest of the federal government will pay back all the extra taxes people paid in since the 1983 deal to save social security. Getting the money from where? It’s all gone, with IOUs in its place.
It is solvent if people pay a second time, with much higher taxes or big cuts in spending on other things.
Compare trade-, national-, state-, municipal- and household-level debt balances now versus then before you push that 70’s analogy too far.
Local Indian restaurant closes. “No one was coming in,” she said. “I was doing $300 to $400 days. I just couldn’t afford to pay my employees on that.”…
And that could be a contagion in the larger Missoula restaurant scene, according to University of Montana culinary arts program director Tom Campbell.
“I’m going to predict it will be just a tidal wave,” Campbell said of the possibility for future restaurant closures. “It’s such a small margin, it will just kill people. Already, (Missoulians) are tightening their belts. They’re not buying SUVs and they’re not going out to dinner very often.”
“Just” a tidal wave? Funny way to put it.
Maybe they mean like “just huge”
as in, “I’m going to predict it will be just huge”
Bloomberg reporting CPI up 1.1%, core up 0.3% (0.7% and 0.2% expected).
Ouch.
I was talking to some long-time hill staffers who remembered when the Republicans were trying to get stronger regulation of F&F (Paulson whinged about needing a “stronger regulator” yesterday).
2005 attempt by Shelby.
I wonder if it would have helped.
Newspapers across the land are dying a slow death by debt, and it’s pretty obvious the internet will rules the waves soon, but what if our government gets all Chinese on us, and restricts access to things they don’t like?
Are you always this cheerful in the morning?
Pussy Galore doesn’t understand that the truth isn’t always fun.
Or that if Aladin said it, then it must be true.
pussy galore the band:
http://www.youtube.com/watch?v=Q0fikUrtTTQ
“Dick Johnson”?
Wow, this board never ceases to amaze me. Can’t believe you folks know PG. Almost makes up for the frequent McCain endorsements.
Hey,
What happened to Geritol Johnny’s biggest supporter, on here?
A new market will open for the printed word.
I’ve written public policy pieces for this blog, though fortunately I was not the target of this government action against it.
http://www.nytimes.com/2008/07/15/technology/15law.html
Yikes!!!
Newspapers are killing themselves because they don’t know how to handle the changes brought about by Google News.
Go check out a story on Google News and click the link that says “all X news articles >>” There are a thousand newspapers with the exact same story, because it came from the exact same source. What’s the point?
A successful newspaper will be able to answer this question: What’s going on around me that is important enough for me to care about but not important enough for the wire services to care about?
There will probably always be a market for the paper edition, however small it may be. The days of the gigantic printing plant may be over. Technology that allows for a fast turnaround (from story to ink) and is cost-efficient at low volumes is probably the future.
‘There will probably always be a market for the paper edition, however small it may be.’
I like to hold papers in my hands. Part of my infatuation with all my books, and boy, do I have a lot of books, is they way they feel, and smell, and, you know—how they’re all booky.
But, having boldly announced that, the fact is I get most of my news from online, and a fair amount of that off this blog. I’m going to hope for the best of both worlds. Paper AND invisible magic electronic bits.
I too like to get my hands dirty reading the fishwraps…
One thing about the print edition of newspapers is they can move stories around (the el lay times LOVES to bury important stories on page 6, of the business section) and lead you down the primrose path of what they want you to believe.
This method doesn’t work in cyberspace…
‘One thing about the print edition of newspapers is they can move stories around (the el lay times LOVES to bury important stories on page 6, of the business section) and lead you down the primrose path of what they want you to believe.
This method doesn’t work in cyberspace…’
Newspapers have a short-term memory.
“you know- how they’re all booky”
Oly you kill me.
Mike
well i think that if they would just quit blowing things out of proportion they might just get back the sales. i quit watching the daily news on TV a long time ago because of the scare tactics they use to frighten people. the news papers do the same.
Are Facts Obsolete?
by Thomas Sowell
http://www.townhall.com/columnists/ThomasSowell/2008/07/15/are_facts_obsolete
Nothing new under the sun…
As the hypnotic mantra of “change” is repeated endlessly, few people even raise the question of whether what few specifics we hear represent any real change, much less a change for the better.
“…One of the most naive notions is that politicians are trying to solve the country’s problems, just because they say so– or say so loudly or inspiringly.”
Good old Mr. Sowell, …talk about obsolete.
So after 25 years of supporting conservative moral socialization Apartheid…he reminds us that voting for political change is a waste of time…gee, he certainly has the “pulse” of the Nation in his figured out, I think the Republican’s have found a replacement for Karl “let’s do the twist” Rove.
My mind is getting an image:
Clarence Thomas holding Obama’s feet, Mr. Sowell wrapping a rope around his hands and Jesse Jackson holding a knife, and pulling down Obama’s pants.
Bernie Mack (voice): “Listen here America,” “I’m talking to you America….Mr. Obama is an American & a damn fine Patriot, now cut down that rope!
“When Gibson reminded him of the well-documented fact that lower tax rates on capital gains had produced more actual revenue collected from that tax than the higher tax rates had, Obama was unmoved.”
In other words he’s more worried about the appearance of “raising taxes on the rich” than he’s interested in raising more taxes.
These Laffer curve arguments about capital gains are subterfuge. If it weren’t for the multitude of deductions, tax shelters and loopholes that are subsequently exploited, there might be some truth to it.
Unfortunately, numerous studies have shown that the Republican administration still has created a deficit larger than every prior administration in history combined. Voting for the same group of self-appointed ‘deficit hawks’ who think the cure for all ills is deregulation and tax relief determines whether or not you vote with your frontal lobe or your amygdala.
Hmmm… you don’t think there would be a point of diminishing returns after a while. The end point of such misuse of ‘trickle-down’ economics is that taxes are eliminated entirely, with the result that tax revenues approach infinity.
I’d agree with Mr. Sowell more, if you know, his boy George W. Bush hadn’t PRESIDED OVER THE LARGEST INCREASE IN FEDERAL SPENDING EVER!
In principal I agree with this guy, but where was he the last 8 years when Bush was running up huge deficits.
“his boy George W. Bush”
Just received a fax from Cheney’s “Shadow” Gov’t Office:
“Blogger Justin has this backwards”…stop…National Flag Alert: Yellow…stop…Duck hunting in Dubai begins Jan 21st 2009…stop
The borrow and spend reklepticans I’ll never understand. Why would they prefer to pay an additional 6% in interest instead of just raising revenue?
Because they get hit when we raise revenue, but everyone gets hit when we have inflation. They can hedge against inflation but J6P can’t.
Porcine beauticians are having a field day with yesterday’s dip on the DJIA below 11,000.
Dow Ends A Wild Day Below 11000; Capitulation?
A plunge in oil prices rescued stocks from free-fall Tuesday, but the gains evaporated in a day of heavy and volatile trading.
Go DUG
The Associated Press reports most Americans are still priced out by high housing prices, and government attempts to prop housing up to save the FBs and financial industry are screwing them.
http://www.msnbc.msn.com/id/25694358/
Moody’s Economy.com predicts, therefore, that housing affordability will not go back to where it was even at the bottom.
“Unless buyers like the Linds and Gylfe move to cheaper areas — usually with longer commutes — there’s little they can do but hope that market forces are stronger than Congressional intervention.”
The traditional benchmark is that housing costs shouldn’t exceed 28 percent of a household’s gross monthly income.
Moody’s Economy.com study based its calculations on this threshold and assumed buyers would have a 30-year, fixed-rate mortgage for 85 percent of the home’s value.
Strikingly, in nearly half of the 40 major metro areas studied, households earning 120 percent of the median income fell short of the affordability benchmark. San Francisco, Los Angeles, Miami and Stamford, Conn., were all in the top 10.
So, wouldn’t this mean that prices WILL have to keep falling? Isn’t the real estate market unsustainable if people are truly priced out forever?
Don’t buy until you can afford a home you are willing to live in long term at a cost below 28 pct of your income.
I use this simple idea to explain the cost of buying a home to my friends, family and co-workers.
There are only two things that determine the price of the home I will purchase.
1) How much cash I have.
2) How much a lender is willing to lend me.
Then I get a blank deer in the head lights expression. I continue to explain…Look, in 2007, the bank didn’t even care if I had a penny, they just gave me as much money as I wanted.
Next year I will have some cash but the bank is not going to offer me one penny. So how much do you think a house will go for?
“Moody’s Economy.com predicts, therefore, that housing affordability
will not go back to where it was even at the bottom.”
It’s a New Era! The old rules of affordability don’t apply any longer!!
“Moody’s Economy.com predicts, therefore, that housing affordability
will not go back to where it was even at the bottom.”
Correct! It will find the NEW, LOWER BOTTOM to adjust to.
DOC
Wouldn’t these kind of remarks tend to encourage short sellers?
Inflation, Bernanke’s warning rub salt in economy’s wounds
ASSOCIATED PRESS
and NEW YORK TIMES NEWS SERVICE
July 16, 2008
WASHINGTON – The U.S. economic downturn gained steam yesterday, with a report of the highest inflation since the early 1980s and a suggestion by the Federal Reserve chief that worse days are ahead.
So, everyone within earshot,
If our banking system should fail, but “the powers that be” will do anything in their power to salvage them or at least postpone the inevitable, I suspect the following proposal will be made-
Social Security IOUs will be traded for stock of private companies, while the private companies maintain own boards/officers. One way or another, the elites have wanted to privatize SS. Now is their chance. And while we are at it, lets throw in the pension funds and life insurance companies. All these entities are sitting on piles of money or IOUs from the govt.
/Humor off
Will give a whole new meaning to the expression, “Invest in America’s future”!
lets see.. a young person would be wondering..
Choice #1. The govt collects SS tax from me and spends it, promising it can repay me somehow, someday.
Choice #2. I could invest some portion of that money and watch it grow for 40 or 50 years.
yeah.. choice #1 is definately superior.
Now consider another case
Joey has a stroke and can’t manage his money, it’s not bad enough that anyone notices just alters his personality. His wife left him and he has no family to help. He get’s calls from telemarketers who tell him to invest all his money in AAA rated CDO’s. They tell him if he invests now he will get a new robot vacume cleaner. Joey has lost his savings in the market but he can bet his future SS check. The CDO’s clear the hurdle for an approved investment because the always reliable rating companies say they are AAA gold. Whoops 5 years later Joey is broke and has no income. Joey looses his house and wonders the street at 68yrs of age. Other homeless people kick Joey’s a$$ and take his shoes. Locals think he is a drunk and avoid making eye contact. After months of eating garbage and roaming the streets Joey collapses and dies in a local park. No one picks him up for a week until his body starts to stink.
SS is an insurance policy, it assures something slightly greater than a cardboard box roof, and alpo.
So, you think people can’t be trusted with their own money.. isn’t that special. What government agency do you work for, meatson?
So you think that all people are capable of investing their retirement money intelligently in a system full of misinformation and manipulation. I mean even our own government lies to us about the state of our economy. If they had listened to Pualson and Ben Stein last summer they would be broke now. The elderly are constantly being taken advantage of because many have lost a few IQ points, go visit an old folks home if you doubt me. You think these people should be thrown onto the streets after they loose their retirement fund to fraud? Should we just send them all over to your house Joey??
meat.. are you against 401Ks, IRAs for the same reasons you don’t approve of some kid investing maybe 25% or 50% of the small SS tax withheld out of each paycheck? (i think only 5% was Bush’s privatization suggestion.)
There will be strict rules as to what can be invested in and when a withdrawl, if any, is allowed.. How much must go into a savings acct, etc..
This aint supposed to be a free-for-all speculation investment account thing with people buying CDOs as you suggested.
I don’t deny that a few people are natural born suckers or are just stupid with their money. We do what needs to be done for them, and always will.
As for the elderly, if someone is determined to be incompetent by a court, a court can elect to appoint a trustee for them. Otherwise they have family and friends to guide them.. otherwise they are already old and retired and have stopped contributing and ‘gambling’ away their ex- SS tax, but are instead withdrawing.
IT’s not either or.
One is an insurance policy
the other is a retirement account that might allow you to have a little fun when you stop working, or live a little more comfortably.
It’s not just natural born suckers, it’s not just the wildly demented.
It’s the sick and the lonely and the overworked and mildly demented. What about the wife who has to care for herself and her demented husband. Maybe she had no role in their finances when they were younger but now it’s all thrown on her. I’m not saying she was smart, but I don’t want her and her demented husband thrown to the wolves.
“Choice #2. I could invest some portion of that money and watch it grow for 40 or 50 years.”
Good goin’ Joey, yeah, you could invest it in the likes of ENRON, REITS, PETS.DOT.COM or INDYMAC! Better to play it safe and spread it around!
Christ. Exeter was SPOT-ON with the Eisenhower quote yesterday.
You would have to have a stroke to believe the asshats pushing “privatization” give a s**t about anyone worth under half a billion.
DOC
Subprime Fannie
COMMON SENSE
Shareholders Get Left Behind
In Fannie and Freddie Rescue
By JAMES B. STEWART
July 16, 2008; Page D1
…
For years Fannie and Freddie followed prudent banking policies, limiting their mortgage purchases to those that met a reasonably strict list of criteria, including a minimum down payment, proof of income and a conservative loan-to-property-value ratio. They had no subprime, jumbo, Alt-A or other exotic and innovative mortgages in their portfolios. When their overpaid chief executives were caught up in shameful accounting practices, they were ousted, previously lax government oversight was increased, and capital requirements were imposed.
Then came the mortgage and credit crises. Most financial institutions responded by tightening their standards. Fannie and Freddie should have done the same, or at least held to the status quo. Instead, with Congress’s encouragement, the mortgage buyers loosened theirs. Jumbo mortgages (and bigger risks)? No problem. Alt-A mortgages? Bring ‘em on. The companies have an estimated $80 billion in what were once considered nonconforming mortgages — and are now considered toxic waste — on their balance sheets. As for the higher capital requirements meant to reassure investors, they were reduced.
yea thats right I was explaining this to a guy I work with how the Government backed mortgage companies started buying bad junk from Country Wide with the FEDs approval.
Sounds like Congress decided to drive a stake through the hearts of GSE shareholders, and HP provided burial services last weekend.
This is what happens when the top 1% own over 90% of stock and 50% of all assetts. They make the rules.
Staycations get creative
Postcards From the Hedge:
Faking a Vacation at Home
Cost-Conscious ‘Staycationers’
Simulate the Travel Experience;
A Tent in the Living Room
By MARY PILON
July 16, 2008; Page D1
Karen Ash is about to take a weeklong Japanese vacation. She’ll buy postcards and souvenirs at a traditional Japanese market. She’ll admire bonsai plants and view Japanese films. She’ll eat ramen, ordering in Japanese.
And she’ll never leave the Bronx.
Hell, if this works for her just think of the great life she will have! She can get pictures of yachts and beaches, diamonds and fancy restaurants. This gal is wealthy beyond her wildest imagination, oh wait…?
She could be the trendiest person around. Just go grab the latest edition of the Blue List and “visit” them all!
It just so happens I’m going to be in Mexico today (on my couch with a case of Corona and a bag of tortilla chips).
See if you can guess where I’m going tomorrow,
hint: A pizza and a case of Peroni.
Now where is that pesky passport….
Ha, I doing ya one better, I going back in time & traveling!
Chicago’s 1893 World’s Fair & Scotland (Hot Dogs & 16 year old Scotch)
I know doesn’t sound appetizing, but I also like mustard on my egg Mcmuffin…I’m just whacked I tell ya
In all honesty, I can think of nothing better. Especially if you load the dog up chicago style. My wife laughs at my normal “dessert” of a nice single-malt scotch and a chocolate chip cookie.
It just so happens I’m going to be in Mexico today (on my couch with a case of Corona and a bag of tortilla chips).
That’s funny.
Years ago (Late ’80’s, when I was house-poor and working as a cable-TV tech) I would sit on a beach chair in my living room, drink beer and watch MTVs Spring Break.
I would tell people that I was on Spring Break for the weekend.
You were a man ahead of your time.
Many years ago I came up with a device that I called the “GoThere!” It’s basically the same size as a panic room, about 7.5′ tall, 4′ x 4′ wide. It has a set of infrared bulbs on top, and two air conditioners that blast cold air from all 4 sides. It also has a simple water-mist system, and a simple fan system.
You would don a set of video goggles with accelerometers to dictate how your head is moving. You could go to the beach, skiing, or to a busy city street. If at the beach, the infrared lights would turn on, making you very warm, with a light mist hitting you whenever the waves broke. If on the Alps, you’d get blasted with the A/C and the fans for wind.
Of course I never actually built it, but the idea would probably sell today. $2500 for a permanent stay-cation, and today’s 3D rendering technology would let me digitize all the popular areas in great detail. Single guy wanting to go to the nude beach? No problem.
I staycation in my swimming hole, which is about perfect now…
Like a 65 degree jacuzzi, when I hang out in the whitewater.
“Many years ago I came up with a device that I called the “GoThere!” It’s basically the same size as a panic room, about 7.5′ tall, 4′ x 4′ wide. It has a set of infrared bulbs on top, and two air conditioners that blast cold air from all 4 sides. It also has a simple water-mist system, and a simple fan system.”
Early version of the Star Trek Holi-deck.
That is seriously the dumbest sh!t I’ve ever heard. The Oakland couple that passed on their Hawaii vaction and is camping in their living room, come on! They live close to some of the most beautiful camping in CA.
90% of the people that visit our nations parks, never venture 100 feet from their car.
We went on a backpack trip starting from a western National Park on July 4th, and arrived @ noon to get our wilderness permit, and of 25 possible people going to our destination, only 16 spots were taken.
The trailhead we left from, is within a 5 hour drive of 20 Million Californians.
That’s how little used the wilderness is, nowadays…
Yeah, but real camping involves the great outdoors. No A/C, no bathroom, no bed, etc. I don’t think that someone who is used to a Hawaiin vacation is ready to rough it.
Renting a cabin is a nice middle ground. My wife and I did that in the Ozarks last year. That was a terrific time. Only a few days but we were away from everything, did some walking/exploring, swam in the Buffalo river. I even had a cave in my backyard.
While there, a guy stopped by and said his dad grew up in that cabin. He was just stopping to see if we owned it. He said they used to keep milk and other stuff in the cave. The cave (had a door) was probably ~65 degrees and it was 98+ outside.
I’ve been to Hawaii. It’s over-rated. The national parks in the western half of the U.S. are probably better (in my mind anyway, I’ve never been there).
Cancun is definately better.
Hawaii kicks butt! Even Maui! You want hiking where you’ll not see a soul and be surrounded by crazed wild pigs on Maui? Go up the volcano and trudge around Poli-Poli. You wouldn’t even believe that you’re only a short drive from overpriced drinks at your cabana bar. Awesome!
I was on Maui, maybe I should have gone up the volcano. Everywhere else we hiked there were a bunch of other people, except when we stopped at some small…village is the only term that comes to mind, on the road to Hana. There was a beach covered up with volcanic rock and the ocean was pretty choppy and smashing against the rock. It was pretty awsome and we got some good pictures, and we were the only ones hanging out there.
Don’t get me wrong, it was beautiful, but so are a lot of other places. A big difference is that other places aren’t so over hyped and so expensive.
I think part of the problem is that I’m not used to the whole idea of swimming when it’s 88 degrees. I’m a southern boy, and when we swim, it’s HOT, 95-100. In Hawaii, the weather was great, but if I got wet and then got out, it wasn’t warm enough for me not to get cold, and the water was cool to boot.
For the money, I would rather have gone to glacier or some other park for natural beauty and Cancun if I wanted to swim and hang out on/in the beach or pool.
Hawaii Volcanoes National Park on the big island is not to be missed, especially on the days that the lava floes are within a few hours hike. And it is one place in the US where they are making more land.
Who owns newly created land? The first person to put a flag on it or build a fence around it?
“it wasn’t warm enough for me not to get cold, and the water was cool to boot.”
I don’t like that either, but Hawaii in early November was just about perfect on that score.
Housing slump in no hurry to end
County prices drop 25.3 percent year over year
By Roger Showley
and Emmet Pierce
STAFF WRITERS
July 16, 2008
Despite the arrival of the traditional peak summer home-buying season, DataQuick Information Systems yesterday reported no sign of an easing in the housing downturn.
Prices in San Diego County slipped by yet another year-over-year record of 25.3 percent to a median $370,000. Sales in June, while higher than those for May, were the second-lowest on record for the month at just over 3,000.
“There’s certainly no evidence that prices overall are stabilizing,” DataQuick analyst Andrew LePage said.
Added University of San Diego economist Alan Gin: “Obviously, the housing market is still weak. I anticipate it will be so at least through the rest of the year and probably into the early part of 2009 as well.”
I know it is immaterial, but where do we stand on the debate over whether the GSEs have an implicit guarantee of their debt?
Lawmakers question Fannie/Freddie plan
NEW YORK TIMES NEWS SERVICE
July 16, 2008
…
Paulson said that if Congress would give him the authority to spend an unlimited amount of money, the markets would accept that the government’s commitment is solid, and that would increase confidence. In turn, that would significantly decrease the odds that the government would ultimately need to spend any money at all.
But the logic did not seem appealing to several Republicans and Democrats on the banking committee, who raised concerns.
“I think you are risking taxpayer dollars here,” said Sen. Richard Shelby of Alabama, the senior Republican on the committee. “To give you – we have respect for you at Treasury – a blank check? I’m not so sure. We’ll have to talk.”
Shelby added, “I fear we’re sitting on a financial powder keg.”
SEC Moves to Curb Short Selling
The SEC said it will move to curb short selling in the stocks of Fannie Mae and Freddie Mac, as well as in 17 financial firms. The emergency action comes amid concern that negative bets against the stocks might be exacerbating financial-sector woes, but it’s far from clear whether the move, which sparked a barrage of criticism, will curb the activity of short sellers.
Perhaps someone who understands markets better than I can explain how short sellers (naked or clothed) can drive down stock prices. My understanding is thus:
Short-sellers (investor type A) think company X’s shares are overvalued, and take short positions in company X’s shares. Greater fools (investor type B) believe company X CEO’s false rumor that the stock price is undervalued, and are thus willing to pay much more than investor type A for the chance to purchase a share of company X. If shareholders decide to sell stock, a type A investor will never be able to close his short position so long as there are enough investors of type B willing to pay a higher price.
Thus it would appear to be a shortage of greater fools rather than a prevalence of short sellers which is causing the problem with financial share prices. Am I missing something here?
What is interesting about the short selling is that many firms were selling the same stock short to multi-investors thus allowing the market place to short more stock than what was available. Seems that if the firm had to put up share for share that the system would take care of itself.
This begs the question exacerbated by the bank run (Indy), when a brokerage goes belly up, how do you get your investment back? If you have the certificates in hand you know what you have. Storm clouds abound and bodes ill as we have truly entered a period where trust in the financial system will be put to the test.
“…thus allowing the market place to short more stock than what was available.”
I don’t get how a gazillion shorts can drive a market down, provided there are bids in the market above the level where the shorts are willing to cover.
SIPC covers brokerage accounts up to what.. $5 million?
$500K
500k ..that’s not very much..
What the hell do people with like $5 million to watch over do with it?
I guess there’s a point where it can’t be both invested and insured… or maybe they buy private insurance.. i dunno.
Turn to page 15 of the SIPC annual report (warning, PDF) and you will see that they have a whopping 1.5 billion in assets. How far is that going to get them in a brokerage meltdown? Oh well, it was a good concept at least!
http://www.jsmineset.com/cwsimages/Miscfiles/6367_SIPC_Annual_Report_2007_FINAL.pdf
“Hedrick is an agent with National Liquidators, considered by industry experts to be the world’s largest marine repo company. The Fort Lauderdale-based company has tripled its business in the past three years, and now takes possession of about 200 boats a month in Florida, Ohio and California. The company’s competitors also say they’ve seen similar increases in business.
“They’re going to hang on to the car, they’re going to hang on to the house. But they’re going to give up on the boat,” said Hedrick, whose employer has doubled its staff in two years to 85 repo agents so they can meet demand from the banks and lenders”
from: news.yahoo.com/s/ap/20080715/ap_on_bi_ge/repo_boom
I don’t think that they’re hanging on to the cars the way they used to. It’s like houses. If you can walk away, you will.
From the WSJ p. C1 sidebar: “C-re-in-ation: It’s the O-I-L That’s Missing”. Judging from today’s number, the inflationary effect of O-I-L is beginning to trickle down to the headlines.
BTW, 26 years ago (1982), it turns out the economy was in a recession, when viewed through the lens of the NBER’s rear-view mirror.
latest news
August gold up $1.80 to $980.50 after inflation data
ECONOMIC REPORT
Consumer prices jump 1.1% in June
Surging energy prices push up CPI the most in 26 years
By Rex Nutting, MarketWatch
Last update: 8:32 a.m. EDT July 16, 2008
WASHINGTON (MarketWatch) - Double-digit increases in gasoline prices helped push up the consumer price index by 1.1%, in June, the biggest increase in 26 years, the Labor Department reported Wednesday.
Not all prices are inflating at this point in the business cycle. (Oh yeah — asset prices can go up or down, but they don’t inflate or deflate…)
Is there something “special” about DJIA = 11,000? Let me guess — is psychologically important that the DJIA not dip much below that level?
Mathematically, no. Psychologically, yes.
Human beings are pre-programmed to enter orders at round numbers (particularly stop orders.)
the DJIA is an abstract number
the fundamental value of 30 companies
———————————————– (divided by)
the fundamental value of the US dollar
So you have one number rapidly approaching zero divided by another number rapidly approaching zero. Its really just an abstract calculus problem, not a measure of the health of the US economy.
Sounds like an indeterminate form. Time to review L’Hopital’s Rule.
The 10 components of the Index include:
1. Average weekly hours worked by manufacturing workers
2. Average number of initial applications for unemployment insurance
3. Number of manufacturers’ new orders for consumer goods and materials
4. Speed of delivery of new merchandise to vendors from suppliers
5. Amount of new orders for capital goods unrelated to defense
6. Amount of new building permits for residential buildings
7. The S&P 500 stock index
8. Inflation-adjusted monetary supply (M2)
9. Spread between long and short interest rates (the yield curve)
10. Consumer sentiment
prof bear, did you buy into the dip yesterday?
Greenspan was right about one thing - they really should have tried to understand what was causing asset inflation.
Jeffrey Brown posed a couple of interesting questions at the oildrum.com
What is the objective value of the 100 largest financial institutions, without the 100 largest oil fields?
What is the objective value of the 100 largest oil fields, without the 100 largest financial institutions?
In other news, China’s new car sales for June are out. No slowdown yet. And BTW, they drive the hell out of their cars in China. Very high average mileage per year.
588,00 new passenger vehicles
248,00 commercial vehicles
China June auto sales up 15.35% yoy
China: 1.1 Billion people
USA: x131 F22 Raptors @ 142 million $$$$$$$$$$$ each
Iran: “Got Oil?”
Cheney: “Got a military?”
Filed under: “Life is stranger than fiction”
Three Days of the Condor:
“…and learns that his “section” was hit because it discovered a renegade plan to take over middle east oilfields.
“…and is considered an exposition of the moral ambiguity of the actions of the United States government following the Vietnam War and Watergate.”
http://en.wikipedia.org/wiki/Three_Days_Of_The_Condor
“…they drive the hell out of their cars in China.”
“How come & You come” Communist China’s version of “Click & Clack the tappet Brothers”
Is it against the law to “Think & Drive” in China?
Old B.F.E. = Bum Fvck Egypt
New B.F.E. = Blind Faith Economics
Negative household formation: here it comes!
http://www.nytimes.com/2008/07/16/us/16share.html?pagewanted=1&hp&adxnnlx=1216210343-BmPQbT9MZFtkEAZWRQFpWw
“With residential mortgage foreclosures still on the rise, more homeowners nationwide are considering Miss Terry’s choice: whether to take in a boarder to keep their homes. Modest but growing numbers are turning to agencies nationwide like the St. Ambrose Housing Aid Center Homesharing Program in Baltimore, which screen boarders to find appropriate matches and relieve some of the fear of strangers.”
I’ve been a “boarder” in NoVA now for almost 2 years and it’s definately a win-win situation for both the homeowner and the tenent as long as you’re pretty simpatico with each other. I pay $725/month for a place in a great location, and that’s about half of the $1,400 or so that most people in Arlington pay to rent a 1bdroom condo or apartment.
I have to admit, I’m not sure at what level I should be worried. The collective information and forecasting I’ve received from this blog has been amazingly accurate over the years. I still believe that home prices will be within my reach yet!
But, I’m not sure what to think about banks. Should I panic and pull out my savings to stuff under the mattress?
This comment will probably not show up (a bit late), but here’s a decent idea:
Spread your cash savings across several banks, not just one. If one goes under and it takes more than just a couple of weeks to get to your money, you’ll hopefully be able to access other accounts.
Stock up on non-perishable foods.
Buy some gold, physical gold, to help you through any possible emergencies.
The buck stops with Obama, unless it stops with McCain, or even with Bush. Actually I wish the buck _would_ stop, instead of continuing its downward spiral…
http://www.cnn.com/2008/POLITICS/07/15/lkl.obama/index.html
http://money.cnn.com/data/currencies/index.html
Call me cynical, but when politicians say things, I’m always looking for the ulterior motive…
Cannibalism among the wolves.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ansrs4i.J_Ek&refer=home
“The U.S. Securities and Exchange Commission subpoenaed Wall Street’s biggest firms and hedge-fund advisers in a widening effort to crack down on suspected manipulation of Lehman Brothers Holdings Inc. and Bear Stearns Cos. shares, said three people with knowledge of the matter.”
“The SEC’s enforcement unit demanded information from investment banks including Goldman Sachs Group Inc., Deutsche Bank AG and Merrill Lynch & Co., according to two of the people, who declined to be identified because the inquiries aren’t public. The Washington-based regulator is seeking trading records and e- mails, one of them said.”
Sinking each other’s stock? Next thing you know, the executives who sit on each others’ boards will be cutting each others’ pay.
Real-Estate Financier’s Death
Hints At Trouble for Lenders
http://online.wsj.com/article/SB121617220846656637.html?mod=googlenews_wsj
To keep growing and outrun the problems, Mr. Coles leaned increasingly on loans — totaling roughly $200 million — from an obscure company, Radical Bunny LLC, run by his accountant. He also sought to raise new money on terms that undermined his existing investors. These moves triggered the departure of several senior managers at the firm in recent months.
Retired plastic surgeon Ted Dodenhoff and his wife sued Mortgages Ltd. in late May in Superior Court for access to company records. The couple, who had invested more than $500,000, alleged the firm misrepresented protections it would afford investors and breached its fiduciary duty with “an evil heart guided by an evil mind,” the complaint says. Mr. Coles “was throwing the old investors under the bus to get new investors,” says Christopher LaVoy, their lawyer.
Quite the tale and there are likely to be many more of these stories as this mess unfolds. If I saw a company called Radical Bunny, I dwould run away.
This is a reposting of a remark by one of the Fed bankers some weeks back but bears repeating:” WE TELL THE TRUTH THE BEST WE CAN WITHOUT CAUSING PANIC”
“We Lie the best we can without causing panic”
What’s the difference?
hmm.. kinda like when a doctor breaks the news carefully, and might not go into all the gorey details, because he doesn’t want you to scream and jump out of his office window. You’d be beyond help if that happened.
Tell me joey,
How long have you known that our banking system has inoperable cancer?
What happens when the hoi polloi figures out that Wall Street was one giant perp-walk waiting to happen?
Will NYC suffer more than any other big city in the land, because of this?
It depends what you mean by NYC. The biggest hit would be to state and local taxes. Otherwise, the contributions of these folks are over-rated.
What the happy-thrifty have to fear most is state and local budget crisis, collapsing services and benefits and higher taxes.
Aside from all the financial didgerido, what makes NYC tick?
Anything that involves information — media, motion pictures, culture, advertising, art, fashion, law, accounting, consulting, research, education, etc. Although some of this is consumed by financial companies.
The finance crowd supports a lot of spending in the local economy. But they either live in Manhattan, where tourists are picking up the slack, or in the suburbs, where it isn’t our problem.
New York City moreover, like a lot of cities that went downhill in the 1970s, lost a lot of its local economy to the suburbs, where many city residents went to shop as local stores closed down. That trend is reversing, creating jobs via capturing income that already exists. And energy prices don’t hit us nearly as hard.
Nope, for most of us the problem is housing costs and state and local government. The former is going to better; the latter worse.
Yes it will. Wall Street is 5% of the jobs, but 20% of the income in NYC. The last two big downturns hit NYC harder that a lot of places elsewhere.
“Lawmakers advances a bill to add insurance surcharges to those living in disaster-prone areas.”
So, this places Sacramento the #1 spot in California right?
California burns through its firefighting funds. Homeowner fees ahead?
http://www.csmonitor.com/2008/0717/p02s01-usgn.html
With the understanding that few locations are without some risk of damage from natural disasters, I’m fine with the idea that those that live in the riskiest locations should pay for that privilege.
I’m also fine with shifting some of the state costs back to the local level. Why should counties that fund a greater level of fire protection such as Los Angeles and Orange Counties in effect subsidize the tightwads in San Diego County? If a county decides, through its own funding decisions, that fire protection isn’t important, why should the state make up the difference?
maybe this is not directly applicable, and just to play devil’s advocate..
Would you approve of surcharging people who live in high crime areas for the extra police protection they require?
imo, being forced to pay extra to live in a bad neighborhood is a double-whammy..
While moving away from the forest landscape, cliff view, mountainsides is an option, who will be left to enjoy it? Only those who can afford to pay more.. wealthy people?
Is this proposal aimed at hetting poor folks out of the best spots?
/devil off
“Would you approve of surcharging people who live in high crime areas for the extra police protection they require? ”
Perhaps, if there actually was greater police protection. Having living in DC, LA, and San Diego, living in higher crime areas doesn’t get you greater police protection.
“While moving away from the forest landscape, cliff view, mountainsides is an option, who will be left to enjoy it? Only those who can afford to pay more.. wealthy people?”
Some of those “prime” areas should be public park land, accessible to the masses. I’m less supportive of public subsidies to keep people in the riskiest locations requiring regular rebuilding due to natural disasters.
You do raise some interesting points and are right to question the motives of some of these proposals.
WoW Bernankes voice sounds like he`s being questioned about a murder today.
Just watch Paulson’s face and Bernanke’s body language
http://video.msn.com/video.aspx?mkt=en-us&vid=bd1f5a85-8dee-4fd0-ba1f-c96e47c54906&fg=rss&from=34
The SEC is a “law enforcement” agency. roflmao
Crissy Cox: “Shrub made me the new sheriff in town, pilgrim”
Paluson: “He ain’t got no “squirt gun” neither, he’s packin’ a Bazooka Babeeeeeeeeeee!
I say replace Crissy Cox with Judge Judy, we need a new sheriff in town!
FED: “give us a blank check & just trust us”
Let’s see…The US Constitution, three branches of Gov’t…. without any checks & balances…sounds like a “Long Term Capital Investment” to me.
Bubblevision just cut off Ron Paul. Typical.
Yep typical, they think he’s a loon, of course all they need do is look in a mirror to find some really shallow minds. I like Ron Paul, and will write him in, but compared to 99.9% of the republodems in D.C. he is 180 degrees out. So we’ll end up with another waste of time.
Regarding portfolios and asset management and personal finance allocations:
The Mike Daly Company advises the purchase of SLV under $200 on an accumulating basis.
And advises the Roth IRA format for the first few buys.
You will experience a ten for one split soon.
The Mike Daly Company holds long shares of SLV.
We bought 10K more yesterday through Wells Fargo.
Good day HBBers! Go Ben!
I shares siver trust?
Yes
“He and his wife, Carol, vow to fight in the courts to prevent a project they say is speculative at best, and at worst will pollute the land, creeks and skies of this tiny town for generations to come.”
California environmental whacko’s thinking is effecting South Dakota republican citizens thinking.
Got Canadian Oil?
Farmers fight plans for new oil refinery
“Plans were kept secret for months but residents of Union County have now voted in favor of rezoning land for a $10-billion refinery capable of converting 400,000 barrels of Canadian oil into gasoline, diesel and jet fuel every day.”
http://www.cnn.com/2008/US/07/15/sd.refinery/index.html
Thanks for the link, hwy, and IIIIIII say, ‘Go, farmer-man! Go! Win! Win!’
Keep the Fed Away From Investment Banks
By Allan H. Meltzer
Clear capital requirements are all we need.
…
In its 95-year history, the Fed has never made a clear statement of its policy for dealing with failures. Sometimes it offered assistance to keep the bank or investment bank afloat. Other times it closed the institution. Troubled institutions have no way to know in advance whether they will be saved or strangled. The absence of a clear policy statement increases uncertainty and encourages problem institutions to demand loans and assistance. Large banks ask Congress to pressure the regulators. Taxpayers pay for the mistakes.
So what can taxpayers expect from an increase in the Fed’s discretionary authority over investment banks? The likely answer is rescues, delays and lax supervision – followed by taxpayer-financed bailouts. Throughout its postwar history, the Fed has responded to the interests of large banks and Congress, not the public.
Investment banks don’t need the Fed to regulate them. Some clear rules on capitalization would suffice.
When the wall street gangbangers are shooting up the neighborhood in their turf wars and innocent people get caught in the crossfire, their exhibition of the lack of good sense and social responsibility practically begs for government intervention.
Listening to Rep. Nydia Vazquez of N.Y. reminded me of a skit I heard on the radio the other day.
(Mexican voice) Come see Mehico the way we see your country
(fathers voice) keep paddeliing kids, were almost there
(Mexican voice) welcome to Mehico
(moms voice) We`re here and I`m pregnant again, I`ll need to get right to the hospital for that free healthcare,and of course I`ll need a doctor that speaks english, and once the babys born he`ll be a Mexican citizen and that will make it easy for us to become citizens!
(Mexican voice) You need a doctoor?
(kids voice) do the teachers speak english in Mexcan schools dad?
(fathers voice) Well they`d better, and pretty soon I`ll get a forged Mexican drivers licence and a crappy Mexican car and we can put an American flag on the bumper.
(family) It`s great to be in Mexico !
(Mexican voice) Oh bruther
SCORE!
A townhouse just down the street from us (same model, same development, unit never lived in) just went up for rent asking $225/month LESS than what we are paying right now. Our lease expires in two months and we were planning to move to a less expensive place anyway. Might be able to simply renegotiate instead of move now…
:::keeping fingers crossed:::
We have a winner! I hope you get at least $250 off.
At least you won’t have to rent a truck, lol.
Raising loan limits while tightening lending standards is like telling a high jumper that just missed 7 ft. four times, o.k. we`re going to raise it to 8 ft. and let you try that.
What’s the value of a house in San Diego, where you turn on the faucet and nothing comes out?
________________________________________________________________
“San Diego realtor William Johnson sees a negative outcome for San Diego if the $9.3 billion bond proposal championed by Schwarzenegger and Feinstein does not pass. The judicial decision to restrict pumping from the Delta severely restricts water imports for San Diego, who is 90% dependent on imported water (there is basically no groundwater in San Diego). This will create a ’stunning shortfall’ for San Diego that won’t be able to be met by conservation alone. Writes Mr. Johnson: We of course can be hopeful for rain showers but the weather man says the forecast is for more drought. So good luck with that. Desalination is opposed, recycling plan not ready, importing more water seems to off the table. So if this proposal doesn’t get done, we best hope someone has some connections with the rain gods and start praying.”
http://therealestatetextbook.com/2008/07/12/bi-partisan-proposal-for-water-bond-issue-may-be-in-peril-and-a-negative-outcome-is-feared-in-san-diego/
Repo Man - You can run, but they’ll find you
http://youtube.com/watch?v=LM4O0syJeA0&feature=dir
More signs of deflation Mr. Ben Jones!!
http://money.cnn.com/2008/07/16/news/economy/cpi/index.htm?postversion=2008071610
I’m with Ben on this one. Talk to us in a year.
~70% of production costs are labor. Labor costs are NOT going up.
You need to have labor costs rise to have significant, sustained inflation.
Not if there is an over-supply of worthless workers looking for work at the same time the dollar tanks internationally. What it really means is:
1) There is a shortage of “real” work (production/manufacturing) with international demand.
2) Those who produce goods with international demand will see their wages keep up with inflation because the value of their work stays more or less constant in real terms.
3) If the rest of the world no longer accepts the dollars and there are no industry jobs in the US because we lack the infrastructure needed to put people to work then everyone’s wage will be decimated with their savings. This happens because service jobs are funded by the income of other service jobs and only a small fraction of real “production” jobs.
The game is up. If you want to make money in the new economy then prepare for the new reality that we must PRODUCE to eat. Get into local manufacturing and earning a living doing hard work.
The only “service” jobs that will keep up with inflation are government jobs (because they control the printing press and steal everything they need to pay their employees). Sadly, the glut in the workforce will probably keep government jobs down too.
“Labor costs are NOT going up.”
I agree. General prices are going up.
A year from now houses will be cheaper, equities will probably be down, wages will be even more depressed and stuff will cost more.
Wells Fargo is up 23% this morning because wells reported better earnings than Wall Street expected.
Lol.
Wells has cooked its books. As reported earlier, in April they decided to wait for 180 days of non-payment of a loan before they counted it against earnings, up from their 120 day policy. That’s financial cockroach if ever there was one, and there is never only one cockroach.
It seems to have been enough to fool the market for today at least. So it’ll be a couple more months before that unravels, just in time for October.
October 2008 anyone?
It wouldn’t at all surprise me if Wells is counting as income the interest and late fees levied against these uncollectable loans.
lmao!
I hadn’t even considered that. Loans which reasonable should have been written off already as bad, instead they keep on the book, avoiding the loss, and further recognize the late fees.
There should be a gaap rule made to address this. Something about how the older a loan is, the less late fees and accumulating interest can be recognized. I’ll have to think on that…I guess in a sense it might be covered under the normal recognition of bad debt…
I1ll try this again
After seeing Rep, Vazquez
It reminded me of a skit I heard the other day
(Mexican voice) Come see Mehico the way we see your country.
(Fathers voice) Keep padddleing kids, almost there.
(Mexican voice) Welcome to Mehico
(mothers voice) Well were here and I`m pregnant again! I`ll be needing to go to the hospital for that free healthcare and oh I`ll need a doctor that speaks english, and once the baby is born he`ll be a Mexican citizen and that will make it easier for us to become citizens and we`ll be needing food stamps because we have no money to eat!
(Mexican voice) You need a doctoor?
(kids voice) Do they speak english in Mexican schools dad?
(fathers voice) Well they better! And pretty soon I`ll get a forged Mexican drivers licence and a crumby Mexican car and we can put an American flag bumper sticker on it!
(family) It`s great to be in Mexico!
(Mexican voice) Oh Bruthoor.
Sorry for the double post, thought the first one got bumped. But I left the food stamps out of it anyway.
Last week there was a news item that a bank in Visalia, Ca. received 500 applications for the single job of 1 “clerk teller”, and more recently 500 people have waited in line to get their money out of banks.
Reality is so much stranger than fiction…
lol…good post, aladinsane….
~Misstrial
http://www.bloomberg.com/apps/news?pid=20601087&sid=am55kKPOiubg&refer=home
Homebuilder Confidence in U.S. Reached Record Low in July
The National Association of Homebuilders/Wells Fargo sentiment index decreased to 16 from 18 in June, the Washington- based group said today. Readings under 50 mean most respondents view conditions as poor.
And:
The NAHB index of buyer traffic fell to 12 in July from 16. The measure represents the number of prospective buyers visiting properties.
Sentiment declined in three of four regions. It dropped to 10 from 16 in the Midwest, to 13 from 16 in the West, and to 20 from 21 in the South. The gauge rose to 14 from 12 in the Northeast.
Watching all the upset people in L.A. trying to get at their money, makes me think that the FDIC is somehow connected with FEMA.
Disaster preparedness isn’t their speed.
Builders: A Vote of No Confidence
Posted By:Diana Olick
http://www.cnbc.com/id/25705300/site/14081545?__source=yahoo%7Cheadline%7Cquote%7Ctext%7C&par=yahoo
i might be able to understand why the bank stocks are up today, but what is up with the home builders? did the housing market suddenly recover?
This is from a CNNMoney piece today about the huge increase in down payment requirements:
“These days, home buyers almost always have to make a substantial down payment, at least 5%, according to Rich Wordman, president of the Florida Association of Mortgage Brokers.”
5% is substantial? Gimme a break.
At least 5% is enough for most people to THINK about whether the value of the home in their area is falling. At 0%, there was a 0% chance of people being concerned about home price falls.
In my opinion, at 5%, there is a 30%-50% chance of people thinking about home prices falling.
At 20%, there is a 100% chance.
Totally o/t, but this is a really funny typo. Couldn’t have used a much worse word, and of course it passed the spell checker while the copy editor was at McDonald’s:
http://www.thestreet.com/s/unluck-your-creativity-in-10-minutes-a-day/newsanalysis/small-business-blog/10426682.html?puc=_tscrss
Economic Pain: ‘Payback’ For Debt-Fueled Growth
http://www.usatoday.com/money/economy/2008-07-15-how-bad_N.htm?csp=34
With gas at $4.50 a gallon, how is a build in crude supply a suprise, and that`s what this rally is for. I guess all is clear time to buy a house and financials.
I took my (SKF) profits and went long in (ING) and (SSO). good idea so far, but is this a head fake?
Dead cat bounce IMO. It’ll bounce pretty high probably, since it fell so hard :), but gravity (underlying conditions which continue to deteriorate) will once again take over.
you gotta be a complete idiot to trade this market, which I am.
here’s the short version:
Paradigm A:
always believe the hype, this time is different, oil only goes up, housing only goes down, all the banks are going under.
Paradigm B:
never believe the hype, it aint different, oil has a speculative premium, housing finding a floor, and some banks are gonna survive.
once you got Paradigm A pounding the shit of the nutsacks laying on the couch eating chips and watching Idol…check back to Paradigm B.
I hear ya. Hence the bounce today.
ING Direct is as strong as anything out there and they pay a great MM rate >3% and FDIC.
Not to criticize, but TDAmeritrade is much stronger and has brick-and-mortar buildings in addition to online banking/investing.
~Misstrial
Bear market rally. The last one lasted about 6 weeks. If history is any guide, they tend to get shorter until capitulation.
Also long SSO, UYG and DUG.
Had a good day today.
Nah. Look at Nasdaq crash 2000-2002. Each bounce was about twice as long time-wise as the previous.
My general rule is - there are no rules. Each historical period will be unique, because each historical period is driven by different factors than all other historical periods.
if news is any guide: the forced unwind of the levered longs in the energy markets and double down derivative shorts in financials is gonna be brutal.
black box the subpoena bee-yatch. Cant touch this….que up Hammertime on the old school record playa/.
just another day in the market in the 21st century.
—–
not investment advice or legal counsel.
Now that’s a haircut!!
http://denver.craigslist.org/rfs/757544385.html
I will give them $800k, not a penny more.
Emerging-Market Financing and the Distribution of Risks
Emerging-market economies have, to varying degrees, already made progress in improving their financial environment over the past decade. Inflation has been substantially reduced, and fiscal balances have been brought under control. Many countries have reformed their financial systems and modernized their business regulations. These policies have helped attract private capital inflows, even though total capital flows still move from developing to industrial economies on net.
Financing mechanisms in the emerging-market economies have also evolved. Most notably, external borrowing increasingly is in the form of bonds denominated in domestic currency, often issued at fixed interest rates, and dated for long maturities, in contrast to the foreign-currency instruments that dominated external borrowing in earlier years. Government bonds of this new type were first issued by Korea and Thailand in the 1990s; Brazil, Chile, Colombia, Indonesia, Mexico, and Russia soon followed suit (Kroszner, 2006a).
These new instruments have helped establish long-dated benchmark yield curves and thus encourage corporate bond issuance and mortgage lending in domestic currency and at longer maturities. The new instruments are also changing the distribution of risk. When entities in the emerging markets borrowed in foreign currencies, they bore the exchange rate risk while lenders bore default risk. This arrangement made the financial crises of the 1990s very costly: Sharp currency depreciations caused the domestic-currency value of foreign-currency debt to balloon.
With domestic-currency financing, lenders now bear most of the exchange rate risk. And with fixed-rate bonds, the interest rate risk, too, is being shifted to the lenders. We would expect that emerging-market borrowers would have to pay higher yields to compensate lenders for this additional risk. But yields on the new instruments have generally been moving down. For example, Mexico, even with its history of macroeconomic instability, can borrow in pesos at a thirty-year maturity at roughly 8 percent.
These low yields are part of a more general decline in compensation for risk in emerging markets, a trend also evidenced by low risk spreads on dollar-denominated bonds and rising stock prices. In part, this trend reflects the low volatility in international financial markets in recent years. However, it also reflects improvements in the economic policies and debt positions of emerging-market economies. In the past, an environment of low risk spreads contributed to overborrowing, booms, and then busts. So far, that cycle has not developed, and it is crucial that sound and prudent policies continue to guard against it’s doing so. Credible macroeconomic and financial policies in the emerging-market economies provide double benefits: They help keep borrowing costs low, and, in the event of a future retreat from risk by global investors, they will help the affected economies weather any ensuing financial turbulence.
http://www.federalreserve.gov/newsevents/speech/Kroszner20070515a.htm
how is this any different to what happened to us with the housing bubble? this tells me that they knew what was going to happen and did nothing to stop it! this paper is dated 5/15/07
One of the financial newsletters I subscribe to has been warning us to get out of Emerging Markets for about 2 months now.
A lot of capital is being repatrioted. Not one country is particularly strong - all due to globalization. Asia and Euros are about 2-3 mos behind the US.
Its all no good.
~Misstrial
Buy Now, Don’t Regret Later
http://finance.yahoo.com/banking-budgeting/article/105403/Buy-Now,-Don‘t-Regret-Later
here we go again!!!!!!!!!!
At least they’re only talking about trinkets and concert tickets, not housing.
Idiots Fiddle While Rome Burns
http://bigpicture.typepad.com/comments/2008/07/idiots-fiddle-w.html#comments
Report from southern New Mexico:
Big Sale on used lawnmowers at PawnMan next to the railroad tracks off Main.
Lawnmower men selling out and moving back to Juarez? Could be.
~Misstrial